While certain functions are standard non-differentiators (accounting, GL, or payroll processes); a big challenge is leveraging ERP Systems to address unique areas for a given business such as CRM, project execution, manufacturing or distribution.
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Creating competitive advantages through ERP Implementation
In General, the spread and the modernization of ERP systems are large and most industries and businesses are relatively mature in their use of ERP systems and related peripheral systems. One can therefore be tempted to conclude that the time where an ERP system can effectively contribute to the competitive advantages are missed.
The truth is probably also that the greatest competitive advantages are often to be found in the development of new innovative products, where ERP does not play a role, or only a limited role. One can obviously not compensate lack of competitive services and/or products with a state of the art ERP system. Conversely, one cannot gain market share with a state of the art product without having a grip on key processes covered by ERP.
A great many companies struggle with a very diverse System and ERP landscape, which is expensive to service and maintain and which suffers from a non-existent or poorly supported integrations. While older systems might suffer from lack of process support and lack of or very costly ability to integrate to other systems in the IT landscape.
Diverse System landscapes often occur because of mergers, acquisitions or a growth, where systems on an ongoing basis are offshot in order to meet the requirements from the business.
SCALES ' perception of competitive advantages through ERP Implementation
Although, as described above, that many businesses are mature in their use of ERP Systems is that, in our opinion, many factors that can provide significant competitive advantages:
Operation of the business at the lowest cost, e.g., secured by:
- Deep and broad system support of processes.
- Flexible adjustment of the system forced by changing market requirements, new products, new areas of business, etc.
- Ability to integrate electronically to customers, vendors etc. based on a flexible Integration framework, Service oriented architecture, transformation services etc. Operation of the business with the appropriate level of customer service, e.g.:
- Ability to respond for customer requirements for products and services through multiple channels.
- Timely advice and confirmation of shipments.
- High-readiness of products in order to meet agreed SLA's.
Law by nature that forces businesses to upgrades and/or re-deploy systemsIn General, many companies implement ERP systems and have these in a period of perhaps between 6 and 12 years. During this period, companies might develop and implement new functionality but often only rarely upgrade to the following releases during the period. Most businesses will therefore after a period operate the business with a not up to date system. In the meantime, there will be new competitors, who operate their business with new and up-to-date systems, often with lower costs, better service and deeper process support to follow. It will, therefore, be almost inevitable that the business is ' forced ' to invest in upgrades or re-deployments to simply maintain and defend its competitive edge.
How about industry specific pre-configured AXelerators and ISV Solutions?
It is generally wise to base an implementation on ISV Solutions. HOWEVER, keep in mind that for every ISV Solution in scope you should do a thoroughly evaluation. Implementation of an ISV Solution can have an apparently positive impact on the project in the short run, but not necessarily in the end. Dependency on a third party vendors release cycle and support organization, error handling, level of maturity etc. will often in reality introduce substantial challenges. One should carefully take all these kinds of considerations into account when selecting third party ISV Solutions. It is often much cheaper and easier to implement few customizations instead of implementing major ISV Solutions.
Pre-configuration packages are usually created for specific industry verticals; any given company in a given industry has unique differentiators and competitive advantages that are not going to be addressed by a vanilla configuration. Companies that successfully leverage ERP for a competitive advantage do so by using the system to create a competitive advantage different from their competitors. While certain functions are standard non-differentiators (accounting, GL, or payroll processes); a big challenge is leveraging ERP Systems to address unique areas for a given business such as CRM, project execution, manufacturing or distribution.
Neither ISV Solutions nor Preconfigured packages are the miracle cure that some vendors claim them to be and are often more effective as a vendor sales tool than a practical way to materially reduce ERP implementation cost and durations.