Business Intelligence for the coming year

Recently I was asked by a business writer for my recommendations for “BI New Year’s Resolutions.” I doubt my response was what the writer had hoped for, since many business blogs and publications garner support from advertisers. And, when you are doing that for a living, you really want to write things that are supportive of the kinds of products your advertisers supply. These days, since business intelligence (BI) is all the rage, there are a lot of dollars being proffered for advertising of upscale business intelligence solutions.

For better or worse, I don’t have to worry about that. (Of course, my income is smaller as a result.) But, here’s what I wrote—along with some other advice to round it out.

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BI New Year’s Resolution

RESOVED – I will never, ever, ever again undertake a BI project just because someone in my organization thinks “it might pay-off.” Instead, I will faithfully resolve to calculate—in advance—the expected ROI (return on investment) for the project.

I have learned my lesson: BI is not like an engine oil additive: departments can’t just “pour it in and expect the company to run smoother, faster, longer and get higher mileage” through some mystical power brought to them by the BI fairy.

In calculating the ROI, I will also remember that “approximately right” is fart better than “precisely wrong,” so will not waste my firm’s precious resources trying to hone a number to perfection before taking action—especially in this tough economy.

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The second question to which this writer asked me to reply regard “top BI trends” for 2012. Once again, I’m pretty sure I let her down. Here’s what I wrote:

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BI Trends for 2012

In 2012, an increasing number of small-to-mid-sized firms will discover that, to get started in BI, they do not need to make six-figure investment. In fact, they may not even need to make a five-figure investment.

If they can unlock “tribal knowledge” and begin to understand what to measure in order to make a real difference in the Throughput of their system (i.e., the whole firm), chances are they can make use of tools they already have like Microsoft® Excel™ to capture data from their ERP system directly via ODBC (open database connectivity) or OLEDB (object linking and embedding for databases). This may lead to insights, and those insights may lead them to market segmentation or other innovative profit-improvers. They do not need expensive software to build a simple, yet valuable, dashboard so they can start making more money sooner—rather than later.

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In the next post, I will provide a concrete example of how simple BI can be done using tools your firm probably already owns.

(c)2008, 2009, 2010, 2011 Richard D. Cushing

Are IT Vendors Driven by the Business Results of Their Customers?

Writing for CIO UK, David Henderson suggests several reasons “Why IT vendors must raise their game”. The second major point he mentions is that “IT vendors tend to be driven by their portfolios rather than business outcomes” for their customers. Henderson points out that IT vendors “continue to make significant investments in their portfolios but aren’t prepared to make the same investment in understanding how these apply to their customers’ businesses,” which can “lead to huge inefficiencies” once implemented at the customers’ sites.

As a result, Henderson continues, “vendors… tend to give poorly defined generic presentations that bear only passing relevance” to the challenges faced by the customer or prospect at hand. Henderson goes on to berate the ERP vendors for “me, too” solutions and their inability to “connect the dots” between their product offering real value for the firm that buys the technology.
I agree that IT vendors need to change. The economic picture is vastly different in 2010 than it was even three years ago.

Where I disagree with Henderson’s writing, however, is who should know what.

Starting off on the wrong foot

Computer-based technologies really were not available to any significant number of SMBs (small-to-mid-sized businesses) until after the introduction of the personal computer (PC) in 1981. Prior to that, computing power available from mainframe and mini-computers was available only to larger firms with significant capital for investment in such technologies.

So, in the early days of the computerization of the SMB market, almost every new prospect was anticipating moving off a system dominated entirely by paper and the necessary manpower to keep the paper flowing. As the price of PC-based technologies fell, more and more companies made the switch. This movement dramatically increased productivity and return on investment (ROI) for such a move was almost a certainty. As a result, many ERP salespeople came in the door talking about increasing productivity and providing rapid ROI for almost every SMB they approached. And, almost without exception, the implementation of that first round of technologies provided consistently rapid payback for the firms.

