ERP System - When Choosing Does Technology Matter?

When choosing a new ERP system, IT vendors speak about XML this and .NET that.  Does technology really matter?  Why should anyone worry just as long as your IT supplier can provide the ERP system functionality youre looking for and has the necessary support infrastructure to help you implement it?

The reality is that it does matter, and for good reasons too.  Its often said that the only thing constant in todays business environment is change.  Its important therefore that any organisation investing in a new ERP system fully understands the benefits the technology brings to its business, and the benefits from the changes that this will bring.  Cynics might say that its the IT industry trying to generate a reason for change, thus forcing users to upgrade to the latest version without really gaining the benefit of the change. 

But there have been a number of significant developments in the evolution of Enterprise Wide business applications.  These systems having evolved from the late 80s can be considered to fall in to three generations of system.

The evolution of ERP system applications a short history lesson

Generation One systems for the mid-market were based on a centralised IT infrastructure with dumb terminals connected directly to the server.  The Generation One system had the benefit of having a simple and relatively low cost device, either green-screen or colour, connected directly to the server.  All the processing was completed on the server itself and never on the Client the terminal at the user end.  The operating systems employed were either proprietary, such as Digitals VME or IBMs OS/400 or some derivative of UNIX.  Because there was no processing happening at the client end, it was relatively simple to connect remote sites across dedicated phone lines, called leased lines.

Generation Two really came about with the advent of Microsoft moving in to the business market, first by replacing the dumb terminals with windows based PCs and more latterly replacing the server with their own operating system Microsoft NT.  Software vendors wanted to take advantage of the Rich windows client so that users felt more comfortable with the windows environment and they could also take advantage of products like Microsoft Office.  Generation Two of business applications used technology referred to as Client-Server where there would be processing carried out at both ends i.e. on the Server and on the Users PC.  This then required more processing power to be added to the desktop.  It also made it more difficult for remote users to use the same connections due to the volumes of data being passed down the line.  (This is where the introduction of products like Citrix and Microsoft Terminal Services came in to affect) 

Where we are today is at the third generation of business application.  Generation Three of business application, is a combination of both Generation One and Two architectures.  It takes the principle of having centralised processing, with minimal processing on the client, but finds a way of still providing that Rich user interface.  Generation Three systems are based on Browser technology, where an Internet Browser, such as Microsofts Internet Explorer or Netscape, is used instead of having client software installed.  Like Generation One, it can be deployed easily to remote users, this time not by having dedicated links, but by using the World Wide Web as the means of communication. 

This is all very interesting, you may ask, but what has this to do with my business?  A great deal, because Generation Three computing is really Internet Computing. 

Internet Computing

Internet computing is a modern concept where a user can access the business application using a web browser.  The key benefit is that the business application can be implemented globally.  It does not matter where the users is, providing they have access to the Internet.  This concept addresses organisations that operate from multiple sites, have employees working from home as well as having operations, agents and distributors abroad.  In contrast, deploying a traditional client-server application requires client side software to be installed on each PC which needs to be connected to the host application.  Implementing the client side software is a time consuming process and is also costly to maintain when upgrades are required. 

Remote users of client-server software require a substantial high-bandwidth communications link to the office or having to face implementing a thin client third-party product such as Citrix or Microsoft Terminal Services.  This requires additional hardware at the host application end, as well as purchasing the software in the first place.  This understandably puts a large premium on the cost of a project. 

With Internet computing, e-mailing a link (an Internet URL) with login and password details to the user is all that is required to deploy the software.  This considerably reduces the initial deployment costs and on-going maintenance.

Self Service

The concept of user Self-Service is now introduced with Internet Computing.  Users are now more readily used to placing an order with Amazon Books or using the Internet as a source of information.  Users have accessed these services without the need for training.  Using the features of an Internet browser greatly reduces application training and deployment cost.  Training thus tends to concentrate on the explaining the business processes mapped out by the system. 

Taking advantage of this new self service concept also reduces cost and complexity in an organisation.  New price lists, technical literature, delivery schedules, cost breakdowns etc. can be the responsibility of different individuals who maintain them periodically.  These documents can be published and held in the ERP system and made available to those who need them.  The go and find it yourself concept reduces costs as someone is not required to service the request.  It is also available 24x7, which means that it is on-demand as required.

This self service concept can be deployed in a controlled way to users outside the organisation to agents, distributors or even customers.  This greatly improves the quality of service given to the individual, whilst at the same time, reducing the administrative overheads by providing the service.  Information is held in one place, greatly reducing the number of different information silos in the business.

Self Service in operation a case study

Let me illustrate what this means in practice.  Well take an example from one of our recent customers, but well have to call them Company A. 

