Accounting System/ERP Customer Survey

April 2006 from CAmagazine written by Michael Burns - Check out the results of our 2nd customer survey of accounting and ERP systems. See how well readers like the system they're using, and how they rate the developers and implementation partners. We also asked for some general feedback about return on investment and future plans.

Eight Tips For Creating A Vendor Short List

February 23, 2006 from Managing Automation and based in part on an interview with Michael Burns - "Your list of requirements should match up with pre-defined critical success factors (CSF) -- those things you must do well in order to be successful as a business, adds Michael Burns, president of 180 Systems Ltd., a business consultancy in Toronto. "If a requirement can't be mapped directly to a CSF, then it's not critical."...

When creating your RFP, Burns suggests asking vendors to respond not with a yes or no but with a number between one and seven. "When they say yes, that can mean anything," Burns says. You can get more specific through a numbering system, where a "6" might indicate that a feature is available in the current release of the software, a "5" that it will be available in six months, and a "1" that it would require a major modification or workaround. Combining your weighted requirements with these weighted responses will give you a way of scoring vendors to determine which makes your short list, he says.

You might be tempted to skip the reference check process, assuming you'll get only positive responses. However, according to Burns, "forty percent of the time, the reference is not a positive one," he says. "It's amazing how little vendors know about their customers." Burns offers a checklist of questions to ask each reference and advises that you tell each one a little about yourself before asking any questions so that they have a level of comfort with you.
Don't spend time on system demonstrations until you've narrowed your list to a handful of finalists. You can even take a two-pronged approach, Burns suggests, where the first demo is done over the Internet and the second one is more in-depth. In all, you should attend no more than four demonstrations, and limit each to two to three hours, he says. Ask demo attendees to identify major strengths and weaknesses, he says."

CIO spending in 2006 - ERP, BI...

February 2006 from McKinsey Quarterly - "47 percent of the respondents say they are budgeting substantial investments in ERP for the coming year. The top priority is sector-specific enhancements to basic ERP platforms. Most large companies have already implemented the basic elements of ERP systems to manage materials and core operating processes and to generate financial metrics. Now many CIOs report that they are building extensions to these systems to improve the productivity of sector-specific operating processes and to address competitive issues in their industries...

CIOs also plan to invest more in business intelligence tools, including applications that extract data from ERP systems and allow users to analyze customer or market trends in finer detail. And they are enhancing the finance and accounting modules of their ERP systems to comply with governance regulations such as Sarbanes-Oxley."

180 View - We also see a trend to making the most of what you have rather than starting all over again.

Mining for Gold

From FastCompany and written by Evan Goldberg, founder, chief technology officer and chairman of the board of NetSuite - "Whether you know it or not you're managing a lot of databases in your business. Tons of mission-critical information resides in a huge variety of applications on your company's computers. From the customer list in the accounting system to the email in people's inboxes, these bits of information are nuggets of gold if they can make it to the right person at the right time. Through a process called "data mining," you can actually look at historical information and use it to make better business decisions. But data locked in silos can be difficult or impossible to mine. Let me give you an example.

Customer Joe emails his salesperson, irate that the shipment he ordered has not arrived. The salesperson has no access to the shipping system and must offer to call back when he digs up the information. He calls the shipping department, they figure out where the shipment is, and he emails Joe back, reassuring him that the delivery will arrive tomorrow.

There are two things wrong with this scenario. The first is a practical problem: Sales couldn't help Joe right away because the information about the shipment was locked up in an inaccessible system. The second is what blocks any chance of data mining: The fact that Joe complained at all is information that is now locked up in the salesperson's email account, doubtless headed for the delete folder.

Wouldn't it be better if Joe had been able to access the shipping information himself, reassure the customer in the first call, and then log the fact that Joe had a complaint about shipping so that anyone dealing with this customer in the future can be aware of the history? And here's the kicker: Later, the customer-service department can track how many complaints were about shipping and identify if there is a more global problem to be solved. They can even correlate shipping complaints with likelihood of repurchase to put a dollar amount on the problem and help give an ROI on fixing it.

New tools are emerging to make it much easier for smaller companies to mine the data in their systems, like larger organizations have been doing for years. Doing so can provide a long term competitive advantage over organizations that make their decisions based on little or no historical data.