Unfortunately, as the market changed (i.e., SMBs’ next round of technology purchases were not taking them off paper-based systems but, more frequently, moving them into a comprehensive suite of application modules or moving some SMBs off the high cost of maintenance associated with mainframe and mini-computer systems), the sales approach of most technology vendors did not change. The technology vendors’ salespeople continued to make the same claims about productivity improvements associated with the first round of ERP implementations and the executives and managers at the customers’ sites continued to drink up the claims like Kool-Aid. In many cases, the SMB management was spurred on by the impending arrival of the year 2000 and the Y2K epidemic of fear. Many executives felt they needed to spend the money to upgrade their systems and took little thought as to the ROI of such an expenditure.

Nobody grew up and nothing changed

By the early 2000’s the ERP market had changed yet again. By 2005 or so, almost every CEO or CFO of every SMB had been through at least one – and usually two or three – implementations of new software (or other technologies) in their business environment. Add to that experience the fact that they now had easy access to the Internet by which to explore and make inquiry regarding almost any ERP software on the market, and the ERP-buyer had changed dramatically over a bit more than two decades.

When ERP was starting to be sold (20-plus years earlier), when the technology salesperson first met a prospect, the prospect was hungry for information about products and capabilities. Furthermore, these green-horn technology buyers were more than willing to make the salespeople their de facto “instructors” in the purchase and application of new technologies in their businesses.

In addition, as previously stated, ROI was pretty easy to achieve. Almost any SMB moving off labor-intensive paper-based processes or coming from costly mainframe or mini-computer technologies was bound to reap savings in operating expenses, and was almost equally likely to achieve increases in Throughput. However, by the middle of the first decade of the 21st century, all the easy ROI from traditional ERP – Everything Replacement Projects – was gone and not likely to return. Sadly, much of the technology salespersons’ product positioning remained unchanged and the sales rhetoric and promises from a good many ERP vendors still harkened back to days gone by – without, of course, actually mentioning that fact.

This unwillingness to face the change in the marketplace was not entirely one-sided. As the traditional ERP sales hype continued to make sweeping “rule-of-thumb” claims about delivering ROI for the ERP-buying executives and managers, these executives and managers proved themselves equally willing to accept the claims without taking the time and effort to discover for themselves what they really needed to know about their particular organization and its potential for reaping ROI from any particular foray into new or upgraded technologies.

What every executive and manager needs to know

As Eliyahu Goldratt has put it so well, there are three – and only three – things that every executive and manager needs to know to make effective decisions in every situation. These are they:

1. What needs to change
2. What the change should look like
3. How to effect the change

If, before making the leap to buy technologies based on “rules of thumb” and sales-speak, executives would just take the time to figure out the answers to these three questions, there would be far fewer stories about traditional ERP implementations failing to deliver expected business results.

IT vendors are not necessarily driven by business results for every client. And, as executives and managers, you should be aware that rules-of-thumb may not apply to you and your enterprise – and the ERP vendor or VAR is not responsible for your business’s not fitting the rule-of-thumb by which other enterprises may have achieved return on investment.

As executives and managers in your organization with your particular circumstances and requirements, you – not the technology vendor or reseller – need to know what needs to change in order for your firm to start making more money tomorrow than you are making today. You – not your vendor or reseller – need to know what the change should look like in your particular organization. (The vendor or VAR may help you understand how new technologies may be part of what that change should look like, but you need to understand the precise need in order to effect your desired ROI. (Read more in many articles found right here at GeeWhiz To R.O.I.)

And lastly, as executives and managers it is your responsibility to understand how to effect the change within your enterprise. (Here again, the technology vendor or reseller may help you understand the technology-related components of the change, but you and your team need to take full responsibility for creating a roadmap for change.)

Need help?

Contact me at rcushing(at)GeeWhiz2ROI(dot)com and I can show you a way to unlock your firm’s “tribal knowledge” to discover what needs to change so you can start making more money tomorrow than you are making today, and you won’t spend money needlessly on technologies that don’t bring almost immediate ROI.

