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Ask CFOs or finance managers what keeps them up at night when thinking about the financial functions of their current SAP ERP system, and their answers will underscore the pain of working with technology that's outdated and software that's hard to use. One California city is addressing that pain.
Late last year, the city of Palo Alto, California, evaluated its SAP ERP system to determine if it was still meeting the city's needs or if the city would benefit from soliciting proposals for alternative ERP products.
"We decided to take a step back and take a look at the marketplace, to see what was out there, where should we go, and what shortcomings could be served better by alternatives," Jonathan Reichental, the city's CIO, said.
Currently, the city uses its SAP ERP system to support major finance, human resource and utility billing processes. Palo Alto implemented SAP in 2003 and completed a major upgrade of the ERP system in 2009, while also replacing the former utility billing system with the SAP IS-U module, Reichental said.
The current version of SAP includes a platform for developing mobile apps, and although the city wants to do more in the mobile space, it can't use the mobile platform SAP provides because it doesn't work with the version the city is running, he said.
Additionally, end users across all business areas said the current system is cumbersome and not user friendly. The system lacks sufficient querying tools, and most departments have to rely on the finance or IT department to develop and provide many reports.
"Making not-so-complex changes to our user experience for our community is very expensive, and it takes a long time," Reichental said. "Our version of SAP isn't that flexible without enormous cost."
The city's evaluation also concluded the following:
- The complexities in the city's legacy SAP ERP system frustrate users and discourage the use of current systems to satisfy business needs.
- There's a lack of self-service functionality.
- There are limited reporting capabilities, which affect employees' abilities to do their jobs efficiently.
- Inefficiencies exist because of redundant data entry, manual processes and unused functionality.
Given these findings, the city will look for a new, integrated government-oriented ERP system and a separate utility and refuse billing system. Reichental said he expects SAP will be among those competing for the business.
Survey highlights the pain of working with outdated ERP systems
R 'Ray' Wangprincipal analyst, founder of Constellation Research
The findings highlighted by Palo Alto's evaluation of its ERP system coincide with concerns shared in a recent study. In the 2015 Enterprise Solutions Survey conducted by Cindy Jutras, president of Mint Jutras in Windham, New Hampshire, 400 companies were asked "What are the top three causes of concern over your current accounting solutions?"
The top concern, noted by 43% of respondents, Jutras said, is the "inefficiency of their current finance staff in performing the necessary operational processes." That is, she said, they're concerned that employees in areas such as accounts payable and accounts receivable, as well as those who make journal entries, can't do their jobs efficiently because of outdated technology.
The next three responses tied at 41%: concerns with the integrity of data, the lack of data context or perspective in being able to relate or apply what they're seeing directly to answering questions and concerns, and the difficulty in reconciling different systems, Jutras said.
"The fifth response was the lack of visibility into the accounting and finance processes, not the actual data," she said. "Then the last of the top six responses was concern over the speed of access to key performance indicators; that is, how fast is it to calculate and see the metrics that they're using to run their business."
Demands of global economy lead to re-evaluation of legacy ERP
Until now, ERP systems and the technologies shaping their design, functions and features haven't evolved much since they were first introduced about 25 years ago -- and companies on average have been keeping their ERP systems one year longer than they had in 2005.
But the demands of the modern global economy are causing more and more companies to consider changing their legacy ERP systems. Like the city of Palo Alto, many early ERP adopters are realizing that business intelligence (BI) and the ability to use large amounts of data more efficiently will enable them to be more competitive.
More and more users will demand software that makes it easier for them to do their jobs, and lets them collaborate and work with the system anytime, anywhere, according to the Office of Finance on the Brink of Change benchmark report released last year by Ventana Research in San Ramon, California.
In the world of ERP today, companies don't want to spend money on tier-one systems like SAP, Oracle and PeopleSoft that cost $10 million to $50 million, take one to five years to implement, and have high failure rates, Michael Critelli, manager at Trenegy, a Houston-based consulting firm, said.
"Companies are very nervous about implementing those systems," he said. Today, companies are looking toward tier-two systems, including NetSuite, SAP Business One and Microsoft Dynamics. "Companies like them better because the functionality and ease of use is a lot simpler and the reporting is built in. If you go with a bigger solution, the reporting isn't there and that's what companies want -- powerful reports."
Steve Chinsky, the former product and project manager for finance at Quidsi Inc., an Amazon.com subsidiary based in Jersey City, New Jersey, agreed that, at least when it comes to Microsoft Dynamics NAV, reporting functionality isn’t available out of the box.
“I get it: Reporting is so complex,” said Chinsky, who left Quidsi this summer and is now senior industry solution architect at Columbus, a Microsoft partner based in Norwell, Massachusetts.
“It would be nice if NAV had more out-of-the-box standard reports, but with the augment of Excel and so many other features Microsoft has added, it’s not really necessary. Additionally, organizations have transactional data inside their ERP systems that they want to use for something else. For instance, they want to take payroll data and tie it in with their hiring practices or with their internal social media channels, said R "Ray" Wang, principal analyst, founder of San Francisco-based Constellation Research.
ERP vendors may not be able to provide all needed ERP functionality
The challenge, however, is that ERP vendors think they can do that, when the reality is that companies need different types of applications -- third party or add-ons sold separately by the providers, he said. "ERP systems running this stuff are really old -- the technology is really old -- and they have very clunky interfaces and that means that it's really hard to pull information out."
For the financial functions, the number one problem is about enabling people to do analytics -- but not just analytics.
"What companies want to do is forecasting and planning and budgeting and demand planning," he said. "But still after all these years, those things are very hard to do."
So even in today's ERP systems, companies have to use other products to add needed BI and analytics functionality.
"Then the problem with the ERP systems are that they're filled with all these bolt-ons and that's what makes it really hard on the finance side," Wang said. "What people are really looking for is the ability to run their ERP systems as simply as an Excel spreadsheet."
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