News & Views

The Financial Technology Show is scheduled for Thursday October 21^st, 2010 in Toronto and is dedicated to Canada’s accounting and payroll professionals seeking to keep up-to-date on the latest technology. I, Michael Burns, will be presenting a seminar at The Financial Technology Show with the following agenda:

• Technology trends
• Making a business case without an ROI
• Top 10 implementation mistakes
• An analysis of sponsored products in terms of target market and key differentiators

Register now and attend for free: http://www.financialtechnologyshow.com/index.php?option=com_content&view=article&id=15&Itemid=28

Written recently by Michael Burns and sponsored by Deltek – “Business software systems are similar when it comes to basic functionality, but you need to look under the hood for the functionality specific to project–focused businesses (PFBs).This white paper will discuss the major functional differentiators of a PFB system as well as other criteria to consider when making a vendor selection decision…”

September 2020 from Toolbox.com – “…We had narrowed the selectees from 18 ERP vendors to two. Vendor A had a time and materials implementation services estimate of $380,000 and Vendor B estimated services at $180,000. They varied by $200,000! The ERP software license and support were about the same.

So why the difference? As I mentioned in my last post, it came down to a huge difference between the estimated number of hours the vendors thought the implementation would. ERP vendor A’s estimated total hours were about half of vendor B’s…” 

180 View – If you read this short article/blog, you will see that the vendor with the higher implementation fees was chosen in the end based on trust. We agree that trust is critical but we also think that an analysis should have been done to break out the two implementation plans so that you could compare apples to apples.

September 22, 2010 from InformationWeek – “Theatrics aside, Ellison’s conversion from cloud-ranter to cloud-computing arms merchant reveals a great deal about today’s rapidly shifting IT landscape….”

180 View – Good article if just for Larry Ellison’s (Oracle CEO) view on the difference between SaaS and Cloud Computing. According to Ellison, Cloud Computing provides each customer with their own separate and virtual environment including hardware and software that can run a wide variety of applications – sometimes called a private cloud. SaaS (Software as a Service) on the other hand is one application and the environment is shared by many customers. SaaS vendors will tell you that the shared environment (also called multitenant architecture) is a positive in that there is much less work involved in maintaining and updating the application.

September 1, 2010 by InformationWeek – “In a strikingly detailed and rare peek inside a huge ERP deal, Airgas Inc. has disclosed that its highly customized enterprisewide SAP implementation carrying a price tag of about $85 million should begin generating significantly more than that investment in annual incremental operating profit by 2013…

So just as we had all been led to believe that big ERP deals are a relics of the past, that they’ll never happen again, that they don’t work, and that they inevitably blow up in the faces of the customer, the software vendor, and the integrator, here we have one of life’s surprises: a big, multi-year, many-moving-parts ERP implementation that by all accounts is succeeding beyond everyone’s wildest expectations…”

180 View – On the surface, it looks like a huge win for Airgas and SAP. But scratch the surface and it does not look so great. For example, there are more costs to keep the highly customized system up to date with future releases. Also it’s not clear whether only out of pocket costs were considered and not the internal costs to implement the system. The benefits include $25 million to $50 million increase in income as a result of anticipated sales growth because of SAP. But I can’t imagine anyone at Airgas or SAP could prove the direct link between the sales growth and implementing SAP. At the very least, they should have provided a little support for their claims.

September 7, 2010 from InfoWorld – “…Here are the top tips from consultants who help customers negotiate pricing, terms, and conditions with vendors such as Cisco Systems, EMC, Hewlett-Packard, IBM, Microsoft, Oracle, and SAP…”

180 View – There are a few good points if you’re new to negotiating with technology vendors. Remember that the ERP vendors in particular anticipate that their new clients will not want to change systems again and so they are more willing to negotiate license fees, terms and conditions but reluctant to negotiate maintenance fees. But in the heat of the deal, anything is possible.

September 16, 2010 from CFO.com – “But it’s not fading from sight as quickly as other material weaknesses are… Most IT-control weaknesses are rooted in poor management rather than the technology itself…” such as 

• Imposing an unrealistic deadline for implementing a new system, leading to inadequate testing
• Not using controls that come packaged with many systems or not reviewing automatically generated control reports
• Providing inadequate training on new systems
• Failing to ensure that system access privileges reflect segregation-of-duties mandates
• Allowing excessive customization of systems, which can damage their integrity…”

180 View – We included this article because their list of IT control weaknesses may not be obvious to some organizations and are worth remembering.

August 2010 from ProjectTimes – “Business process improvement initiatives are frequently key projects within an organization, regardless of the size of the organization or, frankly, the size of the business process improvement initiative.  Even if a business process improvement initiative is targeted at an individual department, the impact of the change will be organization-wide. By ensuring that the initiative is managed as a strategic project, there are increased opportunities for success…”

180 View – The article provides recommended steps for the project, metrics to consider as well as a case study. The information might be of some assistance for organizations planning a business process improvement project. But I think the main point is that project management methodology can and should be applied to business process improvement projects.

2009 by Aberdeen Group – “…Increasingly, ERP customer have come to realize that the value from ERP investments can be increased dramatically through the analysis of the consolidated data captured within and at the edges of the ERP system. BI users value having a single source of that data producing a single version of the truth…”

180 View – We agree that BI and ERP go hand in hand. ERP vendors know this and include out of the box dashboards and predefined OLAP (Online Analytical Processing) cubes as well as ad-hoc reporting tools and interactive query/filter tools that provide grid views of data that can be easily changed within the system or exported to Excel. When selecting an ERP system, BI must be one of the components.

The article also included metrics for “Best-in-Class ERP Criteria” which were:

• 20%  reduction in inventory
• 97% inventory accuracy
• 97% complete and on-time delivery
• 96% internal schedule compliance
• 3.7 days to close a month

Good metrics but when Aberdeen claims that the metrics could be the source of the total or partial ROI of ERP, we disagree. ROI requires a dollar value on savings or increased revenues and these metrics with one exception don’t provide it. The only one that does (inventory reduction) does not give you a 20% reduction in savings in an ROI calculation as you might think. Inventory is included in the Balance Sheet and not on the Income Statement. But there are benefits including interest savings in not having cash tied up in inventory, less warehouse space, less inventory obsolescence and less insurance.

2010 from ITBusinessEdge – “…The cost/benefit analysis should be the real meat of your case, yet this is where most IT business cases falter, largely because they approach it as a purely financial case for investment, according to research by two professors from the UK…”

180 View – We agree. It can be difficult if not impossible to show a positive ROI in IT investments. But that does not mean that the investment is not worthwhile. We recommend that the business case should include Key Performance Indicators (KPIs) measuring Critical Success Factors (CSFs) or those things that an organization must do well in order to be successful. Determine the current KPI and estimate the projected KPI based on evidence that can be defended.