CIOs, Watch Your Step In The E-R-P Game

by Hinesh Jethwani    Jul 16, 2004

A word of caution for trigger-happy CIOs who are fascinated by industry’s favorite abbreviation: An ERP that wins the most popular choice award may not necessarily be the best fit for your organization.

Management fundamentalist and ERP guru Mani Bharadwaj has seen many an ERP project crumble in his life, and crores of rupees being wasted down the drain because of loose strategies and bad decision making.

Speaking to CXOtoday, Mani Bharadwaj, director, Deloitte Touche Tohmatsu India, said, “I firmly believe that one ERP package cannot be good for everything under the sun. A specialized package designed for a single application is functionally richer than what multi-module ERP brands can offer. Most established ERP brands today span across all the diversities and complexities of a business; so there’s absolutely no way that superiority can be attained in each and every component or module. Purchasing an expensive module-clogged ERP package simply because it will offer tighter integration is not an acceptable rationale”

“For example, if you look at billing, in my opinion there are plenty of specialized billing software’s in the market today that can offer much more functionality than what a module within your conventional ’tightly integrated’ ERP can boast of. LIMS is something specifically designed for the pharmaceutical industry. Similarly, many packages are closely modeled to suit niche businesses like chemical manufacturing and insurance, and no other ERP application umbrella can come close to competing with them,” explained Bharadwaj.

An ERP implementation is probably the biggest management challenge that a CIO can face in his tenure. So what advice does Bharadwaj have to give to CIOs in the tight spot?

He replied, “It’s a big challenge to implement an ERP and I think that CIOs are by and large doing a great job today. ERP selection involves a tricky balance between forward thinking and risk-taking. An overall sense of discipline and preparedness must be first ascertained. Business processes are plagued today with evolution problems — although situations have changed drastically, processes remain the same. Re-structuring and extracting more productivity is the first step towards readying enterprises to embrace an ERP. Every management has to deal with a certain level of resistance and insecurity from end users. CIOs should carefully analyze the functionality requirements of their business, the volume metrics involved, IT savvy-ness of employees, and the organizational structure - i.e. whether centralized or de-centralized. Simply investing crores of rupees into networking and hardware to setup a centralized system doesn’t make sense if a business is running smoothly under a de-centralized structure. Breweries and distilleries, for example, function in a completely independent manner on the operation side. So where is the need for centralization in such cases?”

“MNCs follow a two-pronged approach. They first purchase an easy to implement ERP like SunSystems, and then move on to a bigger brand like SAP or Oracle after some years of steady growth. We follow a diagnostic approach to consulting enterprises that are looking to purchase an ERP. A re-validated strategy is drawn after careful analysis of the strengths and limitations of every client. A quick return on investment is the primary objective, and if a simple addition of a single module can help attain that, there’s no need to go in for a complete package,” added Bharadwaj.

Giving his take on the startling success of the ASP model in virtually every aspect of business, Bharadwaj said, “Outsourcing is starting to make more and more sense to CIOs today. Enterprises realize that managing their core brand requires full attention, and outsourcing can deliver exactly that. Hosted service providers are already providing pay-per-use models for applications like CRM. ERP’s in future will become a commodity, and enterprises will ultimately benefit from the wave.”

Bharadwaj has a golden rule for CIOs looking to maintain the perfect balance between business and technology. He explained, “Every business strategy is supported by three pillars — consisting of process, structure, and technology - supporting the business strategy. - which is always moving with changing business paradigms. An imbalance happens when process and structure cannot keep pace with technology. The key is to maintain the movement of all three in parallel. Finally, CIOs should let strategy decide and rule the adoption of technology, rather than the reverse.”

Tags: CIO, ERP, SAP