One ERP versus One Ecosystem

One ERP versus One Ecosystem

The one thing that has been reverberating in the Information Technology circles at UNICEF is about One Enterprise Resource Planning (ERP). This is based on a very strong recommendation that came out from the Business Process reengineering (BPR) by Dalburg and accenture was to have a true ERP environment in UNICEF .This has been a very controversial at the same time political decision that involves a whole a lot of resources in terms of money and people. Please go to the following link to see the entire recommendation.

There are two different aspects to effectively achieve the true ERP system. They are having One ERP system implemented and followed worldwide so the Head Quarters (HQ) and the Country Offices (CO) see the same information in the same way. The other way is to build an Eco system, as I call it, which will comprise of one ERP, combined with one or more systems distributed worldwide with proper interfaces.

Before getting in to the discussion of going right in to the True ERP discussion, we need to look at the evolution of the software during the past fifteen years. When people started using computers for business, it was towards simple applications such as financials, simple automation of the documents using word processors and spreadsheets. Then was the use at the manufacturing such as Material requirement Planning (MRP), Inventory maintenance, accounting involving Accounts payable and Receivables, etc. Even though this was of great help, there was no value addition in the decision making process. Then came the wave of adding more value to the computerization, and integrating the common functions such as Material requirement, Inventory, Purchasing, Financials, Costing, Sales, etc. This evolution is termed as MRP-II and a lot of software development focused on these integrated issue. Even though there was a lot of resistance to these MRP II software packages, they gained steady ground over a period of two to three years, when the managers felt the automation process lead to the formation of Islands of automaton and needed more integration to be able to make effective decisions. This gave birth to the Enterprise Resource Planning (ERP) software. SAP is one among the leader and very popular ERP software with others like PeopleSoft (Oracle) and SAS.

These ERP solutions blended the business and technology so well, that it was very difficult to differentiate them from one another. But in almost all cases, the ERP initiative was driven by the business and would have been supported by the IT section of the organization. However, there were clear overlaps as the technical personal were also equally responsible for the improvement of the business as they know the customizing of the software better than the business user.

This ERP philosophy brought all applications together and tightly integrated. The entire business community was very happy to embrace it for its integrated functions. Added to that because of the Y2K fear, many corporations jumped in to the ERP bandwagon and started their implementation. The ERP as designed brought in the tight integration between different components of the business, at cost of flexibility. As a result, the implementation resulted in huge changes in the way the business was run before. Change management team was a critical element in each implementation and eventually the organizations that were implementing the ERP solutions, started customizing the system to suit their businesses. This was more like cutting their own foot to fit the shoe size. This process of custom development led the ERP software makers to think of their benefit and they themselves started delivering different products for different sectors such as Public sector, Apparel and foot ware, Beverages, Banking, Insurance, etc.

In spite of the different product lines, the organizations did not leave their quest to customize the software to their need, as against critically evaluating their current business process. Reengineering was taken out of the list and Refitting was added. The software systems which were based on the best practice processes were bent to fit to the processes existing in the organization. This has greatly influenced the gains that were projected to happen with the ERP implementations. This in addition to the technological development in the internet era, the software companies, started adding more functionality, options and catchy front ends as bolt-on features shifting from their own integrated architecture.

The convergence of the processes now took the divergence once again. This process led the organizations to use various set of software tools to cater to each specific functions such as Customer Relations Management (CRM), Business Intelligence (BI), Supplier Relationship Management (SRM), etc in addition to the core ERP application.

This will lead to the debate of using one ERP software solution and the respective bolt-on function versus the use of ERP system and to use the working legacy system or third party cheaper software and interfacing them effectively. The second method can be referred as building one Ecosystem in which the processes and the business views in all individual systems are maintained consistently. The Ecosystem approach is very common in private sector based mainly on the implementation cost and to leverage the cost invested in the legacy systems.

The main advantage of the one ERP is that the implementation is fairly simple and the future upgrades could be smoother. The business logic and the process integrity are well established and you can have a seamless support from the software vendor. The major disadvantage could be the cost. Traditionally the solutions provided by the ERP systems are very expensive and also demand a reliable and established infrastructure to operate.

On the other hand, building one eco system will be a very cost effective method, but the ownership to design, develop and maintain the software needs to be addressed in house. Keeping up with the technology will be a big challenge in this case.

Either of the two solutions can be adopted strategically to any organization. In this moment UNICEF is in cross road to make a decision on going one way or another. This strategic decision will be a key to the success of the organization’s mission in the coming years.