Does ERP Matter?

I received a very interesting question by email today from Ephraim Schwartz, editor-at-large at InfoWorld – “Does ERP matter?”

The arguments he was quoting were swaying more towards the “Matters – but much less” corner, and my SAP instincts made me jump up and down and say “Matters – more than ever”, but why? Interestingly, both my and his answers used the same reasoning as root cause for the answer – SOA infrastructure will change the landscape so that ERP matters more/less (pick your opinion here).

So, I stayed up Friday night (I didn’t have to wake up early Friday for a board call any more…) and decided to write this answer as my next blog entry, and send it to Ephraim as a public answer. You can read his column here to see what became of that answer in the broader context of his views, but read all the way through to see my view.

I was always a believer that SOA will not lead to small Lego blocks that will be aggregated on the fly by the consumer as some opinion leaders discussed in the past. Core processes require a certain semantic consistency that is certified by a vendor and compliant with authorities. You do not want your General Ledger going out of whack, just because you connected a web service the wrong way to a process that was assembled from multi-vendor pieces. Think of the set of core processes and the master data they require as the part of the brain that takes care of the involuntary actions of our body – like breathing and digesting – you do it, but you don’t think about it, and you definitely don’t want anything messing around with that part of the brain.

On the other hand, around that set of core processes we see a very large collection of edge processes that can be considered either ERP+ (such as employee performance management), or the other parts of a business suite (like advanced supply chain forecasting and optimization.) Some of these will be delivered as service oriented engines, with loose coupling to the core ERP, others will be composites that will be built and supplied on top of ERP and some other engine, sometimes these are shared engines while other times they are dedicated engines for that composite. In a sense these edge processes are the parts of the brain we educate after we are born. Some are more essential to the business – like CRM (try to get money without providing good service these days and see how essential CRM is), others are more optional but become essential over time (my favorite is emissions management – every company should implement it now and reduce emissions!)

So, is ERP essential or are the edge applications more important? Given your ERP will become service enabled or service oriented, will it be more or less valuable? My view is that with the service enablement, as we have performed through the introduction of Enterprise SOA at SAP, ERP in combination with a middleware platform like NetWeaver becomes the next Enterprise platform. In a sense, this combo “ERP Platform” (called Applistructure or BPP by the analysts) becomes the enterprise equivalent to Windows for the back end processes. Using that same metaphor the question translates to “Does Windows Matter?” and the answer is fairly simple – Windows became the invisible power behind the scenes, enabling a portfolio of applications, all standardizing on the same set of APIs. In that scenario an ERP platform not only matters, it becomes essential to the business.

So the question remains, why would customers go through this kind of implementation? Aren’t they tired of always getting to the next wave, and what is the return? The last waves of mass adoption happened as result of the need to get better transparency, compliance and global scale. If you did not have a resource planning application, you just didn’t know where your assets were and could not convert them from intangible assets to tangible assets (if you don’t know what you are manufacturing you cannot optimize your inventory or your manufacturing plan for the most profitable products). Compliance means that you have to have similar processes and controls across your entire company or else it is really hard to sign a sarb-ox statement that states you do things in a certain way. Finally, if you do not carry those processes to every geography around the world it is almost impossible to scale, especially in a rapidly flattening world.

I claim that the coming wave of implementations will be driven by the need for consolidation, networked value chains and increased speed of process change. Companies had gotten much bigger as result of organic growth and acquisitions. They have multiple instances of ERP applications, with a higher degree of variation amongst those instances. The cost of maintaining these separate instances escalates rapidly over time, and the urge to consolidate (take the hit on short term) becomes higher than the desire to stay on what you have (and take the smaller hit on productivity and maintenance every budget period). The desire of the CEO to have a faster changing company, regardless whether you are reacting or disrupting an industry, clashes today with the CIOs ability to respond to such change, unless they go to a well separated “ERP Platform”. The rapidly connecting world of complex supply chains requires well agreed and externalized APIs that carry data and process outside the boundaries of a single enterprise or a single industry. As such, an ERP platform becomes an essential part of the corporate strategy, not even the corporate IT strategy. It is essential to the corporate process and innovation strategy.

