For many organizations, CFOs either manage IT investments or at least have a heavy influence on how IT budgets are spent. Despite this financial focus at the executive level, however, most ERP implementations still fail to deliver expected return on investments on those initiatives. The irony of this fact is reflected in our 2013 ERP Report, which shows that most ERP implementations take longer than expected, cost more than expected, and don’t deliver anticipated business results.
Business intelligence is one of the missing components of many IT initiatives, including enterprise software implementations. Large-scale ERP systems provide platforms for organizations to standardize their business operations across multiple locations, collect consistent data across the enterprise, and realize a host of other potential business process efficiency gains. However, these productivity and efficiency gains are often undermined by poor business intelligence. After all, these improvements don’t mean much if executives don’t have visibility into key metrics required to run the business.
But what exactly is business intelligence? BI, data warehouse and analytics are all common and overused industry buzzwords but not all executives understand what the concept means. In short, BI is the module or tool used to gather and organize the masses of information stored in your enterprise or legacy systems into a more meaningful analysis of what is actually happening in the organization. For example, business intelligence can provide better insights into what products are selling, who’s buying your products or services, and how much money you’re making on those products or services.
In order to determine whether or not your ERP implementation or IT project is delivering meaningful business intelligence to your organization, there are a few things to keep in mind:
Understand what business intelligence capabilities exist in your current ERP systems. Since business intelligence is such a hot buzzword right now, most ERP vendors are highlighting their capabilities in this area, regardless of how valid they are. It is important to understand whether or not your ERP system has the capabilities required for a robust business intelligence or analytics process. For example, some ERP systems have light reporting capabilities that they oversell as true BI or analytics tools, while others have strong capabilities but require separate or more advanced modules to accomplish. It’s important to understand what exactly your ERP system can provide. If it doesn’t provide the necessary functionality, there are plenty of third-party options in the market that can be used as a supplement to leading ERP systems.
Address both business transformation and IT maintenance KPIs. CIOs often have very different visions of business intelligence and KPIs than CFOs, COOs and other boardroom participants. CIOs may focus more on internal support types of metrics, such as average system downtime, while CFOs and COOs are more concerned with inventory levels, customer profitability and other more business-driven metrics. It is important that your business intelligence tools are implemented to support both analytics related to business transformation and improvements, as well as internal IT maintenance.
Determine the risk versus reward of business intelligence versus other IT initiatives. Lack of visibility into current operations is one of the key reasons why executives want to rip out and replace their ERP systems. However, lack of data is usually not a result of the system itself and can often be addressed by lower-risk and lower-cost initiatives rather than a full-blown ERP implementation. Unless there are other compelling reasons to replace your current system, it is helpful to first understand what options exist in your current system. For example, could a relatively simple upgrade or third-party BI bolt-on provide the information your executive team is looking for? If so, one or both of those options are likely to come at a lower price tag and more tolerable risk profile.
Regardless of which direction your organization decides to go – a new ERP system or some sort of improvement to your current systems – business intelligence should be a key component of your path forward. Only by delivering meaningful, predictive information rather than obsolete, historic data can an organization get the full ROI of what it expects out of its investments in ERP systems and other IT initiatives.
Learn more by downloading Chapter Three of An Expert’s Guide to ERP Success.