The role of ERP in the digital journey
In the quest to continue advancing in the digital transformation, it is time to seize the opportunity of technology modernization to simplify processes and review unnecessary customizations. The combination of ERP with machine learning, IoT and artificial intelligence comes to enhance performance, user experience and creativity.September-November | 2018
Adhering to digital transformation is no longer an option in the contemporary business environment. Instead of pondering the real need to transition to digital, companies are now wondering when and how to make that change. This does not mean that the road is free from uncertainty. Many organizations are still reluctant to accelerate their journey to the next evolutionary milestones when faced with the possibility that they may have to skimp on huge technology and human capital investments – a legacy that often goes back decades of development. Should we simply erase systems and processes already in use? Or is it possible to think of a model that includes the convergence of existing resources with more efficient and modern solutions?
At the core of this convergence issue between old and new IT models is the Enterprise Resource Planning (ERP) of each company – a system that coordinates all business operations, from inventory to billing, from cash flow to accounting management. Each organization has its own digital maturation stage of its ERP and the decision on how to modernize it involves the same questions. “Companies need to do some internal thinking: What is the business case for migration? Will we deal with a completely new implementation? Will I have to mobilize the whole company on the project? How to promote digital culture among ERP users? What accelerators, resources and methodologies should I use?” says Carlos Fogarolli, Deloitte’s partner in the Consulting area and a specialist in the Technology sector. “The answers are diverse and case-specific, but in fact they should be minimally addressed. We understand that digital transformation is entirely linked to how companies make their decisions. One can innovate at any time and any platform, it is a matter of practice”, says Fogarolli.
Each story involves specific needs. The Canadian financial services company ATB Financial, for example, needed greater transparency in its internal and external transactions; the problem was solved with a new ERP that replaced the old system, which was heavy and full of very complex customizations. The apparel chain Carter’s (USA) dealt with more than 20 different systems and a large volume of processes that still involved paper data; all were replaced by only four digital services, which integrated activities of financial profile, collection and GRC (governance, risks and compliance). In turn, the City Government of Buenos Aires, Argentina, has switched its decentralized and analogical processes by ERPs for the management of public lighting, conservation, maintenance and other urban services.
“There are several examples that reinforce the position of the ERP as an element of centralization and convergence between business areas. These systems are vital pieces for the digital transformation and key elements in the issue of data integrity, such as structure of connection with other systems and platforms of the outside world”, summarizes Carlos Fogarolli. “Besides, the modern versions of ERPs offer everything a digital company looks for, with focus on user experience, cloud infrastructure and minimum demand for customizations, if combined with intelligence platforms. These systems provide the autonomy users need for a different and innovative experience with the tool.”
Strategically, we see organizations increasingly accelerate their studies on the benefits of being ‘early adopters’ of new ERP solutions., Carlos Fogarolli, Deloitte's Technology Consulting partner.
SAP, for example, consolidated as a leader in providing digital business management systems, has in its portfolio complete ERP solutions, cloud computing platforms and design thinking systems – technologies that are often at the top of the list of digital transformation facilitators. The latest version of its ERP suite, the S/4HANA, has already been adopted (in several stages of deployment) by more than 3,600 organizations worldwide; about 1,700 projects have already been completed and are in functional phase. “S/4HANA provides the opportunity for people to rethink how they handle their current ERPs. With process accelerators, the possibility of cloud or local infrastructure, advanced analytics resources and specific layers of experience for each user”, says Fogarolli.
Cristina Palmaka, president of SAP Brazil, recalls that “each company is unique, with different starting and finishing points. The possibilities range from the implementation of a new solution to the digitization of an existing structure in the cloud, ‘on premise’, or a combination of both. Of the list of companies that have implemented S/4HANA around the world, 93 are Brazilian. “There are some barriers to overcome in order to resolve our gap with other countries, such as greater adoption of cloud technology and the maturing of companies” says Cristina on the spread of digital transformation among local companies. “We believe, however, this gap has already been addressed for some sectors of the economy. Agribusiness is already well ahead in the transformation process. There are also great opportunities for acceleration in retail and in the public sector, among others.”
Older legacy systems may be outdated, have low level of integration between processes, or carry complex specifications that hamper their interaction with other platforms. The challenge of getting them to converge with a modern 100% digital ERP is not ignored by SAP. “There are tools that allow customers to start quickly, develop and run functions in a simple way, while continuously innovating in the cloud and anywhere they want”, says Cristina Palmaka. “It could be from a new implementation or the conversion of an existing system, to a hybrid structure transformation.” The SAP president mentions a new feature integrated to S/4HANA that helps companies do what she calls a “smooth transition.” “SAP Activate is a methodology that starts with the best practices, minimizes the number of customizations and streamlines the installation, reducing complexity,” says Cristina.
In addition to technology, the option of updating an ERP and embarking on a digital transformation involves, as always, people. “In the end, the goal remains to find opportunities to release employees’ valuable time for activities that require intelligence in decision making”, explains Carlos Fogarolli. “The adoption of a modern ERP is an important strategic moment in all aspects, both in technology and in business”, he concludes.
The greatest challenge is the change of mindset
Difficulties in implementing projects happen in every type of company. The task of adopting or upgrading an ERP system is no exception. According to Deloitte’s study “Your Guide to a Successful ERP Journey” a total of up to 75% of ERP projects do not meet all of the originally proposed goals. The research argues that the need for a change of mindset in business management is the greatest challenge to overcome – and points out 10 steps that organization leaders can take to increase the chances of success in the transition:
Summon the entire team to explain the reasons and strategy that defined the change;
Assign someone to remove obstacles. The project must have a leader with defined authority from the beginning;
Keep your eyes on the rearview mirror. Review the company history and evaluate how the internal audience has responded to changes in the past;
Do not put the wagon in front of the horses. The project must have a clear structure and clearly defined responsibilities before leaving the drawing board;
Get ready for detours. The ongoing changes will affect the work of the employees; these impacts must be mapped previously;
Ask for information halfway. The project must have a formal and well-structured communication network to facilitate the implementation. Reach to your partners to look for solutions together;
Teach people how to adhere to the new standards. A training strategy for the use of the ERP should be well thought out, to identify gaps and accelerate adaptation;
Stay on the right side of the road. Support for ERP users must be efficient and agile, to avoid a drop in performance during the system’s operational phase;
Get everyone involved. The entire company needs to be engaged in the project, with integration and cooperation among all areas;
Getting lost halfway is not the end of the world. Every project faces unforeseen events. They should be addressed assertively while maintaining the trust of the team.