Amid the tsunami of internet-business books that stream into my office daily, there arrived recently an odd piece of flotsam, a book about deploying ERP systems. Written by the estimable Thomas Davenport, "Mission Critical: Realizing the Promise of Enterprise Systems" will appear next month. Davenport is the director of the Institute for Strategic Change at Andersen Consulting and a professor of information management at Boston University.
Doesn't Davenport realize that ERP is out of favor? Perhaps that's why he's suggesting that we start referring to the ERP system as the ES, or enterprise system. Fine. But why an ERP, or rather ES, book now?
Maybe, with Y2K in the history books, it's time to take a fresh look at the ES. Davenport asserts that the ES will be instrumental in delivering the next generation of e-commerce, particularly the B2B variety: "If you want our customers, your suppliers, and your employees to have easy Web connections to your most important information, you're going to need both a good ES and Internet/intranet connections to it." And if you don't have an ES yet, you can learn from the victories and defeats of the many companies that have spent the better part of the '90s deploying them.
Here the book does not disappoint, drawing on a survey of companies that have deployed ESes, as well as case studies of which the author has in-depth knowledge. The clearest message is that ESes can deliver considerable business gains in companies that re-engineer themselves strategically. He finds little or no net benefit at companies that have deployed ESes because of purely technical gains.
Pain but no gain
Oddly, Davenport finds that few companies have methodical ways to track gains from deploying ESes, and although most companies say they put in the systems to improve the information available to management, many have done little to follow through on gathering and utilizing that information once the ESes are in place.
Sometimes companies don't bother to measure process improvements because some benefits are quantitatively obvious, such as reductions in middle management or accounting staff. But considering the vast amount of time and money that have been spent deploying ESes, Davenport laments that so little is known about their impact.
One company that has significantly improved its way of doing business, and knows it, is Dow Chemical, which used SAP as the underpinning of the "value-based management" approach to decision making, in which shareholder value and profitability are stressed. Dow expects the system to free up "hundreds of millions of dollars" over the life of the system.
Can we look forward to a more resounding future for the ES? Yes, Davenport says, if companies are diligent in making data available for management decisions, either through a central "ES cockpit" approach or through a decentralized approach, where business-manager "cyber-cowboys" have access to data and decision-making autonomy.
Davenport's straightforward, if dispasionate book is timely because ERP, or rather ES, isn't going away; it's just catching its second wind and will run hand in hand with e-business for the next decade.
Does your ES fit into a business strategy? Or is it just optimizing yesterday?