How to Understand The Best Practice Logic for ERP

Executive Summary

  • ERP systems are frequently sold on the claim of best practices.
  • ERP customers usually do not realize that best practices don’t exist.

Introduction

Many of the arguments that are habitually made in favor of ERP are, in fact, nothing more than logical fallacies, and because of this it is important to review briefly the definition of “logical fallacies.” Proponents of ERP use a number of logical fallacies in the quotations used throughout this book, and when they occur, I will be referring to these proponents by their official names. In fact, it is quite surprising how many of the quotations from ERP proponents fall into one or more categories of logical fallacy, and realizing this led me to read a book specifically on logical fallacies in order to make sure I was able to identify all of them properly. When a topic leads one to actually There are some interesting questions that should be asked whenever any software vendor makes a statement about best practices:

  1. Who decided something is a best practice?
  2. Was the best practice put to a vote?
  3. Was it deemed to be so by an expert?

If item three is affirmative, where is the research to support the notion that a way of doing something is a best practice? What a person who asks these types of inflammatory questions (yes, simply asking for evidence is considered infl ammatory with regard to best practices) will find is that in the vast majority of cases, the practice is a “best practice” simply because the proposer declares it to be so. There is no research and no explanation as to how it was determined to be a best practice. Furthermore, if two different ERP systems—both of which are based upon best practices—diverge in some way on how to do things, which one is actually performing the best practice? Best practices sound suspiciously like something that one is asked to take on faith— and they are. Eugene Bardach, a professor of public policy, analyzed claims of best practices in his fi eld and found that best practices are not based upon research.

“Appearances can be very deceiving. On closer inspection, it often turns out that the supposedly ‘good’ practice is not solving the problem at all. Inadequate measurement plus someone’s rose-colored glasses were simply producing the illusion of mitigating the problem. It may also turn out that, even if good effects have truly occurred, the allegedly ‘good’ practice had little or nothing to do with producing them.”

The further one gets from actual implementation, and the less experience one has with working with software, the more likely one is to believe that software can encapsulate best practices. Because the term “best practices” is so general, it does read a book on the topic of dishonest argumentation, this is a good indicator that something is wrong with the information that is being researched.

The Car Versus Truck Best Practice Example

Let’s take the example of two automobiles: one sedan and one truck. I currently own a Honda Accord, but have been thinking of buying a four-wheel drive Toyota Tundra. These are two very different automobiles built for different purposes. Both score very well in reliability, which I consider a best practice; that is, I prefer high quality cars that require infrequent repairs. However, could the fact that they both use an internal combustion engine and pneumatic tires be considered best practices? These are two of the most important inventions in human history, so I suppose I would not object to calling them best practices. But on the other hand, every car I look at offers the same thing, so while they are best practices, they are not differentiators. Am I interested in comparing best practices that are not differentiators? I would say probably not. The Toyota has four wheel drive, which can be a best practice if you intend to take the car off road, but is an unnecessary and extravagant option if one does not intend to use the vehicle in this manner. Four wheel drive decreases gas mileage after all, and the knobby tires required to go off-road, ride roughly on a paved road. So should I sell my Honda and buy the Toyota? Well, there are a number of factors, such as how much I will be using the vehicle for commuting versus taking my jet ski to the lake and going camping. The vehicle’s benefits to me change depending upon the situation. There are some best practices, such as reliability, that are important to me, but may be less important to other people. For instance, neither of these are particularly stylish. However, the Land Rover is very stylish and has the best practice of four-wheel drive. If anyone has ever sat inside of a Land Rover with a leather interior, I think we can agree that their interiors are a best practice (that is, they feel very nice). In order to get the stylish ride, one has to pay a great deal more, and give up the Japanese reliability for English reliability.

So how do I decide on my vehicle with all these competing best practices?

I hope I have shown that there is a reason that people don’t take the concept of best practices to buying an automobile, or really to any other purchasing decision, and this is because the concept is ridiculous. People look for a series of trade offs in characteristics until they find a desirable compromise, and then make their purchase decision. It does not happen now, and will not happen in the future, that your friend will announce that he based his new car purchasing decision on best practices.

Best Practices in Which Software?

I used the example of cars because most everyone has at some point made a decision to purchase a car and because cars are relatively easy to understand. However, the concept of best practices is equally unhelpful and even problematic in making distinctions between things that we do not know as well. As my expertise is supply chain software, I know that making supply chain software decisions based upon best practices does not make any sense. This is elementary for me, because I have spent more than a decade and a half analyzing and configuring supply chain software and work with it almost every day. However, because I don’t know much about accounting software, if someone were to propose that accounting software can be purchased based upon best practices, it would seem to me to be a tenable statement, but only because I do not have the content expertise to truly analyze the claim. Certainly there are things that are desirable in accounting software that could be deemed “best practices.” For instance, it is desirable that the program post the actual quantities entered into the database, rather than using a random number generator. It is desirable that the program not crash and delete the last five hundred accounting entries. However, once we get past the rather banal areas of functionality, there will be considerable debate as to what are best practices.

Conclusion

The fact that the concept of best practices was such an effective marketing ploy is yet another indicator that many of the executives that analyzed ERP software sales pitches did not have suffi cient experience with the software they were purchasing to know that software couldn’t be purchased using best practices as a measure. Now that I have covered best practices generally, I will provide specifi c examples of how best practices have been used to sell ERP, and what the results were. To some degree, all the ERP companies used best practices to sell their software. I happen to focus on how SAP uses the term because I have spent so much time over the years reading their literature.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion