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We are not doing ERP

I recently spent time with a CIO who explained that the Executive Board of the Utility Company had decided they would “not do ERP” as part of their IT transformation. Like many companies, they see ERP as synonymous with what Gartner describes as a monolithic ERP megasuite. They do not want a complex, high cost, inflexible ERP that business people will not want to use.

I couldn’t agree more.

You can characterise the monolithic ERP megasuite as:

  • Integration trumps agility and fit to requirements
  • Single vendor and technology stack
  • Business disillusioned by poor usability
  • Slow to react to business changes
  • Enhancements inhibit upgrades
  • Increasing subverted by business users adopting point Saas solutions

In contrast Gartner describes a Postmodern ERP Strategy  as:

  • User Centric
  • Based on loosely coupled applications not a single product suite
  • Driven by the nexus of forces (Information, Social, Mobile, Cloud)

Why are Utility companies drawn to a Postmodern ERP strategy? Utilities seek to provide a safe, reliable and value-for-money essential service. This involves striking a balance between performance, costs and risks over the life cycle of network assets, ensuring  the health and safety of employees, customers or the public. Major changes to core ERP and Asset Management systems are inherently disruptive. Utilities often need to focus on optimising and augmenting their existing systems, rather than replacing them.

So if the ERP Megasuite is dead where does that leave the 2640+ Utilities around the world that run their businesses on SAP?

The good news is that SAP has embraced Postmodern ERP like no other.

Augmenting ERP and Asset Management

SAP has invested heavily acquiring companies that provide complimentary solutions to core ERP and Asset Management systems. These products widely support non-SAP core solutions. For example SAP Work Manager, previously known as Syclo is the most widely used mobile solution for IBM Maximo sites. It continues to be rolled out at Water and Power Utilities today that use no SAP ERP solutions. Business Objects solutions are used with any ERP and Asset Management system around the world. Similarly Cloud based solutions such as Ariba (procurement) and Successfactors (HR) are suitable for any IT landscape no SAP ERP is required.

SAP now offers a range of best of breed solutions that are designed to augment existing ERP and Asset Management Systems covering areas such as:.

  • Strategy  Management
  • Planning and Budgeting
  • Workforce  Planning
  • Managing Contingent Labour
  • Employee Recruitment
  • Employee Talent Management
  • Electronic Procurement to Pay
  • Paperless processing of supplier invoices
  • Travel and Expense Management
  • Mobile Work Management
  • Mobile Device Management
  • Self Service Reporting
  • Executive Dashboards
  • Complex Analysis of SCADA data
  • 3D Modelling of Assets
  • eCommerce
  • Customer Service and Sales

Simplifying ERP

As well as augmenting ERP with best of breed point solutions, SAP continues to dramatically simplify the core ERP solution. As Gartner points out, ERP continues to play an important role moving forward. It can reduce IT costs by up to 40%, but more importantly it drives business value. This is why SAP is addressing the challenges of monolithic ERP megasuites head on. The best part is that you don’t need to rip and replace your existing SAP ERP system but can adopt each of these innovations over time at your own pace.

User Centricity. A major criticism of monolithic ERP megasuites is poor usability.  SAP continues to expand the Fiori next generation user experience across core ERP, aimed at simplifying the experience of all users and especially casual users.  There is a great online tool to calculate the benefits of Fiori http://www.sapcampaigns.de/us/UX_Calculator

Agility. Monolithic ERP megasuites promised one system to replace disparate point solutions. However the breadth of scope and system enhancements often led to complexity.  SAP is simplifying core ERP applications based on the SAP HANA database. The first application is SAP Simple Finance. Because of the power of HANA, SAP has removed redundant tables and functions that were required for scalability on traditional databases.
This helps to eliminate reconciliation, reduce batch processing, enable real time reporting and underpins a new User Experience that is second to none. This is the future of SAP ERP.  For more information on SAP Simple Finance refer to the following blog.http://scn.sap.com/community/epm/financial-excellence/blog/2014/09/18/implementing-sap-simple-finance

Simplicity. The number one business challenge of our times is complexity. In the past monolithic ERP has been a villain in the drive for simplicity. The SAP HANA database helps to change the game by simplifying your IT landscape. This was a key message from Snohomish County PUD at Sapphire.

SAP also supports core ERP applications on HANA in a private cloud. The HANA Enterprise Cloud is offered by SAP and partners like IBM. This allows Utilities to significantly reduce the complexity of provisioning and administering their own infrastructure and ensures that they will always have up to data software from SAP so that the latest innovations will be available. This also allows you to consume core ERP functions as a service rather than having to buy upfront perpetual licenses.

Striking the right balance

Gartner warns that “Postmodern ERP will create new integration, analytics and application management challenges… there is a risk the landscape could fragment into a new form of the “classical,” best-of-breed approach, with all of its inefficiencies.”

As always, integration is one of the key differentiators for SAP. Rather than being a software supermarket selling disparate cloud applications and integration technologies, SAP’s DNA is to provide applications that seamlessly work together. While this is still work in progress for some of SAP’s public cloud acquisitions, the previous experience of integrating Business Objects illustrates SAP’s commitment to providing end-to-end solutions. Integrated hybrid
public cloud, private cloud and on premise solutions is a key element of SAP’s simplification strategy.

So when the senior management of your Utility says that they will “not do ERP”, I encourage you to agree with them and reframe their thinking that while monolithic ERP megasuite is a thing of the past, the next generation of Simple, User-centric, ERP in the cloud should be part of your IT strategy. 

Gartner recommends that “Postmodern ERP is about striking the right balance between the value of an integrated core ERP system augmented by more user-centric, cloud-based applications.”

I couldn’t agree more.

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4 Comments

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  1. Devashish Bhattacharya

    This is really good. But I have a very basic Q that strucks my mind each time I hear about moving to the cloud. Why would companies risk their confidential data to be in the cloud?

    Regards,

    Devashish

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    1. Scott Hirst Post author

      Devashish,

      I tend to agree with you. Utilities are essential service and critical infrastructure providers that demand the highest levels of security, availability and disaster recovery. It is entirely appropriate for them to be risk averse when it comes to moving to the cloud.

      However since SAP and our partners started provisioning HEC environments in country (we have one in Australia) the conversation has changed. We are now having cloud conversations about when and how and with whom – not why.

      A big driver for change is the aggressive adoption of Cloud by the public sector. We are seeing all levels of government (Federal, State, Local) mandating cloud first strategies. In response to this demand SAP Australia recently announced a massive local investment in this space SAP to Establish Institute for Digital Government and Data Centre in Canberra in Support of Public Sector Transformatio…

      My view is that that the public sector will lead the way in demanding appropriate security, availability and disaster recovery in the cloud and will make many of the Utilities feel more comfortable about a move to the cloud.

      The Public Sector is not moving to the cloud because they suddenly “got the religion”. They are acting purposefully to address imperatives of IT cost and complexity.

      Utilities have the same imperatives.

      Regards

      Scott 

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