What we still need is a significant investment by the vendors (I love this new-found ability to say “the vendors”…) to simplify the implementation and operation of this ERP platform. The target should be a sub 100 days implementation (in the case of mid-market companies sub month) and more importantly – the ability to continuously modify the edge processes every 100 days. The core should not be touched, or if it is reconfigured (notice – not re-coded!) the implementation should recommend a battery of self tests that will re-certify the implementation as “still valid and working well” without manual labor or long down time.

Around that ERP Platform, many other products from the vendor and the partners can be loosely plugged and the overall system can stay compliant – as long as all products are adhering to a single eco-system set of rules. That is the vision of Enterprise SOA, and SAP is a few years ahead of the industry on the delivery of such vision.

ERP platforms matters more than ever.

shai

Comments

[Ram]

Hi Shai,

Congratulation and good luck for a new beginning.

When they ask a question of this nature e.g. ‘Does ERP Matter?’. [or Does IT Matter? for that matter]. Are they really doubting the role of ERP/IT infrastructure and thinking as if ‘ERP may not Matter'? [ And SAP/Oracle were running the biggest scam for all these years ;-) ]

I think, 'Is ERP a differentiator (now)'? should be the relevant question.

http://careerless.blogspot.com/2007/04/shais-blog-does-erp-matter.html

[Rick Bullotta]

Hi, Shai.

I think the other key question is "what is ERP"? I surmise that it doesn't have its original meaning any longer. While I'm not too fond of the term "applistructure", sometimes it fits. Or a "Business Operating System", so to speak...

- Rick

[Ram]

>>

I am just thinking loud. Traditionally, it is believed that being ahead of the time should be the key to success.
But is it possible that being ahead of the time might act as a negative factor?

Which one should be considered better?
Right change at the right time or
Right change but ahead of the time.

Or Do you think that 'Ahead of the Time' is actually the 'Right Time'? :-)

[Jonathan Maier]

Enterprise Resource Planning, ERP. Nowadays the major challenge is IRM: Information Resource Management, this implies managing information as if it was part of the life of customers, people and companies.
Information is not based on a classic business model anymore but on dynamic diffusion channels. Therefore managing these channels and making them evolve naturally with the constant evolution of customer's needs is the challenge that IRM (ERP) is facing. The solution in my opinion are Open Source tools as opposed to existent ERP's.
Even though SAP, Dynamics and Co. are powerful and well developed tools, I believe that their structure doesn't allow them to be as organic as needed and as flexible as Open Source solutions can be.

J. Maier, IT Project Architect and Designer.

[עדי פרנקפורט]

שי שלום
ראיתי את הכתבות עליך ואם ברצונך לקבל עובד חדש לפרוייקט שלך אשמח אם תצור קשר

[yeosef ohana]

בס"ד
היי שי
קראתי במיוחד את הכתבות עליך מהעיתון בעברית,כיוון שאני יותר מתקשה באנגלית
אנימבין שעובר עליך תהליך של מודעות ,כיצד לעשות את העולם יותר טוב
כמו כן אני מבין שאתה עוסק כרגע בגיבוש פיתוח למנוע חשמלי חסכוני.
ברצוני לספר לך שהייתי בעבר מנהל פיתןח של חברת ההייטק נאולים .חברה זו עסקה בפיתוח מנוע עתידי לתחום ההייטק .המנוע בעל בנוי על בסיס פיזו והוא בעל ניצולת גבטהה ביחס למנוע סליל.
אני סבור שמנוע זה יוכל להשתלב באופן כל שהוא במכונית העתידית.
כמוכן יש לי הרבה רעיונות על איך תראה המכונית העתידית מבחינה טכנית ושלבים ליישומה ,אשמח לשוחח איתך על כך .
בנוסף אני כרגע עוסק בפיתוח עצמאי של תוכנה לזיהוי דיבור.
כתובת האימל שלי
yeosef@walla.com

[Mario Ruiz]

ERP matters: it can change your procedures, strategy and operations if you do not choose carefully.

The most important thing is to align your strategy to your ERP before beginning to implement.

Mario Ruiz
http://www.oursheet.com

[ani]

hi shai! i'm a student of last year production engg. i want to know more about ERP. can u send me some e-books to me?
if possible, send them to
amdatar@gmail.com

[Mark]

"The target should be a sub 100 days implementation (in the case of mid-market companies sub month) and more importantly – the ability to continuously modify the edge processes every 100 days."