©2010 Richard D. Cushing

A New ERA in ERP - Part 3

[Continuation]

I do not, for one minute, doubt that the vast majority of technology vendors actually do offer products and services that can be “solutions” for a good many SMBs. If I did not believe this with vigor, I would not be involved in the industry. But saying that a store offers shoes does not automatically imply that they have the correct “solution” for your particular foot. Your foot may be too wide or too narrow to fit comfortably in the shoes they offer. You may need a shoe for hiking in the woods and they sell only dress shoes. Or, the store may have the color and style you find suitable, but they don’t have the 10-1/2 size you foot requires.

Unfortunately, most – but not all – of the salespersons that I have encountered in this industry over the last quarter century are salespersons first, even though they may be engaged in a process that they refer to as “solution selling” or “consultative sales.” All too frequently they do just enough to “consulting” to find a place to get their foot in the door to “sell.”

The problem – more likely than not – is not the salesperson. The problem is almost certainly to be found in the policies and compensation plans under which the salesperson is engaged with their employer and the training that they have received. Even the bulk of “solution selling” and “consultative selling” training courses are only thinly disguised presentations of ways to get more salespeople in the door at clients’ and prospects’ offices and not, in fact, actually focused on the “solution” or “consulting” part of the equation. This is evident by the fact that those giving the training in “solution selling” or “consultative sales” need to know little or nothing about the actual product being sold or how to actually “consult” a business toward achieving more of its goal (read: making more money).

If vendor/VARs are interested in becoming real and practical “solution” sellers, they must also become real and practical “consultants” that understand how to guide management teams in the process of discovering:

1.       What needs to change in order for the system (i.e., the entire enterprise) to improve and make more money

2.       What the change should look like (read: Does the vendor/VAR actually have a product that “looks” like what your management team believes the “solution” should “look” in its working and effectiveness?)

3.       How to effect the change (read: Can the vendor/VAR help in deploying their technology in order to make it effective in the end result?)

On vendors providing low-cost or no-cost solutions

I, personally, find it hard to believe how many vendors today are supplying valuable applications at no-cost or low-cost to huge numbers of users. Everyone knows about Google, which alone provides search-engine capabilities, a blogging site, Google Apps – used for document sharing and collaboration, email services and more. EverNote provides a service that I find absolutely invaluable and allows me to store up to 40MB per month on their servers at no cost to me. EverNote also allows me to use their site for sharing and collaboration. Then there are low-cost applications like CEOexpress.com and eFax that also furnish me with huge benefits for pennies per day.

Jan Hichert is right! People are expecting more and more for less and less out-of-pocket expense. This is a trend that is not likely to end in the near future. The question is: what should vendor/VARs be doing about it?

My recommendation to the industry is that they convert all of their salespeople into genuine whole-hearted consultants – at least insofar as that is possible. (Some, I fear, cannot be converted. They will, perhaps, never be anything but a salesperson through and through.)

Note: Those that cannot be thus converted should remain salespersons, but they should be making three or four face-to-face sales calls per day making “incremental sales” being fed by a sound program of relationship marketing. It is beyond the scope of this article to go into more detail, but if you are interested, see Justin Roff-Marsh’s book entitled Reengineering the Sales Process for more information.

The vendor/VAR’s new staff of through-and-through consultants should be turned loose in a program of incremental transactions. Unlike today’s one-big-gulp approach to sales, allowing a relationship to build over time while gradually increasing the size of the transaction simultaneously builds a solid relationship between the prospect/customer and the vendor, while allowing the vendor/VAR to prove to your management team that a) the vendor/VAR really does have your enterprise’s best interests at heart; b) the vendor/VAR really does know how to help your business improve – i.e., make more money; and c) the vendor/VAR really can be trusted with delivering on its promises.

Allow me to give an example of what such a program might look like:

Step 1: A no-cost one-day “proof of concept” engagement about how the vendor/VAR’s approach can help you unlock valuable knowledge already present in your organization in a way the leads to improvements which, in turn, help you make more money.

