Don’t cut the ERP budget yet! Companies are realizing that successful e-business strategies start with a solid back-office foundation By John Ziegler

Almost every article you read today talks about ERP in the past tense. Some consultants and industry watchers would have you believe the ERP revolution is dead and buried. With all of the activity over the past few years in the SCM, CRM, B2B, B2C Internet strategies and development, some of our consulting experts have pronounced ERP dead. It seems that if you are not a part of a B-2-Something, Open Source e-business software solution, you are in big trouble and about to be eaten by your competition. This is somewhat true and the ERP revolution may have slowed down, but the basic business requirements for ERP systems have not gone away.

Companies everywhere are confused by all of the open system strategies and e-business ads, articles and seminars. The new trends for business supply and demand are clearly being addressed by all of the varying e-commerce strategies. These are huge opportunities, but where does it best fit your company and where do you begin? These business questions are still the same as they have always been.

What are the business answers and the IT strategies to support those answers, today? This is what is frustrating many corporate executives and re-directing their IT budgets to the research and implementation of e-business projects. This new e-business revolution and desire to be using the Internet for e-commerce has shifted the majority of IT budgets and spending away from ERP systems.

The Latest and Greatest
Executives are asking; how can we improve our internet e-business? What is our new e-business strategy? Do we even have an e-business strategy? How can we use it better? In today’s frantic rush to the e-business market place, it seems as though the technology is driving business decisions instead of the business decisions driving the technology strategy.

We in IT are our own worst enemies when it comes to something new. We all want to jump on it immediately, forgoing all other old requests. “Just forget what we were doing! This new technology is where it’s at. It will surely solve all our problems and besides, it’s way so cool.”

When I was with what is now one of the world’s largest application software companies, I saw the same thing happen internally. Research and development was shifted to client-server, open source technology. It was the industry direction, all of the experts said so. If you weren’t coming out with client-server open source technology-based application software, you would not survive.

Everyone in the organization wanted to be on the new project. It was the place to be. It seemed as though within a very short time a new world order had evolved. If you were left behind to work on the old product, you were in the minority. You were not invited to all the new activities, and your circle of friends was getting smaller and smaller. It is very sad, but we in technology tend to leave our old behind to die.

Unless your business is based totally on technology, I do not believe you should abandon the IT basics of your business for the pure sake of technology. These basics are good business practices supported by a strong foundation of a good IT infrastructure and integrated business application software.

I believe we must be actively involved and keep up with the latest and greatest technology. But information technology must always be in harmony with your business direction. Your IT also must be able to support your business decisions as they happen. How fast could your IT support the new sales, distribution and manufacturing business processes, the new customers, new vendors, all new item part numbers and so on?

Now you can take orders over the Web in every language and currency. You can now e-procure in the new Internet marketplaces, but you can’t ship your products because your not sure where they are and how many you have. Your supply chain has a broken link somewhere, so you don’t even know to buy raw materials for your replenishment manufacturing. Accounting billed in the wrong currency and can’t collect the receivables for another 30 days. To top it off, because of all that you had to use substitute materials in a non-standard manufacturing process to satisfy the next rush order and cost accounting isn’t sure you made any profit at all.

This Old House
I have always used the analogy of building a house on a strong foundation, and I believe it still holds true in today’s e-business trends. You can spend all of your time and money building tall walls, beautiful windows, doors and a steep roof, but if they are not built on a strong foundation, you will be forever filling cracks, adjusting windows and doors, and painting over your mistakes. All house plans consist of four basic components: foundation, floors, walls and a roof. In the simplest form, business processes of any manufacturing / distribution business is also made up of four basic components: selling, making, buying and accounting for everything. For any house or company to survive, all of these functions must be built on a strong foundation and fit together seamlessly.

This foundation is your ERP business application system. ERP systems are designed to be the supporting foundation of these basic business processes. If your foundation is strong it will support any structure. No matter how much new technology you add on, if the basic functions are not working well together, you will never realize true success. If your IT foundation is strong and in harmony with your business strategies, your new e-business projects will add value as improvement projects instead of repair projects.

Just Sleeping
In order to save ourselves and truly benefit from the e-business systems we just put in place, we need to jack up the house and rebuild the foundation. It’s always easier to start with the foundation and build up, but it can be done. It will just take a little more work.

Over the past few years, many companies have chosen to implement e-business solutions first and have moved the basic business process and functionality until later. They will be among the first companies to start new ERP system implementation. The ERP software business will then wake up from its sleep. I believe it will be much like me in the morning, slow to wake up, a little groggy, but after a refreshing shower, ready to go again.

for more information email John Ziegler at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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