Generating A Surge In The Digital Era

by Unnikrishnan Nair - VP & Head of Information Management, Philips

Business Context

Information Super Highway or Internet has revolutionized the world at much larger and faster scale as compared to any other change in human history. There is almost nothing which was not impacted due to this change. Street vendors got smarter through e-commerce portals like Flipkart, Snapdeal, Amazon amongst others. Even fishermen got smarter through alerts on exact fishing locations and dangerous climate conditions. Traditionally established industries were no exception either. In fact, there is a clear recognition on the car manufacturer’s side that unless they change the business model quickly, the internet based transport solutions providers would be generating maximum value while the equipment manufacturers would be driving most of the efficiency with ever thinning margin.

The above fundamental shift in business operations is forcing companies to look for strategic alliances, takeovers or even mergers to drive efficiencies. One of the key success factors for these fundamental organizational changes is the capability of ERP platforms to integrate and take out waste. A recently concluded research shows that only 30 percent of these strategic projects result in positive value for all stakeholders. Majority of them either fail miserably or do not result in extracting projected value. This means many organizations are stuck with the original ERP installations, specific customizations, incompatible information models, unique IT service delivery processes and more. In effect, ERP has transformed itself into a monolith of resistance to change.

With this backdrop when we look at the world of ERP, we see clearly old and new school divide. On one hand we have the Internet generation which is extremely agile, adaptive and capable of producing a new idea almost every day at every nook and corner of the world, on the other, the traditional ERP School believes in well-structured processes, legal and regulatory standards, clear roles and responsibilities. 

The evolution

It is interesting to think that most of the ERP platforms used today are designed before the advent of Internet. While most of these platforms claim that they are “web enabled”, there is an in-built stigma to “open up” these platforms. In fact, a “service oriented” platform has been affected due to large install base and the need for backward technology compatibility. Clearly, strength of the platform is now becoming part of the weakness. Most of the experts of these platforms also feel very comfortable in this “commanding” position which is self-destructive in long run. 

What businesses need in the future is a “plug and play” environment where new business models could be launched, a new company could be taken over and integrated very fast and also an existing business can be hived off in an efficient way. Ultimately every large organization should have its own “Business System” which will consist of all – People, Processes, Tools and Analytics to operate efficiently. This business system will keep evolving as the markets demands differentiation.

In order to address this seemingly endless divergence of need, cloud computing is gaining wide spread acceptance as the security concerns are effectively being addressed. There is a growing level of expectation even at large corporations to go for “Cloud ERP”. One of the key reasons for this is the ability to connect “anything” with ease and enable new business models as the market demands. Thus, with all probabilities we are again at a cusp of a huge change in the ERP domain. In the cloud world, people expect ERP to “offer” a set of “standard services” which could be called from a business process management platform (BPM) in a pre-defined sequence. The pre-defined sequence becomes the process in a business model and thus effectively keeps the change in core ERP itself limited.

Industry Trends

Good news is that almost all ERP providers recognize this need to be flexible and are responding in various ways. While small ERP solutions like Tally are offering cloud hosting and multi-tenancy models, large companies like SAP are out with HANA – the full in-memory computing environment. While SAP is fast releasing all their products in the HANA platform, there is still skepticism in terms of “openness” of the modules and the ease of integration into a BPM platform which ultimately would unlock the full power of ERP platforms like SAP in a digital ERA. Another key concern is the cost involved – both for licensing and migration costs.

 

Logical Steps

It all depends on the level of pain acknowledged at the business side. If there is clear understanding at the board level that ERP platforms is the Achilles heel, there will be more hunger to drive change in the organization. Be prepared, this is not an easy one to achieve. It takes years of perseverance and dedication to change fundamental cultural DNA of the company. The rewards are also big. Many companies are talking about cutting 50 percent of IT costs, 40 percent improvement in time-to-market, multiple increases in the inventory turns, reduced NOC levels and others. Hence it is strongly advised that IT should not get excited about the new technology possibilities and instead start creating awareness. It needs to be much more fundamental, driven from the business side starting from the top and IT should sign-up only if they are ready for long haul!