Information Technology Management with a Purpose

May 16 2011   9:50AM GMT

Understanding the business value of ERP



Posted by: S R Balasubramanian
Tags:
business value
ERP implementation
KPI
relevance to business
vendor evaluation

We have an association of CIOs residing in the NCR region and we meet regularly to discuss matters of common interest. These meetings are in the form of seminars or group discussions, either amongst us or those involving external speakers who are technology or management experts.

Relevance of ERP
As a part of the series, we held an internal meet of CIOs a few days ago for a discussion on ERP implementation and its effectiveness in our respective organizations. About 50 CIOs attended the event. Since the subject was vast, it was important to decide the format of the meeting so that the desired objectives were met. Instead of presentations by a few members, we thought it would be better to place a few salient points for discussion by members.
These points encompassed all elements of the ERP journey, like establishing the need for ERP in the organization, formal definition of project objectives, evaluation/ selection of ERP package and implementation partner, project manager and the team, business transformation, etc. We thought of capturing best practices adopted by the member organizations.
The meet was conducted in a panel discussion format, but at the same time, allowing enough opportunities for all participants to join in the discussion with their views. I was asked to moderate the session.

Establishing the need for ERP
The discussion kick-started with the point – whether the need for ERP was clearly established in the organizations right at the beginning. Answers varied; some expressed their plan of taking ERP as the core application accumulating data from all other legacy systems for consolidation. For someone, it was his company CEO who, having seen it running at some other organization, opted for ERP. Some were clear that their companies needed financial reports and that led to the introduction of ERP. Some said that it was due to peer pressure and also the fact that other companies in their industries had ERP, while some others said that the objective was just to replace their old and creaking legacy systems.
I tried to elicit CIOs’ views on the business value of ERP and the role it can play to further the business of the organization, but didn’t find adequate appreciation from the audience about this being a genuine requirement or an admission that this aspect was left out in their scheme of things.

Laying out project objectives
The second discussion point was about the need for an organization to formally lay down the project objectives or their expectations from the ERP implementation. It was explained that without a clear definition of objectives, it is very difficult to assess the degree of success for any project. There are elements like business drivers, KPIs, or some measures that define goals for the enterprise.
The responses from participants ranged from saying that there was a broad definition to some small and insignificant measures. For example, one CIO stated that the objectives were set based on broad expectations spelt out by the CEO or some functional head during the kick-off meet. Some said that the expectation was to reduce manual entries, or for preparing final accounts from the system. Some said that meeting demands of compliance to IFRS was the need and some said that generating MIS was the need expressed.

Getting IT right
It was only towards the end that one of the CIOs got up to explain that their organization had hired a consultant to lay down KPIs for the CEO and further down to each functional head and that served as the document to drive the design of the ERP system. That was a significant statement and I thought that adequately explained this point and grand finale for the meet.
Discussions during the entire meet were intense and we thought it better to discuss a few issues in depth rather than running through many. To me, the meeting revealed one significant point: there is a need for the CIOs to understand the business value of ERP and IT in general. They need to focus on business outcomes and not limit their focus to operational matters. CIOs still have some distance to travel in spite of their assertions that they have already ‘arrived’.

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