ERP Software

Selecting your ERP Partner

"Many vendors don't offer the customer a realistic perspective of what is required. Yet to get the best benefits, the customer and vendor must devote the time to selecting and implementing an ERP software solution in line with the business," said Craig Such, managing director of Access Supply Chain.

According to Craig Such, managing director of Access Supply Chain, it's when an end user has failed to define exactly what is required from a solution in order to meet the precise needs of the business -- and then expects the software to provide all the answers anyway.
A vital role any vendor should play is to demonstrate fully how a solution will fulfill business expectations. "In some cases, a vendor may underplay the amount of planning and resource necessary, just to get the order," says Such. "Unfortunately, the user will get a system that neither achieves his immediate goals, nor supports the business going forward."

Such says the biggest cost any user faces when purchasing an ERP software system is the one least likely to be mentioned: the time it takes to get it right and the potential disruption. "Many vendors don't offer the customer a realistic perspective of what is required. Yet to get the best benefits, the customer and vendor must devote the time to selecting and implementing an ERP solution in line with the business."

For Access Supply Chain, the equation for ERP software excellence is simple -- you can't get out what hasn't been put in. Here are the key elements of its blueprint for success:

Clear requirements are key to a solution. Define these for every part of the business, particularly with an eye to the future and your changing needs.

Select a solution based on product functionality and implementation resources and techniques. ERP software is not about buying software or services: it is a solution. A user must select a vendor who can demonstrate that its system can achieve clearly articulated business objectives, and that there is a clear understanding of the business and its needs.

Follow a proven implementation methodology for example, Prince2. Having selected a system, the next task is to make sure it is delivered on-time and to budget. In very few instances is this clearly defined, says Such. "Prince2 is a well recognized and respected standard, in terms both of implementation and methodology, that can be applied equally well to projects of any size. It ensures the project scope is clearly defined -- who is responsible for what, when and how -- with tight procedures built in, so the erp software project is constantly reviewed at every stage before sign-off."

Go for a fully integrated solution. Information entered in one area of the business must flow right through the organization, so there is no duplication; nor should there be any software integration  issues, which can be a common occurrence.

You'll get better support direct from a localised author. ERP software can be complex and require specialist support. Resellers that lack real expertise can sometimes offer only diluted levels of support, while products from overseas may not be in line with the latest legislative changes, such as Intrastat or waste packaging regulations.

Ensure that you are shown how the solution will address your needs. Too often, a vendor will assure a customer that its solution can fulfill all of their requirements, without actually providing the evidence. seeing is believing, so ensure it is standard software not bespoke software for the demonstration.

Be sure that quotations are broken down into detail and compare like for like. All modules involved need to be listed, such as manufacturing orders, as well as the service days and project stages. Omissions can create problems later on and prove costly to remedy. Also, users need to ensure that software upgrades are included and not charged as an extra.

Beware of solutions that claim they need very little implementation. An ERP software solution is only as good as how well it is implemented. Failure to scope an implementation adequately can mean only a 75% fit -- with the 'missing' 25% being what delivers greatest benefit to the business.

Insist on a detailed presentation of how the software can fit your business. Regardless of what people say, comparable solutions will take a similar number of implementation and training days. A detailed breakdown of what is involved is critical.

And Such adds: "Finally, you can't just run the solution -- you have to pilot and prove it, testing out all potential issues before you go live. You can't afford to skimp on training: you must invest in your users up front if you want the right payback. Implementing ERP software properly takes time, resource and good planning. But it all seems worthwhile when that vital report you need, that used to take a day and half to pull together, is now delivered at the press of a button."

ERP news from newsfactor

ERP Software guide

SSA want's to be a player

SSA Global Technologies Inc. has lately been on a buying spree of enterprise application vendors that rivals Oracle Corp.'s, in deal frequency if not size. The once-bankrupt ERP (enterprise resource planning) vendor is amassing an eclectic portfolio that analysts say positions it as an emerging major player in the changing back-office applications market.

