News & Views

News & Views is published monthly by 180 Systems. Our objective is to provide recent articles to our readers on business technology topics. In some cases, our blog contains a title with a hyperlink to a source article, a quote from the article and our comments. In other cases, we have provided a blog without a hyperlink for original content by 180 Systems. We encourage you to post your own comments. You can also access our blog by topic.

How to negotiate software contracts

Contract Negotiations, ERP

January 2011 from CAmagazine and written by Michael Burns – “A major acquisition such as an ERP system should be considered a lifetime investment. It’s not just a software purchase; it’s a contract that includes maintenance fees, which will exceed the cost of the software in four to five years. A good dose of due diligence is in order — not only in testing the software and assessing the vendor, but also in reading the contract… ”

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Gaining an Edge: Don’t Tolerate Slow Financial Processes

Benchmarking, Business Process Analysis

December 20, 2010 from Bog Fat Finance Blog – “APQC research conducted during the fourth quarter of 2010 points to renewed enthusiasm among CFOs and controllers for investing in financial process improvement, with another round of cost elimination being the primary goal. Particularly in the area of accounts payable, we see large organizations taking steps to reduce the total process cost by eliminating headcount. Along these lines, there has been a lot of interest in document imaging and management technology that aims to reduce the mountains of paper invoices that gum up payables processing. That, in turn, allows organizations to consolidate many of the positions previously needed to manually process all that paper.

But beyond cost efficiencies, there is the issue of slow cycle speed. This is where you tend to see the hard-to-quantify benefits of process streamlining and automation in stark relief. With the APQC metric below, taken from our Open Standards Benchmarking database, we can achieve a snapshot of performance variance in the times needed to close the books on a monthly basis…”

180 View – The short article shows a chart with the cycle time to complete consolidated monthly financial statements. Top performers do it in 2 days and bottom performers do it 9 days. Although the difference is not huge, a few days could make a huge difference if a change is required as a result of the numbers. Ideally the organization should have already been alerted to problems before the consolidated financial reports are produce based on real-time dashboards and leading indicators, which foreshadow things that could happen.

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Biggest ERP failures of 2010

ERP

December 28, 2010 from InfoWorld – “No year in the IT industry would be complete without a number of high-profile ERP (enterprise resource planning) project failures, ones that burn through mountains of cash, bring company operations to a standstill, generate bad publicity for vendors, and toss careers in the trash.

There’s no one reason why ERP projects run off the rails. In fact, you can equate a typical project to a three-legged stool, with the customer, vendor, and systems integrator each serving as a leg.

Customers have to plan well, budget enough money for training, and evolve their usual way of working. Vendors must deliver software that functions properly and matches up well with a customer’s business processes. And implementation teams have to set the right expectations, meet project milestones, and avoid waste.

If one or more of these legs doesn’t hold up, things can get ugly…”

180 View – Let’s hope that lessons will be finally learned and InfoWorld will not  have any ERP failures to write about in 2011.

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Hub-and-Spoke ERP Model Drives Efficiency in Large Enterprises

ERP

December 17, 2010 from IndustryWeek – “Globally expanding enterprises often have units working in silos using business processes that are not standardized across the organization. To ensure business efficiency, large multinational enterprises need a robust Enterprise Resource Planning (ERP) solution that preserves a desired degree of enterprise diversity while cohesively managing units across geographies through process harmonization.

The two-tier ERP model, also known as the hub-and-spoke model, has several features that enable large enterprises to integrate their global and local business processes. This article outlines a successful implementation strategy to deploy ERP solutions across individual business units. It also discusses a framework to select the best-suited hub-and-spoke ERP and best practices to ensure a smooth implementation. Such a strategy can enable multi-instance ERP solutions, thereby driving business process efficiencies, improving competitiveness and lowering costs…”

180 View –. The article suggests 3 approaches to a large scale implementation – 1) Single ERP with a single instance, 2) Single ERP with multiple instances and 3) Multiple ERPs with multiple instances. The article provides pros, cons and best suited for each of the approaches. We disagree with some of the analysis including the following:

Best suited for Per article Per 180
Single ERP with one instance Medium-sized enterprises managed / governed centrally Any sized enterprise based on a cost/benefit analysis
Single ERP with multiple instances Large-sized enterprises already heavily invested in a particular stack in HQ with few divisions or operations in disparate geographic locations Only if high speed access is not available
Multiple ERPs with multiple instances Large-sized enterprises already invested in a legacy ERP in their HQ looking to provide flexibility to their geographically distributed subsidiaries while controlling costs. When a single ERP with one instance can’t be justified
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Beyond ROI: Creating Long Term Value Through ERP

