4 Steps to Achieving Innovation in Spite of Your ERP Platform

This Mark Twain quote comes back to me whenever I think about the central role that ERP platforms play in the innovation efforts of many organizations. How long has it been since we first started to hear that ERP was dead?

It was well over 10 years ago that the inflexibility of ERP systems led naysayers to predict that it would be phased out and replaced by more modular and adaptable applications that would be better equipped to support the many unique aspects of each enterprise. More recently, the cloud/SaaS/subscription model pundits began the charge again.

Surely this new paradigm would spell the end, and ERP would soon take its place along with the other legacy apps — right next to the mainframe and those client-server apps that are still serving some usefulness (albeit many on life support). Yet SAP saw double-digit growth and record revenues in 2012.

So here we are in June 2013, and ERP remains as relevant as ever. However, that doesn’t mean that some of the causes of those dire predictions aren’t an issue, and most importantly, play a major factor in an organization’s innovation strategy. I’ll be talking about this with Forrester Research analyst Liz Herbert in a webinar next week, as innovation has topped cutting costs as an IT priority for the first time since the economic downturn.

I know what you are thinking — innovation and ERP, isn’t that an oxymoron? But stay with me here. Based on the pervasiveness of ERP platforms throughout the enterprise, it is nearly impossible to approach innovation initiatives without it. From a technical perspective, these systems are completely intertwined as the source of data for many peripheral applications. (Go ahead, change a data type or a table value in the ERP system without telling anyone. And then wait for the complaints when you realize how many other systems are affected.)

From a business process perspective, the effect is even more pervasive. Whether the organization changed its business processes to be in-line with the out-of-the-box system (yeah, right), or it adapted the software to support its very unique business processes, it is by now inherently connected with the ERP platform.

So if you want to introduce innovation — whether that is more BI and analytics, collaboration tools, or even mobility — ask the question again about ERP’s role as you try to stay away from either the data rooted in the platform or the business processes underpinned by it.

But the real challenge with ERP in support of innovation goes deeper than just change. The many years of satisfying these business processes and integrating with different systems in addition to the multiple development teams and external vendors who have made changes to fix defects or add new features has resulted in a tremendous amount of customization.

We all know it is out there and it is impossible to avoid. You must break through that customization to understand the complexity and the scope, as well as identify the code that is being used and the code that is dead, before you can embark on any innovation initiatives.

There are four things you need to consider when addressing the huge amount of ERP customization that holds you back from the innovation needed for growth:

  1. Size and complexity – The first step is figuring out how much customized code you have, and how complex it is. If you are considering an upgrade to take advantage of new features or functionality, integrating a new collaboration toolset, or launching a new mobility platform, this inventory is the only way you’ll be able to determine if the customization will even work with the upgraded version—or more accurately, how much effort it will take to make them work.
  2. Structural quality — After you figure out what code you have, you need to find out how well it is built to determine if the ERP customization will enable or constrain extensions, upgrades, and integration activities. Surely you don’t want to propagate what may be poorly structured customization.
  3. Dead code — I have read that anywhere from 20 percent to 40 percent of customization fall into the dreaded “dead code” category. It is unlikely that you have any idea how much dead code you have sitting around your ERP platform, yet you are paying for it many times over — for your SI vendor to maintain it, when it obfuscates finding the root cause of defects in “live” code, or when it is being unnecessarily tested or changed even though it is not even being invoked anymore!
  4. Vendor transparency — You expect your SI vendors to introduce innovation, and in fact, we see more and more organizations have started to contractually stipulate it. Yet how confident are you in the ability to manage and measure this innovation? This can only be achieved with transparency around your outsourced ERP development and support to make sure that your ERP service vendor has maximized the efficiency of its work around your ERP system.

ERP may ultimately meet its demise, but until we get there, you need to find a way to manage it. Register for the webinar on June 26 and join me to hear some tips from Liz Herbert on how you can take control of your ERP platform if you ever want to get to the promised land of innovation. (Even if you can’t make the live event, registration will get you access to the recording and presentation afterwards.)

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