Chicago-based SSA Global was buzzard bait a few years ago. Its current incarnation was formed in 2000, when several investment firms stepped in and bought the assets of bankrupt software maker System Software Associates Inc. The company's backers, primarily distressed-company forager Cerberus Capital Management LP (named for the mythical three-headed dog that guards the gates of hell), began bulking up SSA Global's portfolio by buying similarly struggling ERP assets. Most notably among those was Baan, which SSA got in 2003 for around US$132 million only a few years after Invesnsys PLC paid €762 million (around $708 million at the time) for the storied, but foundering, company.

SSA Global's string of acquisitions gives it a comfortable cushion of support and maintenance revenue for its legacy applications. Nearly 50 percent of its revenue for the nine-month period ended April 30 came from support, with services contributing another 23 percent.

The company stayed under the radar until this year, when it raised $99 million in a May IPO (initial public offering). Most of that cash went to repay debts owed to Cerberus and investment company General Atlantic LLC, which together own 87 percent of SSA Global. Still, the IPO gave SSA Global a public fundraising mechanism and raised its visibility. This month, it announced its biggest acquisition to date, buying CRM maker Epiphany Inc. for $329 million in cash.

Analysts praised the move as a smart pick on SSA Global's part. Although Epiphany is struggling with shrinking revenue and has posted a loss every year since its inception, it brings $239 million in cash and investments to SSA Global, significantly trimming its purchase cost. It also has strengths in its CRM (customer relationship management) software set that SSA Global lacked, especially in marketing and call-center functionality.

"They got them at a very good price, and it's a complementary area," said AMR Research Inc. Research Director Judy Sweeney. Forrester Research Inc. analyst Ray Wang called the deal a great one for SSA Global's customers, who will gain access to Epiphany's sales and marketing tools.

As SSA Global rolls up ailing ERP technologies into its portfolio, its challenge is to create a sensible, unified applications set from its collection of disparate pieces. The company's chief technology officer, Cory Eaves, said the company has mapped out a two-part strategy.

First, it will maintain the applications it buys for as long as existing customers want to continue using them. Second, it is developing its own SSA-branded line of enterprise applications encompassing the whole range of corporate operations, including sales, human resources, supply chain, product lifecycle, and corporate performance management software. SSA is picking out the best features from its acquired software to add to its SSA line, according to Eaves.

"If [customers] want to move forward, we have a single, go-forward set of applications," he said. "Some are acquired and some aren't. We're spending over $100 million on research and development investments. We've been building a ton of technology ourselves."

SSA Global's success will depend both on how well it retains legacy customers and on how well its new ERP line fares in a crowded market. On the first count, analysts say it's doing a solid job.

"I've slowly been converted," said Forrester's Wang. In his conversations with legacy customers, most say they're happy with SSA Global's work to preserve their applications. "They've been focused a lot on giving their existing customers a safety net -- the right upgrades, the right patches," he said.

"They've been on target with all the promises they've made," Sweeney agreed.

SSA Global rests in the precarious "second tier" of ERP companies, behind industry giants Oracle and SAP AG. That segment is changing rapidly, with most companies struggling for profitability as they fend off bigger players on the high end and ambitious new entrants like Microsoft Corp. and Salesforce.com Inc. in the SMB (small and medium business) space. Vendors frequently disappear through consolidation, as Epiphany is about to.

But SSA Global has several major advantages: its base of more than 13,000 legacy customers, and a strong position in the manufacturing industry, which accounts for more than 80 percent of its revenue. Complex product configuration, field service and repair are all particular strengths of SSA Global's software, areas that less targeted CRM products can't match.

"I think this is a market that keeps SAP and Oracle up at night," Wang said. "SSA has all these manufacturing customers and has been good at keeping them. These are customers that SAP and Oracle would have thought would have migrated by now."

SSA Global doesn't have the financial resources to become an aggregator on the scale of, say, Oracle, which followed its $10 billion PeopleSoft purchase with $630 million Retek buy made more expensive by a high-profile bidding war. SSA Global's last quarterly report, for the period ended April 30, showed a cash balance of $128.9 million; for the first nine months of its fiscal year, it had net income of $23.6 million on revenue of $524.9 million.

Still, investors like SSA Global's strategy. "The management team at SSA has decades of experience at midmarket software companies, so they have a strong understanding of the industry dynamics and the other companies in the marketplace," Smith Barney analyst Mark Verbeck wrote in a recent research note. "SSA's acquisition of Epiphany is an excellent example of the benefits of the company's acquisition strategy."

