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Considering a Postmodern Approach to ERP System Selection

A Postmodern Approach Recognizes That a Single-Vendor Strategy May Be Suboptimal

By Michael Sizemore
ERP Specialist
Huntzinger Management Group, Inc.

Promoted by Meaningful Use emphasis and funding for several years, clinical systems are becoming less of a dominant force in driving information technology (IT) decisions. Organizations are devoting increased attention to other dimensions of their IT ecosystems, such as enterprise resource planning (ERP) systems. And, unlike electronic health records systems (EHRs) that frequently presented new automation, implementing new ERP systems usually involves the challenge of replacing some degree of existing automation.

michaelsizemore
Michael Sizemore

For years, there has been a trend in IT to transition from a best-of-breed system philosophy to more of a single-vendor approach that leverages the benefits of a fully integrated system. Such an approach is successful when all business aspects of system supports are aligned and integrated. However, when the business aspects are less aligned and integrated, providing automation support from a single, integrated system becomes more challenging. Such is the case with ERP systems as they must support the convergence of three distinct main domains:

  • Enterprise financial management (EFM)
  • Human capital management (HCM)
  • Supply chain management and procurement (SCM)
  • And, potentially, business intelligence (BI) capabilities

Recognizing the challenges presented with ERP systems, consideration needs to be given to their selection using a postmodern approach.

In general terms, postmodern refers to a departure from modern approaches, in this case, pursuit of a single-vendor system philosophy. The application of a postmodern approach to ERP system selection is based on the recognition that seeking a single-vendor system that attempts to integrate EFM, HCM, and SCM may result in functionality that is suboptimal for the discrete domains, as well as overall ERP.

The “postmodern” ERP system, was defined by Gartner in 2014 as:

“A technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.”

Thomas Spol, senior director at PRO Unlimited, further defined the postmodern approach in a July 09, 2015, article for CIO Review:

“In the postmodern ERP world, the legacy ERP suite is deconstructed into a more loosely set of integrated business functions. The pieces make up the whole, rather than the whole (or suite) comprising the pieces.”

Given the unique aspects of the three ERP dimensions, a postmodern ERP system will likely be comprised of functionality from two or more vendors and may include multiple deployment models. Obviously, such a postmodern approach relies on the integration capabilities of individual components provided by multiple vendors. The individual functionality must effectively integrate as siloed applications will not deliver the desired results.

It’s not uncommon for organizations to immediately pursue acquisition of an ERP system, employing a single-vendor philosophy, without thoroughly determining and understanding the unique requirements of each ERP dimension. Unfortunately, as noted in Alice in Wonderland, “if you don't know where you're going, any road can take you there,” the result may be an ERP system that is incapable of adequately meeting the organization’s various requirements.

A postmodern approach to meeting ERP system requirements follows five distinct phases:

  • Strategize – Determine the specific requirements of the three dimensions, EFM, HCM, and SCM, as well as the degree of actual integration required. Clearly evaluate where the emphasis lies between dimensional functionality and necessary integration. Assess the organization’s preparedness to embrace and assimilate a new ERP system. Use this information to develop a robust plan to pursue selection and implementation of the new ERP system.
  • Architect – Based on the dimensional functionality and necessary integration identified, and via awareness of actually available vendor solutions, determine if requirements can be met through a single-vendor approach or necessitates a postmodern hybrid approach.
  • Select – Following the defined ERP system architecture, qualify, assess, and select the most appropriate ERP system solution(s) for the organization.
  • Deploy – Following the organizational preparedness assessment and the degree of change management required by the new ERP system, deploy the system in a manner that balances benefits realization with organizational exposure to risk.
  • Optimize – No system implementation, including those of ERP systems, optimally addresses all requirements. Plus, additional process innovations are identified during the implementation that will be desired enhancements. To maximize the benefits derived from the new ERP system, a conscious and thorough optimization phase needs to occur.

Two important project organizational aspects need to also be considered. First, selection and implementation of a new ERP system is a business initiative, not an IT initiative. While IT needs to play a critical supportive and guiding role, the ultimate executive sponsorship and project leadership needs to be led by business stakeholders, capable of objectively and transparently advocating for all three ERP system dimensions.

Similarly, the second organizational aspect of an ERP system team is to involve stakeholders from all three ERP system dimensions, ensuring that there is representation of individuals who clearly understand the current state of the three dimensions, as well as individuals capable of envisioning how their optimal future state could exist. Naturally, this team needs to also incorporate adequate IT representation.

In summary, while a solution from a single vendor may constitute ERP system utopia, blind pursuit of such a solution may result in suboptimal, and possibly even detrimental impacts on EFM, HCM, or SCM operations. A more effective postmodern approach may be appropriate, one that focuses on optimizing overall performance, even at the cost of a non-single vendor solution. Regardless of the ultimate approach taken, focus your ERP project efforts on facilitating operations, not on an artificial system strategy.

Topics: Tech Blog