Enterprise Suites or Customised Solutions
Attempts are being made in
government sectors and various businesses to utilize the information technology
to foster the profits and ensure the accountability. Case studies show
indicative successes in businesses. Government sectors are yet to post glorious
success stories. Implementation of IT based systems require deep analysis of
the background of organisation vis-à-vis IT solutions being offered by the COTS
solutions. There are innumerable vendors offering generic IT solutions to
highly customised domain specific solutions. A family of solutions called ERP
(Enterprise Resource Planning) solutions is the most prevalent buzz word in the
industry. Many big to small vendors are offering ERP solutions with elaborate
to limited features editions. The costing of each feature complex, licensing
complicated and direct applicability unclear. It is time that we shall look at
the options and solutions for enabling the organisations with IT. I ponder over
various aspects of decision making for implementing an IT solution. The
question of security of the system is not addressed in this discussion
(requires a larger and individual space), though it is very important and is
actually addressed when we initiate the implementation. It is mandatory to
study the built-in features of a solution vis-a-vis domain and specifications
before zeroing upon a solution. Let’s look at few aspects of decision making
factors in thinking about IT solutions.
COTS Solutions for ERP
The most popular buzz word in the
area of enterprise IT is Enterprise Resource Planning (ERP). ERP is a business
management software suite that an organisation or a business company uses to
collect, store, manage and interpret data from various business activities,
including product planning, trading, finance, manufacturing, service delivery,
marketing, sales, inventory management, shipping, tracking and payment. The aim
and goal of an ERP is profit enhancement and growth of any organisation. The
resource being managed could be raw material, funds, material, inventory,
products, humans, services, infrastructure and anything which is the core
business of an enterprise.
ERP aims to provide an integrated
view of core business processes, often in real-time, using common databases
maintained by a database management system. ERP systems track business
resources—cash, raw materials, machinery, man power and production capacity—and
the status of business commitments: purchase orders and payroll. The
applications that make up the system share data across the various departments
like manufacturing, purchasing, sales, accounting, etc. ERP facilitates
information flow between all business functions, and manages connections to
outside stakeholders.
ERP is a concept. Hundreds of ERP
types and solutions exist which are applicable to various domains, sizes and
contexts of application. Primarily aimed at helping businesses to operate
business efficiently, the ERP solutions also help to cut down the unnecessary
expenditure, delays and wastage of resources. Once all these are streamlined,
the business intelligence and streamlined control provides clear indicators of
potential growth. Thus, practically all aspects of business are covered under
ERP. ERP is not a fancy word for boasting that we have implemented ERP. An ERP
implementation must show that there is a marked difference in the profits and
there is a clear indication in numbers that there is return on investment.
Functional Areas of ERP
An ERP system covers the
following common functional areas. In many ERP systems, these are grouped
together as ERP modules:
- Financial accounting: General
ledger, fixed asset, payables including vouchering, matching and payment,
receivables cash application and collections, cash management, financial
consolidation
- Management accounting: Budgeting,
costing, cost management, activity based costing
- Human resources: Recruiting,
training, duty rosters, payroll, benefits, diversity management, &
retirement.
- Manufacturing: Engineering, bill
of materials, work orders, scheduling, capacity, workflow management, quality
control, manufacturing process, manufacturing projects, manufacturing flow,
product life cycle management
- Order Processing: Order to cash,
order entry, credit checking, pricing, available to promise, inventory,
shipping, sales analysis and reporting, sales commissioning.
- Supply chain management: Supply
chain planning, supplier scheduling, product configurator, order to cash,
purchasing, inventory, claim processing and warehousing (receiving, put away,
picking and packing).
- Project management: Project
planning, resource planning, project costing, work breakdown structure,
billing, time and expense, performance units, activity management
- Customer relationship management:
Sales and marketing, commissions, service, customer contact, call centre
support - CRM systems are not always considered as a part of ERP system but
rather Business Support systems (BSS).