The question facing customers and industry analysts is, as the midmarket ERP field shakes out, which vendors will be left standing? AMR Research's Sweeny sees SSA Global and Infor Global Solutions as the two key players left in the manufacturing applications market. Wang cited SSA Global, Infor, Lawson Software Inc. (which recently bulked up by agreeing to buy Intentia International AB), Sage Software Inc. (another aggregator working to turn an acquired software collection into an integrated set) and everyone's favorite ERP stealth shark, Microsoft, as the top candidates to be independent companies doing $1 billion in annual revenue by 2008.

"Our view is, the market is absolutely consolidating, but even at the end of the consolidation, there's not going to be just two companies left," Eaves said. "We have our key niche. We're not going anywhere."

news from Infoworld.nl

ERP implementation tips

An enterprise resource planning (ERP) software project can be daunting for first-timers or veterans handling a migration. Get started on the right foot with the top 20 ERP implementation tips from Linux users, consultants and vendors.

Planning

1. Know your goals for your ERP implementation. Choose the product that promises to meet those goals and put measurement tools and processes in place to gauge your success, advises Lance Williamson, engineer, Engenio Information Technologies, Inc., Wichita, Kan. In particular, he said, set goals for performance, response time and downtime.

2. Don't do any project without a plan, particularly an ERP project which touches almost every part of your organization, said Bernard Golden, CEO, Navica Inc., a consulting firm in San Carlos, Calif. Create process with regular milestones and participation from affected organizations. And be sure to test, test, test, all the way through. "All of these things seem like 'nice-to-haves' rather than critical elements in a project, but can make the overall project much more successful," Golden explained.

3. Involve users in your ERP project planning phase, said Andy Klee, president of Klee Associates, Inc., a consulting firm in Cedaredge, Colo. "The software is not going to do you much good if you don't have employee buy-in," he added.

4. Don't do the planning and implementation alone if you don't have the in-house skills to make it happen, said Jorg Janke, president of open source ERP vendor Compiere Inc. in Portland, Ore. "Determining which options and features to use requires experience," he said. If the in-house team doesn't have that experience, Janke advises, find a local ERP expert who is trustworthy and who collaborates well with your team.

5. Be realistic in your cost projections. Double the consulting firm's estimate, Klee said. "I hardly ever hear of these projects coming in under the estimate," he explained. Also, be realistic about training costs. "Even at the largest level, companies underestimate the training costs," he said.

6. Don't keep adding to your project. In the planning and evaluation stage, people see the capabilities of products and want to use each new one they discover. "Commit to what you want to do initially," said Jon Reed, a Klee Associates consultant. "Get your return on investment and then expand. Otherwise, you'll have a never-ending and unsuccessful project."

To host or not to host?

7. If you'd prefer the hosting model for your ERP, then scrutinize your application service provider (ASP) well, says Janke. First of all, you must be able to trust this ASP with your data. "Find out if that hosting company provides cookie cutter solutions or can customize the ERP suite to fit your needs," he advises. "Many outsourcers don't know enough about ERP to customize it. Then again, if a cookie cutter solution is okay for you, then fine, use an outsourcer and you don't have to take care of your ERP."

8. Follow the money. "Hosting should take out a lot of internal costs of labor," says Frank Prestipino, vice president of Oracle's global enterprise applications strategy.. "It should save you money…by spreading payments over a period of time. You should be paying less over a period of time for hosting than you would do it yourself." The hoster should provide this analysis. If you're not paying less, don't use an ASP, he said.

Evaluation

9. Choose an ERP package that is industry-standards based. "You don't want to find yourself out on a limb with customers who can't interact with your proprietary, out-of-standard implementation," says Oracle's Prestipino.

10. Look closely at maintenance costs. "You can pay a great purchase price and find that it costs a fortune to maintain," Prestipino said.

11. Evaluate your processes and decide if changing them to fit a particular ERP suite would be beneficial, Klee suggested. "Either you're looking for customization or going for out-of-the-box," he says. "With the latter, people have to change how they do things in order to conform to the package. That may work for a company that needs to make changes anyway. Often, however, it's better to choose a suite that can conform to your needs."

12. Discuss a vendor's stability with the vendor reps and outside experts. Find out if the company is losing market share, which might make it a candidate for a takeover or failure, Pestipino said.