Step 2: A $795 one-day engagement to plan the execution steps on just one of the ideas resulting from the “proof of concept” engagement (Step 1).

Step 3: A engagement called the “Next Steps” program to help formulate step-by-step plans to leverage additional concepts stemming from Steps 1 and 2.

Step 4: A one-year engagement to help the client develop and execute on a POOGI (Process Of On-Going Improvement) program.

Step 5: Sale of an updated or upgraded ERP system or tactical extensible technologies that support the POOGI or “Next Steps” initiatives

Note: The reference to “Insert Value Price” has to do with value-price, not by-the-hour consulting. This means that, if you, as a client, are going to benefit to the tune of say $100,000 in Throughput from a particular initiative, you might be willing to pay on a plan such as: $30,000 up front, plus n% of the increase in Throughput over the next 12 months.

Arrangements and sales approaches such as these are a win-win for the parties involved. You and your management team are more likely to reap benefits from real – not hyped or hypothetical “solutions” – and the vendor/VAR can make more money because you are making more money.  That sounds fair, does it not?

Summary

We are not entering a new ERA in ERP. We are – for better or worse – already into the new era. The question is how will vendors/VARs and you, as the buyer, respond in this new age. By keeping the roles of each party clear and by you and your management team taking full responsibility for sound and rationally calculated ROI for each new IT investment, everyone wins.

Plus, if vendor/VARs become really and truly solution-oriented, this team of people that work day after day with SMBs and have considerable experience can learn to bring no-cost and low-cost solutions to your doorstep by helping you unlock what you already know – but frequently do not know that you know. This, too, is a win-win for all involved.

(c)2010 Richard D. Cushing

A New ERA in ERP - Part 2

[continuation]

How can we make it right?

First of all, we should begin by clarifying the proper roles and boundaries in the arrangements between vendor/VARs and you, the buyer. W. Edwards Deming once said, “It’s management’s job to know.” That is a sweeping statement, but I am absolutely convinced that it is true. If you are an executive manager (meaning you have authority to “execute” – to take action), then it is your job to know the impact (or potential impact) of every action you undertake. It is not the vendor’s or VAR’s job to tell you with certainty impact of your actions regarding his or her product or service in your particular circumstances.

So, what is the role of the vendor/VAR?

The vendor/VAR should be fully equipped to understand what the product or service under consideration for purchase is capable of doing – including being fully aware of its limitations. Furthermore, the vendor/VAR should be equipped to help guide your management team into a rational evaluation of the benefits your organization might receive through the proper application of the product or service under consideration. In my opinion, the evaluation assistance should not be predicated on sweeping generalizations. Rather, the vendor/VAR should be willing and able to provide proof of concept based on what your knowing management team has concluded is the change required to be regarded as “improvement” or “sufficient improvement” in some measurable way.

Example:

If your management team has determined that your warehouse operations can presently process (i.e., pick, pack and ship) an average of 68.7 shipment lines per hour, but with significant growth on the horizon, your team has decided that you will need to ship an average of about 100 lines per hour (a 45.6% improvement) without a change in personnel or the number of persons staffing this function, then the vendor/VAR should be able to demonstrate to you – in a proof of concept environment – that their technologies will, in fact, help your current staff achieve an average of 100 lines per hour.

By the way, the buyer’s management team should also know, by this point in the process, the estimated value of these three critical factors:

·         delta-T: The change in Throughput [T], where T = Revenue less Truly Variable Costs

·         delta-OE: The change in Operating Expenses [OE], which may be implied to be zero in the scenario stated above

·         delta-I: The change in Inventory or demand for other Investment, which would be the “capital budget” the management team has established for the purchase and implementation of the new technology in order to achieve a predetermined ROI

These three important financial metrics come together in the following formula:

 By assuming these appropriate roles and division of labor, the vendor/VAR avoids the risk of making claims about ROI that the product might be able to deliver, but may fail to deliver due to circumstances beyond his control in the customer’s environment. Similarly, you and your management team avoid making rash and risky assumptions about ROI predicated on “averages” and other “promises” insinuated by the vendor/VAR. Both parties know precisely where they stand in the arrangement and, yet, an ROI has been effectively calculated.

