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Of course, simply implementing ERP is not the answer by itself. There are benefits
to be achieved by extending and enhancing ERP capabilities through integration
with other applications, such as business analytics, and external sources of data. At
the same time, for those organizations that have yet to implement, such a
transformative solution can be a daunting task. Both situations can benefit from
the enhanced capabilities that service providers can offer. The proof is in the
results, midmarket organizations that have implemented ERP and utilize a service
organization are seeing an average 14% reduction in operating costs as a result of
ERP compared to 5% for those that are not employing a support organization.
This helps to maximize the ROI on ERP investments.
Based on research from two recent Aberdeen surveys, this report can serve as a
guide to midmarket organizations on the reasons to implement ERP along with the
benefits and capabilities those organizations can expect to receive. It will then
illustrate the best strategies for:
selecting ERP
creating an evolving ERP strategy
utilizing third-party services during and after implementation
taking an integrated approach to ERP
These steps provide midmarket organizations with a road map for future growth.
40%
35%
31%
18%
18%
0%
25%
50%
1. Top of mind for organizations of this size is the need to reduce costs.
Many midmarket organizations are in a growth phase. As such, they are
experiencing the side-effect of increasing operational costs. As the
organization takes on more resources and enters new markets, it must find
a way to keep costs from spiraling out of control.
2. Additionally, growing organizations must contain costs in order to use
available funds for increased investment. Managing growth expectations
is difficult as the organization outgrows its original operational structure.
There is a danger of losing the organizational identity as employees become
more spread out across geographic locations and decision-makers are
removed from direct access to daily operations. Thus, visibility is hindered
and best-practice standards are not retained throughout the organization.
3. At the same time, as organizations become more complex, they have further
difficulty interacting with both customers and the extended enterprise.
Thirty-five percent (35%) of midmarket organizations feel that they need to
be easier to do business with. Difficulty in communicating with the
extended enterprise hinders the organization's ability to factor data from
suppliers, resellers, and customers into plans, budgets, and forecasts.
4. Additionally, midmarket organizations have indicated a need to improve
customer response time. Inattention to customer service has an effect
on customer satisfaction, and ultimately customer retention and profits.
2012 Aberdeen Group.
www.aberdeen.com
68%
59%
65%
62%
41%
42%
23%
24%
17%
38%
Best-in-Class
All Others
0%
25%
50%
75%
Percentage of Respondents, n = 174
Source: Aberdeen Group, April 2012
Of course, as organizations continue to grow, they will realize that they can no
longer operate as they have in the past. Applications such as accounting tools or
spreadsheets that may have been sufficient in the past can lack the functionality
that is needed for expanded operations. Best-in-Class organizations are more
likely to integrate disparate applications. As an end-to-end business application,
ERP and its extensions provides midmarket organizations with an opportunity to
do just this. As such, 97% of Best-in-Class midmarket organizations have already
implemented ERP (Figure 3), in comparison to 81% of all others (the Industry
Average and Laggards combined). Still, even organizations that have already
implemented ERP may not be deriving full value from it. The system may not be
able to interact with other applications, employees may not be properly trained,
the IT department may not be able to fully support the solution, or many other
factors. An ERP implementation must continue to grow along with the
organization through modification, extension, and continued support. The reasons
for implementing or extending ERP will be listed later in this report, but first it is
important to identify just what is needed for a successful ERP implementation.
Best-in-Class
100%
Industry Average
Laggards
97%
84%
75%
50%
77%
All Others
Functionality
4.55
4.17
Ease of use
4.42
3.97
4.25
3.74
4.19
3.74
4.07
3.60
4.03
3.69
0
Also, Best-in-Class organizations are more heavily favoring ERP systems with
integration technology and capabilities. Of course, there may be some legacy
systems that need to be retained. As an end-to-end system of record, ERP needs
to be able to interact with these applications. Additionally, there are extensions of
ERP such as Business Intelligence (BI) that must be integrated effectively.
Percentage of Respondents, n = 79
70%
Leaders
59%
Followers
44%
35%
0%
Services can add benefits to an ERP system in many ways. Leading midmarket
organizations are more likely than followers to enhance their ERP solutions with
the knowledge that service organizations can provide. This can come in the form
of software customization, system implementation and configuration, system
integration, or in ongoing support (Figure 6). For growing midmarket
organizations, these services can take the strain off of the IT organization and
other individual employees to allow the organization to take advantage of ERP. At
the same time this can minimize any negative impacts that a substantial business
transformation like ERP can inflict. When substantial changes to the business
happen, such as the addition of new product lines, subsidiaries, processes, or
regulatory requirements, service firms can be brought on board to ease
the process.
