How to Understand Why SAP ERP is Unquestioned

Executive Summary

  • ERP systems were proposed to reduce complexity.
  • The result was that landscapes became even more complex.

Introduction

This book was hatched during a conversation with a longtime friend who works in SAP Basis—the infrastructure area of SAP that is concerned with installing and maintaining the SAP applications. During our conversation he made the following comment:

“Look at the typical SAP landscape at a company. It now has so many applications that it eliminates what was supposed to be the advantage of ERP in the first place.”

My friend’s statement got me thinking: what is actually known about the benefits of ERP?

ERP significantly predates my introduction to working on IT projects, and because ERP has been on every project in which I have been involved, I have What I discovered through my research was that my colleague’s single observation was only the tip of the iceberg, only one example of what turned out to be multiple false assumptions about ERP put forward by multiple entities over many years. I actually held several false assumptions regarding the benefits of ERP myself; I had never analyzed the issue closely and had been fed a steady stream of misinformation about ERP by biased parties and those who simply repeated the message they had heard from others. However, after I read the academic research on ERP, I was appalled to find unsubstantiated statements about ERP made repeatedly and routinely by individuals who presented themselves in their articles as knowing something about the ERP market. Of all the technologies I have researched, the coverage of ERP that I found was probably the worst journalism I have ever encountered. In fact, based on my research, I concluded that the vast majority of articles on ERP are misleading and not useful to people who are attempting to truly understand ERP. Of course, the articles are extremely useful to companies that wish to sell ERP software or services. Interestingly, ERP is a topic that has not been analyzed critically outside of academic literature. For those who believe that—at any time, at any place—the best determining factor of what is true is what most people think, this will not be a good book for you. Examples of when the prevailing opinion is incorrect are simply too easy to point out for anyone to be able to propose that generally agreed-upon opinions are correct. For instance, at one time, various gods explained all physical phenomena.

The Commonality of Believing False Things

In ancient Egypt, there was a wind god, a sun god, a god of the harvest, a god that ate the sun in the evening and gave birth to the moon and did the opposite in the morning. In ancient times people literally believed that physical phenomena could be controlled by praying to or making offerings to these gods. If that example is from a time too long ago for you, consider this: within the past one hundred years, the most prestigious universities in the US declared that women could never work in medicine because they would become hysterical at the sight of blood. More recently, US intervention in other countries was based upon a “domino theory,” a proposal that was never proven, never meant to be proven and was simply a justification for the violation of most of the treaties that the US had signed. These are the tip of the iceberg with respect to beliefs that were widely never actually seen a project without an ERP system.

Henry Ford received the Grand Cross of the German Eagle, the highest medal Nazi Germany could give to a non-German. However, you won’t find this story in any Ford commercial; if something does not fit with the desired history narrative, it is conveniently altered until the desirable storyline is created. For this reason, the great frequency with which the biggest and most prestigious institutions have been wrong is underestimated enormously. It is therefore quite likely that many commonly held beliefs today are wrong; in fact, it is easy to demonstrate that they are.

ERP as Just Another False Belief

There are many areas where the commonly held—and institutionally held— opinions are at odds with research in the area, and ERP is such an area. During my research, I found some statements that amounted to: “ERP must be beneficial because so many highly paid executives cannot be wrong.” However, couldn’t the same statement be made about mortgage-backed securities and credit default swaps? AIG, Goldman Sachs and Bear Stearns love them; these companies are chock full of smart people, so how could they be wrong? People who are well disposed toward ERP will most likely read this book (actually they will most likely not read it) and reject it out of hand; how can people agree with something that is counter to their financial benefit? Obviously, if a person consults in ERP, that person is going to be sold on ERP. Who would ever be so thick as to believe something that could negatively affect their pocketbook? If you are a partner at a large consulting company that implements ERP systems and your large house and large Lexus have been paid for by ERP implementations, you will not want to read this book—guaranteed—and you will not want other people to read it. Your life would be more difficult if this information got out. However, if you are one of these partners, the problem is that you will have nothing but anecdotal evidence (you have seen ERP work and provide value to clients), argumentum ad numerum (lots of companies use ERP and how can they be wrong?), or ad hominem (the author must not know what he or she is talking about), because the research on ERP will not support what you are telling your clients nor your luxurious lifestyle. Very few people have suggested what I propose in this book, so it’s rare that people have even had to confront the question of the evaluation of evidence regarding the benefits of ERP. I can anticipate the negative responses because one person, Cynthia Rettig, wrote one of the few articles that were not critical of ERP in an ancillary way, but were critical of ERP’s foundation. Many of the criticisms of her article fell into categories listed in the previous paragraph (argumentum ad numerum, ad hominem, etc.).

Even the most educated part of society—people with PhDs in the sciences—finish their academic careers still clinging to the idea that new discoveries disproving the theories upon which they built their careers must somehow be wrong. A famous example of this is Albert Einstein. Einstein was eerily prescient about most of his scientific hypothesis; in fact, he is widely credited with seeing fifty years beyond any of his contemporaries. However, when he made predictions about the new science of quantum mechanics, he was incorrect. Niels Bohr—a thought leader in what was an entirely new field and who did not follow rules of “large” physics—was proven correct. It turns out that God does play with dice after all. The desire to find evidence to support one’s already existing hypothesis and to filter out contradictory information is called “confirmation bias.” It is one of the most powerful of cognitive biases and exists in all of us—except not necessarily to the same degree in each individual, and not to the same degree in each individual at each age in their lifetime. Confirmation bias explains why things that are learned early in life, no matter how false, are adhered to so strongly into adulthood. It explains why advertisers will pay more to reach younger viewers than older viewers.

