Little effort is needed by now to persuade business leaders that automation of business processes – from the very first link in the supply chain through accounts payable and employee expense management and all the way to the customer’s front door – should be a cornerstone in any modern business plan. Especially with the rise of sophisticated, cloud-based solutions, companies have come to realize that automation, integration and total visibility throughout the many facets of an organization can, in and of themselves, be valuable assets.
Well-integrated business solutions are the backbone and nerve center of any successful company, enabling mission-critical processes to be executed in real time and up-to-minute information to be disseminated throughout an organization. Supply chain interruptions are averted. Loss of assets, whether through bad management or fraud, is avoided. The effort wasted on manual process is eliminated. Companies can simultaneously reduce their costs while increasing the volume of production and fulfillment of orders. The results can be astounding improvement in the ability to scale a business. For example, without automation the cost of invoicing across companies ranges from $12 to $55 per invoice, with a processing time ranging from 14 to 35 days. With automation, the numbers can be reduced by 70 percent.
Sounds magical, right? Well, many a company has found that reaching the promised land of increased profit through transparency a pipe dream, often because the partner it chose did not possess one or more key qualities needed to realize a return on the investment in automation. Companies being courted by ERP providers should ensure their suitors are superior in four important areas: Adaptability, configurability, data integration and migration. A thorough vetting on each count will minimize the risk of a bad technology investment, or, worse, financial disaster.
Tales of Unmet Expectations
The corporate landscape is littered with wrecked partnerships and costly litigation over failed ERP and other business application implementations. These failed implementations can almost always be traced to breakdowns in one or more of the four areas, which for the purposes of this paper we’ll call the Tenets of Sound Application Implementations. Take for example a federal case filed recently by an East Coast company that distributes technology products to more than 30,000 resellers around the world. The company was growing fast but saddled with an aging and fragmented legacy system. Because the margins for technology products are thin, profitability depends on efficiency – the ability to process and ship orders quickly and intelligently forecast and stock inventory. In short, the company needed organizational transparency. What the company got instead was a disaster. A project that was supposed to take 11 months and $17 million had instead taken three years and $66 million – and counting. When it sued, the company’s new system still had not gone live. It will be unclear exactly where the implementation broke down until all the facts emerge in court, but the complaint indicates poor configurability and migration issues.
One of the most infamous – and most studied – failures was the bitter tale of Hershey Foods. A failed $112 million technology upgrade caused Hershey to miss $100 million in Halloween candy deliveries in 1999. The company lost market share and space on store shelves. Its stock price dropped 8 percent in a single day and 35 percent in a month. Wall Street analysts took nearly a year to regain confidence in the company. Hershey eventually confirmed that the problem was with getting customer orders into the system and transmitting them to warehouses. Total cost: $150 million in sales. Post mortems pointed to a lack of good data integration.
Case after case, while individual circumstances vary, failed attempts to automate business process nearly always are rooted in a violation of our four tenets. Check back tomorrow for Part 2, where we’ll discuss each of the 4 Tenets of Apptricity Solution Development in detail.