For Post-Modern ERP, There’s Only One Road Map That Matters: Yours
Today's guest post is from Oscar Nafarrate, Director of IT and Business Processes for Grupo Herdez. Oscar and Grupo Herdez CPO Javier Carnevali will speak on implementing SaaS at their organization in a Spanish-language webinar, The Digitalization of Procurement and Finance, presented in partnership with IDC on Tuesday, September 20th at 12 pm EDT. Today, Oscar shares his thoughts on how to develop a modern technology roadmap that includes SaaS solutions.
When ERP systems first came on the market, they connected and automated many processes and made running a business more efficient. Today, the aim of using technology is no longer just to do the same thing more efficiently; it’s how to efficiently run a business that is always changing. Integrating mergers and acquisitions, complying with new regulations, and global competition all demand companies be able to quickly change the way they work.
Legacy ERP systems are too rigid for that purpose. Specialized platforms for supply chain planning, business intelligence, customer relationship management, procure-to-pay, financial forecasting and other processes offer much more agility and functionality. Integrating these new applications--some of them cloud-based--with legacy systems gives businesses the ability to undertake new technology initiatives that add value to the organization. With them, we can build the post-modern ERP that Gartner has been talking about for the past few years.
This is not about building a new technology stack. It’s about building business value. When I became a CIO, my CEO’s top priority was to implement technology that could add value to the business. He didn’t have any particular systems in mind. That freed me and my team to dig into the business and figure out what we could do that would make a difference to the bottom line.
I think that’s the right way to think about it. If there’s something you can do that really adds value, but there’s no system on the market, do it on a spreadsheet. Getting the value is the top priority.
A ship about to sail
Keep business value in mind when you’re talking to vendors and listening to their marketing pitches and learning about their “road maps.” There might be some great ideas in there. Their future plans for their technology might look like Star Wars. It may seem that a software company road map is like a ship that is departing. Just hop on board, and you will arrive at the destination they’ve planned.
However, the only road map that matters here is yours, and you’re not looking so much for a ship to hop onto as for partners for your journey.
But before you partner up, take a long, hard look at the business to understand what the drivers are and what the full potential is at peak performance. What will it take to get to that performance? Once you have that part done, understand the constraints you have on the technology side and try to figure out how to solve them.
Some of them will be relatively easy to solve. Some of them will be very hard, and that will constrain the value that you can get. This is how you begin building your roadmap.
This is not something IT is going to do on its own. You have to partner with other areas of the business. You really need to understand the concerns of sales, marketing, and supply chain, finance, HR and other business units in your company. Get out and visit the facilities. Play dumb. Take notes. Keep your mind open. You’re just there to listen and learn. It’s too early to suggest solutions.
You need a well-defined business case before you propose anything, and you need to align on it before speaking with vendors. Otherwise, it’s just an argument, with the business people saying, “I want this technology because it is nice and modern,” and the IT people saying, "This doesn't integrate with what we have." Neither of those arguments is relevant. The only relevant argument is the one about business value.
Since my background is in business, not IT, I have a very strong IT team who helps me understand how everything is going to work. So, we have the business people, and the technical people. These can be difficult meetings, but constructive. There's always the point of view that we didn't notice the first time.
We also pull in outside resources, attending MIT CISR and partnering with Gartner to answer specific questions in areas and they help us gain clarity. All these factors are part of the decision. Eventually, when everyone stays focused on business value, the choice of vendors becomes clear.
Following this process at our company, we identified three main areas where we could add value with technology: Pricing, volume and optimizing our costs.
For a consumer goods company, promotions are a huge area of opportunity. We did some analysis that showed if we could increase our average price by one percent, we would add five percent on our EBITDA. That convinced everybody that the value was there. In fact, there was no other area that could deliver as much value. By implementing Siebel CRM we could give all of our managers and stores the visibility they needed to run the right promotions at the right time, and that became the first piece of our roadmap.
Next we implemented Coupa for spend management, and we’re embarking on a three-year roadmap to implement a warehouse and transportation management system from Manhattan Associates.
Integration is an important part of your post-modern ERP road map, but it's not all about integration. Here again, it’s about business value. Every time we have to make a decision about a complex integration, we're always balancing the cost and effort with the business benefit that it will yield. For example, with our Coupa implementation, initially our goal was to put everything related to spend optimization in Coupa. But at that time, we didn't understand how difficult it would be to integrate freight costs with accounts payable. We won't get a lot of business benefits out of that, and it's going to be very complex so that’s not on our road map right now.
Make your own road map
Early ERP systems were really about connecting business processes with technology, in many cases for the very first time. The vendor roadmap was very important because it defined a lot of what you could and couldn’t do. In a way, that made things simple.
Gartner’s thoughts on post-modern ERP make a lot of sense. The challenge is getting there. My company is very complex. We have over 1000 products and we’re doing business domestically and internationally. This is not so simple, but this is the way we need to go.
In the past, the discussion was mostly about new technology and new functionality. I’ve never agreed with that vision. Of course as a CIO you need to understand functionality very well. But technology is only there to help your business move forward. What does your business need and why? What is the business case?
The answer will be different for every company, and no one will be able to hand you a ready made road map. You have to take your technology hat off, and get out there and listen and learn and partner and argue and make your own.