The Young Impressionable Brain

The young brain is the most malleable; it exhibits what neurologists call neuroplasticity and as such, it can learn new things quickly. As the brain ages, it develops specific neural connections (actually, the development of knowledge means creating some neural connections at the expense of other neural connections), meaning that it becomes increasingly “hard-wired” for particular thoughts and particular ways of thinking as we age. Although sometimes suggested, it is not true that the best-educated people are immune to confirmation bias. The more an individual has invested in any philosophy or course of action, the more they have to lose by adapting to a new way of thinking. In fact, merely following advice can reduce the ability to question that advice, particularly if that advice comes from an entity with some type of authority. The investment can be both psychological as well as real (in that one receives negative real-world consequences for changing one’s views). Both of these factors—the psychological need to protect previous mental investments as well as real-world consequences of changing one’s views—frequently combine to prevent people from changing to a new and better way of doing things and often make the mind impervious to contradictory information. There is research indicating that math is performed with less accuracy when the conclusion is in conflict with one’s beliefs. One question to ask is:

“Can the person who disagrees with the contentions in this article actually afford to agree with them?”

The Test of Financial Bias

Most importantly, do they have a financial bias? As for myself, I can reasonably propose that I am financially unbiased with respect to ERP, unlike the few other authors who have written on the topic of ERP. I do not make my income from ERP, but I do derive work based on the sale or implementation of ERP. I connect the systems I work with to ERP, and if ERP were to go away tomorrow, I would simply connect a different system to the planning systems in which I specialize. For the longest time it has been proposed that ERP serves as a backbone and helps the implementation of other systems. However, from my experience I have found that ERP tends to interfere with implementing other systems (although, I should say that all of my implementation experience is with “Big ERP,” and in performing research for this book and other research initiatives at Brightwork Research & Analysis, I’ve found some ERP systems that do not impose as much interference). I have been impressed with several smaller “ERP” applications; while they have similarities in terms of their footprint; they have nothing in common with Tier 1 or Tier 1 ERP software vendors in terms of costs, account control, business model, and a variety of other factors.

The Lack of Questioning with ERP

Quite simply, ERP has been ubiquitous and an unquestioned necessity. Certainly, I don’t recall people saying they liked any of the ERP systems that had been on these projects, but that did not really matter; ERP was just the reality. After this conversation with my colleague, I began researching the topic of ERP’s usefulness and value-add to companies. I expected to find a large number of books—and quantities of research and articles—that demonstrated the benefits of ERP. Instead, I found quite the opposite. Here is a synopsis of what I found:

  1. There are few research studies on the benefits of ERP. The research that does exist shows that ERP has low financial payback.
  2. Research into multiple aspects of ERP by serious researchers (not some survey by a consulting company or IT analyst firm) clearly shows that ERP significantly changes companies, but that the benefits from these changes are of a dubious nature. That is, there can be a mixture of positive and negative outcomes from ERP implementations.
  3. The actual research is at complete odds with most articles on ERP, which almost universally promote ERP as a virtue.
  4. Most of the information on ERP is unsubstantiated hyperbole written by people who benefit financially from ERP implementations directly, or by those who have “sampled the Kool-Aid” and simply don’t question any of the assumptions about ERP.
  5. There are no books that question the benefits of ERP.
  6. There is no book on the history of ERP.

What the Research into ERP Revealed

What I discovered through my research was that my colleague’s single observation was only the tip of the iceberg, only one example of what turned out to be multiple false assumptions about ERP put forward by multiple entities over many years. I actually held several false assumptions regarding the benefits of ERP myself; I had never analyzed the issue closely and had been fed a steady stream of misinformation about ERP by biased parties and those who simply repeated the message they had heard from others. However, after I read the academic research on ERP, I was appalled to find unsubstantiated statements about ERP made repeatedly and routinely by individuals who presented themselves in their articles as knowing something about the ERP market. Of all the technologies I have researched, the coverage of ERP that I found was probably the worst journalism I have ever encountered. In fact, based on my research, I concluded that the vast majority of articles on ERP are misleading and not useful to people who are attempting to truly understand ERP.

Of course, the articles are extremely useful to companies that wish to sell ERP software or services. Interestingly, ERP is a topic that has not been analyzed critically outside of academic literature. For those who believe that—at any time, at any place—the best determining factor of what is true is what most people think, this will not be a good book for you. Examples of when the prevailing opinion is incorrect are simply too easy to point out for anyone to be able to propose that generally agreed-upon opinions are correct. For instance, at one time, various gods explained all physical phenomena.

Conclusion

Since I began working with ERP in 1997, I have found that ERP systems have interfered with the value that can be obtained from business intelligence systems, bill of material systems, web storefronts, etc., in addition to the planning systems I have implemented (in fact, pretty much any system that must be connected to the ERP system). In the past I simply accepted this as the way it was: I thought IT implementation had to be difficult and frustrating. My exposure to many systems that are far easier to implement and have better functionality than Big ERP has led me to question my assumptions. More companies should be asking themselves this question; unfortunately these types of questions are not asked because a groupthink has settled over the topic of ERP.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

Search Our Other ERP Content

References

Thanks to Ahmed Azmi for his contribution to this article.

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

Who Loves ERP Systems?

Executive Summary

  • ERP systems are frequently defended.
  • Who defends them (and who doesn’t) tells you a lot about who the ERP systems actually benefit.

Introduction

What you discussed about ERP projects is exactly what the academic literature shows, and which no implementer or vendor is interested in acknowledging. That is over decades of studies, ERP has no ROI as we cover in the book The Real Story Behind ERP: Separating Fiction from Reality. But remember, everyone has to have an ERP system. They are mandatory and to question this orthodoxy is to be dismissed as a wearer of a tin foil hat. Everyone knows that you need one. Except they have a negative ROI. But of course, everyone needs one!

And furthermore, no combination of systems can be used (i.e., connecting a financial system to a supply chain planning system to other systems). Also, you can’t start with a few systems and add customization. No matter what the industry or how poor the fit with the ERP system, you must use an ERP system. All of the financially interested parties have spoken on this topic.