The most important infrastructure to get in place to allow data mining is, of course, databases. A customer relationship management application for your sales people and service people will capture information that otherwise ends up getting lost in sticky notes or emails. Many questions can be answered just by running reports in these applications, and with today's Web-based versions of CRM the applications can be easy to get up and running without being hard on the budget.

The next step will be answering more global questions about the business like the ones I have alluded to above. How does activity in one department affect the bottom line? To answer these questions will typically involve information from multiple business applications, such as the CRM system and the accounting system. There are a few approaches to solving this dilemma.
The first is to synchronize the data between the systems. This can be challenging and the technical expertise required generally beyond what small organizations have access to. But if the application vendors themselves have developed tools to synchronize the information in their databases, such as allowing purchase history to be stored in the sales system, this may be an option.

The second approach is to develop what is called a "data warehouse". This is an external database that combines information from multiple "operational" databases such as the CRM system and the accounting system. Technically savvy users in your organization may be able to do home-grown versions of this approach that work fine for you -- even if it means the data is just summary data in a big spreadsheet. More advanced data warehouses can require third-party tools and consulting and can get expensive.

Finally you can choose business applications that actually offer cross-departmental functionality and are "pre-integrated"; you can therefore do your data mining straight from the operational system. Some sales force automation tools also offer customer support functionality. Totally integrated systems cover everything from accounting to your web site activity to sales and service.

Whatever approach you choose, there's gold in them thar hills. A better understanding of who your customers are, how and when they purchase, and how your interactions with them affect future activity is another contribution IT systems can make to the bottom line."

180 View - Evan Goldberg has put his money where his mouth is and developed a "pre-integrated" system. The article makes sense and is a subtle and effective way to promote NetSuite.

BPM Viewpoint: Suite Vs. Stand-Alone: The Latest Debate

March 2006 from Business Finance - "Business performance management (BPM) was the little kid on the finance-application block when it emerged as a category of software a few years ago. Stand-alone BPM packages sit on top of mammoth enterprise resource planning (ERP) suites, giving companies budgeting, reporting and analytics capabilities that fit their needs. In Business Finance articles on the debate about suite vs. best-of-breed, there was never any doubt where BPM software from non-ERP vendors fell.

But times are changing, and the scrawny kid is bulking up. BPM systems will never challenge ERP as transactional repositories, but they are becoming bigger and more complex every year. And the "stand-alone vs. suite" discussion is beginning to surface within BPM-specific software purchase decisions. Several major players in the BPM software space completed recent acquisitions in a push to offer a broader spectrum of BPM functionality. Then late last year, they announced that they had integrated those disparate systems into comprehensive product suites.
The appeal of the suites is easy to understand. Without one, a complex company with lots of operational data coming from a wide range of source systems has to assemble a variety of software packages to cover budgeting, forecasting, consolidations, management reporting and financial analytics. In the process, the organization struggles to ensure that the applications always use the same up-to-date version of all data. The total cost of this undertaking can quickly skyrocket because of the effort required to maintain a myriad of different data connections.

But, warn many consultants, BPM buyers looking for consolidated data management and ease of integration from product bundles sold as suites need to do their homework. The promise of tight connectivity may be hollow. Some software packaged as a "suite" is tied together more at a marketing level than in the source code. The user interface may look the same across products -- which can be a plus for training requirements -- but under the covers, applications that share a name and front end may still be radically different.

The other big risk in purchasing a suite is that buyers may not obtain as much functionality from each of its components as they would get if they bought the planning, reporting and analytics pieces separately. This is especially likely for organizations in industries for which distinct vertical solutions are available. These companies may find that the extra expenditure of resources required to keep multiple unique applications from multiple vendors running in unison would be more than offset by the savings they can reap by buying an application that closely meets their requirements. They would need to customize software either way, but when they make their purchase decision, they should weigh the cost and value of each option.
Of course, determining how much customization a product will need and how much effort will be required to connect data analysis packages with data source systems is a daunting challenge. Purchasers should find out all the requirements for linking products into a smooth operation. Many a BPM project has been put on hold or canceled because the purchaser expected implementation to be far cheaper and quicker. But buyer beware: Routine vendor demos and high-level discussions with salespeople don't provide enough information. Help is available from other sources, including independent consultants with considerable BPM experience. And the due diligence process for a software purchase always should involve in-depth meetings with companies that already use products on the organization's shortlist.