13. "Whenever a company and its ERP package are acquired, it's not usually good news for the customer," Klee said. "Often, the vendor is buying the client base and is not that interested in the software itself. Instead, they'll try to get clients to move to their own platform." In this situation, customers may have to migrate without good business reasons.

ERP information from techtarget

Free ERP?

Carillon Financials Corporation  is looking to lure hundreds of customers away from Enterprise Resource Planning (ERP) software industry powerhouses Oracle and Microsoft. To do so, Carillon is giving away more than $100 million of software to businesses across the country.

“We are seeking users of competitor's systems who are dissatisfied or have outgrown their systems.” explains Larry Pettit, President and CEO of Carillon. “Carillon is ready to shake up the ERP software industry. I want companies to discover the unparalleled functionality that Carillon has to offer. It's time to claim our share of the market.”

To encourage users of Microsoft Business Solutions, J.D. Edwards, Oracle Applications, PeopleSoft, Real World, Macola and Lawson software ERP software systems to explore the possibilities, Carillon is waiving the license fees on up to 800 ERP software systems: 300 Enterprise Editions and 500 Workgroup Editions. The program, which began in June and continues through September 30, 2005, has already generated more than 3500 inquiries.

Wise business decisions can not be made just based on price so once a customer inquires about the promotion, Carillon arranges a demo for the customer. Feedback from the demos reveals that companies are very excited about the opportunity to license free software that offers superior functionality to most other currently available systems. Additionally, Carillon systems are modular allowing the customer to tailor the system to their needs.

free erp with your fries

Open architecture battle

"Oracle's competitors have done a good job of creating some confusion in the market, and they've been successful at it because Oracle has not been successful in getting out its message," said Forrester senior analyst Ray Wang, in an interview with SearchSAP.com. "Oracle should not have to defend its middleware technology since SAP is the software vendor moving into an infrastructure play."

Oracle's middleware technology is similar to SAP's NetWeaver application and integration platform. It includes Oracle's application server, integration tools, business intelligence, portal, development tools, data hubs and collaboration software, according to Forrester. But unlike SAP, which supports third-party products, Oracle lags behind and must develop a partner program to certify integration with its stack, Forrester said.

"How can you have partnerships when you haven't locked down what Fusion is?" Wang said. "Oracle is addressing this now."

Don't expect Oracle to launch Fusion in its entirety in 2008, according to Forrester. The most likely scenario is that Oracle will roll out portions of its Fusion project and then monitor early adopters, Forrester said. 
March to SOA:
Web services will change, not kill apps, Forrester says

Where does Oracle outshine SAP? According to Wang, the Oracle Business Process Execution Language (BPEL) Process Manager, a technology it acquired from Collaxa, enables Oracle customers to have more reliability, ease of administration and flexibility in managing business processes. BPEL is an XML language, designed to use Web services to enable task sharing for grid computing environments.

Companies can make a workflow change with the BPEL Process Manager, without having to write any code. SAP has an equivalent tool, but Collaxa was the leading tool on the market, Wang said.

SAP customers have also been slow in upgrading to mySAP ERP, the latest version of SAP's software suite. Although the exact number is disputed, more than half of SAP's customer base is on SAP R/3 software, an earlier version of SAP. Still, SAP executives said the number of customers signing upgrade contracts has been steadily increasing.

"Oracle is not out of the race," Wang said. "But the race is about who makes the least mistakes, so the market is playing itself out now."

Look for new pricing models

As SAP and Oracle launch services-enabled software suites, customers can expect to see new pricing models rolled out as well, Forrester said. Both vendors will look to simplify pricing and licensing, while the competition continues to give deep price discounts for initial licenses.

Oracle could decide to launch usage-based and user-based licensing models with Project Fusion. Customers should also be prepared to bargain for the types of credits given for existing functionality, Wang said. Also be aware of support changes and maintenance fees.

