opinions and evidence. The Trouble With Enterprise Software.

I had a great two weeks away from all things online, so I’m jumping into this debate rather late.

Part of my sporadic academic work of late has involved re-reading quite a lot of impenetrable stuff about the limits of empirical research in social sciences. Karl Popper etc. Do not fear, I will not attempt to force them on you here. In fact, I’m going to ask for the opposite here right now, I want a big solid pasta plate full of empirical research.

The blogosphere is full of folks dashing off opinions. Some are very erudite, others not. 99% of the blogs I read are  opinions. That’s cool, there is nothing wrong with an opinion. I have a whole archive of them here on this very blog. It is just that an opinion, is well, just an opinion.

Cynthia Rettig recently published a short piece in the SMR called The Trouble with Enterprise Software  Part of the piece is a rehash of ERP is complex, and therefore doomed argument. It is like the stuff Bobby Cameron did about SAP in the mid 1990s. The article also  links to research about how CEO’s view CIOs. (similar results to how they view other C-level execs, I thought), and some commentary on large system complexity.  It was strung together neatly enough, but it wasn’t based on any real research, at least in a recent enterprise software context.

The article’s core argument,

At present, however, corporations see in software’s seductive invisibility and seemingly open-ended flexibility a never-ending frontier of promise, where hope triumphs over reality and the search for the next new thing trumps addressing difficult existing problems.

Is tantamount to calling corporations stupid.  Very few are, either that or us vendors have a conspiracy going that would defeat even Jason Bourne.

Some of my fellow enterprise software bloggers jumped to praise and expand on the article   ERP is in a mess, and a donkey so they say.

Sensibly, Andrew McAfee points to some peer reviewed empirical research to counter this doomsday view of enterprise software.

The sober and understated language of this paper’s abstract contains a vital insight for people who question the overall value delivered to companies by their information technologies: if IT were not delivering value, rational decision makers would not keep investing in it. Rettig’s argument falls into a long line of pessimistic writing about the value of corporate IT. Much of this writing takes the implicit, and at times explicit, view that the executives who make technology decisions are dupes, perennially falling for a “triumphant vision” of software. These executives are presumably swayed by vendors’ sales pitches and the consistent message from IT’s ‘helper industries’—an ecosystem of analysts, journalists, consultants, and (yes) academics—that everything’s different now, so investments must be made.

10 months ago I read this paper Scale without Mass:Business Process Replication and Industry Dynamics  (I’ve blogged about it a number of times.and sadly I even brushed up on some statistics to understand the methodology) 

I wonder why the much enterprise blogosphere has largely ignored one of the most significant empirical research projects on the link between IT and Productivity, yet hypes up a neat little polemic that offers nothing new?  Perhaps because the empirical evidence jarrs with those dearly held opinions?  After all, where is the techmeme spike for the post “SAP and Oracle worked fine in 10,000’s of business again today”? 

Over on the Enterprise Irregulars board Dennis Howlett dissed McAfee’s post . Dennis said…

This from Andrew McAfee: struck me as being incredibly simplistic and avoiding the reality that’s out
there.

Odd that. I’m out ‘there’, and McAfee’s post describes exactly the ‘reality’ of much of my day job. The other week I was talking to a bank that is merging  yet another take over and a huge utility dealing with deregulation. I spent most of a day recently with a very large chemical company that had gone from 47 core HR systems to one.  The chap who normally sits opposite me is closely involved with a  project at the largest food company in the world.  Next week I’m at a leading high tech company helping work out what bits to run on the ERP, and what bits to run on niche applications, building a joint roadmap to reduce integration complexity. No, it is not all triumphant vision, but this stuff works. What all these companies have in common is that they are simplifying their businesses with an ERP system.  The core ERP business is healthier than I’ve seen it since the late 1990’s.

If you ask P&G about how they absorb takeovers, their ERP system is a big part of this success.

