Enterprise Applications--The Genesis and Future, Revisited Part Five: More on ERP Evolution

Enterprise Applications—The Genesis and Future, Revisited
Part Five: More on ERP Evolution
P.J. Jakovljevic - April 5, 2004

Customer Relationship Management

Another important area of enterprise resource planning (ERP) vendors' functional expansion has been in the front-office and customer relationship management (CRM) arena, since customers are demanding applications and tools that allow them to link back-office ERP systems with front-office CRM systems. CRM has gone from a vast field of point solutions to suites of customer care applications covering SFA, field service, telesales, call center, marketing automation, etc. Today's enterprise applications are required as a matter of course to address more than the processes taking place within the walls of an enterprise. Almost all traditional ERP vendors (small and big alike) experienced a "wake up call" and have long been trying to expand their product offering in tune with the ever-changing trends and requirements of the new collaborative economy.

To that end, over the last few years, all significant enterprise applications players have been actively partnering or finding other ways to provide solutions that allow businesses to collaborate more effectively. Consequently, the boundaries between ERP, CRM, e-commerce, and SCM have blurred so much that any attempt to functionally separate them becomes ever more pointless. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the once-considered more remarkable and supposedly more relevant CRM and e-commerce activity.

The cycle begins with the attraction of the customer through sales and marketing. This hopefully results in an order management and fulfillment process and ends with customer service, which can involve anything from field installations through to enquiry and complaint management. All of these steps have to be executed well without exception. Otherwise, the prospective customer will end up on a competitor's list of customers. Therefore, the relative importance of CRM versus ERP, ERP versus SCM or of any other match-up is irrelevant. All of these functional areas are critical, except for some esoteric or autistic businesses that can get by with implementing islands of information.

The "64,000-dollar" question is how all business processes work together. In the electronic world, the degree of flexibility and efficiency of collaborative processes relating to the customer life cycle, product life cycle, and so on, to name but a few, will be a big determinant of losers and winners. As proof of the above might be the fact that the traditional large ERP providers like SAP, PeopleSoft, and Oracle can claim bigger CRM-related revenues than every pure-CRM vendor except for Siebel Systems that still clings to its CRM leadership position (see Comparison of ERP and CRM Markets' Life Cycle Snapshots). Some demarcation line here could be that ERP vendors are successfully selling into their manufacturing install base, while CRM specialists stronghold remains the service sectors where ERP as not gained much religion.

This is Part Five of a six-part note.

Parts One, Two, and Three covered developments from the 1960s through the 2000s.

Part Four began the discussion of ERP evolution.

Part Six will look at the future.

There is a Glossary for the terms italicized throughout this article.

Real-Time Performance Analysis

ERP software's scope has also recently gone beyond traditional transactional business functions by enabling organizations to deliver real-time performance analysis directly on the desktops of CFOs, CEOs, and other business managers. Major ERP vendors have been shifting focus from routine users' transaction requirements to the overall organization's business imperatives, thereby helping lines-of-business (LOB) become more knowledgeable and proactive. Instead of requiring a collection of processes, the system should appear to each user as a vast source of information. While relational databases, currently used by ERP systems, are good at retrieving a small number of records quickly, they are not good at retrieving a large number of records and summarizing them on request. Most ERP products have a rich database, but, translating the data stored within the database to information useful for making enterprise decisions has proven difficult. With the availability of software analytic solutions, several dozens of ERP providers can supply their customers with a valuable tool for harvesting the business value out of their database. Therefore, major ERP vendors have been increasingly embracing OLAP (On-line Analytical Processing) tools that provide a high-level aggregated view of data.

While ERP and analytics have been inseparable ever since the idea of business automation via IT way back in the 1960s, they have had different user experiences, evolutionary paths, and so on. Namely, although ERP systems have positively transformed many enterprises' business processes, many users have still been left feeling as oversold to, due to the overwhelming notion that these systems inhibit access to the vital information "jailed" in them. Often indeed, in most traditional ERP systems a number of financial activities are grouped together to form artificially created processes, which bear little resemblance to the actual business activities, such as ERP systems' focus had often appeared to only be getting the correct figures into the general ledger, which has a transactional glut as a result.

Contrary to traditional core ERP, business intelligence (BI)/analytics provides an environment in which business users receive information that is reliable, consistent, understandable and easily manipulated (i.e., flexible). Because C-level executives and middle management have always had a need to understand their business' performance regardless of good or bad economic times—while the output from BI might change, the need is always there. Particularly since the recent massive demise of dot-com's, the depressed economic times, and the stringent Sarbanes-Oxley Act (SOA) reporting regulatory requirements following up the high-profile corporate fraud scandals (such as Enron, Tyco, and WorldCom) have additionally increased executives' focus on understanding and managing corporate performance.

New disclosure rules are prompting companies to share information faster (for example, accelerated filing of 10Q quarterly statements and 10K annual reports, report sales of stock by executives (insider trading) within days of the transaction, expanded list of "significant events" to include changes in debt ratings, inclusion of financial results of partnerships in earnings reports, etc.), and sophisticated data-collection and data-analysis applications come in handy in that regard. Given that the BI tools have neither been terribly complex nor expensive to deploy, but have still been helpful in facilitating the decision-making process, they have lately become considered necessary rather than as a luxury. Also, decisions are nowadays increasingly made at ever lower levels in organizations. For more information, see Business Intelligence Success, Lessons Learned.

To that end, various enterprise business intelligence (BI) solutions enable organizations to track, understand, and manage enterprise performance, and they leverage the information that is stored in an array of corporate databases/data-warehouses, legacy systems, and diverse enterprise applications. The latest evolutionary step introduces the concept of corporate performance management (CPM) (often interchangeably referred to as enterprise performance management [EPM] or business performance management [BPM], too), which is an emerging portfolio of applications and methodology with business intelligence (BI) architectures and technologies at its core. Historically, BI applications have focused on measuring sales, profit, quality, costs and many other indicators within an enterprise, but CPM goes well beyond these by introducing the concepts of management and feedback, i.e., by embracing processes such as planning and forecasting as core tenets of a business strategy.

For the above reasons, the vendor landscape remains diverse, with every vendor, including many ERP aspirants, touting some (or nearly total) CPM capabilities. Thus, the arms race to marshal the most complete CPM platform has lately intensified; see BI Market Consolidation Compared to ERP Market Consolidation.

This concludes Part Five of a six-part note.

Parts One, Two, and Three covered developments from the 1960s through the 2000s.

Part Four began the discussion of ERP Evolution.

Part Six will look at the future.

Sources and Recommended Further Readings

1. ERP: Tools, Techniques, and Applications for Integrating the Supply Chain. Second Edition; Carol A. Ptak, CFPIM, CIRM, and Eli Schragenheim; The St. Lucie Press/APICS Series on Resource Management; 2nd Edition, 2003
   
   
2. Selected Readings in ERP; APICS Complex Industries SIG, 1999
   
   
3. Maximizing Your ERP System: A Practical Guide for Managers; Dr. Scott Hamilton; McGraw-Hill Trade, 2002
   
   
4. APICS Dictionary; 10th Edition