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1 Integrated ERP Guide: Expert answers to your most frequently asked questions In collaboration with Tribridge and Aberdeen Group

2 2 I N Introduction One: Prepping for ERP Enhancement Two: ERP Implementation Three: Growth & Global Considerations Four: Change Management & Communications Next Steps

3 3 Introduction As companies grow, they get weighed down by a lot of information siloed in individual systems service, and customer relationship management (CRM) among them. Getting these data sets talking with one another effectively is key to operating with that customers demand in today s 24/7, always-on economy. Enterprise resource planning (ERP) systems have been developed to accomplish precisely this: to automate, multiple business functions both internal and external information such as customer and marketing data in real time. solutions enable them, for example, to align their data on purchase orders, inventory receipts and costs. They can track orders from acceptance to of payment. And all of this provides valuable insights to assist sales forecasting and inventory optimization. Nick Castellina Luis Gallardo Kathy Killingsworth

4 4 One: Prepping for ERP Enhancement Nick Castellina: resource planning are its ability to enable standardization, visibility, and collaboration. It helps to standardize best practices and introduce formalized methodologies across the organization. Luis Gallardo: It improves the integration of operations with administrative functions and, depending upon the needs of the organization, can control, or integration of the supply chain. Nick Castellina: ERP means real-time visibility to decision makers, so they can better plan and execute business strategy. And it helps to connect employees across the organization, no matter where they are, in order to improve collaboration. For example, manufacturing operations to customer service and delivery. ERP helps to standardize best practices and introduce formalized methodologies across the organization It can enhance operational visibility, financial control, or integration of the supply chain.

5 5 Kathy Killingsworth: These issues can be regarded as symptoms of more fundamental problems in IT. Are you having problems getting access to information about your business? Is it taking too long to close your books at the end of the month? information about their orders? Do you have inventory management issues? Does accounting take too long to do basic processes? Do you have outdated processes manual data aggregation or paper-based documentation?? Additional questions you should be asking and answering are: Are your IT resources too time consuming or costly? Do you have disparate, stand-alone software systems? Do you have a number of different software applications for different purposes? Is your company s growth complicated or hindered by software integration issues? If your organization is facing challenges in any enhancement to your current ERP implementation.

6 6 Luis Gallardo: This is a company-by-company and even a business-unit-by-business-unit question. It really depends on the company s circumstances: where the most pain can be alleviated or the be a question of enhancing business visibility, by improving the integration of operations with the administrative functions; or it could be a matter of control or integrating of the supply chain. The key is determining your needs before you implement the ERP solution, and knowing your objectives and goals going into it.

7 7 Nick Castellina: You should start by looking internally. Kathy Killingsworth: Come up with an internal set of questions, based upon what makes you unique and innovative as a company. Luis Gallardo: Focus on your culture, what is important to you in terms of value, current pains and needs. This will provide core values and needs based set of questions. Kathy Killingsworth: Next, put your core values to one side and objectively evaluate how the weaknesses in your company s culture might impact this ERP project. First and foremost, change required to accommodate a new way of Strong project management correlates very strongly with a successful ERP implementation. An ERP implementation should be viewed not just as an IT solution, but also as a business solution that will transform your organization, doing things? Are your stakeholders prepared to reengineer their processes to obtain better results? Who are the key decision makers in your company who need to buy into a new system in order to make it successful? Despite what they say, people are not always open to new ways of doing business and managing change. What is the message that will resonate with internal concerns to help gain support for a new system? Are people afraid of losing their jobs? Do you have a project manager who has enough experience within your company to manage this project for you? Should you hire someone to act as your project manager for this critical initiative? testing your company s culture for its ability to adapt to technological changes. Luis Gallardo: Next, you can move to the tactical project management. Nick Castellina: And you will need to answer a new set of questions, such as: What can you afford? What can you support? Which processes are absolutely necessary for support? Who will be using the solution? Are there any technologies that need to be integrated? Is there agreement on the requirements and budget necessary to implement the solution successfully? Oftentimes, successful organizations employ a third party to help with this process. They can help devise a list of essential criteria.