This doesn't mean a BPM initiative isn't worth the effort. I regularly talk to organizations that have deployed performance management software, and many say they can't imagine managing a business without their new tool. It just means that the bigger and more complicated these systems become, the closer the correlation between the thoroughness of the due diligence process and buyers' satisfaction with their purchase."

Microsoft unveils mid-market BI software

March 16, 2006 from InfoWorld - "Microsoft unveiled new business intelligence (BI) software Wednesday that was designed to let mid-market companies use analytics and scorecards to study business data through various organizational roles. BIO (Business Intelligence Optimization) for Microsoft Dynamics SL, slated for release to manufacturing in May, allows business users to build, manage and use scorecards and reports, according to Microsoft officials. Users can then view the analytical reports with Microsoft tools such as Excel, Office SharePoint Services, and other Office products or directly within the BIO application.

Microsoft developed the new BI software with channel partner NexVue Analytics. BIO is built on SQL Server Analysis Services and integrates with SQL Server 2000 and 2005, Microsoft said. The software is scheduled for general availability in June. Pricing for the BIO Foundation, an entry-level option, starts at $3,600 and includes financial analytics and a two-user license. Additional users and project, distribution, and field service analytics solutions can be licensed for additional fees."

180 View - You will find many examples of ERP vendoprs acquiring or developing BI solutions. Sage began selling its version of the eAnalytics Portal authored by Dynamic Software Systems International. Late in 2005, Exact Software acquired Vanguard Business Systems, which makes a BI product. Systems Union acquired F9 and MIS AG a few years ago... ERP systems generate lots of data but without BI it's not easy to get useful information to make decisions.

The Effect of the BI Application on Business Performance

March 1, 2006 from DM Review - "Over the last couple of years, most of the business intelligence (BI) vendors have relabeled their products as performance management solutions. Their definitions of performance management have varied, depending on what products they happen to include in their suites, but they usually fail to demonstrate exactly how their products have helped the business performance of their customers. Even if they tried, it would be very difficult for them to show how the particular features of their products generated superior business performance compared to competitive products...

The latest OLAP Survey had an even larger sample than the four previous editions: data from 2,100 participants in 95 countries was used to analyze dozens of aspects of the purchase and use of more than two dozen OLAP products. In total, 5,551 people responded, but some were not yet users, others were vendors using their own products and some were unable to answer questions. This is by far the largest independent survey of BI users ever carried out.
How Do You Measure Business Performance? Because of the wide range of products included, The OLAP Surveys don't compare features of products - how could you compare the features of Hyperion Essbase and Oracle Discoverer? Instead, since the second edition of The OLAP Surveys in 2002, we've used a benefits-based benchmark. After all, why would you buy any BI product if you weren't hoping to gain business benefit?

We came up with a basket of eight possible business benefits. They cover various areas, focusing on aspects such as reduced costs, increased revenues, improved customer satisfaction and greater internal efficiency. We also allowed respondents to add a ninth if they thought it relevant. Few did, and because no consistent ninth benefit has emerged, we continue to use the same standard list of eight benefits:

• Saved headcount in IT,
• Saved headcount in business departments,
• Reduced external IT costs (hardware, support, consulting or software licensing),
• Saved other non-IT costs (e.g., inventory, waste, financing),
• Faster or more accurate reporting,
• Increased revenues through better sales and marketing analysis,
• Improved customer satisfaction through enhanced product quality and/or service levels,
• Better business decisions through more thorough or timely analysis...

The OLAP Survey uses the business benefit index to measure the effect of numerous factors, including:

• Product choice,
• Methods of product selection,
• Architecture (MOLAP versus ROLAP),
• Input data volumes,
• Server platform,
• License fees paid,
• External consulting costs,
• Type of lead implementer,
• The extent of Web deployment,
• Deployment time,
• Data load/aggregation time,
• Query performance.

Of all the aspects evaluated, query time turned out to have the biggest impact on the business benefits achieved. Others, such as data volumes and server platform, had remarkably little impact on the BBI. This year, even product choice had little impact, though it was higher than in previous years.

180 View - The author has focused his attention on Online Analytical Processing (OLAP), which is but one component of corporate performance management systems. The other components - strategic planning, scorecarding, budgeting and forecasting, and consolidation - would have a much bigger impact.