A Typical SAP ERP Implementation

Let us take a look at a typical Deloitte implementation with SAP. After years and hundreds of millions spent, how does the implementation get a positive ROI? Obviously, the cost is the denominator in the calculation, so the bigger it gets the bigger the payoff needs to be.

I covered in this article how consulting companies parasitized by vendors and consulting firms as I covered in the article How Vendors and Consulting Firms Parasitized the ROI of IT.

Open Source With Customization and Integrated Applications Never an Option?

SAP consultants laugh when I present open source ERP options like ERPNext.

However, with open source ERP, you can now add customization and better individual applications, and you have plenty of budget to do it. The sort of amazing thing about this is there are no SAP customers I have ever seen that feel particularly advantaged by “having an ERP” system. It’s more considered a boat anchor. Now, who might jump on this article to defend SAP? Most likely it won’t be a customer saying

“How dare you; I love my SAP ERP!”

Instead, it will be an SAP consultant or SAP sales rep who makes money from SAP. Invariably the biggest supports of ERP are not users.

How Executives Give Their Users Systems They Don’t Want

Who supports ERP systems in ERP customers? Executives. Executives who make the purchase decision, who get wined and dined by the vendor-consulting firms. Moreover, the exact people who never log in to the ERP system. If you want an endorsement from an executive in technology, ask them what they use for email and calendar scheduling. In that they are experts.

Users of ERP are non-plussed. Go into the cubicle area, and people are trying to get their work done, with SAP often getting in the way. But who thinks ERP is great? It is the people who ride the ERP money train. But we already know that the consultants love ERP. Sales reps love cashing ERP commission checks.

No kidding. We all know people like getting paid.

The question is what is the ROI for the customer, not for the vendor or consulting firm.

The Implications of ERP Systems

Contrary to popular belief, not all companies have implemented ERP. Is there is any reason for those companies that do not use ERP to start? Furthermore, many companies that have ERP systems have implemented only certain modules, and within these modules only certain functionality. Perhaps by communicating the true payoff of ERP, it will have a positive effect by making even small adjustments in the behavior and decision-making of ERP vendors and buying companies. ERP vendors and consulting companies that specialize in ERP have not given their clients an accurate story. That is a problem because every year, companies must essentially decide anew how much to reinvest in their ERP system. This reinvestment can take many forms.

  1. Support Fees and Upgrades: Means paying the yearly support fee, and upgrading the software—which also means investing resources in understanding the release notes, testing the new version—making sure the new version is compatible with other applications and with already written customizations.
  2. Deepening the use of ERP: Often means choosing to activate more ERP modules and more functionality within the modules as well as adding more customization to the system to meet various business requirements.
  3. Adding More Non-ERP Applications from the ERP Vendor: Can mean purchasing additional non-ERP applications from their ERP vendor that will not necessarily give the business what they need but will meet the needs of the IT department and will be “integrated” to their ERP system. This can extend to infrastructure, content management, and business intelligence software. Some of the large ERP vendors, in particular, develop sales plans to take over most of the software purchase for any enterprise software that their current ERP customers buy.
  4. Deepening the Interaction with the Vendor: Software vendors like their customers to attend conferences, talk about their success stories, be part of user groups, etc.

The most common decision over the past several decades has been for companies with ERP systems to increase their involvement and purchases with their ERP vendor in any of the ways mentioned above, but is that the right decision? Purchasing companies get a steady stream of information from the software vendor and consulting companies that other customers who follow the advice that the ERP vendor recommends continue to see gains in their business and efficiency—but is this true? So much of this information is financially biased because it comes from a desire to sell more ERP software and services, but where can companies turn to find out the “real story,” and one that is not biased
by promotion.

Conclusion

ERP promises, over a 5 year period, an increase in business productivity. When we compare the before and after figures, we see no increase in revenue per employee or units of output or profit per person-hour. In fact, we often see an increase in IT staff to employee ratios (for obvious reasons and to maintain the ERP system). In this case, the ongoing cost of the IT investment keeps escalating until it consumes most of the IT budget leaving no room for innovation.

To answer the question, “Who defends ERP systems.” The answer is those that benefit the most from their implementation — vendors and consultants.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

Search Our Other ERP Content

References

Thanks to Ahmed Azmi for his contribution to this article.

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

How to Use the Latest New Digital Transformation Terms!

Executive Summary

  • Digital transformation is ramping up the bridge and has caused its own digital transformations requiring a whole new set of super open minded terminology.
  • This is not some “Deepak Chopra-ish” fanciful wordplay, but serious terminology enhancements that all implementers and OTs should be aware of.

Introduction to the New Digital Transformation Terms

The term digital transformation has been with us for a few years, with digital transformations appearing left and right. However, there are special conditions have now arisen on projects that require further elaboration through terminological discussions. You will learn about these new and groundbreaking digital transformation terminologies in this article.

What is the Right Terminology for Digital Transformations that Fail?

The problem with the term digital transformation is that while we switched out the word “implementation” for digital transformation, it was quickly determined that nothing changed on projects. This lead cynicism to run rampant. Depression occasionally set in, with some of those in software implementation going so far as to wonder (out loud sometimes) if it was merely wordplay.

What did change is that many marketing departments had to use the “find – replace” command in their word processing systems to bring their documents up to snuff.

Within a short period, a revolution occurred in the IT industry, and there were no longer any software implementations.

Why might you ask?

Well to understand why we need to go back to why the terms were switched in the first place.

The Digital Transformation Master Plan

What follows is top secret. It is not for presentation to non-SAP friendly personnel.

This graphic displays the bad old days of software implementation.

