Companies must evaluate the proposed enhancements to the ERP system not just on cost, but on all factors that determine the real payback from the investment. These factors include:
- Systems effectiveness: The new infrastructure and software must support new business processes aimed at improving performance, new software solutions such as Performance Management and enhanced management reporting
- Business efficiency: All of the cost savings that can be achieved because of the new system
- Business effectiveness: Higher revenues, greater competitiveness, improved customer satisfaction the company will achieve with the investment
- Total cost of ownership (TCO): The lifetime costs associated with the acquisition, installation, operation, support and maintenance of the entire system
Ventana Research sees a pervasive lack of understanding of what is now possible with ERP systems. Companies are missing opportunities to automate a wide range of processes that consume a great deal of employee time in business units, finance and administration. They believe it is impractical to implement Web services. They may have not considered how to leverage wireless technology for their field sales and support teams. Finance staffs waste time across the entire accounting cycle on operations that ERP software can automate. Discounts for early payment go unearned because the accounts payable process is too cumbersome, and days sales outstanding are too high because systems that would accelerate receipts have not even been evaluated.
Where an ERP upgrade is indicated, Ventana Research advises our clients to assemble a team to create a priority list of process, software, and system enhancements to ensure the system leverages the company's capabilities to their fullest potential. The list would establish how each enhancement would have a business benefit and how to evaluate each benefit. Once the team creates the list of ERP-driven enhancements, assign a cross-functional team consisting of line of business, finance, and IT to determine the resources required to achieve the business benefits with the ERP improvements. Organizations should avoid unnecessary implementation and ongoing operation costs in the design and deployment of the enhancements.
Too often, the focus of technology investment is buying something entirely new. Ventana Research believes companies can achieve significant returns by enhancing what they already have, particularly their core ERP system.