Figure 6: How Leaders Use Services
Software customization
System implementation and configuration
52%
43%
System integration
39%
Ongoing support
39%
Leaders
0%
35%
70%
Percentage of Respondents, n = 79
Source: Aberdeen Group, April 2012
Leaders
Followers
57%
52%
Local support
Relationship to vendor
Cost of services
39%
35%
52%
58%
0%
35%
70%
Percentage of Respondents, n = 79
Source: Aberdeen Group, April 2012
One may be led to believe that adding additional investment on top of the ERP
software itself would cause the organization to take longer to receive ROI. The
data suggests that this is not the case. The results of including third-party support
into an ERP strategy are impressive for midmarket organizations (Table 1). Those
organizations that are using services are reaching ROI more quickly, have shorter
implementation times, and are containing costs and project scope creep more
effectively. Thus, the organization receives the benefits of ERP more quickly,
minimizes the implementation's disruption to operations during the
implementation process, and propels the organization towards future growth. If
ERP has already been implemented, data presented later in this document will
illustrate how employing a service organization will produce bigger benefits
derived from ERP.
Table 1: The Result of Third-party Support
Result
Services
Months until ROI
25.5
Months from installation to first
7.9
"go live"
Percentage of pre-defined
budget spent on
109%
implementation
Percentage of time project
completed beyond original
12%
timeline
No Services
31.5
11.3
121%
13%
Source: Aberdeen Group, April 2012
Best-in-Class
60%
Industry Average
Laggards
54%
40%
30%
0%
27%
Of course, it is absolutely essential that the data being used in BI is the same as
the data contained in ERP (and vice versa). Multiple data sources can cause
redundancies and inconsistencies. BI, or any extension of ERP such as Customer
Relationship Management (CRM), must be integrated effectively. This integration
can be handled in-house, or by hiring a service organization to handle integration
and expansion. Best-in-Class organizations are more likely than all others to
enable their employees to perform process that span different applications
without consciously switching between those applications (Figure 9). This must be
seamless and transparent. Employees then have one place to go for all of their
data needs. They are now more likely to seek data out on their own and factor it
in to all decisions.
100%
Industry Average
Laggards
90%
84%
75%
75%
71%
62%
53%
50%
91%
Best-in-Class
75%
75%
All Others
78%
72%
60%
52%
50%
Standardized
Standardized
enterprise-wide
procedures for order
procedures for
management and
procurement, cash
delivery / fulfillment
collection, and financial
reconciliation
Standardized
enterprise-wide
procedures for
production planning
and execution
Next, ERP can help to promote collaboration across the organization. First, Bestin-Class organizations are 61% more likely than all others to feature crossfunctional continuous improvement teams (Figure 11). These teams are used to
increase collaboration across the organization and drive further improvements
and growth. From a visibility standpoint ERP is also being utilized to foster
communication throughout the organization. Disparate business units can greatly
affect one-another, so it is important for individual functions to be aware of what
is going on in other parts of the organization. For example, Best-in-Class
organizations are 75% more likely than all others to coordinate manufacturing
organizations with customer service, logistics, and delivery. This ensures that
manufacturing is in sync with the customer facing part of the organization. This
results in consistent quality and superior demand assessment.
84%
Best-in-Class
All Others
61%
55%
40% 37%
20%
48%
38%
Further, ERP aids decision-makers with the visibility into daily operations that they
need as they become further detached from individual employees and processes.
This begins with the fact that the Best-in-Class is over twice as likely as all others
to be able to drilldown from summary data into individual transactions (Figure 12).
Even those that are not at the very top of the organization can benefit from the
visibility that ERP provides. Best-in-Class organizations are 189% more likely than
all others to provide a fully integrated view of all customer information to any
member of the sales or marketing team. This facilitates customer interactions and
leads to customer satisfaction.
82%
69%
70%
50%
40%
30%
10%
All Others
Best-in-Class
61%
55%
33%
21%
19%
Ability to
A fully integrated
automatically notify view of all customer
decision makers information available
when certain
to any sales and
conditions occur
marketing person
83%
90%
65%
Best-in-Class
Industry Average
55%
60%
35%
30%
0%
Integrated business
applications serve as a
complete and auditable
system of record
Laggards
31%
20%
30%
18%
10%
Users have access to
ERP from mobile devices
Event Management
(Triggers & Alerts)
Best-in-Class
Industry
Average
Laggards
60%
29%
19%
25%
12%
8%
23%
13%
10%
17%
10%
12%
20%
14%
13%