“Staying the same will not work. The supply chain can hold your business model back, or propel you ahead,” says P&G CEO AG Lafley. “SAP allows us to get more in tune with the dynamics of the supply chain, with our consumers and with our customers.”

Or what the Nestle CEO says about the globe project, linking it to Nestle’s impressive business results.

…we’re fully benefiting from Globe, which now covers about 90 per cent of sales. That allows much better management of working capital and trade spend.

…”He puts Globe paramount among his enablers. “Globe allows us to have a much tighter management. A much greater level of transparency. Not only is the system now covering virtually all our businesses, we’re updating some of the earliest applications.”

But then, I’m just swopping anecdote for anecdote.

  Digging a bit deeper, I read Hackett studies that say

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 Hackett’s Book of Numbers™ Research. 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.

And further

Hackett’s research found that world-class Fortune 500 companies run these functions at lower operational costs of $134 million/year ($7.1 million/billion of revenue) compared to typical companies, and process automation and IT enablement play a very significant role in realizing these lower non-IT back-office costs. In addition to this efficiency impact of IT, a direct correlation was found between performance of the IT function and effectiveness in finance, procurement, and HR

This stuff works.

Much of this blog is a rant against complexity, and if I look around here at SAP, I’d say fighting complexity is our biggest competitor. Sure we have much to learn about simplification, and we must get significantly better at reducing and managing complexity. But if there is one thing that I loathe more than unnecessary complexity it is the oversimplisitic. ERP is complex, so is the Belgian tax code. Many of those that damn SAP and Oracle for its complexity seem to suspend business reality when discussing the next great start up that will blow us away.

I’ll restate my rumplestilkin test.

Lock your new paradigm busting vendor in a room and only let them out when they have a compliant Polish payroll.

That sounds trite but most of what ERP applications do is complex ugly stuff. Companies do this stuff, not because they want to, but because a lawmaker, auditor, union or some regulatory authority demands it.  I’ve argued before that putty and lego are not good metaphors for the software that helps run your business. If you can sprinkle some magic ceteris paribus dust on business, and create a neat guns or butter world, then enterprise software would be simple. Actually, you could do it on a napkin. But tell that to the folks who thought up the Norwegian (or was it Finnish) business travel per diem rules. (especially the ones about mileage rates for reindeer sled travel)

So  keep the comments about ERP salespeople and Porsches rolling.  But where is the big stonking empirically solid research that shows me that ERP is dying or that it doesn’t work?

 As much as I hate to quote a competitor success story, herewith a small sprinkling of irony… Andrew’s Ducati wouldn’t be on the road today if it wasnt for enterprise software. 

I’ll finish this long opinion piece by quoting a bit more Andrew McAfee.

I agree that it’s important not to naively accept anyone’s triumphant vision of corporate IT. But it’s also important not to make claims in the other direction that are too sweeping. Perhaps most fundamentally, it’s critical at some point to stop floating hypotheses about IT’s impact (or lack thereof), and to start testing them. We have enough history and enough data to permit more excellent studies like the one conducted by Aral, Brynjolffson, and Wu. Designing and executing resarch that is both rigorous and relevant is difficult, at times dismayingly so, but as these three show it’s well worth the effort.

 Bring on the empiricists.

24 thoughts on “opinions and evidence. The Trouble With Enterprise Software.

  1. Thomas,

    Many thanks for this – I’ve seen posts on this via other feeds, but never really delved into them (family, garden, weather(?), holidays… lots of good reasons!).

    One of the comments on McAfee’s site sum it up nicely: Take control over your ERP implementation and it will be a success. Another key aspect, I think, is: don’t put all your ERP eggs in one vendor’s basket.

    By the way, make sure you continue doing these podcasts with Craig. Blogging with a community person and coder will keep things real for you (and prevent you from going becoming too ivory towerish🙂.

    M

  2. Very interesting and provocative. There is, as I am sure you know, a wealth of research on “information systems” as a dimension of “organisational structure”, and then looking for causality on “IS” on ability / inability to respond to environmental uncertainty. From a measurement or outcomes point of view, it is often difficult to separate out other strategic factors such as “market dominance”, “management team factors”, etc. etc. I really do hope that people point to the actual research from this point on if this conversation on your blog takes off.

