For many government entities and corporations, implementing a new Enterprise Resource Planning (ERP) system represents a multi-billion-dollar investment, often disproportionately benefiting system integrators and ERP vendors. An ERP can range from a basic accounting tool to a comprehensive system integrating finance, HR and logistics into a single platform.
Kitbag Consulting has designed and developed Integrated Business Support Systems from our insights gained from collaborating with clients on significant system changes, organisational restructuring and machinery of government transitions.
In our LinkedIn post series, we aim to highlight key shortcomings in the implementation and use of complex ERP solutions, focusing on elements that cause significant disruption.
What is an ERP?
A simple question but most misunderstood by leadership who fail to correctly frame staff expectations and set boundaries on vendors and integrators scope of work.
Transactional System. An ERP system is fundamentally a system designed to manage transactional activity within an organisation. It captures and processes data from various business transactions such as sales orders, purchase orders, inventory movements and financial entries in real time.
By consolidating transactional data into a unified dataset, ERP systems provide a seamless view into the financial health of an entity, reducing duplication and improving the accuracy of reporting. This transactional nature ensures that every action taken within the system is recorded and tracked, providing a comprehensive view of business operations and facilitating better decision-making and operational efficiency.
What ERP is not ?
Conversely, management activities are concerned with the planning, oversight, decision-making and the maintenance of strategic direction of an organisation. Management activities such as setting goals, monitoring performance and making decisions are based, in part, on data and insights gathered from the transactions within the ERP.
By implementing robust frameworks for planning, execution and evaluation, organisations can respond more swiftly to market shifts and emerging opportunities. For instance, strong project management practices lead to successful initiatives, while efficient risk management processes mitigate potential setbacks. Ultimately, management activities are finely tuned to a company's strategic objectives, enabling effective and innovative operations, positioning it ahead of competitors who may lack such disciplined oversight.
Transactional and management activities serve distinct but complementary roles within an organisation. Again, transactional activity reside in ERP systems and typically highly structured and automated to ensure accuracy, management activity does not.
While transactional activity ensure the smooth execution of day-to-day operations and are the building blocks of operational efficiency, management processes use the dataset of these transactions to guide and optimise long-term strategic objectives.
For government, they serve as the guiderails to achieve policy objectives and for corporates, they are a source of competitive advantage.
Building Bespoke Solutions
Integrating a new ERP system comes with technical and commercial challenges that can impede success. Essentially System Integrators and ERP vendors have a real profit motive to meld transactional and management processes into the ERP to develop a bespoke solution.
Once bespoke, vendors can legitimately disassociate themselves from providing ongoing support whilst continuing to draw a licensing revenue stream without an ongoing support liability. This support liability then falls to third party system integrators at an additional and significant cost to the ERP owner.
In one significant case, this resulted in system upgrades being delayed by years and wasteful capital expenditure in the order of hundreds of millions of dollars per year in capital with significant additional expenditure hidden in the operating budget.
To address this, government agencies are now mandating that ERPs are to be configured, not customised.
Moreover, with a misunderstanding of what ERPs provide, there are well documented and observed instances of leaders attempting to change their organisation's operations to comply with the ERP. This is and will continue to be an source of considerable angst that is improperly attributed to change fatigue.
Hence we strongly advocate that management processes should remain separate to the ERP and have been designing and developing Integrated Business Support Systems to fill this void. The challenge is in the design, building the Integrated Business Support Systems to interface with other data systems (see Activity Integration below) at the right level to ensure management processes are usable to both the executives and line management.
By adopting this approach, technical and operational risk is reduced, the ERP vendor is held to account and the success of future upgrades is assured.
System Integration
Another impediment to a successful ERP implementation is the requirement to link disparate systems to work together seamlessly to achieve business outcomes. System integration during ERP implementations comes with enormous technical cost and risk.
We argue that the cost and risk in most cases outweigh system integration and integration can occur at the task and activity level using an Integrated Business Support System, the middleware that contains the management activities to provide context to the requirement for and use of data.
Activity Integration
Activity-focused integration is an alternative to provide a more nuanced path to competitive advantage than system integration alone as it emphasises the optimisation of the way tasks and activities are performed within an organisation.
By concentrating on refining and standardising management activity, businesses can achieve speed to decision with greater transparency across organisational boundaries without necessarily overhauling existing systems. For instance, streamlining task flows, eliminating bottlenecks and implementing best practices can lead to significant gains in productivity and customer/community satisfaction.
While integration is crucial for ensuring different technological components work together seamlessly, system integration should only occur where the risks and costs are outweighed by considered benefits.
A deeper focus on activity improvement ensures that each step in the value chain is as effective and efficient as possible, ultimately leading to a more agile and competitive organisation.
Alternative to System Integration and Bespoke Solutions
As a consultancy we have on many occasions been engaged to write Standard Operating Procedures (SOPs) for organisations with significant ERPs. Those SOPs communicate how managerial activities should be performed to complement the transactional nature of ERP’s.
Unfortunately those SOPs and supporting processes have been articulated in such a format (Word/ Excel and or Visio), they more often than not become expensive shelfware after their first use or forgotten with the inevitable staff churn.
With advances in technology, Kitbag Consulting has been designing Integrated Business Support Systems that transforms shelf ware into a functionally based support system.
This has significant ability to improve the means, controls and efficiency of the organisation through embedded best practice and enables an enterprise view of end to end activity.
Using the functionalities of the approach, staff can follow their relevant activity according to their role/ function and link in to the transactional system at the appropriate screen to perform that transaction. Essentially, all of the departmental processes are external to ERP thus requiring minimal modifications during ERP integration.
Minimal modification enables the software vendor (not the System Integrator) to routinely conduct technical upgrades with little operational disturbance and no additional cost over a negotiated maintenance agreement.
It will in its very nature embed the agencies’ governance framework, reduce audit procedures and ensure alignment of legislation, policy and business rules into roles and everyday practice.
The approach also promotes self‐sufficiency in that agencies will own the processes and be able to amend them to cater for legislative, policy and business changes.
