Showing posts with label SME. Show all posts
Showing posts with label SME. Show all posts

28 December 2011

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.


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.


 

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:


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.


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

09 April 2010

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

04 January 2010

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