Company background

 Company A is a manufacturer and distributor of power tools sold to directly in the UK and via agents and distributors world wide
 Orders received from distributors via fax and e-mail overnight
 Sales staff have to re-key data in to the system
 Data is misinterpreted due to language difficulties and transposition errors

The Solution

 With a browser based integrated system the distributors can view the correct product technical details
 Look for complementary products & services
 Enter their own sales orders
 Have online credit checking
 View stock balances and availability

Hang on a minute.  You might say that this is just e-commerce theres nothing new here.  And with e-commerce you have to create a new facility, worry about security and maintain a separate database of products and prices and so on.  Sure, if you are selling to consumers its necessary.  But if you are selling to businesses who already have a credit account, they why go to the trouble?  Similarly what about your own employees working from home or out of another facility?

The Benefits

 Near 100% order accuracy
 Reduction in rectification shipments
 Shorter lead times
 Opportunity to Up Sell complementary products and services
 Accurate pricing
 Free Sales to concentrate on key UK accounts
 Better sales analysis thus leading to
 Better targeted marketing

Best of breed vs. an integrated approach

This discussion has been on going since the advent of integrated ERP systems.  The definition of integrated varies widely.  Today with IT vendors looking to differentiate themselves in the market, they are developing wider functionality as part of their integrated offering.  This leaves the "Best of Breed" solutions retreating into more specialist areas.  Clearly there are significant advantages in having a single source of information throughout an organisation.

Data is held once and used many times.  Having duplicate records clearly requires greater levels of administration and inherent inefficiencies.  Ask yourself, how many duplicate customer records do you have in your organisation?  If third party solutions are used and data has to be shared, then interfaces have to be built and maintained.  Often there is considerable investment in these interfaces which can get broken when either system is upgraded. 

So the case for an integrated system is clear?  Not quite.  But surely an integrated solution cannot have the same levels of functionality as a Best of Breed solution?  This is often the case and a clear example of where the 80/20 rule comes in.  Even so, it is still often more cost effective to have 80% of the functionality than go down the route of linking in a Best of Breed solution.  But that's where the technology comes in.  It may not be the case that the system's toolset will plug the missing 20%, but it might go towards filling in another 5-10%.  But care is needed to understand whether the modifications made to an integrated solution count as bespoke developments.  This is another area which needs to be avoided, as all the advantages of avoiding having to build interfaces to a Best of Breed solution will have been lost. 

Its important to identify systems than can be modified within the standard framework and hence can be upgraded when new maintenance releases are available.

Software Customisation

An increasing number of IT vendors are allowing their customers the ability to modify their systems.  Traditionally software packages are parameter driven, that is a number of pre-defined software switches can be chosen to allow the software to behave in different ways.  Beyond these switches, the customer cannot alter the basic features without resulting in bespoke software and all the inherent costs associated with developing, maintaining and upgrading their systems. 

Some suppliers now offer the facility to have associated software which can be developed and modified to allow for different behaviour of the system.  As its associated software, the main system remains untouched and therefore can take advantage of upgrades. 

EFACS for example, has had this associated programming language, allowing users to modify its behaviour, for over 10 years.  The latest version relies on a piece of technology called Variable Component Architecture.  Object orientated systems consist of many thousands of components, the building blocks of the system.  These components are written once and used many times, thus preventing programmers having to repeat code, for example a stock allocation routine, being written in each application every times its needed.  Many of these components can be selected or modified to meet the business needs of the company without adversely affecting the integrity of the standard ERP system.

These systems ship with alternative versions of many of these components. During the implementation phase, choices can be made between the available versions of a component, to ensure best business fit to the companys needs.  This allows customers the ability to customise their system.

Customer facing applications that are tailored to your exact needs can provide additional competitive advantage.  In areas, for example such as Estimating, Quotations, Product Configuration or Sales Order Entry, the relevant components can be selected from the options available or if you want something that is unique to you then you can develop your own version or have it developed for you by the vendor.

Below are some common examples where organisations are able to customise standard software to improve control and reduce cost and complexity;

 Special sales order entry logic such as margin checks, alternative part selection on stock out, product restriction to specified supply channels
 Additional data entry during purchase order receipt such as specific test results, certificate of conformity checks, recommended stock locations based on usage rates
 Purchasing logic to prevent order line values exceeding buyer limits, ensure unit costs are within a defined tolerance of standard
 Product configuration advance logic to automatically calculate lengths, weights or areas during configuration, automatic route creation with machine and run time selection based on options chosen, constraint checking to ensure mutually exclusive options are not illegally picked

What about other technology factors?

There are a number of other factors which are important when choosing a system.  Vendors talk about XML, XSLT, HTML, .NET and so on.  You will also see a few applications with technologies like Workflow. 

What follows is a break down for each area and an explanation of where the benefits can be realised. 

