In-Depth
Companies Maximize ERP by Integrating BI, Aberdeen Report Finds
A new report from Aberdeen Group shows the strong synergy that integrating ERP and BI systems can bring.
The need to trim costs in these uncertain economic times is, in part, driving the adoption of enterprise resource planning (ERP) strategies. From managing financials and human resources to capital and inventory, ERP's value has been tied to standardized business processes as well as information centralization.
The problem: ERP collects a mountain of data that often goes unanalyzed. To get the most from ERP, a new study from Aberdeen Group suggests integrating business intelligence into ERP deployments. As the report notes, "ERP investments can be increased dramatically through analysis of the consolidated data captured within and around the ERP system."
Aberdeen's study of 990 people looked at how companies achieved best-in-class performance by combining ERP and BI efforts. David Hatch and Cindy Jutras, co-authors of the Aberdeen study, used five key performance criteria to identify Best-in-Class companies value derived from combining ERP and BI. Such companies enjoyed:
- Operating costs reduced by 17 percent
- Administrative costs dropped by18 percent
- Staff reduction (12 full-time employee positions were eliminated or employees were deployed elsewhere)
- Closing monthly financials in less time (reduced to 3.7 days)
In contrast, for example, Industry Average companies cut operating costs by just 7 percent; Laggards actually saw their operating costs increase by 2 percent.
The analysts note how "Over the past three years, Aberdeen has watched as the need to reduce costs bubbled to the top as the primary business driver behind ERP strategies. Together with growth and customer service, these three [drivers] have dominated the pressures driving ERP implementation strategies." ERP, they point out, "is often viewed as a necessary infrastructure."
To bring "order to the potential chaos, perhaps the most significant of the extensions to ERP is business intelligence (BI). Think of it as a layer on top of or embedded within ERP and other applications which wind up being giant repositories of data."
Hatch and Jutras warn enterprises not to think of BI and ERP as separate initiatives. In fact, ERP and BI projects have similar goals: "The top requirement of a BI deployment … coincides with the need to extract additional value from the relevant business data which is inherent to an ERP implementation. Improving the speed of access to this data is the key to transparency, visibility, and informed decision-making."
What were the secrets of Best-in-Class companies in achieving their exceptional results? The report notes that to reduce costs and provide transparency through speed of access to business data, best-in-class companies "provide visibility across functions and departments pervasively across the enterprise, standardize business processes, and streamline and accelerate business processes." Best-in-Class enterprises:
- Provide decision-makers the ability to drill down from summary data to transactions that form the fiscal and operational audit trail; 67 percent of Best-in-Class companies provide drill-down into fiscal and operational audit trails versus just 38% for Laggards
- Offer real-time visibility of all processes from quote to cash
- Use ROI estimates to justify ERP projects; ROI is designed to measure business value and measurement doesn't stop after they have been achieved.
- Integrate business intelligence with other enterprise applications
- Provide self-service BI capabilities to stakeholders (so users are able to work with BI systems with a minimum of IT help)
"Companies that implement ERP solutions have two basic options when it comes to integrating BI capabilities", states Hatch. "Our research has found that top performing companies are embedding BI within ERP solutions rather than deploying BI applications as separate implementations that 'sit on top' of ERP systems."
Additional behaviors contribute to how Best-in-Class enterprises distinguish themselves. For example, they were more likely to standardize implementation of ERP across a potentially distributed enterprise (68 percent versus just 46 percent for Laggards). Best-in-Class companies have learned to maximize their use of ERP by using features familiar to them from their BI systems; they are more likely to use their ERP system to notify users in real time of exceptions occur (53 percent compared to just 33 percent of Average companies).
Based on its study, Aberdeen says its analysis of "Best-in-Class companies shows that a combination of capabilities are necessary to derive the most value from integrating and deploying BI within an ERP environment."
The behavior of Best-in-Class companies is clearly paying off. Such companies "are achieving 100 percent (or greater) ROI faster than their peers, reaching this milestone on average within the first six months as opposed to timeframes that start at a year and go well beyond two years for Average and Laggard companies."
The study advises all companies to take "an integrated approach to ERP and BI. Whether BI tools are currently embedded within your ERP solution, tightly integrated, bolted on after-the-fact, or non-existent, don't treat ERP and BI as separate projects. Take the approach of using BI as a means to extract enhanced value from data within ERP (as well as other enterprise applications)."
Hatch and Jutras point out that "ERP can transform data into information but BI tools are required to complete the transformation from information to intelligence."
The full report is available at http://www.aberdeen.com/link/sponsor.asp?spid=30410737&cid=6082 (a short registration is required).