Business Case, ERP

December 2, 2010 from Toolbox for IT – “Small and medium-sized companies face significant challenges in implementing company-wide or enterprise-wide solutions. These challenges arise from the scarcity of resources − money, time and people and expertise. And yet the business imperative to implement truly effective systems is even greater, since the technology gap between large and small companies is widening. In response to these challenges, the prevalent thinking among business owners and management is to push ERP vendors to produce ROI measures, most frequently citing statistics such as reduced inventory and inventory carrying costs, reduction in days sales outstanding, or reduced order cycle times. This thinking misses the mark. Not that those metrics aren’t important. It’s just that smaller companies need to think “beyond ROI,” to the strategic long term value that ERP can deliver…”

180 View – Although the author makes a number of good points, the article also misses the mark:

  • The article uses very high level terms to describe going beyond ROI such as “continuous improvement and streamlining of business processes over time”.
  • ROI is equated with metrics such as such as reduced inventory and inventory carrying costs, reduction in days sales outstanding, or reduced order cycle times. Reduced order cycle time may not provide an ROI as you need to quantify it for the purposes of ROI.
  • The suggestions on getting beyond ROI include “Look for a fully integrated ERP solution. Best-of-breed software applications are dead.” This is not true. Many companies choose a best of breed option based on a compelling business case. For example, a company may have complex HR requirements and simple financial requirements and it makes more sense to invest in a best of breed HR system.
  • ROI is hardly ever achieved in a new ERP system. But what can be attained is the achievement of strategic goals which are defined as Critical Success Factors and measured by Key Performance Indicators.
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Developing An Effective KPI Plan

Business Intelligence, CPM

November 29, 2010 from Dashboard Insight – “When looking at the BI landscape and available solutions, dashboards give the biggest bang for their buck. After all, with high levels of interactivity, strong data visualizations, and general capabilities that provide the quickest way to monitor performance and manage what is happening within the organization, it stands to reason that dashboard use would be gaining in popularity.  Despite the positive aspects of making BI and analytics easier to access and to interact with, the reality is that effective dashboards don’t design themselves. Simply implementing a dashboard and monitoring metrics does not mean that decision makers will benefit from their use.  Businesses require an effective action plan that ties into the organization’s vision in order to drive long-term success…

180 View – There is some useful discussion. I would add that metrics should be SMART – Specific, Measurable, Actionable, Relevant, and Timely. Without being specific, the numbers are ambiguous and there can be many ways to interpret the results. You should not choose metrics that are can’t be measured accurately or take a huge effort to obtain. Actionable means that the metric is easily understood and that it ties back to a specific team that is being measured. Relevant metrics are linked to strategy. Companies that need to wait a month or more for their metrics are in deep trouble. Real-time should be the goal, but accuracy objectives will cause a delay to make sure the numbers are right. You should be shooting for days – not weeks.

As well some measurements are inherently lagging indicators, which tell you about historical results – sales, gross profit, customer satisfaction… The most important metrics are leading indicators, which foreshadow things that could happen. For example rising error rates in shipping or longer time to ship often precede declining customer satisfaction.

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Beyond budgeting

CPM

November 15, 2010 from FSN – ““The annual budget is an artifact rooted in managing feudal governments in agrarian societies,” declares Robert Kugel, analyst and research director for financial performance management at Ventana Research, and although many organisations are putting aside some of the assumptions that are usually associated with this (such as ever-increasing expenses) and ramping up the frequency of budgeting revisions and forecasts, the latter can prove problematic for the many more that are using inadequate, ineffective and inappropriate software and systems…

Fortunately, the tools to make budgeting and planning more efficient are increasingly accessible – even for those determined to retain the much-maligned spreadsheet as part of the process. As FSN has previously highlighted, the collaborative nature of cloud-based applications such as Microsoft Office 2010, Google Apps and various other online productivity tools can make collaborative processes such as budgeting much easier to manage, by removing the need to distribute data via email, and eliminating the confusion and complexity that can be created by version management during the collection and consolidation phases…

The next level up is purpose-built budgeting software. It was once the preserve of the very large and those with very deep pockets, but cloud-based offerings are making these specialist systems more widely accessible and affordable…

180 View – Many organizations go through hoops to complete their annual budget using inadequate tools. The article suggests a number of alternatives and suggestions for improving the budgeting and planning process.

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The Business Case: Information for Project Portfolio Decision Makers

Business Case

2010 from Global Knowledge – “…There is no universal business case template. An effective way to consider what should be contained in a business case is to think like the decision makers. Put yourself in their shoes and imagine you were being held accountable for selecting the best investments for your enterprise. What would you want to see in business cases that would lead you to those decisions? The information would probably include the following information. 

  • Executive Summary
  • Why consider this project?
  • What does this project deliver?
  • The financial case: How much will it cost? What are the benefits? How does this project compare to other projects?
  • What is the time frame?
  • What are the risks?
  • What is the forecasted resource usage?
  • What other alternatives were considered?…”

180 View – The article does contain some basic and useful guidance in preparing a business case with some examples. However the number crunching and presentation of the business case is the easy part. The hard part is coming up with quantifiable benefits that can be clearly supported.

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