8 8 Kathy Killingsworth: The alignment of your organization s ERP implementation goals with your business strategy should be accomplished during the planning phase of an enterprise project. The related expectations for the project. This process typically involves questions in two areas: (1) what is the desired impact of the project on the business; and (2) how will the success of the project be measured? goals such as reducing total service or product cost, increasing market share and improving customer penetration and customer satisfaction. Answers to the second question typically address things like on-time and on-budget performance, implementation of desired new capabilities and possibly achievement of measurable business Looking ahead, your ERP implementation should be able to adapt to changes in your business as your company grows. improvements, such as reduced transaction costs and reduced complexity. Clearly articulating these goals and expectations will give your team context and direction so that design decisions can be aligned with, and support, overarching goals. Luis Gallardo: A good business partner can help you break down the overall strategy into its key points and then help you map those to opportunities within the business and ultimately to the right ERP solution. Each opportunity will need to be prioritized by the business value it can provide to ensure that a proper business case for it can be made. Kathy Killingsworth: Looking ahead, your ERP implementation should be able to adapt to changes in your business as your company grows. and it should enable end users to readily obtain the information they need to perform their tasks. To this end, you will need to determine if your current staff is trained in the new ERP software. If not, do you need to consider hiring new technical experts? You will also want to consider whether the company that developed and owns the ERP enhancing the software. Beyond these basics, think about the improvements you expect from a new ERP system. For example, if you are focused on product costing, how will this be handled by the various ERP solutions? Can actual costs be tracked and compared to standard or estimated costs? Or, if you have to accommodate regulatory compliance business requirements, will the ERP system meet those needs?

9 9 Two: ERP Implementation Luis Gallardo: The answer to this is undoubtedly yes. Kathy Killingsworth: The transformational element behind cloud computing is that businesses are now empowered to stop worrying about what computing power is required for the tools they need, and instead can focus on building the right tools to meet business demands. Nick Castellina: SaaS solutions can be implemented more quickly, require fewer internal IT resources, and can be paid for on a month-tomonth basis, rather than tying up a large amount of capital in an up-front expenditure. In addition to being great for SMBs, this approach can also be applied by larger companies to a multi tiered ERP strategy, enabling them to get new subsidiaries up and running as quickly as possible. Kathy Killingsworth: Take care, however: Although your SaaS ERP solution may be in the cloud, it s vital to keep your feet on the ground when selecting a cloud provider. Because cloudbased ERP systems are important and complex, they should be single tenant. A single-tenant environment allows integration, proper security, development and the ability to have a segmented security footprint. Get all of the information Ask about risk mitigation, compliance, operational your other applications, and the ability to run ERP in the cloud. Understand the differences in deployments Do your homework to get the full picture of on-premise, pure cloud and hybrid solutions, and the best business situations for each. Crunch the numbers Accurately compare total cost of ownership when evaluating cloud versus on-premise ERP and accounting solutions. Many cloud providers claim to be single tenant, but in fact are sharing terminal servers or database servers All that being said, the increased scalability, faster deployments, reduced dependence on IT, minimized initial investment and rich integration capabilities of ERP via SaaS are all very attractive reasons for midsize businesses to strongly consider the cloud. SaaS solutions can be implemented more quickly, require fewer internal IT resources, and can be paid for on a month-to-month basis

10 10 Previously, we looked at some of the advantages and challenges of a SaaS ERP implementation. Now let s step back and take a look at how a cloud implementation differs from a traditional onsite approach. Kathy Killingsworth: Traditional implementation of an ERP system means on-premise deployment. This type of implementation includes the procurement of additional hardware, software, data centers and IT resources. While many organizations still require on-premise implementations for a variety of reasons, increasing numbers of midsize businesses are choosing to deploy their ERP systems in the cloud. With cloud implementations, there is no hardware or software to purchase. You simply pay one monthly fee based on the number of users who access the system. There are two types of cloud ERP deployments: public and private. Public clouds are standardized and built for massive scale. Public cloud solutions allow large numbers of customers to share database servers and application code they are great great for you (the customer). Private clouds are customizable to the needs of an organization. They enable you to leverage existing IT resources and offer additional layers of security, as well as increased redundancy through access to a colocation model for data storage. Private clouds offer: Reliability and fault-tolerance The hosting partner is able to host secure, reliable applications. No patching or maintenance With less hardware to manage and maintain, you can focus on what is important. The ability to get online fast Private clouds enables you to quickly deploy both a business site and business-critical software. Enhanced control You have greatly enhanced, often full control over your systems and data.