- Data services : Various
"self–service" interfaces for customers, suppliers and/or employees
Implementation of Enterprise Solutions
Many ERP vendors offer plethora
of suites to implement in businesses. Some are domain specific and some are
generic offerings. Before we look at the ERP solutions applicability, we need
to understand the three aspects of any ERP project:
Implementation: A process that
defines the method to implement the ERP Software in an organisation. The ERP
solution comes pre-configured means an organisation just needs to set up the
master data (e.g. employees, materials, customers, suppliers, pricing records
etc) and start transacting on the new system. In reality this rarely happens;
as all organisations are different in some way or the other. Normally the
standard settings are modified as per need (to extent of flexibility offered by
the system).
Configuration: Most of the COTS
solutions offer existing parameters and functionalities which can be assigned
the organisation specific value. Configuration is syncing the COTS system with
the company process so that system could perform as per the organisation
requirement. Configuration is done using the existing structure and
functionalities available in the package. Many times calling for change in
organisation functioning as per available functionalities of the solution.
Customization: Customization
involves developers. If configuration is not supported by default
functionalities then with the help of coding in the given compatible language,
new features are added to meet the business requirement. These changes are
normally outlined on what’s called a functional specification, which is usually
written by the responsible functional consultant. Customization can be costly
and can complicate future upgrades to the software because the code
changes/modifications may not easily migrate to the new version.
Few Questions before Decision
It is highly improbable to fit
any commercially off-the-shelf ERP solution to an organisation or business
directly since each entity has its own practices perfected over a long time,
operational mechanisms which have worked for the business and local policies
operating in the domain. So before taking a leap into investing into ERP
implementation, it is extremely important to sit back and think about few
questions:
- Is operation automation the aim
or the organisation requires to capture business intelligence for overall growth?
- Many times
organisations/businesses mistake operational automation for an ERP
implementation?
- Which domains need to be
addressed and the level of integration between various domains of
business/organisation is to be defined?
- Is any COTS solution fit the
scenario? Or totally customised solution is required. If COTS is to be
customised more that 20%, it is better to look for alternatives.
- Is the organisation/business
adaptable enough to changes and is it ready to adopt the industry best
practices offered by the various ERP solutions?
- How much investment can be made
in the ERP implementation?
- What is the Return on Investment?
- What is the goal of ERP solution
so that the implementation shall optimise the structure and operations towards
business returns? To define the overall goal a top-down approach is to be
adopted.
- What is the timeline and approach
to implementation? This is so that the phased manner of implementation can be
adopted. In defining the phases the logical bottom up methods are to be adopted
for successful implementation.
- How much integration with legacy
systems? Or what is the plan of replacing the legacy systems and data
migration?
- Is it possible to standardise the
procedures across various arms of the organisation?
- What will be the structure of
flow of information across various hierarchies in the organisation/business?
- What is the maintenance cost year
on year and what will be the upgrade strategy?
- What is the expected security
level to be built-in?
Building customised hierarchies,
often changing reporting structures, dynamic workflows require ERP solution to
be fully configurable (or require customisation) with respect to these aspects
of implementation. Most of the ERP solution providers have proprietary
frameworks for customisation. This is also a business model in which the cost
of changes and maintenance is intended to be unreasonably high due to
proprietary technology. The expertise is not easily available for the
proprietary solutions.
Many times the decision makers
confuse office automation with ERP implementation. They would like to automate
certain activities like billing and voucher preparation but do not have a clear
cut aim of which processes to be converted to automated workflows. Business
process automation is an intangible knowledge which needs to be translated into
the workflows with authorities and adequate security. There is no direct
visibility of the parameters required to be converted to reports and which
output reports can drive the input parameters. Translating business acumen to
an IT system is an art which depends upon the technical knowledge of ERP
solutions as well as the business practices. Sometimes analysing the rationale
behind a particular practice can allow the solution designer to tweak with it
and bringing an optimum solution in terms of implementing the policy in a
different form and following the best practice of the solution. This reduces
the customisation effort and the functional requirements of the organisation
are also met. But this seldom happens and mutual blame complicates the
solutions.