EDI On Demand

March 07, 2006 from E-Businesss News - "We are focused on applying our vision of Software as a Service (SaaS) to bear on EDI and the gamut of EDI related issues, as well as to other services for suppliers and retailers. To that point, we are not a VAN or software company... We are seeing that SaaS is being accepted much more widely because of the likes of SalesForce.com have driven the awareness of the viability of this kind of service... We are finding that more people are frustrated by handling the details of EDI on their own and we are seeing more and more software ripouts... companies eliminating their existing EDI software installations and replacing them with hosted services."

180 View - We don't know the company, SPS Commerce, that is discussed in this article. But we do think they have a good idea.

Use internal benchmarks

2006 from McKinsey Quarterly - "While a company must know what its peers are achieving, it's a mistake to measure its performance against the competition: these benchmarks are typically just samples of data with little explanation behind them. Companies that use external benchmarks are often frustrated to find themselves off by a factor of five to ten, positively or negatively.

Using external benchmarks compounds the internal difficulties that service companies face in normalizing activities and the data that define them. Consider a measure such as costs per unit of information processed: some companies include allocated costs, such as corporate overhead and salaries; others don't.

Internal benchmarks deliver more detailed metrics, allowing a company to find its own best practices and to see where and how they are achieved. It can then have access to all relevant information to assess differences among business units and accounts. In defining internal benchmarks, for example, a company can determine which costs are included or how asset costs are allocated — details that get lost in external benchmarking. A company can see what's really possible within the organization by using its own benchmarks."

180 View - The benchmarks should be metrics or key performance indicators that align to Critical Success Factors - those things that must be done well in order to be successful.

Sarbanes-Oxley - A Tough Act to Follow

March 15, 2006 from CFO Magazine - "The costs are indeed substantial. AMR Research estimates that, by year-end, U.S. businesses will have spent $20 billion on Sarbox compliance since the law was enacted. On average, AMR estimates that companies are laying out about $1 million on Sarbox compliance for every $1 billion in revenues.

CFO's survey shows an even greater hit to income. Finance managers at companies with annual revenues of $500 million or more indicated that Sarbox compliance had taken an average yearly earnings bite of more than 2 percent. Smaller companies were worse off. Respondents at businesses with sales of under $500 million said Sarbox compliance was devouring 4.5 percent of their earnings each year...

The major flashpoint of the argument is the way auditors attack 404. Some finance chiefs feel that the Public Company Accounting Oversight Board (PCAOB) has taken a heavy-handed approach to Auditing Standard No. 2, which instructs engagement partners on how to check their clients' internal-controls reviews. As a result, CFOs say auditors test and retest internal controls to ensure their sign-offs are beyond question. Finance managers contend the prospect of auditor nit-picking forces clients into indiscriminate documentation of internal controls.
The PCAOB appears to be aware of the situation. In a November 2005 report on the initial implementation of AS2, the board criticized auditors who "did not alter the nature, timing, and extent of their testing to reflect the level of risk."

By taking a one-size-fits-all approach to their testing, accountants apparently ignored the risk profiles of individual companies. "As a result, some auditors appeared to have expended more effort than was necessary in lower-risk areas," the board stated, noting that "in some cases, a higher-risk area should have received more audit attention than it did."

180 View - Not only should accountants consider the risks, but they should also not waste time on non-critical controls. Certain controls over completeness or accuracy can be marginally helpful - what's the point of testing them?

Standardization of infrastructure and business process

March 13, 2006 from BPM Today - "Anderson explains that back in 2004 the pressure was on to get economies of scale, and to drive efficiencies and new business opportunities -- which meant real-time information and automation. But that in turn required visibility and standardization -- bringing data together and making it accessible. And to do that, a well-managed and cohesive I.T. and network infrastructure was needed.

"We didn't have that," he says. "From PCs to the ERP system, we needed to do some serious work to get the infrastructure sorted out, settled and stable. So that's what we concentrated on first."...

Attention turned to the business systems themselves -- at the time, a mix of systems across its sites, including BPCS, MTMS, Syspro, and Compass. "They're all great systems, but the company had given the local businesses autonomy, so there was no consistency in set-up or business processes, and a high degree of bespoke software. It had all been done to provide the businesses with what they believed they needed at the time, but it meant the organization as a whole didn't have the visibility it needed. "Also, if we stayed with it, we would be forced to follow expensive upgrade paths that would involve considerable rework simply to replicate existing functionality. We would have spent over £1 million (US$1.7 million) over two years just to stand still." Clearly, not good news, and there was another classic issue. "People were using departmental spreadsheets and workarounds. They were doing a great job, but it's a lot of effort to get information that's out of date."