On the need for technology vendors to shift from selling “products” to selling “solutions”

A lot of salespeople who presently work for technology companies are going to throw stones at me for this, so let me get some clarifying statements on the table right away:

·         I know that there are technology firms, and even individual salespeople, that are 100% genuine in the desire to sell “solutions” rather than “products,” and this is to be applauded.

·         I know that, in general, salespeople at technology firms get compensated for selling their technologies and not for selling “solutions” – which “solution sale” cannot be measured.

·         I know that technology salespeople can and do walk away from prospects where it is abundantly clear that the sale of their firm’s technology would not be a “solution” for the particular prospect in question.

“Solution selling” – so-called

Now I know that so-called “solution selling” is all the rage in the technology industry. Every firm in the industry certainly wants to be known for selling “solutions” and not just their particular brand of technology. Nevertheless, the process described as “solution selling” has its limitations, even when properly and diligently applied by conscientious practitioners.

Consider the fact that no matter how long a salesperson is engaged with you as a client or a prospect, there will always be things that the salesperson does not know about your firm and how it works, about your industry, and about your particular environment, people, and intentions with the product under consideration. On the other side of the same coin, there will always be things that you and your management team do not know about the product you are considering – its capabilities, its capacities, its limitations, and more.

This is not to suggest malice or subtlety on the part of either party. The salesperson may be as honest as the day is long and full of good intentions. Nevertheless, lacking clairvoyance or omniscience, there will be questions that are not asked on both sides of the pending transaction that do not get asked. And, these questions do not get asked simply because neither party ever thought to ask them because neither party – at the time – felt that the question had any relevance given their understandings of the circumstances at the time.

The problem with “solution selling” is that it confuses the roles and boundaries once again. The process implies that the vendor/VAR knows and understands more about the client or prospect’s business and environment than he or she does. It implies, in fact, that the vendor/VAR knows and understands the actual matters of what needs to change in order for the organization (as a whole) to improve – where “improvement” is defined as making more money tomorrow than they are making today (in a for-profit scenario). I say this because, only then – only if and when the vendor/VAR actually understood what needs to change – would the salesperson be in a position to offer an actual and effective “solution.”

However, knowing what needs to change to make the enterprise – as a whole and integrated system – improve is the purview of you and your executive management team and not that of the vendor/VAR. Once these roles are re-clarified and each party in the engagement takes proper responsibility for their part of the “knowing,” then real and effective “solutions” may be the result.

[To be continued]
(c)2010 Richard D. Cushing

A New ERA in ERP - Part 1

Jan Hichert, CEO of Astaro Corporation recently wrote, “[A]s a slow recovery begins it is becoming clear the emerging economy will not be the same as we became accustomed to before the recession and businesses will not be run as they were prior to the economic collapse in late 2008. Budgets will remain small and despite growth, businesses will continue to be wary of investing in new solutions causing them to scrutinize the cost and benefit of new products. Because of this change, business to business vendors, especially technology vendors will need to shift the business model from providing products to providing solutions and focusing on customer needs rather than product capabilities. Vendors that are able to provide low cost or even free business solutions like Vistaprint, will be better positioned to survive and thrive in this new economy.”

Mr. Hichert’s words set forth three salient factors surrounding SMBs (small-to-mid-sized businesses) in the new economic era in which we find ourselves operating today:

1.       Smaller budgets and increased return-on-investment (ROI) vigilance on the part of the technology buyers

2.       Increased need for technology vendors to shift dramatically from selling “products” to selling “solutions”

3.       Vendors that are able to provide low-cost or no-cost solutions will be better positioned to survive and thrive

On smaller budgets and increased attention to ROI

Some history

Since the emergence of PC-based accounting and ERP (enterprise resource planning) applications for SMBs beginning in the 1980s, software vendors and resellers (VARs) have gone through some schizophrenia over the whole matter of talking about ROI with their prospects and customers. In the early days, there software vendors and VARs offered considerable “hype” about the ROI available to those who adopted computer-based accounting solutions. Unfortunately, it was the vendors or the VARs doing the calculations and, when some firms did not reap the benefits anticipated from the so-called “promises” made by the vendors, law suits ensued. Of course, the legal wrangling, and the fallout thereof, squelched much of real and legitimate discussion regarding the benefits that should accrue to the organization that buys and implements new technology.