SAP and SAP consulting firms figured out the fundamental flaw in software implementations. And it had nothing to do with the lies told during the sales process, immature SAP applications like S/4HANA being implemented or faked resumes by SAP consulting firms. No, the problem was that the declaration of success had to wait until the end of the project. And since SAP projects failed with such frequency, it meant that most projects would never get to the promised land of being declared a success.

SAP and their consulting partners needed to make a radical change to address this issue.

Introducing……”DT!”

The answer was simple. Make the project associated with a successful terminology, so that the process itself rather than the outcome was the focus — i.e. a “digital transformation.”

This way the project is already successful because it is associated with something considered virtuous. Who in their right mind could be against transforming something?

It does not matter that the term is meaningless in the modern context as it is from the 1900’s describing the transition from nondigital technologies to digital technologies. Almost no SAP consultants or customers will bother to look it up!

Simply assert meaningless terms to your heart’s content!

Furthermore, it turns out that IT departments also have no interest in validating the success of their projects, and are very happy to use this terminology also. Everybody wins!

The 100% Conversion Ratio of Software Implementations to Digital Transformation

We are very happy to report that the conversion of SAP software implementations to digital transformation was 100% successful. There are now no more software implementations occurring…..anywhere.

However, the industry was left with a conundrum.

The Need for New Digitial Transformation Terminology

Even if digital transformations fail entirely, they are still referred to as digital transformations. For example, the fact that Lidl recently halted one of its SAP projects to go back to its far more desirable “legacy” system did nothing to diminish the fact that it was still a labeled as a “digital transformation.” In fact, it is still labeled as a successful implementation on the KPS website. However, was it? Both SAP and KPS still consider the Lidl SAP failure to be a digital transformation…..because they got paid.

Digital Transformation or Bank Account Transformation?

This brings up the question, should a digital transformation that fails instead be more accurately called a..

“Digital bank account transformation”?

And this leads to the next topic.

What is the Right Terminology for Digital Transformations that Fail and are Greater than $300 million?

Now if the digital transformation fails but also costs more than $300 million? After much discussion, it was agreed that it would be called a..

“digital boondoglefication.”

What is the Right Terminology for Digital Transformations that Lead to High Degrees of Account Control?

A significant benefit of ERP digital transformations is that they put the vendor and consulting company in a good position regarding account control. This allows the vendor and consulting partner the face time to talk down any competing applications. Our research into ERP implementations….digital transformations is that this is primary ROI to ERP digital transformations. As a high degree of account control is the desired outcome of such projects, the question has been posed “what should they be called.” It was concluded that this is a.

“digital accountformation.”

Conclusion

This is an exciting time to be developing new terminology for the digital transformation industry, and we are happy to report on all of the tremendous new terminologies that are coming from the field. As with the original base term of digital transformation, all of the new derivative terms are equally evidence-free. Digital transformations are actually transforming digital transformations, and that can only be a good thing, as this video from the digital transformation center can attest.

Digital transformation is not simply a term being parroted by people who have “no idea what they are talking” about. Far from it. Endorsements for digital transformation can be found in this video. It is easy to see the excitement in the responses from these endorsements. It turns out that digital transformation is creating more breakthroughs leading to more OT booms than in any time in history (according to the video). 

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

Search Our Other ERP Content

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

The Disastrous ROI of Big ERP When Comprehensively Calculated

Executive Summary

  • The evidence is clear that ERP’s ROI is negative.
  • What is even less discussed is that investing in ERP leads to even more negative ROI with further purchases.

Introduction to ERP’s ROI Face Plant

The academic literature on ERP is that its ROI is negative. This was explained in our book The Real Story Behind ERP. In this article, we will expand upon this to consider the implications for ROI in the rest of the enterprise after the initial ERP purchase.

Including the Larger Picture Analysis — Post ERP Implementation

The studies on ERP ROI are focused only on the ROI of the ERP system. However, none of the studies that we reviewed looked at the overall picture. We analyzed this in the Brightwork Solution Architecture Analysis.

The problem with the ROI of just ERP is that it limits the impact that ERP systems have on the other applications that are purchased. This is because the strategy of ERP vendors to push what are most often marginal applications into the customer by the ERP vendor. A perfect example of this is SAP. SAP has an extremely poor stable of applications outside of their ERP system, the sordid history for which we covered in the article How SAP is Now Strip Mining its Customers.  None of the research includes this very important implication. (Oracle, SAP, Infor, Epicor, Sage), etc…. the larger ERP vendors follow this approach.

How Much Do Companies that Implement ERP Know About their Lack of ROI?

This quotation for Sam Graham, a highly experienced independent ERP consultant applies.

“ROI rarely comes into the equation. At best, ERP is seen as an inevitable necessary evil, or a ‘rite of passage’ to becoming a big company (SAP had a very effective campaign in the UK (and presumably other markets) a few years back, along the lines of, “Now SAP isn’t just for large companies” which glossed over the fact that they were actually talking about Business One. Clever marketing; and a lot of companies fell for it, believing that they were running the same software as the ‘big boys’.) Rarely do they talk to independent ERP consultants and, when they talk to general management consultants, these people are usually keen to sell their services (and gain experience in ERP) so the last thing that they will do is put obstacles in the way of their clients buying a system.

In my last job in industry, I was taken on as Materials Manager for a $100m t/o Swiss company that had just had a disastrous BPCS implementation. They approached what was then called Coopers & Lybrand (now part of PWC) for assistance. C&L sent in a consultant, who identified more work than one consultant could handle, so they pulled in a second, and then a third. Now; when you had 3 C&L consultants, you had to have a senior consultant to supervise them. And when you had 3 senior consultants, you had to have a partner to manage the 3 senior consultants. So they ended up with a partner, 3 senior consultants and 9 consultants on-site. 5 days a week. I’m not making this up; but it gets worse.