  3. every one of the companys you reference and most that SAP has ads around are in the mfg space. My response to the good professor was that ERP’s footprint has been small in most other industries – elss than 25% enterprise coverage. His premise was we have shut down legacy systems and the Ducati engine, while internally complex, insualtes businesses from that complexity. My analogy then is in the ERP Ducati, 2 cylinders hum along nicely, the others are still housed in older engines. And as such the cost per inch of coverage is very high, and the sputtering pretty noisy…

  4. Excellent response Thomas – glad to see the break has put a “Tiger in your tank” as Esso used to say. (Sorry couldn’t avoid that one.)

    For balance – the piece I put out at ZDN drew attention to the anomalies contained in the research – which Andrew admits is difficult.

    The problem for us as observers rather than participants is that we see a lot of the downside and very little of the upside. This is an issue I hope to address in the not too distant future.

    The upside we do see tends to be spun to within an inch of the gates of Nirvana and I know from being on real reference calls that sometimes recorded fact is fantasy. It is therefore hardly surprising that some of us call it.

    To the issue of complexity – Henning said to me and others that what keeps him up at night is the concern his $billion project will break. When I read Hasso’s 429 page lecture, much of what I see is complexity. You are right to be wrestling with it. Your company has been complicit in creating it. It’s your company’s responsibility to fix it. IMO.

    I wish you success because in truth, no-one wants to see these implementations fall apart.

  5. My, my Thomas – a fortnight of rest yields this? I’m humbled yet exonerated. To Dennis’ point, it’s true that sometimes the PR around ERP implementation success makes those who were present during the gestation and birth roll their eyes. But I too have slogged through retiring 37 HRMS instances and integrating point solutions where necessary, and nobody was there to cheer us at the finish line – because it isn’t glamorous and it isn’t easy and it often has further to go. And it *is* complex. So is a piano, but it can do much more than a kazoo, musically.

    It seems to me that we’re still in our infancy with regard to finding the right types of interfaces that allows us to interact without being exposed to unnecessary complexity.

    Cheers,
    systematic

  6. Hogwash, Dennis…building new towns and large dams is also complex, and the Chinese are showing the world how to do it in months, not years. Damn good program management, economies of scale and repetition and aggressive goal setting. Across the world, there is a revolution going on – far more efficient airlines, $ 2 wines, etc are showing how to take fat out of supply chains.

    And after 100K (at least) ERP projects, our industry still whines about complexity. By now we should have specialists who can convert any data from any source to SAP in days. Who should come with a bank of test scripts which can be customized in days. Or even better, 80% automation of testing (various testing is often 50% of impl project effort)

    Here’s a revolutionary idea. SAP should set up an exception group which is called in to review every implementation project plan over 90 days. The first year there will be a lot of bitching and moaning, but by year 3, 90% of projects will meet that standard.

    Will it happen? Fat chance. SAP and its partners pride themselves on complexity. Till that changes, any attempts to remove complexity from the core product is lipstick on a ….

  7. Vinnie, I have never met a business leader/owner who does not think that their business is unique in some way – and expect the ERP to reflect that. Thats why ERP implementations can get so complex.

  8. Hey Vinnie – was that ‘hogwash’ aimed at me? I hope not! And I’ve watched the French literally roll a 6 lane highway out over months.

    Simon – the ‘unique’ has its gestation in the notion that 80% would be enough and we’ll build the rest as custom because that secured the deal and ensured the consultants had a play where they could endorse the product. It’s an incestuous world.

    Here’s another example 2x Siebel implementations going along side by side in the same place. 2 x different consultants. No communication. Guess what – the apps couldn’t talk to each other either. Result – $2 million cost Siebel had to bear. Accenture kicked off the job. Management fall out. Truth? Everyone’s complicit. No-one’s taking responsibility.

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