Enterprise Resource Planning (ERP) is a tool used to manage and integrate key organizational functions such as inventory control, production operations, human resources, accounting and financials. With ERP organizations can streamline processes through automation, increase productivity and improve reporting capabilities, data security and regulatory compliance management.
Setting the tune
Deciding to implement an ERP solution or similar technologies involves applying a strong strategy and program which must come from the Board, senior management, or those charged with governance. Moreover, the transformation program should come with multi-phase projects and involves understanding the organization’s needs and current state. This should be done by analyzing current processes, identifying gaps, ambiguities and pain points, determining the fitness and suitability of technology solutions considered, and redesigning processes to match and catapult ERP’s advantages. Once the strategy and, program has been crafted and executive approvals have been obtained, comes the implementation stage. Organizations must have a team with the right competencies to understand and align their organizational architecture with the changes to be implemented. Additionally, organizations need to understand the data structure and quality to ensure integration, acceptability and seamlessness during data cutover and migration to new ERP solutions. These are the key prerequisites to setting the tune and forming a vision or the Target Operating Model (TOM).
Driving towards ERP-powered solution
Once the TOM complements the established goals and vision of the organization, tactical planning with the senior management and key stakeholders must occur. Transitioning to the chosen ERP solution must be carefully planned, implemented correctly and supported by a governance framework. Driving to become an ERP-powered organization also requires a future view on scalability and knowing whether an organization is growing or a mature organization already. This is better answered by the type of ERP hosting they will select to implement, which can either be on-premise, cloud or hybrid.
On-premise hosting has been the traditional model, but due to complications brought about by risks on security, infrastructure and hardware requirements, many organizations are reassessing this model to try to rationalize and recalibrate the costs. Cloud hosting the infrastructure, platform, application (or all these) is a possibility. However, some organizations like to manage risks and comply with certain local regulations, thus the concept of hybrid model of on-premise and cloud solutions. For the past years, ERP vendors such as SAP, Oracle, Microsoft, Workday and Infor have been selling cloud as an enabler towards flexibility, streamlining of costs and building trust with clients. To become an ERP-powered enterprise, organizations are pushed to reassess opportunities and threats, rethink their TOM, revisit their strategy and select the most appropriate hosting model for their transformation journey.
Be ready for challenges
Every organization faces unique situations when deciding to drive transformation projects. In my experience, we need to be mindful of the “F5” when preparing and considering project plans for better project risk management:
- Frail project governance. As ERP implementations come with multiple phases and workstreams, organizations need to have the right people in the team from top to bottom, choose the right structure and establish accountability, ownership and responsibility. This should also be supported by a strong governance framework aligned with corporate policies and guidelines.
- Fragile support and team dedication. Organizations tactically assign senior managers or experts in their field to join the project team but are not off-loaded with their “Business-As-Usual” (BAU) responsibilities and reporting commitments. This may result ing fragile support and lack of dedication in attending to the complex and time-bound requirements of the project. To mitigate these, organizations need to plan ahead and assess their manpower needs.
- Fallacy of “one-time, big-time” operation. Some organizations think implementing ERP ends with go-live without preparing and anticipating for potential issues, defects, errors or problems that are not in-scope during the testing and migration period. Depending on the approach, testing can be done after all developments are completed in a waterfall method or can be iterated in agile methods. Nonetheless, ERPs continue to operate with new or exceptional scenarios that have not been foreseen or tested, thus requiring hypercare considerations. In line with the TOM, organizations need to prepare a service delivery approach and team to cater to and manage changes, enhancements and incidents or problems as the ERP is put into use and operation.
- Flawed data quality and integration. Data plays a key role in successful implementations. Older and more traditional organizations venturing into ERP transformations often overlook data quality from various sources (either maintained manually, in spreadsheets or in legacy systems) and how they will be cleaned-up, converted and transformed into the new ERP solution. As coined by IBM programmer George Fuechsel in the 1950s, garbage in garbage out (GIGO) is a principle to think of when working with data. When data are not properly sorted, structured, validated and corrected, these will create chaotic results and output in the ERP. The solution is to allocate time in fixing noted discrepancies, irregularities and gaps in your data source and ensure it is properly mapped, captured, converted and transformed into the ERP system.
- Forgetting about security and regulatory compliance. Nowadays, these areas are critical for organizations as threats continue to evolve exponentially and governments respond by requiring utmost compliance to certain rules and regulations. As these are non-negotiables, security and compliance should be major attributes to include during implementation. There are certain regulated industries in the Philippines (such as financial services, power, and telecommunications) that need regulatory approval prior to starting the ERP or technology adoption, particularly those using the cloud hosting model. Also, considerations for alignment and concurrence with the Bureau of Internal Revenue’s Computerized Accounting System (CAS) accreditation and the National Privacy Commission’s requirements on data processing systems registration, must also be prioritized.
It is vital to know your position in your industry and your vision for your organization as it will determine your eagerness to embrace ERP implementation. In practice, it is all about your organization’s readiness, adaptability, and willingness to invest. ERP transformations should always start with setting the right tune and elements.
Gilbert T. Trinchera is a Senior Manager from the IT Advisory group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or ph-kpmgmla@kpmg.com.
For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.