This was in the days of MRPII and, in those days, Ollie Wight & Associates were thought to do the best courses on the subject. So the Partner persuaded our CEO to send all of the company’s management team on a 5-day course. Then, when they came back, he said to the CEO, “You know, now that your people have been on that course, there is a danger that they will use terminology that our people don’t”. So he persuaded the CEO to pay for the same 5-day course for all 13 C&L staff on the project. And that meant not only paying for the courses, hotels, expenses etc; but paying for their time to be on the course!”

This is our observation as well.

Companies that purchase ERP listen to biased entities, ERP vendors and ERP consulting companies that are presenting them with sales information.

Conclusion

Companies that implement ERP systems have not and are not doing the most elementary research to evaluate the potential benefits of the software they are purchasing. They not only do not research the ROI of the ERP system itself but do not have the knowledge of the ROI of the follow-on applications that the ERP vendors plan to sell to them after they have captured the account.

Decision makers don’t measure benefits, (measurement is tricky), don’t read academic literature, and benefit by doing things that are considered “right” at the time to do. What is considered right to is controlled by the marketing departments of vendors and consulting companies that also control the media landscape? So IoT is being pushed right now. Are there really many use cases for IoT? They exist for package delivery and a few other areas, but IoT use cases are quite overstated. Big Data is similarly overstated. But assertion without evidence is the norm in the IT industry. Loosely translated, the only justifying logic for ERP is that firms that promote ERP propose that ERP is something that should be purchased. That is it. And the firms that recommend ERP, most frequently recommend the most expensive ERP systems to implement.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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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

The Myth of ERP Being 90% Out of the Box

Executive Summary

  • ERP vendors nearly always tell companies that the functionality they provide will cover more requirements that it does.
  • This leads to unplanned customization.

Introduction to the Myth of ERP Coverage

ERP systems were first introduced in the 1980s as a single system that would meet all of a company’s needs. Consulting companies helped vendors present this fiction because they made so much money from ERP system implementation.

SAP Promotes the 90% Out of the Box Myth

One of the most assertive promoters of the 90% out of the box myth was SAP. SAP has been extremely assertive in declaring that all systems that exist at an SAP prospect that are not SAP are “legacy” as we covered in the article How SAP Used and Abused the Term Legacy. SAP also promote the false construct that SAP was only built upon best practices, as we covered in the article How Valid are SAP’s Best Practice Claims? SAP argues that companies should implement as much of standard SAP functionality as possible and minimize customizations. However, SAP only offers a portion of the functionality necessary to run companies. This is where the proposal is made to perform business process re-engineering, as we covered in the article Reengineering and its Impact on ERP Sales. Re-engineering was a trend that eventually petered out, primarily because re-engineering projects did not demonstrate the ability to add value to customers.

90% Out of the Box

Even though ERP systems have been implemented for decades and vendors like SAP know that 92% of the ERP systems will be moderately or heavily customized, SAP sales continue to propose to prospects that 90% of their functionality will be addressed “out of the box” SAP ERP. This is one of the significant reasons ERP systems were able to become so prevalent. In this way virtually all ERP systems are sold under a false set of pretenses. In each case, they have to escalate in time and budget because the customization percentage is perpetually underestimated. There was never any effort (by consulting firms, but also by Gartner/Forrester) to illuminate this fact to customers. If someone can make me aware of some entity that did this, I will read it, but there is a peculiar silence on this topic.

Proprietary ERP and High Expense

When a company buys SAP, they also end up with the high-cost ABAP customization environment. They did not have to accept SAP’s recommendation to use ABAP, but almost all of them have. This served as a “double whammy” for the customer. First, they accepted the false assumption that they would only have to perform limited customization. Then when they found out that they would have to customize highly, they were stuck with the ABAP coding and SAP customization environment, which dramatically added to the cost of ERP projects. SAP and other ERP systems have turned out to be high cost closed systems that give the vendors increasing levels of control over the IT budgets of these customers. While SAP is the most difficult broadly sold ERP system to customize, ERP systems have tended to be developed as monoliths, and have been expensive to customize.

Customers that relied upon consulting companies found that the consulting companies were “in on it” and merely repeated whatever the vendors said. This entire system of the undisclosed history of ERP has only helped the bottom lines of consulting companies.

Conclusion

For decades ERP and partner consulting companies have been telling prospects something they know is false. This falsehood is that most of the requirements of the customer will be met by the standard functionality of ERP. Once purchased, proprietary ERP systems have proven very expensive to customize. In this way, and other ways, ERP systems appear to have been a Trojan Horse, allowing entities to take control of IT spends under false pretenses. Interestingly, the companies that have told all of these lies and have so misled their “customers” have not been called out on this inaccuracies. Buy this does explain, or is one of the explanations for the broad negative ROI to ERP systems.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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

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Should SAP Come Clean on How Much SAP ERP Relies on Excel?

Executive Summary

  • SAP normally presents SAP ERP as a system that can stand alone. However, if this is true, why is it so dependent on Excel to function?

Introduction to How Much SAP ERP Relies on Excel

In the original presentations from SAP, R/3/ECC was primarily about work in the application. Customers were not told, even after the evidence was quite clear that users would be using ECC in combination with Excel that it is how the system would be used.

What Was Promised?

In research, it is very important to evaluate what was promised, and then what happened. One does not view a discrepancy between promise and outcome and disregard it unless there is no research motive. Moreover, SAP salespeople and consulting companies routinely understate how much ECC relies upon external systems to customers. You don’t even hear the word Excel on SAP presentations. Its as if ECC does everything.

Consulting

The number one way to report and do analysis in ECC? Yes, that would be Excel. ECC has been fantastic for creating external spreadsheets. It seems that Microsoft does not get enough credit for ECC being able to function.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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Categories SAP

Is SAP ERP Good Because it Won Against Other Options?