The bottom line: "We had to standardize: We wanted to maximize consistency and minimize support costs," says Anderson. "We looked at our existing spread of ERP systems and they're all mid-tier applications, and we're a mid tier company, but although they were all doing an OK job, none would do everything we wanted off the shelf."

So he looked at the big guns. "We had the perception that the likes of Oracle and SAP would be too expensive. But we established very quickly that there's a lot more to be had out of a Tier One application suite." He also found that price and the software vendors' focus were not as he'd thought and eventually selected Oracle."

180 View - It's the classic Best of Breed vs ERP debate. In the case of the article being discussed, it sounde like the business processes were similar enough to have 1 system do it all. Although the article says the company being discussed is a "mid tier company", a little research showed that the "APi Group employs over 5,000 people and performs annual revenues in excess of $900 million."

Three Myths of Management

March 27, 2006 from Harvard Business School - "In a new book, Stanford professors Jeffrey Pfeffer and Robert I. Sutton assail popular yet shaky—maybe even harmful—management practices. Our excerpt starts with a hot trend: benchmarking...

There is nothing wrong with learning from others' experience—vicarious learning, as contrasted with direct experience, is an important way for both people and organizations to learn how to navigate a path through the world. After all, it is a lot cheaper and easier to learn from the mistakes, setbacks, and successes of others than to treat every management challenge as something no organization has ever faced before. So benchmarking—using other companies' performance and experience to set standards for your own company—makes a lot of sense. In the end, good or bad performance is defined and measured largely in relation to what others are doing.

The problem lies with the way that benchmarking is usually practiced: It is far too "casual." The logic behind what works at top performers, why it works, and what will work elsewhere is barely unraveled, resulting in mindless imitation...

In these and scores of other examples, a pair of fundamental problems render casual benchmarking ineffective. The first is that people copy the most visible, obvious, and frequently least important practices. Southwest's success is based on its culture and management philosophy, the priority it places on its employees (Southwest did not lay off one person following the September 11 meltdown in the aviation industry), not on how it dresses its gate agents and flight attendants, which planes it flies, or how it schedules them. Similarly, the secret to Toyota's success is not a set of techniques but its philosophy—the mindset of total quality management and continuous improvement it has embraced—and the company's relationship with workers that has enabled it to tap their deep knowledge. As a wise executive in one of our classes said about imitating others, "We have been benchmarking the wrong things. Instead of copying what others do, we ought to copy how they think."..

The fundamental problem is that few companies, in their urge to copy—an urge often stimulated by consultants who, much as bees spread pollen across flowers, take ideas from one place to the next—ever ask the basic question of why something might enhance performance. Before you run off to benchmark mindlessly, spending effort and money that results in no payoff, or worse yet, in problems that you never had before, ask yourself:
Is the success you observe by the benchmarking target because of the practice you seek to emulate? Southwest Airlines is the most successful airline in the history of that industry. Herb Kelleher served as CEO during most of Southwest's history and remains the chairman to this day. Kelleher drinks a lot of Wild Turkey bourbon. So does that mean that if your CEO starts drinking as much Wild Turkey as Kelleher, your company will dominate its industry? Get the point?

Why is a particular practice linked to performance improvement—what is the logic? If you can't explain the underlying logic or theory of why something should enhance performance, you are likely engaging in superstitious learning and may be copying something that is irrelevant or even damaging.
What are the downsides and disadvantages to implementing the practice, even if it is a good idea? Are there ways of mitigating these problems, perhaps ways your target uses that you aren't seeing?

180 View - There are many levers to enhance performance. Technology is but one of them. The best way to enhance performance is through motivation just as Southwest did by not laying anyone off in the bad times.

Web services may threaten enterprise security

February 22, 2006 from ComputerWorld - "Clear text messages used in transferring applications via Web services can potentially slip through existing security hardware allowing malformed code to run rampant within organizations. Typically malicious code such as Trojans and worms are detected at the gateway; however, current XML and SOAP attachments (Simple Object Access Protocol) can potentially allow threats to enter the network, as well as information leakage. "Adding to the problem is security controls built into Web services applications, which offer a compromise in performance and as a result are systematically being turned off," Dierickx said."