11 11 Kathy Killingsworth: Executive ownership and regular reinforcement of the importance of a successful ERP installation should be emphasized. Stakeholder engagement and executive sponsors commitment critical. The right balance of executive involvement in an engagement motivates and, frankly, pushes the team to get the job done and to do so with a high level of quality. From a stakeholder aspect, ERP implementations simply aren t successful without a good deal of involvement from the project s various participants. This does not mean there must be full-time engagement from everyone involved, which would be especially hard for SMBs, but it does mean the team must focus on the project when it matters. You should conduct, or participate in, a formal project kick-off meeting with your consulting Stakeholder engagement and executive sponsors commitment are critical. team so that you can outline project objectives, key responsibilities and time-lines. Communicate a clear roadmap of the tasks and activities by phase as the project progresses. Provide a checkpoint of go or no go after the design phase and signoff, and prior to go live implementation. Make sure that your employees take accountability for their functions of the new ERP system. A train the trainer approach works best by function. Not designating functions can lead to additional needs and costs for training as the project is implemented. Nick Castellina: How you implement your enterprise resource planning solution depends on your company s size and on what type of legacy systems your organization is currently using. Some companies use an ERP implementation as an opportunity to restructure the organization. Others try to implement an ERP based on existing needs. Whatever approach you take, the method of implementation should be aligned with your organization s overall goals. Whatever approach you take, the method of implementation should be aligned with your organization s overall goals.

12 12 Nick Castellina: Phased rollouts can be quite successful, but organizations should also take a look at best practices that can be taken from the ERP vendor or a third-party service; these practices will help to improve the way the business is run. Also, rapid implementation organizations. Luis Gallardo: In light of today s economy, many companies are breaking big bang implementations into small chunks. The challenge rollout should always have the end goals in mind and be aligned with the overarching business strategy.

13 13 Luis Gallardo: There is always a correct balance in life and that applies to ERP implementations as well. Companies can get ahead by implementing social tools within their ERP. Nick Castellina: It is certainly possible to do remote ERP implementations, and organizations have had success with both remote and in-house implementations. Luis Gallardo: There are aspects to a project that are better handled remotely if managed appropriately while others should not be. If cost is a big factor, then a larger push to remote implementation may be appropriate. However, never underestimate the power of a face-to-face conversation to truly communicate effectively. Whether done remotely or in-house, good social collaboration across the organization is key to any successful ERP solution.

14 14 Three: Growth & Global Considerations Nick Castellina: Best-in-class organizations are 63% more likely than all others to have an ERP solution that can quickly and easily adapt to business change. This adaptability is essential because as the backbone of a business, ERP that aspire to grow must choose an ERP solution that can accommodate business change. Luis Gallardo: This is commonly referred to as scalability and it is a very important factor in evaluating ERP solutions. Most of the tier 1 solutions (SAP, Oracle, Microsoft Dynamics AX, etc.) have strong capabilities to grow. The implementer to help you manage this growth while also managing the functionality required to scale and the cost associated with activating new functionality or expanding to new regions or businesses. Scalability...it is a very important factor in evaluating ERP solutions Best-in-class organizations are 63% more likely than all others to have an ERP solution that can quickly and easily adapt to business change.

15 15 Kathy Killingsworth: If your organization is considering global expansion or has existing operations around the world, you should consider the impact of foreign currencies and languages exploring a new ERP system. Most countries have unique requirements when it comes to their local regulatory issues, tax rules and statutory reporting consuming. In addition, exchange rates constantly are necessary for correct periodic accounting. If converted foreign amounts are not periodically reports can be misleading. Luis Gallardo: Regarding foreign currency: if you are U.S.-based company, you need to be concerned about FASB 52, which focuses on foreign currency translation, and compliance with International Financial Reporting Standards (IFRS). Languages and the implementation of native language interfaces for different countries are also keys to effectively and properly using the system. You don t want language barriers to prevent Foreign currencies and languages are just some of the global issues that transnational corporations need to consider. Other global issues include legal and statutory reporting in other countries and compliance with local labor laws and processes. Kathy Killingsworth: Top-tier solutions such as Microsoft Dynamics AX provide foreign-currency conversion, localization compliance and language conversion support for several countries around the world. Localized versions of top-tier solutions enable foreign subsidiaries to easily address local legal and statutory reporting requirements, while still conforming to internal corporate consolidation and reporting standards.