Workflow

Some of the modern ERP systems now have an ERP System Workflow engine which sits behind the scenes and automates business procedures and improves operational efficiency.  Workflow is more sophisticated than simple Triggers or Event driven activities as these tend to be a single shot process.  Workflow can chain events together depending on the outcome of earlier stages.  This is valuable in many different circumstances, for example when the volume of administrative work is high, or where internal organisational procedures require multiple sign-offs, such as approvals in the purchasing process.

The integration of the ERP system, through Workflow linked with e-mail and task management, features of standard office automation products, results in a control mechanism that helps to ensure that the right work is done at the correct time, by the right people and in proper sequence.

Typically, Workflow systems may be configured to send information to users triggered by events within the ERP system.  For example, the receipt of a purchase order might cause an e-mail to be sent to the accounts department with the details of the order.  A staff member within that department will then be able to accept or reject the order by selecting an option from a form in the message. Multiple messages may be sent to a number of recipients, showing the full information or selected details as appropriate.

Powerful time monitoring and alerting procedures are built into each workflow process. If actions are not carried out in a timely manner, then escalation messages can be automatically generated and sent to relevant staff. These features will help to ensure that customers are not let down, through key people being on holiday, being busy or through poor internal procedures. 

The business processes can be defined using a graphical workflow defining model which controls the stages of events.  As businesses change their procedures, the Workflow engine can be modified to accommodate those changes.  When coupled with Document Management, the combined technology provides a powerful document review system. Documents can be passed from one user to the next, with each user making changes if necessary before passing on to the next user.

XML
Although the concept is simple, XML is probably the single most important advance in Information Technology in recent years. 

XML stands for eXtensible Markup Language, and was designed by the W3C (World Wide Web Consortium) to make it easier to interchange structured documents over the Internet.

A document is not a piece of paper containing typed or handwritten information in the traditional sense. In modern IT parlance, a document is a data entity, defining and containing a volume of data. Structured documents contain content, including words and pictures, together with explanations as to what role each piece of content plays. XML is the industry standard language that defines the content of a structured document, and that document is normally referred to as an XML document.

As an example, if a sales order may be defined as an XML document, each piece of information in the sales order, customer, value, due date, etc is separately defined in the document with an appropriate label. 

Making two systems talk to each other is not a simple task, but use of XML simplifies the problem.  A company can send a structured electronic purchase order using XML to describe the part number, price, quantity etc, and the receiving companys system will then be able to translate the XML document and know the price, quantity and part number that has been ordered. 

In order for two systems to communicate using XML they need to be aware of what information is being exchanged.  XML describes this information, and rich toolsets are available to locate and process the relevant parts of the XML document.  This makes XML ideal for describing business information, in all its many forms.

The automatic exchange of business information by electronic means has in the recent past been achieved through relatively complex Electronic Data Interchange (EDI) systems where data content was defined by a number of competing and complex standards, some of them proprietary.  Now, some of the problems of strict structure, competing standards and expensive Value Added Networks encountered with EDI are resolved by the flexibility of XML and the use of the Internet as the transport mechanism.

There is some debate about the speed at which business-to-business ecommerce, or B2B, will develop. But one factor agreed by most is that, because XML eases online data exchange between disparate systems, it will help to encourage the growth of online commerce and trading. The major effect of XML for the average company is that the web will become a more useful and powerful business tool whether the company is an online buyer or a seller.

Web Services

Web Services are third-party data processing facilities which are extensions of your system.  A simple example of a Web Service is services like Streetmap or Multi Map.  By entering a post code in to either service will return a map of the location.  This facility can be linked to a modern ERP system, using XML.  So for example, clicking on a customers address record can automatically lift their post code from your ERP system and return a location map without pressing another key.  This is a Web Service in action.

There are other Web Services, free or on subscription, such as address validation or credit checking. 

EFACS E/8 has an Export Documentation Portal which is available as a Web Service.  Shipments can be packaged as a consignment and posted to an Export Documentation Portal, using XML, for generating the correct shipping documents.  Because the service is web based, the consignment can be posted on to the Chamber of Commerce to get a Certificate of Origin certificate.  It can also be posted electronically on to the Customs and Excise to get customers clearance.  This web service reduces the need to have your own software and greatly reduces the transaction cost and lead time. 

There are many more Web Services that are beginning to appear on the market which greatly extend the customers computing power.

Conclusion

Most ERP systems today are mature products.  There are few green field sites anymore.  The way systems manage the sales process from order receipt to fulfilment is pretty much the same.  But business changes all the time.  If you are coming off an old legacy system or consolidating disparate systems, then just integrating your front office with your back office is simply not good enough if you really want to use technology to assist your business. 

There reaches a point where you cannot do much more with your system because the technology simply wont enable it to do so.  There are many systems out there which are sold as modern based systems, use all the latest buzz words, but are fundamentally on old platforms, many on Generation Two technology and some even going back to Generation One technology.  If you are looking at changing your systems, take a closer look at the infrastructure underneath.