ERP hardware which route should you go

Baldor Electric Co. and Welch Foods Inc. have much in common. Both are growing, midsize companies with similar-size IT departments. Each uses packaged ERP applications and is run by IT managers who want complete alignment with the business. But when it comes to the hardware running these systems, the companies are polar opposites. Fort Smith, Ark.-based Baldor has consolidated its hardware to an IBM z990 running Linux that hosts its SAP ERP applications. The company, which makes electric motors, moved off IBM pSeries servers running AIX and is planning to switch applications on its Intel servers to applications that run on the mainframe, including moving a Windows-based mail server to Lotus Domino. Welch Foods, a Concord, Mass.-based juice, jam and jelly producer, is moving from a System 390 IBM mainframe as well as an IBM midrange AS/400 (now the iSeries) running a mix of applications to an Oracle ERP software system that will run on Intel-based Linux servers. The vendors involved in these projects -- Dell Inc., which supplied the servers to Welch Foods, and IBM, which supplied Baldor -- announced the migrations last week. Mark Shackelford, Baldor's IT director, had three mainframes and eight Unix servers. Late last year, the company decided to consolidate to one new mainframe, the z990, running Linux and z/OS operating systems and using zSeries virtualization technologies. Weighing heavily in support of the mainframe was its track record: There hadn't been any mainframe downtime since 1997, said Shackelford. The ERP software applications run the business, manufacturing, finance, sales, distribution and Web applications, among others. "We have a very stringent requirement of being up all the time," he said. The move to the mainframe was completed in June and has increased performance by 40%, Shackelford said. The cost of the z990 was offset through staff reductions; the mainframe/Unix management staff was cut from eight to three because Unix servers were eliminated, so he now has an IT staff of 38. IT spending has declined from 1.7% of sales to 1.2%, and Shackelford said he expects additional reductions. Three years ago, Shackelford had investigated migrating to a Windows server environment with cluster fail-over. "We thought we were going to save a ton of money," but the systems crashed all the time, he noted, and the idea was quickly abandoned. Larry Rencken, vice president of information services at Welch Foods, joined the company in June, when the path was already set, but it's one he supports. Welch's decision to adopt the Intel platform with Oracle ERP software and a virtualized environment using VMware was heavily influenced by the vendor's recommendation, as well as Oracle's example of running on a Linux and Intel environment itself, said Rencken. Welch Foods has 100 physical Intel servers virtualized to 200. Rencken said he likes being able to add servers as needed for performance and scale, as well as building "on a foundation with common processes that have been streamlined and fully integrated." Jacob Matusevich, Welch's manager of networks and server technologies, said there's no significant difference in uptime between the Intel and IBM environments. Rencken has an IT staff of 50, but that includes what he described as a short-term increase, because he is still supporting two environments. The migration project will continue into 2007. He put IT spending at about 2.5% of revenue, but that reflects the transition costs and expansion of Oracle-based applications to replace paper-based processes with automated ones. Charles King, an analyst at Pund-IT in Hayward, Calif., wasn't surprised by the difference in approach taken by the two companies. "I think from a customer standpoint, the world is much more made up of shades of gray, and at the end of the day, each customer is a unique case."

Erp hardware news from computerworld

ERP Implementation Success Factors

These principles should work as for large corporation as well as for midsize and even small business. We will not be talking about old-wisdom, which you know from the college classes or business school about management and staff involvement into the decision making, brainstorming, etc. - we'll be ERP specific

· In-house Technical Expertise. Well, complication of computer networking and its security, plus the fact that SQL is now standard for the database platform (Microsoft SQL Server, Oracle, DB2, etc.), plus internet connection line and its support make it inevitable to have IT expertise in the company - this might be the whole department or just coming or part time networking consultant. Our experience indicates that the lack of internal or always available onsite specialist decreases the chances of success dramatically. And the explanation should be simple to this fact. Nowadays ERP software systems requires minor or major customization, integration and reporting and all these steps in turn require patient coding and testing in the test environment or on the sample dataset/database

· Dedicated ERP software administrator. This is true that users could be trained and would know how to use the system. However typical ERP software has its own life and somebody should assign new users, setup security roles for them, modify reports and makes custom reports available for the users, setup printers, try first to resolve the issue by looking at the techknowledge database, and so on. ERP software administrator doesn't have to be IT guru - she/he needs to be trained on how to administer the program and how to deal with technical support. Image for a moment that if you take out manager from the company - even if all the employees have excellent training and used to work for the company numerous years - you will still expect performance degradation. The same should be said about ERP software system

· Expect Certain Number of Issues. IT industry is not yet mature and it is probably sad, but the reality, that even very experienced consultant, developer, programmer makes errors - or your software environment has something that make the custom piece malfunction. When you see the consultant being persistent in resolving your issues - please be patient and try to help him or just don not make him nervous.