16 16 Four: Change Management & Communications Nick Castellina: ERP implementations require capabilities similar to those generally required for the management of any project. There must the skill sets to ensure a smooth implementation. Scope creep must be managed. But really this all stems from a project plan that is well thought out from clear service providers prior to implementation and communication with the ERP vendor as well as any third-party. mediums that are effective for them. This is more of an art than a science, but system integrators (companies that assist with implementations, such as IBM) have effective change communication programs with methods, accelerators, templates, examples, etc., that assist in this area. Luis Gallardo: The most important obstacle,however, is to streamline/eliminate the basic human inclination to resist change. There are many different models and approaches for helping employees embrace change, and the issue can be addressed through a change management program within an implementation project. There are ways to motivate people and a good book to read is Who Moved My Cheese by Spencer Johnson. You need to send relevant communications to various stakeholders at the right time through

17 17 Next Steps Now that you ve heard from the experts, you should have a better sense of what an enterprise resource management implementation or enhancement to your existing ERP solution would be like. The decision whether to move forward is, of course, for you and your colleagues to make. But we recognize that you may have any number of further questions and concerns that you would like to address. Our advice is to reach out to a reputable ERP vendor or implementation service provider (like IBM or another experienced provider that you can trust) to talk through these issues and gain a better sense of where your organization stands vis-à-vis a new ERP solution. And when the time is right, move ahead. Additional Resources: ERP infographic: Getting the Most from your ERP Analyst Blog: Take an Integrated Approach to ERP Analyst Blog: Let the Chef Make Your Selection for you: Utilizing Business Partners Analyst Blog: Creating a Winning Team Aberdeen ebook: A Guide for Successful ERP Strategy in the Midmarket: Selection, Services, and Integration. Aberdeen ebook: Using Services to Support a New Generation of ERP

18 18 Full Profile of Industry Experts Nick Castellina is a Research Analyst in Aberdeen Group s Enterprise Applications practice. Nick joined Aberdeen in His primary research focuses on the use of ERP, SaaS, or cloud model, as well as ERP strategies in small and mediumsized businesses. His enterprise applications research explores how ERP is used differently across industries, and how it can apply to all roles within the organization. Additionally, budgeting, and forecasting. Other topics that he covers include project management, enterprise performance management, professional services to these activities, Nick plays a major part in the development of the Aberdeen Business Review. Luis Gallardo is an Associate Partner for IBM Global Services in the Midmarket group of the Global Business Services organization. In nearly 14 years his consulting career path has covered multiple industries, with the core of his work in distribution industries with considerable exposure in life sciences, consumer products, food & beverage, clean (green) technology, electronics, insurance, entertainment, retail, manufacturing and government. Luis s broad project expertise is centered around the ERP business software and business development roles for all aspects of ERP His consulting knowledge extends into several different disciplines, including software selection, business case development, business transformation and application management services. Kathy Killingsworth has more than 25 years of consulting and private industry experience, including IT strategy and business process management, systems and software development, packaged systems implementation projects and quality assurance. Kathy oversees the strategic direction of Tribridge s national Microsoft Dynamics AX practice, which includes on- ERP solutions. Major areas of focus for Kathy improving the overall solutions delivery experience, ensuring that the solutions and sales of Tribridge clients, and developing new ways to enhance customer service. Under her leadership, Tribridge has been acknowledged with numerous customer excellence awards for innovative ERP implementations.

19 Copyright IBM Corporation IBM Corporation 1 New Orchard Road Armonk, New York U.S.A. Produced in the United States of America May 2013 All rights reserved. IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at ibm.com/legal/copytrade.shtml References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. All customer examples described are presented as illustrations of how those customers have used IBM products and the results they may have achieved. Actual environmental costs and performance characteristics may vary by customer. SMM03011USEN-00

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