PDF File: 

CFO1_wp_scheurich.pdf

DecisionPoint Applications

Throughout the ‘90s, most large businesses moved from legacy systems to comprehensive ERP systems purchased from vendors like Oracle, PeopleSoft, and SAP, in an effort to standardize back-office processes and reduce the costs. With the use of more and better-organized transactional data, decision-makers would be better able to guide a company’s success.

While ERP systems have succeeded in standardizing marginal or nonvalue-added back-office processes and produced some cost savings and efficiency improvements, the average CFO typically gets less information out of the new ERP system than from the system it replaced. The promise that the new ERP systems would provide better analytical information is largely unfulfilled: We have failed in creating more profitable business through better access to information. In fact, most ERP implementations have added nothing to a company’s decision-making ability, and far too many have resulted in an actual, palpable decline in decision-making capability.

Active decision support systems unlock the power of the information stored in ERP systems. By intuitively aggregating all of a company’s sources in a single source and distributing relevant reports, analytics, and alerts, active decision support systems deliver on the original promise of ERP systems – better business through a more powerful grasp of a company’s information. Understanding the development of ERP systems and the business they support reveals the evolution of active decision support and its necessity for successful, modern business.

The Problem: ERPs Alone Are Not Enough

ERP applications are very good at what they do: capturing data; but they do not organize it for analysis or provide quick answers to decision support questions. A profitable customer may be let go because the inability to see separate accounts for each business unit incorrectly tells you he isn’t profitable. Enabling good decisions is simply not ERP’s strong suit.

Historically, ERP applications were purchased function by function from different vendors, rather than as an integrated suite from a single vendor. Therefore, massive incompatibilities exist between commonly understood business entities such as “customer” and “product” as a company moves from, for instance, the financial ERP system to the manufacturing system. Because decision-making always works across ERP systems, the incompatibilities make real, factual decision-making all but impossible.

Finally, the cost savings most companies achieved from installing ERP systems often has not equaled the first-order costs of purchasing those systems, let alone the second-order costs of implementing them, or the third-order costs of maintaining them.

It’s not surprising that there are few examples of companies successfully realizing decision-making benefits from their new ERP systems. Due to a general lack of decision-support capabilities, the business value of these systems has typically eluded both business users and IT departments.

The IT Team Attempts to Fix the ERP Reporting Problem

With the new ERP applications implemented, analytics and reporting problems unsolved, and decision-makers still without the information they need, companies turned to their IT departments for help. Looking for new ways to access, analyze and deliver data, the IT teams generally progressed through a series of attempts to get decision-makers what they need: accurate, comprehensive, up-to-date information.

IT Becomes the Reporting Service Bureau

The IT team attempts to either write reports themselves or copy the ERP data to another location (mirroring), integrate end-user tools, and create a self-service reporting system to respond to various end-user needs. But the catalog of reports these reporting bureaus produce, over relatively short periods of time, are very dangerous:

• If the data isn’t mirrored, reporting competes with transactions for system resources, impeding the performance of the ERP system.
• Defined against a particular ERP application, reports must be rewritten when that ERP application is upgraded. As the number of reports reaches into the thousands (usually in less than two years), the cost of rewriting the report catalog can rival the cost of the initial ERP system implementation.
• Time is of the essence: Decision-making is measured in minutes or hours; report writing is measured in days, weeks, and months.
• Data is organized in a way that made sense only for ERP – cryptic codes and numbers in thousands of tables with abstract names.
• Data from differing ERP systems don’t synch up: currencies are not mapped to a common currency; calendars differ in length and in granularity; what one system calls a product, another system refers to as a part or an order; employees and customers appear in one data set as names and in another as numbers.

IT Experiments with Data Warehouses and Data Marts 

With the failure of IT reporting bureaus, IT departments turned to data warehousing and data marts. Here, data is extracted from multiple ERP systems, merged together, cleaned and collated, and stored in a form intrinsically intelligible to ordinary decision-makers. The theory is excellent, but in practice the custom IT projects are risky and expensive:

Data Warehouses

The average cost of building a custom data warehouse for a financial ERP system is $2 million, and it usually takes two years to complete. Most distressingly, more than 50 percent of data warehousing projects fail, according to Ovum Research. This “2-2-50” problem is inescapable.

Data Marts

Data marts, which focus on a single source application within an ERP system and a single set of users, have higher project completion rates, failing only a third of the time. Following are their unique set of serious problems:

• Data marts slice the company into silos – often the same silos the ERP systems enforce – and critical horizontal analysis then requires teams of people and weeks of time.
• Data marts typically contain historical data only at a highly summarized level, without enough detail to spot meaningful trends or support reliable predictive analyses. They in fact store so little complete historical data (a year or less) that not only do they distort both hindsight and foresight, they actually produce false trend and projection analyses.

Successful businesses make successful decisions for a reason: knowledge. If a corporation’s IT team is spending its time trying to patch the holes in a faulty information pipeline, at least two things have already gone critically wrong. Not only are decision-makers ill-equipped to successfully guide a company, but the IT team is also wasting its energy in an area where it needn’t spend so much time or money. So, how does a corporation ensure its leaders are armed with current, powerful, comprehensive information so they can do what they are paid to?

Industry and IT experts have agreed that data warehouse is the best way to proceed. It provides reliable, robust enterprisewide decision support, providing the analysis and ROI that ERP systems have thus far failed to deliver. This leaves many markets, particularly the U.S. market, with tens of thousands of new ERP implementations, abysmal decision support, and seemingly no means to rectify the problem and erase the ERP ROI deficit.

Active Decision Support Systems

Better decisions come from better information, which comes from systems that support human decision-making. Systems that mix sophisticated software and an intricate knowledge of business rules provide a complete platform for total ERP reporting solutions. From data warehousing and management through to query and reporting tools, they are automatically configured, integrated, and ready for immediate deployment and use.

Companies that purchased ERP applications must buy decision support systems to fulfill the original promise ERP investments offered: superior analysis and increased ROI. These systems now exist, integrating with standard ERP environments, automating the process of copying, rearranging, and distributing ERP data, and understanding the common classes of decisions every organization must make. And all of this can be done in as

little as eight weeks. That means businesses can capitalize on their solution in the same quarter it’s purchased. From $2 million over two years with a 50 percent chance of failure to guaranteed success in less than two months: progress is tangible.

• The company, for the first time, has a system that can move any information from its point of capture to its various points of use in seconds or minutes.
• Responsibility for system reliability, maintenance, and enhancement is in the hands of a single software vendor, bound by agreement to support, enhance, and extend the technology as an organization’s ERP portfolio changes and expands.
• Transform IT personnel from systems builders to systems implementers and business integrators, reducing the time, cost and risk of deployment and ongoing maintenance.
• The company is prepared and ready as the range of data required to make informed business decisions grows beyond the ERP systems to encompass front-office automation systems, email and intranet environments, and suppliers’, customers’, and trading partners’ systems.

The active decision support system provides an end-to-end, enterprisewide solution for ERP reporting problems. This means updated, accurate, aggregated information literally at the fingertips of decision-makers. The proper system also alerts management to unacceptable business variances before they manifest and provides the supporting information necessary to make adjustments to either avoid damage before it is done or act on opportunities before they disappear.

The business of business hasn’t changed.

It’s still the bottom line. But the information at your disposal has changed, and at last compa-nies don’t have to wait for their technology to catch up to their thinkers. Information from any of a company’s sources, to any user’s desktop, in the form and at the time that is most beneficial. Active decision support systems finally deliver on the ERP investment, allowing companies to make more and better decisions, faster. Business is evolving.