Executive Summary

  • The concept is sometimes promoted that because SAP ERP is popular, that it must lead to good outcomes for customers.
  • What were the true reasons for SAP ERP’s popularity?

Introduction to SAP ERP Being Popular as an Argument

We recently found this quote on ECC regarding its popularity.

“R/3 in its days – before SAP had the dominant market position it has today – did win against most of the options on the market so it had some merit. “

How SAP Sold Out Customers to Corrupt Consulting Firms

There are many things to say here. First, SAP was the most aggressive vendor in giving away it is consulting to consulting firms. These firms, in turn, recommended SAP. Not because SAP was right or the correct fit, but because it allowed them to make the most money. Therefore, the playing field was not level. Consequently, it is not at all evident that this was a good decision merely because many companies selected ECC.

How is SAP Degrading Customer’s Investments into SAP?

Moreover, as I observed, that initial decision is looking worse and worse as SAP is changing the terms of the deal by giving customers a bad upgrade option in S/4HANA and by using indirect access to illegally push the account to buy SAP. Customers now deal with an SAP that is making up false constructs (like Type 2 indirect access) to control them. SAP thinks and behaves as if they are owed a certain percentage of the IT budget, even if the customer does not want to use their software. A vendor that acts this way is a liability to have in the building. SAP will be pummelling its customers for the next two decades. Every year that passes will likely increase the regret that they ever purchased SAP.

Who Likes ECC, Customers or SAP Consultants?

There is no evidence that ERP systems are beneficial to customers that implement them. I can say I have never seen an SAP account particularly happy with ECC. Users also do not enjoy working with ECC. They find it a burden and SAP is frequently lampooned at my client sites. It is also often commented that the system does not live up to expectations or is otherwise “takes forever” to “get things done.” ECC frequently appears to be a system that was forced on the users by the executives rather than a system that users want to use. The people who are happy with ECC, are consultants who make money from ECC.

The most prominent defenders or ECC or SAP on LinkedIn are never customers. They are SAP consultants who say a lot of unscientific things to defend their source of income. 10 out of 10 SAP consultants enjoy billing hours for SAP. I keep pointing to academic research that no other ERP consultant has read and that no ERP consultant is interested in reading. That is the academic consensus of decades of papers on the subject demonstrates no ROI from ERP systems.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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Can SAP ERP Be Sold with Realistic Expectations?

Executive Summary

  • Is SAP sold under realistic expectations? This is brought up as a possibility, but direct experience with the SAP sales process indicates that this is highly unlikely.

Introduction to Realistic Expectations for SAP ERP

It is sometimes stated that..

“If one has reasonable expectations, ECC can work well.”

However, how often is ECC sold with reasonable expectations?

How SAP Salespeople Operate

Salespeople ensure that customers will not have realistic expectations. Every SAP sales presentation I have participated in or reviewed has been entirely divorced from the reality of SAP projects. SAP sales reps, along with SAP consulting companies will in all cases vastly underestimate customization, undersell the real TCO of ECC, overstate ECC’s “best practices,” and on and on.

Conclusion

It is near impossible to have realistic expectations of SAP applications, because SAP is so active in providing false information to their customers.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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Categories SAP

Is it Right to Lead Clients into SAP Software Failure?

Executive Summary

  • S/4HANA is an implementation that makes money for SAP and consulting partners but has a very low likelihood of success.
  • S/4HANA implementation has turned into quicksand, and the consulting partners know this.

Introduction to S/4HANA Risks

Our observation from many implementation data points of S/4HANA as outlined in our S/4HANA implementation study is that S/4HANA is the highest risk application with the least likelihood of going live of any application we track. One major reason? S/4HANA is not a completed application.

The risks of S/4HANA implementations that are specific to S/4HANA (that is exclusive of all of the factors outside of S/4HANA such as the implementation partner, customer, etc..) break into the following:

  1. Incomplete nature of the overall application. (see SAP’s Misleading Storyline For S/4HANA Being Incomplete)
  2. Problems with HANA has in supporting a S/4HANA ERP system.
  3. Customization remediation effort due to changes in the database schema.
  4. Data migration effort due to the changed in the schema and the shortage of tools for making the migration (along with migrating custom tables)
  5. The loss of functionality through “simplification.”
  6. Customization remediation effort due to changes in functionality.

Obtaining Financially Biased Information About S/4HANA from SAP’s Coterie

Interestingly, the entities that provide information about S/4HANA to the market are either SAP itself or SAP consulting firms. SAP has been massively overstating S/4HANA as covered in How Accurate was Hasso Plattner on S/4HANA? Media entities that cover SAP are paid directly by SAP. We are a research entity that focused mostly on SAP. When we receive research requests from companies interested in the validation of information about S/4HANA that has been provided by SAP and their coterie, we find that in 100% of cases the company is working from an inaccurate set of assumptions. And in 100% of cases, the assumptions are positively biased. It is clear that the objectives of SAP and their coterie is to get S/4HANA into companies by any means necessary, and by telling any lie they need to tell.

S/4HANA’s extremely poor implementation history has been almost entirely censored. SAP consulting firms won’t discuss these failures and halted projects with prospects, they want to discuss SAP marketing talking points. And when an individual from a consulting firm writes an article about S/4HANA, they are very careful to never discuss their financial bias in favor of S/4HANA, or that they, for instance, have a quota to sell S/4HANA services. Instead, they prefer to present their views as if they are impartial.

This explains articles like this, that vastly overestimate the readiness of S/4HANA for implementation and underestimate the implementation challenges with S/4HANA. They have no other purpose than to drum up business for S/4HANA implementation services.

The S/4HANA On-Premises vs Cloud Distinction

These are all called out for S/4HANA on premises. S/4HANA Cloud has too small of a functionality footprint for any one company but small professional services firms to implement. (S/4HANA on premises and S/4HANA Cloud are two separate applications, something which SAP deliberately obscures to customers and Wall Street.)

