Squeeze Your ERP A Little Harder Before Ditching It
March 7, 2018 Alex Woodie
The pressure to migrate to newer ERP systems and cloud-based applications can be heavy, particularly if you’re using perceived “legacy” platforms like the IBM i server. However, the urge to replace one technology with another should be resisted, especially if your business challenges aren’t rooted in technology.
That’s the gist of a conversation with Eric Kimberling, the founder and managing director of Panorama Consulting Solutions, which functions as a neutral third-party adviser for customers’ ERP-related decisions. Panorama recently published a report poking holes in the widely held notion that newer ERP and cloud systems are better for business.
“First and foremost, it comes down to cost and risk,” Kimberling tells IT Jungle. “For a lot of companies, they may find that getting more out of their current system, or upgrading or enhancing the system they already have, is potentially less costly and less risky than if they to do a full-blown replacement.”
That doesn’t mean you should never abandon your old ERP system. In the battle for business supremacy, better technology can play an important role, especially if your technology dates back to the Carter Administration. “Lower cost doesn’t necessarily mean much if it turns out you have a big opportunity cost of not replacing your systems and the potential benefits that go along with that,” Kimberling acknowledges.
But companies should be careful not to ascribe too much worth to the power of technology to impact the business when other critical aspects are overlooked, out of whack, or otherwise misaligned.
“It’s important to not get too hung up or go in with a pre-conceived idea that you need to replace your current system, because you may find that the lower cost and lower risk option delivers more ROI,” he says. “Everybody is looking for that silver bullet as a way to just use technology to fix all our problems, because it’s a lot easier, it’s more predictable than the human and process side of things. If we could find a silver bullet technology, that’d be great, but so far it doesn’t seem to exist.”
Cloud-based applications, including cloud-based ERP, are hot. There’s no denying that cloud technology is tempting. If you just subscribe to a cloud provider’s service, the thinking goes, you can leverage the same capabilities and access the same pool of resources that the most successful and trend-setting companies are accessing.
Don’t get carried away by that nonsense, advises Kimberling. “The ease of use of the cloud, the ease of implementation, and the fact that you can basically just flip a switch and you have great access to this great new technology — it’s great from a technology perspective, but it’s actually perpetuating the problem, which is that technology alone isn’t fixing anything for any company,” he says. “It’s the combination of technology along with improved business process and proper training and organizational change for people. Without doing all three of those things, you’re not really fixing the problem.”
In fact, sometimes the adoption of a new system can mask underlying problems for companies, and create even bigger problems down the road. That’s a real risk when adopting cloud solutions, which are more rigid than on-premise ERP and generally lack the configurability and flexibility to adapt to customers’ unique businesses.
“In some cases you can argue it’s even more difficult from a people and process perspective with cloud solutions because you have relatively less flexibility to change the software to fit the people and the processes the way it is now, which some people want. They want that lack of flexibility because they want to force best practices onto their organizations,” Kimberling says.
“But what they don’t recognize is now you’ve just shifted the risk. It made things easier or cleaner from a technology perspective. But now you’ve just shifted the cost and risk over to the people and process side of the equation. The problem is that most companies don’t recognize that. They think the risk and the cost has just gone away, but it hasn’t.”
It’s remarkable how little forethought some companies put into technology decisions, and how much executives and other technology decision-makers let biases and emotion get in the way. When considering an ERP migration, decision-makers should conduct a rigorous analysis that weights the costs, the risks, and potential return on investment (ROI) in a dispassionate manner.
“It all comes down to an ROI. If you don’t do a business case analysis, it’s all conjecture,” Kimberling says. “Companies go in with assumption that their system is broken and they need to replace it. But as you dig into the situation, you find that actually there’s other things at play — the business processes may be broken, or the people maybe weren’t trained on the system properly — but it really has nothing to do with the system itself. So if you go in and replace that system, you’re not really fixing the problems.”
The IBM i server has certain qualities and characteristics as an ERP platform, and they cut both ways. On the one side, it has a reputation for stability and security and reliability, which are qualities that have endeared it to a generation of technologists who have spent decades working with the platform. For these die-hards, leaving the platform is difficult, even if a different platform or a cloud offering may actually fit their business better.
On the other side, there are decision-makers who see a 5250 screen and immediately jump to the conclusion that the platform is outdated and should be replaced. Falling into either of these bias traps is a good way to make poor decisions for your company.
“With IBM i, out of all the different platforms, we see that’s the one where you’re going to have a lot of legacy loyalty, where people are very loyal to the IBM i architecture,” Kimberling says. “It’s stable, it’s performed, it’s worked well for them for however many years or decades. It’s just hard for that group to sort of shift away . . . . They’re so loyal to it, they swear by it, so it’s hard to get away from it, in some cases even if you want to.”
Kimberling advocates bringing a neutral and dispassionate rigor to technology decisions, an approach he espouses in his consulting engagements. Every company has a certain amount of bias going into the technology process, Kimberling says, but he tries to minimize it.
“Quite frankly, that’s why so many of them hire us, because we are independent, we’re technology agnostic, we’re not emotional about it,” he says. “We’re just very pragmatic in helping them navigate and figure out the best path forward.”
Best Path Forward
In most cases, companies are better off taking a conservative approach to maximize existing technology rather than risk a rip-and-replace affair, he says.
“It’s pretty rare we go into a client where you are completely tapped out,” says Kimberling, who worked for Schlumberger and PricewaterhouseCoopers before founding Panorama Consulting Solutions near Denver, Colorado, in 2005. “There’s probably a pretty good chance you can get a lot out of what you have now.”
The easiest way to augment an aging ERP system is by looking at the financials. In many cases, there are business intelligence, reporting, or analytic functions that the customer has not adopted that could bolster the business. When there aren’t good BI or analytic modules available from an ERP vendor, third-party solutions can be bolted on to provide an immediate productivity boost.
“What we find is most of our clients have not fully leveraged their system to the extent that something off-the-shelf or out-of-the-box is going to give them a lot more than they have now without necessarily developing something new,” Kimberling says. “Assuming you’re not on a completely obsolete ERP system, most ERP systems are going to have some level of BI or reporting or analytics that a lot of companies aren’t taking advantage of, either because they haven’t upgraded or they haven’t added those modules.”
Beyond the low-hanging fruit of BI, more value can often be squeezed from an ERP system by tackling bigger projects, such as advanced planning or demand forecasting, he says. Kimberling says he sees a fair amount of migration off the IBM i platform. Kimberling recommends companies that find themselves running older ERP systems on IBM i to consider what the vendor has to offer.
“Your best bet is to look at some of the more recent version of some of those products, whether they be from Infor or other providers who still provide solutions that fit in that environment,” he says. “Even though Infor may not be sinking as much money into those products as some of other ones, you find a lot of companies that find incremental value in making an incremental improvement to what they’ve got.”