· Trust Your Consultant. When you decide on somebody to implement the system, you need from this moment on to trust him and let him have high security access to the ERP software hosting server. Complex security makes consultant suffer from getting connected, installing the patches or custom pieces. So many times we were spinning our wheels in trying to test new custom business logic, when, say Windows or MS SQL Server security was restricting us to do the actions we needed

· Do Not Overnegotiate. This is from the sales cycle. When you purchase the system - you should purchase the software and implementation from the same company - otherwise your partner will place you on the second priority list. We saw numerous examples, when client purchases Microsoft CRM licenses from nation-wide distributor, and then is trying to find somebody to implement the system. Also if you are cutting software prices - you may see your consulting company rescheduling the work for you in favor of somebody else.

CRM ERP?

Industry watchers were unsurprised by SSA Global's acquisition of struggling CRM specialists Epiphany last week, as the deal had been rumored for some time and the company was known to be seeking a buyer.

What's more interesting about the deal, at least to one market expert, is SSA's overall growth strategy, which has been built around a long series of acquisitions over the last several years. Scott Nelson, analyst with Gartner, said that while SSA hasn't yet gone to great lengths to integrate many of the technologies it has purchased, it is becoming what he calls a "CRM source for the masses" that is winning deals with companies that aren't necessarily interested in attaching themselves to the latest trends in enterprise software.

"(SSA) appeals to a type C organization, or people who aren't looking for leading edge technologies or even mainstream products," Nelson said. "These companies just want a solid solution with a (vendor) behind it that that's going to stay in business and back them up and give them some stability."

Over the years, SSA has pieced together the holdings of a number of firms, like Epiphany, that were one time high-flyers in the enterprise space that lost their momentum at some point. The most notable of those is undoubtedly former ERP giant Baan, the assets of which SSA bought from Invensys in 2003.

According to Nelson, who views SSA primarily as a rival to mid-market players such as Lawson, there's a solid opportunity for companies providing the less glamorous applications to customers. However, the analyst believes that the next step for SSA should be taking the many products it has acquired and pulling them more tightly together.

"The challenge is that now they're getting to a point where they'd like to start unifying it a little bit more so that they can cross sell, but it's never easy to combine technologies, and it won't be easy for SSA either," he said.

Information from News.com

Open Source ERP

The goal of ERP isn't simply to provide a unified application interface for every aspect of a company's business process -- it also tries to include the inherent data-mining capabilities that go along with it. But while JD Edwards, Oracle, SAP, and others have invested significant resources in building ERP software that's customizable enough for any business, these companies have also forced the price of the software to heights many businesses just can't afford.

Enter open source.

A large part of ERP's high price tag goes toward the army of business process and programming consultants needed to customize commercial software for individual business operations. Access to open source ERP application code, on the other hand, means you can accomplish this customization in-house, while avoiding hefty software licensing fees to boot.

One of the best-known open source ERP apps comes from Compiere. With an eye toward business analysis, the software incorporates CRM, POS (point of sale), and inventory management modules that offer excellent flexibility for multiple business scenarios. The product integrates with most relational databases using JDBC, and it offers specific support for Oracle and Sybase. Server and client platforms include Linux, Solaris, and Windows, among others. The software is published under the Mozilla public license.

Available under the GNU license, webERP -- another production-grade project -- contains full accounting features, including general ledger, accounts payable, and accounts receivable books, as well as role-based security and a highly customizable Web-based front end. Oriented toward manufacturing-style business processes, it includes support for order entry and inventory management. As opposed to Compiere, it has no modules for customer management, HR, or similar resources. Gold, silver, bronze, and translation support are available from a number of companies around the globe.

Other projects are available, but one characteristic of open source is that different projects define their category's feature sets in different ways. This is especially true of ERP packages. Linux-Kontor, for example, defines ERP without accounting, focusing instead on customer management, order entry, invoicing, and inventory. TUTOS, on the other hand, calls itself ERP but more closely resembles a groupware suite. Clearly, some research is needed to make sure you're really getting what you expect in this category.