Implementation Costs

Secondly, the implementation cost of S/4HANA on premises is guaranteed to be extremely high for the factors listed above. Merely the costs of item 3 and 4 will be extremely high. S/4HANA is like no other SAP ERP upgrade, which was already quite problematic and expensive.

ERP Failure Rates

ERP and more broadly enterprise software failure rates are a frequent topic of conversation among those that work in the industry. However, what is curious is how undiscussed the implementation of applications that have a very low likelihood of implementation success. If the implementation advisory function is more focused on billing hours than in selecting applications that have higher probabilities of implementation success, then naturally, failure rates will be higher than necessary.

Increasing Consulting Revenues with S/4HANA

Even with S/4HANA extremely low implementability, SAP consulting firms still want the S/4HANA consulting business. This means they work with SAP to mislead customers and prospects about the existing S/4HANA case studies, their personal implementation experience with S/4HANA and S/4HANA’s revenues.

But what happens if the project that is being recommended by the consulting company has close to no chance of being successful?

Consulting

What we are seeing is a consulting ecosystem that is recommending S/4HANA implementations that in most cases will not go live and will worsen the condition of the client, but which benefit the consulting company. So should consulting companies be recommending implementations that they know will fail? The SAP consulting market has become so profitable for so many companies, combined with SAP bringing out such immature applications, that implementations are recommended that have close to zero chance of improving the condition of the customers.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

ERP Contact Form

  • Interested in Our ERP Research?

    It is difficult for most companies to make improvements in ERP without outside advice. And it is close to impossible to get honest ERP advice from large consulting companies. We offer remote unbiased multi-dimension ERP decision support.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, contact us and we will be in touch

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References

Repair MRP Book

 

MRP System

Repairing your MRP System

What is the State of MRP?

MRP is in a sorry state in many companies. The author routinely goes into companies where many of the important master data parameters are simply not populated. This was not supposed to be the way it is over 40 years into the introduction of MRP systems.

Getting Serious About MRP Improvement

Improving MRP means both looking to systematic ways to manage the values that MRP needs, regardless of the MRP system used. It can also suggest evaluating what system is being used for MRP and how much it is or is not enabling MRP to be efficiently used. Most consulting companies are interested in implementing MRP systems but have shown little interest in tuning MRP systems to work to meet their potential.re

The Most Common Procedure for Supply and Production Planning?

While there are many alternatives to MRP, MRP, along with its outbound sister method DRP, is still the most popular method of performing supply, production planning, and deployment planning. In the experience of the author, almost every company can benefit from an MRP “tune up.” Many of the techniques that the author uses on real projects are explained in this book.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: The Opportunities to Improve MRP
  • Chapter 3: Where Supply Planning Fits Within the Supply Chain
  • Chapter 4: MRP Versus MRP II
  • Chapter 5: MRP Explained
  • Chapter 6: Net Requirements and Pegging in MRP
  • Chapter 7: Where MRP is Applicable
  • Chapter 8: Specific Steps for Improving MRP
  • Chapter 9: Conclusion
  • Appendix A: Calculating MRP
Categories SAP

Is SAP’s ERP System Innovative?

Executive Summary

  • SAP’s ERP systems are often presented as a good application, even innovative, but we question this assertion.
  • To understand SAP ERP, it becomes necessary to understand how ERP was originally sold when SAP first became a well-known vendor.

Introduction to the Whether SAP’s ERP Was Innovative

SAP claims to be an innovative application. The following quotation presents this.

“To be fair to SAP, they have great products and they have not so good products 🙂
SAP Business Suite is a great ERP when implemented properly and deployed on a scalable/reliable platform (ahem, e.g. Oracle).
You have correctly pointed out all those inaccurate claims on their other not so good products. However, this shouldn’t diminish those positive impacts of their very trusty and reliable Business Suite applications since 1992. Rational product development decisions should prevail over old feud though. Moreover, the rational thing to do is to continue the ECC product line way past 2030 with updates in technology and Business processes so that true innovations without disruption is what all customers can depend on.”

Is ECC a Good Product? Is it an Innovative Product?

There is a consensus that ECC is a good product. SAP’s entire existence is due to ECC.

However, is ECC innovative? To consider this question, let us consider the actual definition of innovation.

“Innovation can be defined simply as a “new idea, device or method”. However, innovation is often also viewed[by whom?] as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs. Such innovation takes place through the provision of more-effective products, processes, services, technologies, or business models that are made available to markets, governments and society. The term “innovation” can be defined[by whom?] as something original and more effective and, as a consequence, new, that “breaks into” the market or society.” – Wikipedia

Therefore, innovative means the company came up with something that no one else came up with. It must be new. Now let us consider ECC.

ECC was just a better and broader implementation of something all the ERP vendors were doing back in the 1980s. At that time software vendors were acquiring MRP vendors, and incorporating MRP systems into financial systems to make “ERP.” The benefit was integration, but less discussed was that much was lost in this process. For example, it worsened the MRP systems, which is something I covered in this article Why are Companies Still Running MRP from ERP?

The idea was that with one system costs would decrease. However, can anyone look at the costs of ERP implementations and say this reduced costs?

Another problem is that ECC is so weak in so many areas that without Excel it would die.

The number one way to report and do analysis in ECC? Yes, that would be Excel. ECC has been fantastic for creating external spreadsheets. It seems that Microsoft does not get enough credit for ECC being able to function. 

ECC is Good Outside of Finance?

ECC is difficult to use in supply chain management (the area of functionality I have been consulting in for decades in SAP), and it received far less development effort than SAP’s FI/CO module. In fact, I consult with ECC customers that normally have great difficulty in managing the supply chain process with ECC. The supply chain functionality was hastily created by what looks to be force feeding supply chain books to developers. The forecasting functionality is virtually impossible to work with. I could go on and on. But this is why I recommend to companies that they do not perform MRP or forecasting or any supply or production planning in ECC.