I know you're super smart, but have you ever worked on a client site? With BusinessOne, maybe, but even the mid market requires some complex voodoo that easily runs over 100 days.

Ok For Now

[saar]

לשי אגסי בנושא רכב חשמלי
ברצוני להציע לך לקחת את הפרויקט של הרכב החשמלי מס צעדים קדימה
אים בפינוי זמן הנסיעה מעצם הנהיגה
ואים בהפחתת תאונות הדרכים למספר זניח
כבר כיום ישנו כלי תעבורה שמספר התאונות בו שואף לאפס
אף על פי שהוא מוביל מספר אדיר של נוסעים
מנקודה א לנקודה ב
וזו היא כמובן המעלית
הגורם הגדול ביותר לתאונות הינו הגורם האנושי
גורם זה לא קיים במעלית
כמו כן איין הנוסע במעלית צריך לעסוק בנהיגתה מעבר ללחיצה על הכפתור הנכון

לדעתי השילוב של מכונית בתוך מערכת הדומה למעלית ניתן לעשיה בטכנולוגיה הקיימת כיום
אים נדמה את המעלית למכונית ואת הפיר ( אופקי או אנכי ) לכביש העתידי
כאשר ה"מעלית מכונית" יכולה לצאת מהמערכת או להיות בתוכה כול הזמן

הסיבה העיקרית לכך שכול כך חשוב למצוא פיתרון זה או זהה לו היא העובדה שממש ברגע זה עומדים בתור מעל שלוש מאות אנשים כול שנה על מנת למות בתאונת דרכים

במידה והנך מעוניין אשמח לשוחח איתך על הנושא
צור קשר למייל שמסרתי ברישום
יש להקפיד לרשום בשורת הנושא
1234
על מנת שהמייל יעבור את דואר הזבל

לה"ת
סער

[saar]

לשי אגסי בנושא רכב חשמלי
ברצוני להציע לך לקחת את הפרויקט של הרכב החשמלי מס צעדים קדימה
אים בפינוי זמן הנסיעה מעצם הנהיגה
ואים בהפחתת תאונות הדרכים למספר זניח
כבר כיום ישנו כלי תעבורה שמספר התאונות בו שואף לאפס
אף על פי שהוא מוביל מספר אדיר של נוסעים
מנקודה א לנקודה ב
וזו היא כמובן המעלית
הגורם הגדול ביותר לתאונות הינו הגורם האנושי
גורם זה לא קיים במעלית
כמו כן איין הנוסע במעלית צריך לעסוק בנהיגתה מעבר ללחיצה על הכפתור הנכון

לדעתי השילוב של מכונית בתוך מערכת הדומה למעלית ניתן לעשיה בטכנולוגיה הקיימת כיום
אים נדמה את המעלית למכונית ואת הפיר ( אופקי או אנכי ) לכביש העתידי
כאשר ה"מעלית מכונית" יכולה לצאת מהמערכת או להיות בתוכה כול הזמן

הסיבה העיקרית לכך שכול כך חשוב למצוא פיתרון זה או זהה לו היא העובדה שממש ברגע זה עומדים בתור מעל שלוש מאות אנשים כול שנה על מנת למות בתאונת דרכים

במידה והנך מעוניין אשמח לשוחח איתך על הנושא
צור קשר למייל שמסרתי ברישום
יש להקפיד לרשום בשורת הנושא
1234
על מנת שהמייל יעבור את דואר הזבל

לה"ת
סער

[doron cohen]

To Mr shai agasi

He who daring winnings

all the bast!
doron
doron's automotive diagnostic lab.

[Natan Gonen]

I just finished reading the article in Yediot written by a little bit skeptical Sever Plotzker. My reaction was to find a way to express to you my feeling at the end of the reading. I found this blog and I hope you will be able to read that your vision has inspired me. As an Israeli living in USA for more than 30 years and still sees me as an Israeli first, I want to thank you and the people around you for pushing this project to be an Israeli revolution that will change the world. Finding a replacement to the dependence on oil is not just a the start of the solution to global warming, it is also the key for the future of the security of Israel which we all cherish. If there was a need for volunteers to push this project I will jump first.
I wish you all the success (May you overtake Bill Gates place in Forbes list). I hope to see the dream come true very very soon.
Yeshar Koach,
Natan Gonen