Information from Linuxworld

One ERP system can cut finance costs by 23%?

By moving to a single ERP system for finance and at the same time implementing consistent data and technology standards, companies can cut the cost of finance operations by 23 percent, according to Book of Numbers(C) Research from The Hackett Group, a business process advisory firm (NASDAQ:ANSR). But companies that take either of these approaches independently may see little to no savings, or even a slight increase in finance operations costs, Hackett found.
World-class finance organizations rely on both of these approaches, which help them spend 31 percent less than their peers on finance, operate with nearly half the staff, and also complete their financial reporting cycle more quickly each month. In addition, they turn to a wide range of other complexity reduction techniques that help them generate even more cost savings. World-class finance organizations, for example, rely on a single chart of accounts, use half the bank accounts of typical companies, and do fewer budget iterations.
Hackett's new Book of Numbers research volume, "Optimizing a Return on Business Complexity: Performance Metrics and Practices of World-Class Companies", focuses exclusively on the value of complexity reduction. The full research is available only to members of Hackett's Executive Advisory Programs.

The Hackett Group is a world leader in best practice research, benchmarking, and advisory services that empower executives to achieve world-class enterprise performance. Hackett offers analysis and insight backed by metrics derived from 3,300 benchmark studies over 13 years at nearly 2,000 of the world's leading companies, including 93 percent of the Dow Jones Industrials.
Value of Complexity Reduction in Finance
Hackett began its analysis by looking at a range of areas to identify those with the greatest ability to reduce business complexity. The research identified two areas as among the most significant - the number of finance or ERP systems and adherence to data and technology standards, including the use of standard hardware and peripheral software tools for finance and usage of common data definitions. The research showed that individually, reducing complexity in these two areas had little impact on cost. In fact, companies which had not moved to a single common ERP system saw cost of finance rise slightly as they implemented standards. But when companies focused on both together, they saw significant cost reductions. The median cost of finance for companies with common applications and high standards was .99 percent of revenue, 23 percent less than that of companies that did not meet either or both of these criteria, where total cost of finance operations was 1.28 percent of revenue. This amounts to $2.9 million in annual savings for a $1 billion company. Savings were equally distributed between finance labor and technology.
Hackett's research found that world-class companies clearly focus on these two complexity elements. They are 61 percent more likely than their peers to have a single ERP system, and rely on common data definitions 20 percent more often. In addition, they cut costs by another 21 percent, or $2.1 million/billion of annual revenue, over companies that focus on just these two elements, in part through their implementation of complexity reduction in many other areas.
World-class finance organizations rely on a centrally maintained, uniform single chart of accounts 98 percent of the time, while only 82 percent of all typical companies make the same claim, according to Hackett. They use only 14.4 bank accounts per billion dollars of revenue, less than half the number used by typical companies. In this area, Hackett's research showed a clear correlation across the board between a decrease in the number of bank accounts per billion dollars of revenue and decreased treasury management process costs. World-class finance organizations also do an average of only 3 budget iterations, 25 percent fewer than typical companies.

"Reducing complexity and creating a centralized system for finance can be exceptionally challenging. But the potential rewards are significant. This is why world-class finance organizations make it a priority," said The Hackett Group's Finance Practice Leader Mark Krueger.
"To make it happen, companies need to begin by assessing the systems they're using. How many are there? How standardized are they? Are differences being driven by real business need, or by some combination of happenstance and perhaps practices established before parts of the company were joined in a merger? Careful planning and the consideration of options such as outsourcing and shared services are also critical, as is strong support from senior management. Finally, change management is a critical element. To keep people from backsliding, companies may need to go as far as shutting off old systems and processes as soon as the new ones are working," said Mr. Krueger.
The Hackett Group's research into world-class performance is compiled in its Book of Numbers series, which provides senior executives fact-based performance metrics and insights based on Hackett's extensive database of best practices and process metrics in IT, finance, HR, procurement, and other areas. Hackett Book of Numbers volumes are available to members of Hackett's Executive Advisory Programs -- premium-value, membership-based programs providing confidential advisor inquiry, best practices research, and peer learning opportunities.

ERP Information from the Hackett Group