Deloitte and Accenture on the other hand, desiring to bill the most SAP hours as possible, never recommend reducing the reliance on SAP, no matter how bad the functionality. The entire SAP consulting ecosystem exists not to help customers, but to bill as many hours in SAP as possible. Any approach that reduces this primary objective will never be recommended. SAP gives awards to consulting companies no matter how much they mistreat clients. Even WiPro won an award!

However, SAP proposes ECC is great for all of the things mentioned above. The result is now companies perform these functions in ECC with great difficulty. This issue extends to analytics (all ECC systems have separate analytics systems) to sales order management (CRM has taken much of ECC’s sales order origination function) (why SAP loves indirect access claims against Salesforce).

ECC, a System Propped Up By Customization, Other Systems and Excel

As time has progressed from the initial “sales job” for ECC as the Swiss Army knife of applications, ECC has given up increasing amounts of functionality to other better applications. No one seems to remember that this is not what SAP or their coalition of the billing said would happen. Originally CIOs wanted to get rid of their multiple systems, but decades later, ECC also has….you guessed it, many systems connected to it. And SAP is more difficult to integrate with other systems than any other vendor.

Without these systems, and without extensive customizations (something else that SAP lied to customers about), and without exporting to Excel, the frustration with ECC would have no release valve, ECC would be removed from companies at a far high rate. People that consider the popularity of ECC neglect to mention that ECC is propped up from so many dimensions. ECC can be considered like an old man. If four other people drive him around and give him his medication, he can have an active lifestyle. But without that external help, he is not going anywhere.

ECC is stable, comprehensive (a relative term I know), standardized, and probably a few more accolades…..but innovative? Companies that implemented ECC are better off than before they purchased ECC? Not the companies I see and that is not what the academic research indicates.

And as we will discuss, life is about to get even more difficult for ECC customers.

When and How ERP Became the Largest Software Category

ERP became the largest enterprise software category purchased during the 1980s, and it held onto this title until just recently until giving it up to CRM. But it did so without any evidence that ERP improved the condition of companies that purchased it and used it.

It is important to recall that SAP and consulting companies told customers that ECC was the only system companies would never need and would lower their spend. Over decades a tremendous number of companies have lied about the impact of ERP on customers, and because all of the money is on the side of the ERP “industrial complex,” they are never called out on their inaccuracy. These are the usual suspects. And they have something very important in common. None of them care about what is true.

The Sordid History of ERP

Looking back at the history of ERP, it is easy to see that ERP was purchased because it became a trendy item. Deloitte, Gartner, Accenture and a whole industry — all with a pro-ERP financial bias — all told companies they had to have an ERP system. My analysis of the academic literature is that ERP systems have a negative ROI (as covered in The Real Story Behind ERP).  And because of the high cost of SAP ECC implementations and ongoing maintenance and the fact that ERP systems don’t particularly enable companies to do things better than they did them before.

SAP ECC has a strongly negative ROI. SAP ECC implementations are the most expensive implementations that we track. We offer two online TCO calculators for ECC, one for large customers, and a second for extra large customers. Lidl just canceled a 7-year project that cost $500 million Euros. Many billion dollar and up R/3/ECC failures are all through SAP’s history. Imagine what happens to the ROI of ERP when the failures are taken into account?

Both software vendors and consulting companies have been very careful to never let their customers know the TCO of ERP. It would be ruinous to ERP sales, and therefore would not allow the most important driver in all of the ERP industry, namely quota attainment.

Trapped by SAP ECC and Lead to the Slaughter with S/4HANA?

Executives brought no standard of evidence to the decision making process with respect to ERP, never asking what proof vendors or consulting companies could point to. Executives within customers that purchased ECC were not so much “thinking” as following the adverse risk strategy of just “looking at what your neighbor is doing.”

Now these companies are stuck with ECC systems that offer little flexibility, are exorbitant to maintain, and with the introduction of S/4HANA have a highly unappealing upgrade path. S/4HANA cannot be upgraded from ECC, but is a full reimplementation, pounding customers budgets once again. This is truly outrageous, but the consulting companies are silent on this, presenting S/4HANA as a positive development. (the customer’s exorbitant TCO is money in consulting firm’s pockets)


Deloitte and Accenture’s perspective on software TCO can be understood by Matthew McConaughey’s speech in the Wolf of Wall Street. “You take your customers money and put it in your pocket.” This is how the SAP consulting companies think about their customers. 

With the introduction of S/4HANA, a system that over three years after introduction is still not ready to be implemented, SAP has made the entire value proposition of their ERP system from bad to horrendous. And this is before we get into the other questions of the even lower ROI products that customers often buy from SAP to connect to ECC, and the indirect access liabilities of HANA, which SAP stipulates as the database for S/4HANA.

Conclusion

Our conclusion is that while SAP R/3/ECC has been great for Deloitte, Infosys (and of course Oracle who loves those database revenues driven by ECC with 70% of all ECC instances using the Oracle DB), ECC has not been beneficial for customers that implemented it. That is these SAP customers would have been better off custom coding their solutions (or keeping their existing solutions). Moreover, now companies have SAP, they have SAP account reps trolling their hallways. These sales reps are insistent that their customers double down on their negative ROI SAP ERP investments with even more negative ROI investments into more SAP products that are a step down from ECC. And that with indirect access, customers may have to pay for connecting any non-SAP applications to the negative ROI SAP ERP application. The entire SAP scenario has completely lost the plot. And money rather than product drives every decision.

If only customers buying SAP ERP back in the 1980s and 1990s had any idea that this would be the eventual outcome of their trendy SAP ERP purchase.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

https://en.wikipedia.org/wiki/Innovation

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
Categories SAP