Practically all solution
providers like SAP, Oracle, Microsoft, Ramco, Baan and many more COTS offer the
above functional domains and modules but require respective proprietary
configuration and customisation to fit into any organisation or a business. The
advantage of ERP solutions being direct availability of Industry best
practices, built in reports, industry standard business intelligence
algorithms, integrated frameworks for workflows, rules, interface screens and
built in security and authentication features. Most of these OEMs have been
strong in one technical domain but over a period of mergers and purchase they
acquire other technologies. Thus complete solutions are not integrated by
design. Internally modules are joined by various patches to talk to each other.
Not all technical domains are strong and have state-of-the art features.
Employee Self Services (& Custom Developed Solutions)
Employee self-service (ESS) is a
term applied to web-based or kiosk based applications that provide employees
access to their personal records and payroll details. This is a common
requirement of each and every employer being essential for private as well as
public employers. This is the first step towards e-governance in which
government-to-employees or business employer-to-employees charter is addressed
by IT solutions. The features allow employees to change their own contact
details, family members & banking information. It also allows
administrative tasks like applying for a leave, reviewing of timesheet,
inquiring about available loan programs, requesting for overtime payment, and
viewing of compensation history, internal transfers, travel approvals, medical
benefit requests and submitting of reimbursement slips. With the emergence of
ESS, employees are able to transact with their Human Resource office without
physical appearance which is considered irrelevant in some transactions. ESS
may be operated on an employer's intranet, via a web service or specific
kiosks.
ESS is an increasingly prevalent
trend in human resources management that allows an employee to handle many
job-related tasks that otherwise would have fallen to management or
administrative staff. ESS software is available as a stand-alone product or as
a component of some larger application, such as an enterprise resource planning
(ERP) product. These applications are also built on workflow based systems so
that transactions can be stored. ESS is part of a larger movement towards
automated and, increasingly, Web-enabled services that encompasses e-support,
e-voting, Web self-service, e-procurement, and e-outsourcing, among other
possibilities. Each one being a custom solution for the particular domain
addressing the specific needs built over the practiced rules of operation.
Integrating these solutions for an organisation goes by the design premises of
the solutions. The experience of domain experts and IT experts goes into
building three tiered solutions (database layer, business layer & GUI
layer) which can be scaled and integrated.
Open source technologies offer a
plethora of solutions like workflow engines, rules engines, security frameworks,
GUI constructs, authentication frameworks and non-proprietary development
environments to build a highly concise yet scalable applications. There is
strong support available from open source community on these technologies. This
approach of implementing specific services through web-portals is one of the
easy options to start automation of the organisation/business. Using
non-proprietary technologies and integrating open source solutions sometimes
can give optimum cost solutions for specifically customised services of a
particular domain. It is possible that integrating various domains as an
after-thought can be challenge. But well-structured domain by domain
implementation can form a great backbone for any kind of large implementations.
A detailed look at feasible approaches and available technologies can bring in
slow and steady development in all domains. As such this meagre investment can
form a strong baseline for bigger and larger integrated implementations as and
when an organisation is ready for the uniform enterprise solutions and cultural
change.
e-Governance
Implementing information
technology advancements in government setups is first a thought experiment and
then an implementation. Government setups are not necessarily profit driven.
There is large difference between governance and resource management for
profitability. The two being named as e-Governance and ERP respectively.
Industry has matured with respect to its business tasks and has evolved many
industry practices. Governance practices are yet to mature and form a baseline
standards. The primary goal of governments being research, growth of the
country and welfare of the citizens. There is clear demarcation between the
profit-oriented government sectors and enablement sectors. Thus applying ERP
solutions which are based on industry practices and are tuned for profitability
are generally misfits in enablement governance oriented sectors. This leads to
high rates of failures during implementation.
