MANUFACTURERS today face two conflicting mandates: fostering innovation that can drive true business value, and running IT efficiently and cost-effectively.
For many, that often includes standardising on key pieces of software and vendors for economies of scale and easier maintenance.
Not only do organisations want to minimise their technology acquisition costs, but they also want to create a streamlined IT environment with fewer integration points and less software customisation. But choosing a technology for a standardisation strategy can be carried too far.
Standardisation decisions are most effective when made for a discrete set of capabilities that are in alignment with business requirements. Applying a standardisation decision beyond those capabilities without considering whether it is the best fit for the new requirements, is a mistake that can hurt a company’s overall effectiveness.
ERP systems are a prime example; because for many companies they represent a large investment of time and money, CIOs want to maximise their ROI.
This investment generally pays off in terms of the value that ERP brings to a company. But when CIOs try to wring more from their investment by forcing ERP to handle functions such as performance management, which lie outside ERP’s core competencies, they do the business a disservice.
The problem lies in the divergent requirements and purposes of ERP and performance management. ERP is about cutting costs and reducing overhead by streamlining transactional processes such as order fulfillment and billing. It optimises efficiency but it has nothing do with whether a company is performing effectively.
That’s more the province of performance management (PM), this enables key decision makers to use business intelligence to identify issues and discover opportunities going forward. With ERP, you may be automating the business, but are you seizing the right marketing opportunities, approaching the right prospects, or recognising and addressing business weaknesses?
ERP won’t answer that for you because it’s the muscle, while PM is the brains and a fundamentally different concept than ERP.
The bottom line for business executives and CIOs looking to successfully implement PM is simple: if PM is what you’re after, then you need a solution designed specifically for it.
And as PM becomes a necessity in today’s hyper-competitive business world, forward- thinking CIOs will leverage both the brains of PM and the brawn of ERP to stay ahead of the curve.
PM is an iterative, non-predefinable process that reflects the ever changing nature of the business world. For example, the answer to one question could trigger a number of follow-up questions that reflect changing business conditions—and those questions simply cannot be predicted.
As such, self service is key to PM effectiveness. Business users simply cannot wait for IT to generate a new report for every new question, and IT can ill afford the time to churn out multiple reports and their follow-ons.
Technology is key to enabling the insight required for effective performance management. It depends on a number of technologies, such as business intelligence software, ERP systems and planning and analytics software, to support key processes such as goal setting, performance monitoring, data analysis and planning and forecasting.
The key issue is manageability for both parties. Used in tandem companies can further leverage the data in a successful ERP system to gain greater business value and achieve better ROI across the enterprise. That balance is what ultimately allows systems to be successful, and in the end, IT and user requirements are best answered by a complete performance management system.
* Paul Hoy is manufacturing industry director with Cognos.