Soon, technology vendors were making only the vaguest of references to ROI with benefits being stated in the roundest of numbers using remarks that include many qualifications and limitations. Frequently there were expressions of “results obtained by others” without reference to who these “others” might be, nor an opportunity – in most cases – for the prospective buyer to discuss the specifics surrounding these published “results” with a living reference. Gradually, even that dissipated into merely discussions around “the ways” in which an organization “might” reap benefits from the purchase of this technology or that one, but even the language of assurance slipped away.

Of course, this diminishing willingness on the part of technology vendors to discuss solid ROI calculations with their prospects was accompanied by an increasing number of troubling stories appearing in trade – and even mainstream – publications about ERP implementations going vastly over budget, not producing business benefits that had been anticipated, or both. Some ERP deployments even failed entirely – usually after the expenditure of some millions of dollars – and the proverbial “plug was pulled” on some of these projects. Even more devastatingly (though rare), there was the occasional firm that, itself, failed to survive after its ERP implementation went awry.

Where this went wrong

There any number of directions one might point a finger of blame for this whole matter of technology and return-on-investment going wrong. However, allow me to suggest a few that might be worthy of consideration:

·         Technology vendors/VARs – For better or for worse, many folks that became involved in the explosion of PC-based technologies over the last 30 years or so did so because they simply enjoyed technology. This makes sense, and I have nothing against one enjoying the work they do. In fact, I believe it should be so. However, some of these vendors and VARs were convinced that the technologies they offered were the answer to every question. Some of them sincerely believed that if a process could be automated, then it should be automated.

Since moving companies off paper-based accounting processes, or even off very costly mini- or mainframe computing systems, was easy to sell and typically allowed companies to grow several times over without dramatically increasing back-office overhead, ROI was a “no-brainer” and most companies that purchased were virtually assured to benefit – at least enough to make it worth the buyer’s investment, even if not as much as buyers had hoped before closing the deal.

This ease-of-selling and ease-of-ROI caused many technology vendors to get rich. It also caused far too many of them to get lazy. “ROI? Absolutely! No problem. You’ll probably get between x% and y% increase in revenues and your operating expenses will probably decrease by between n% and m%. You’ll be sittin’ pretty. Trust me.” Thus was the standard sales chatter, and many first- or second-time buyers of PC-based accounting and ERP technologies bought it – hook, line and sinker.

·         The SMB executives – Just like the vendors sold it, the SMB executives bought it. Both sides of the transaction were pretty certain that new technology worked just like “new and improved” additives for your car’s engine. Just pour it in and the engine would run smoother, quieter, longer and with less friction. So, these vendors and executives poured in new technologies from time to time expecting the companies to run smoother, more efficiently, and make more money – it was as simple as that.

·         The SMB IT departments – Unfortunately, just like folks getting into PC-based technologies as a vendor or VAR, many of the people who got into corporate IT got into the field for exactly the same reason as the vendors/VARs. They simply liked working with the latest and greatest technologies – and, for the most part, they were good at it.

Nevertheless, this led many corporate IT staffers and managers to take on the same sense that engulfed the vendor/VAR community: namely, if it can be automated, then it should be automated. In fact, many corporate IT staff and managers actually moved pretty fluidly back and forth between working for vendors/VARs and working on IT departments. Some of the relationships even bordered on incestuous and provided little cause for rethinking the ROI value of technologies available or proffered by the vendors.