Almost every sector of operation
in a country is governed by various arms of ministries, making government a
very wide and varied kind of structure. Though operationally clear in
individual setup, it is very complex in unison. Though governed by uniform
constitution and rules, interpretations and applications vary widely from
domain to domain. There is no standardisation. Due to lack of standardisation
across various government arms, no considerable effort has been put by any
solution provider to tune the government practices into an ERP solution. The
willingness to invest in IT solutions for e-governance by various government
arms is different at different levels.
A DoD report states that there
are vast dissimilarities between the Defense Department and private sector and
it is an "invalid premise" to believe that commercial off-the-shelf
ERPs have the capability to meet all DoD needs, even though the software be
customized and business processes alerted to conform with the ERP.
The existence of processes
without analogue in the private sector leads the government agencies to
integrate ERPs with legacy systems. But that undermines the fundamental value
proposition of an ERP in the first place--the full integration of processes.
The various departments and arms
of government do not have (or do not intend to have) real federation across
multiple ERP implementations. In reality, transactions aren't contained within
a single organization and thus many functionalities remain out of the scope of
IT system.
The leader driven functional
domain controls hinder the attempts to standardise the data. The aims and goals
of an organisation may differ from others. The rule and policies vary with
vested powers. Thus the framework is never standardised. Even the processes are
non-standard largely dependent upon the governing authorities. Each changing
incumbent un-doing the predecessor’s policies in order to make a mark (a sorry
state but true). Frequent changes take its toll on the IT solutions and
integration tends to break down
IT implementations require
organizations to change from within. Organization's willingness to change
behaviour and processes is a prerequisite. There are many within the
organisation who do not want to accept this change. Manipulative vested
interests de-rail these implementations. The obvious method of de-railing being
highlighting the minor flaws in the system. Another factor for failure being
lack of support from the domain in-charge whose intangible knowledge needs to
be captured into the system. The fear of losing the power of processes and data
is all prevalent. The idea of domain experts working towards creating better
policies with the help of large database and advanced tools is yet to trickle
into the administrators.
IT project owners lack authority
to achieve business process changes. Ultimate control being the financial
management domain creates a weakness. Leaders with authority and accountability
who can ensure necessary amount of change and enforce agreement between
disagreeing parties would require to own the implementations. Moreover, they
would have to be personally engaged in the process, since delegating their
authority will dilute the implementation and eventually fail.
Many features of standard COTS
solutions are irrelevant for government sectors like valuation and depreciation.
These are built for private sector as part of a tax strategy, which have
minimal operational value to the government structure. A diligent
accountability based approach (cost accounting, technical goals accountability,
administrative accountability & governance accountability) would be better
for implementing an IT solution in the government sectors. For this the well
thought out practices and efficient mechanisms need to be instantiated through
the IT solutions.
Most of the attempts in
government have been individual efforts and limited to a small arm of the
organisation. Scalable and generic solutions with organisation wide impact have
not been attempted. This kind of attempt would have resulted in a framework for
a COTS module for government.
Decision to implement ERP, ESS or
customised solutions for e-governance, e-support, e-procurement etc is a
careful mix of the extent of IT penetration (domain identification), choice of
technology, investment cost and cultural change readiness. Implementation should
be a task driven by authority and backed by cultural change.
Following reference reports from
the internet are a good read. Some parts are used in the above given text.
- Systemic problems with DoD ERP
strategy and implementation, warns report By David Perera, September 23, 2012
- U.S. Air Force Blows $1 Billion
on Failed ERP Project by Robert N. Charette, 15 Nov 2012
- US Department of Defense – U.S.
Air Force, Feb 11th, 2013, Entry from the record in the “Catalogue of
Catastrophe” – a list of failed and troubled projects from around the word
- www.nasa.gov/offices/ocio/portfolio/business.html
- http://searchsap.techtarget.com
- http://www.osc.state.ny.us
- http://sapoverview.blogspot.com
