When it comes to analytics, the future is now!
There’s a misperception I run across again and again talking to customers and prospects, and that is that you have to have ERP (Enterprise Resource Planning) fully deployed before you can move ahead with analytics. But this does not have to be a serial process. You can apply analytics to data generated outside of ERP systems and start getting business benefit now, and even more benefit once ERP and the value from a consistent business process platform and improved data quality comes online.
Studies done last year by Nucleus Research show that businesses get an average $10.66 of benefit for every dollar spent on analytics. In a press release announcing these findings, David O’Connell, Principal Analyst at Nucleus, remarked “With so many organizations opting not to invest in analytics, those companies that leverage this technology to learn more about their customers, products, and costs will be in a strong position to cost effectively grow their business at the expense of rivals.”
Consider the case of industrial gas supplier Airgas. The company has been converting its 12 regional distribution companies over to SAP, a process it expects to complete in the first quarter of 2013. With just 4 of the distribution companies switched over, Airgas Chairman and CEO Peter McCausland had this to say in the company’s 3rd quarter 2012 earnings call: “Based on our experience today, we are confident that by the end of calendar 2013, the benefits we detail will be achieved and will constitute a minimum of $75 million in annual run rate operating income, with the likelihood that these benefits will ultimately reach or exceed $125 million. The areas of benefits we have announced do not represent the full earnings power of our SAP conversion, however, and we expect additional economic benefits after the implementation is completed and we tap into the potential of the new system.”
If that’s not compelling enough for you, consider this: the long term viability of both your analytics and ERP programs could depend on getting started with analytics now.
Here’s why. For most customers, an ERP program is a multi-year, multi-million dollar undertaking. When ERP goes live you get instant benefit from automating a lot of your business processes. And, as you turn on different components of the system, you start generating data, but it takes time to accumulate and realize the business impact.
There’s this idea that for analytics to be effective, you have to wait until have a massive warehouse of ERP-generated data. That’s simply not true, and the business won’t wait. This is especially true for Asia Pacific-Japan, where so many customers are just beginning their journey with ERP, moving from Excel to something else.
Whether you have analytics or not, business users are still making decisions, people are still ordering and selling and all those sorts of things so the real question is, “how do I provide them something now so they can make more effective, more timely decisions knowing that the data quality and the amount of data is only going to grow improved, more enriched as ERP is rolled out across the company?”
Another consideration in favor of analytics now is that at some point in time you’re going to want historical data. You might as well start collecting and analyzing results even if it’s in a manual capacity, because everyone’s doing it on an Excel spreadsheet, the back of an envelope or just plain gut feel anyhow.
If you wait for ERP to be fully deployed, you’ll be late to the analytics game. Not only that, you might actually jeopardize both programs.
Analytics yields planning and prescriptive information that users can get insight from and take action on now. Most ERP data is rear view mirror, the system of record, and the things the CIO needs to measure aren’t always what business users find valuable. If the business is watching IT implement ERP, and they’re not deriving the value they expect from it as fast as they expect to get it, it’s not good for the long term health of your ERP program, and you may never get to analytics.
By putting analytics in users’ hands ahead of, or alongside ERP, you get immediate business benefit, you win the hearts and minds of stakeholders, and you get them invested in the process and excited about what they can achieve over the long term with a warehouse full of transactional information.