[To be continued]
(c)2010 Richard D. Cushing

The New ERP – Part 36

In December 2009, Eric Kimberling, founder and president of Panorama Consulting Group (Denver, CO), offered his "ERP Software Predictions for 2010". They are as follows (with my comments added:

1. Diligent focus on ERP software benefits realization and ROI. Long gone are the days of spending like it's 1999 and hoping for the best. CIOs and COOs will continue to face pressure to prove that every dime of investment in ERP systems is justified and generates a solid return on investment. Look for more deliberate spending, more phased rollouts, buying licenses only as they're needed, and hesitancy to invest in more expensive advanced enterprise software modules.
   
   Isn't this what The New ERP – Extended Readiness for Profit is all about? We have emphasized the ROI should be a deliberate forethought for you and your management team over and over. We have repeatedly pointed out that spending money on technology – or anything else – based on some "hope" that your organization will improve is pure folly. "Hope" is not a strategy; it's a small town in Pennsylvania, I believe.
   
   
2. SMBs to get back into the ERP software market. The bright spot in any recovering economy is usually small business (SMBs). As the economy emerges from the recession, SMBs will look for small business software to automate their operations and scale for growth. In addition, large software vendors such as SAP and Oracle will continue to focus on the SMB market to reinvigorate their revenue growth in software license sales. [Emphasis added.]
   
   "Growth" ought to be the focus of every business organization. This is also the focus of The New ERP. While cost-cutting is the knee-jerk reaction to trying economic times, there is a limit to the gains that can be made through cost-cutting. I have frequently put this challenge before individuals and groups of businesspeople and have yet to receive a correct response: "Name for me one business enterprise that has become a market leader where its primary business strategy was 'cost-cutting.'" Growth is the only strategy that has no limitations to improvement.
   
   
3. Increased adoption of Software as a Service (SaaS) at SMBs. While SMBs may lead the charge in their small business software investments, it may be difficult for them to make the necessary investments. Given that tight credit markets will likely continue into the new decade, many SMBs will look to SaaS ERP software to help them minimize up front capital IT costs. [Emphasis added.]
   
   Here again we see that this approach falls directly in line with The New ERP – Extended Readiness for Profit. Minimizing up-front capital IT costs means nothing less that holding what we have called delta-I (the change in Investment) as low as possible while driving to maximize delta-T (the change in Throughput). Once again, the strategy we are suggesting is right on the money – literally.
   
   
4. Lots of ERP SaaS talk, but not as much action at large organizations. Larger companies, on the other hand, are likely to consider SaaS options, but are much less likely than their SMB counterparts to commit to these deployment models. As software vendors expand hybrid solutions combining the benefits of SaaS with the flexibility of traditional ERP (e.g. Oracle's On Demand and SAP's Business By Design offerings), larger organizations will continue opting for non-SaaS options that more commonly reduce cost and risk while maximizing business benefits in the long-term. They will, however, be more inclined to leverage SaaS for some niche functions, such as Document Management Systems (DMS), Human Resource Management Software (HRM/HCM), Product Lifecycle Management (PLM), and Customer Relationship Management (CRM). [Emphasis added.]
   
   In this case, I think Mr. Kimberling misses the mark. While his analysis is likely correct as to the reactions of "large organizations" versus "SMB" firms to SaaS offerings, Kimberling is off-base when he makes reference to "the flexibility of traditional ERP." In fact, if "traditional ERP" has fallen into disfavor for any reason in the last decade, it is the sheer weight of evidence that "traditional ERP" is far too rigid that has led to it.
   
   On the other hand, The New ERP's approach to solution design and decision-making is all about taking "traditional ERP," with its inherent rigidity, and finding economically sensible ways to extend its capabilities at low-cost and without (or minimizing) changes to source code.
   
   
5. Increasing focus on organizational change management and ERP benefits realization. As demonstrated by the exponential growth in Panorama's organizational change management practice, companies are directing much of their ERP software investments to areas that ensure they implement effectively and get more out of their existing enterprise investments. The need to more effectively manage organizational and business risk will likely result in a continuation of this trend in 2010. [Emphasis added.]
   
   Bang! The New ERP hits the target again. Imagine the novel idea that companies should "direct much of their… investments to areas that ensure they implement effectively and get more out of their existing enterprise investments." That sounds very much like what we have been trying to hammer home with The New ERP – Extended Readiness for Profit.
   
   
6. With ERP software, it's still a buyers' market. Even in the most optimistic scenario, overall 2010 enterprise software spending will not return to pre-recession levels. This means ERP software buyers will remain in the driver's seat, which will be reflected in aggressive software pricing and shared benefits implementation models, such as that introduced by Epicor late this year. [Emphasis added.]
   
   Mr. Kimberling's statements here suggest – and rightly so – that, in some prior years, the "ERP software buyers" were not "in the driver's seat." If you have read the prior posts in The New ERP – Extended Readiness for Profit, then you will understand when I ask this question: "Why, for goodness sake, has the ERP software buyer not always held his ground and stood fast 'in the driver's seat'?" The New ERP is all about assuring that you and your management team are, and remain firmly ensconced, in the driver's seat.
   
   
7. Enterprise software risk management. As CIOs and executive teams remain on the hot seat to prove the value of their investments, risk management will be the name of the game. Look for more ERP implementations to leverage organizational change management and independent oversight of software vendors to help mitigate business risk. [Emphasis added.]
   
   A survey of the literature surrounding the ERP software industry makes it all too plain that, heretofore, most CIOs and executive teams were not held to metrics that would clearly "prove the value of their investments." In fact, far too many CIOs today still make excuses about how the "benefits" of investments in IT cannot be measured.
   
   However, as The New ERP boldly asserts, if the organization cannot figure out how – and approximate how much – a recommended change in information technologies will lead to increasing Throughput, reducing Inventories or demand for new Investment, and/or cutting or holding the line on Operating Expenses, then maybe – just maybe – the IT change just isn't worth making.
   
   
8. ERP software vendor consolidation. Vendor competition was fierce before the recession and is even more so now. Dozens of smaller vendors are starved for cash and unable to fuel R&D and other product innovations without infusions of capital. Add the fact that larger vendors have cash and some have grown successfully via acquisition to date (e.g. Oracle and Infor), and continued vendor consolidation looks inevitable.
   
   In my opinion, vendor consolidation is neither good nor bad from the perspective you and your management team. If you are applying the concepts set forth in The New ERP – Extended Readiness for Profit you come out a winner no matter who supplies the desired technologies.
   
   
9. Focus on integration rather than major ERP package enhancements. Given corporate aversion to risk, companies are going to be less likely to bet on entirely new products or risky upgrades. As a result, vendors are more likely to invest in incremental product enhancements and tighter integration between modules rather than revolutionary changes to their software. [Emphasis added.]
   
   Once again The New ERP falls right in line with Mr. Kimberling's analysis. Why should an organization undertake a "risky upgrade" or "bet on entirely new [software] products" – traditional ERP (Everything Replacement Project) – when following the guidelines in The New ERP will bring them near-immediate benefits through increased Throughput and/or reductions in Investment demands and Operating Expenses?
   
   
10. Niches, low-hanging fruit, and business value.
    Look for companies to be very deliberate about how they invest in enterprise software, the risk they're willing to take, and how they manage implementations. If executives aren't convinced that their enterprise software investments will deliver measurable business value, they won't invest in it. Areas that deliver immediate value are priorities for the coming year." (Kimberling 2009) [Emphasis added.]
    
    Now this one sounds so good, I almost could have written it myself! What a strange thing it is that it took nearly 30 years from the coining of the term "ERP" to reach the point where companies have become "very deliberate about how they invest in enterprise software" and business executives "won't invest" unless they're "convinced that their… investments will deliver measurable business value." That is far too much wasted time, energy and money. Don't you think so, too?
    

Works Cited

Kimberling, Eric. Top Ten ERP Software Predictions for 2010. December 7, 2009. http://panorama-consulting.com/top-ten-erp-software-predictions-for-2010/ (accessed December 21, 2009).



©2009, 2010 Richard D. Cushing