Enterprise Resource Planning (ERP) isn’t sexy enough. This is how the Register describes a technology that has a long history of being slow, sluggish and complex even though it has modernised and evolved to the point where the capabilities it offers are indispensable. An ERP system integrates and manages core business processes across an organisation in real-time – including finance, HR, manufacturing, supply chain, services, procurement, and analytics – while acting as a single source of truth by collecting, storing, and enabling access to data from all departments. SAP, Oracle, and Microsoft Dynamics dominate the enterprise ERP market, while mid-market players like Sage, IFS, and NetSuite (owned by Oracle) maintain significant market share, with emerging cloud-native providers like Workday increasingly challenging the traditional vendors’ positions.
Modern ERP, says Forrester, means an adaptive, AI-based platform that streamlines product development, processes and experiences. These new, modular ERP solutions are secure, resilient and rich with data and the capabilities of AI. They’re also easier to integrate, manage, update and customise. ERP systems are also being revised by cloud computing, which enables organisations to shift from on-premises solutions to more flexible and scalable Software-as-a-Service models, which improve the organisation’s ability to enjoy real-time collaboration, automated updates, and enhanced mobile accessibility across the enterprise.
The problem is, companies aren’t that keen. They’ve already done their ERP implementation, and the process was daunting and disruptive, taking up to a year to complete – in some cases it can take upwards of two years. It’s also expensive, a fact that hasn’t changed over the years, despite a more modular approach. A study by Software Connect found that the average cost of an ERP integration sits at around 3% of an organisation’s annual sales, which translates to roughly $1 740 per month for a small company, or up to $9 330 for a large enterprise. That’s just the cost of the software. Integration within the business across different systems such as finance or sales adds another 1%, taking the cost of integrating that ERP platform up to 4% of total annual revenue.
Looked at through the South African lens, the cost of an ERP becomes almost prohibitive; many ERP solutions are paid for in dollars. But cost isn’t even the biggest reason why companies aren’t modernising their ERP platforms, despite the benefits it offers.
“It’s disruptive, it’s expensive, it’s high risk, and nobody likes change,” says Grant van der Westhuizen, sales manager, business applications, Braintree. “If the ERP doesn’t work, it can have a major impact on the business to the point where it can cause it to fail. It’s also really hard to quantify the cost upfront – there are often costs that nobody can foresee.”
Clumpy and clumsy
So, if an ERP is expensive to own and disruptive to integrate, why not leave the old system in place? This is certainly what many companies are thinking. Forrester found that only 13% of companies were prioritising finance, 6% HR, and 7% operations. These are businessvcritical functions that can fundamentally change an organisation’s trajectory, which means that this ongoing resistance demonstrates a reluctant acceptance of how ERP can affect customer outcomes.
The problem is, Forrester has also found that legacy ERP investments aren’t giving companies the speed, intelligence and flexibility they need. Clumpy and clumsy, they don’t have what it takes when it comes to agility, results and, even more importantly today, AI. Like it or not, AI is an essential component of success as it adds speed to analytics, processes, automation, and insights. Forrester referenced how Cohere has used NetSuite to scale more effectively and drive its decision-making – the ERP has played a measurable role in defining Cohere’s success story.
A similar narrative sits behind Massmart’s move to comprehensively modernise its ERP infrastructure. “We reimplemented our ERP
completely in 2008 because we recognised that the business had to rejuvenate itself and prioritise the customer value proposition,” says Pieter Schoeman, IT and projects director, Makro South Africa. While he didn’t want to mention the name of its ERP system, he said Makro needed company information accessible to enable rapid decision making.
It did, however, take a while for the system to settle and for the business to start changing behaviours based on the relevant information that was now available. However, by 2010, the company hit a growth spurt that Schoeman believes is down to the successful integration of its ERP.
“We doubled the number of our stores and grew exponentially,” he says. “This formed the basis for our ecommerce journey that started in 2014 – we had a foundation that allowed us to build a stable and capable ecommerce platform. The success of our ERP implementation kickstarted the realisation within the broader Massmart group, and extended into other areas of the organisation. Builders Warehouse went on the same journey and had a very successful implementation; Game followed suit and is experiencing a similar revolution.”
Change management
It’s a success story because the company paid attention to two things that often cause an ERP to fail – leadership and change management. A great example of how ignoring these essential elements can be disastrous is the failed SAP ERP implementation that cost the Spar retail group R1.6 billion in 2023. The cause of this expensive failure was not down to any one particular side or issue – both SAP and the group aired their laundry on the matter – but one contributing factor did stand out: change management. It’s something Makro paid attention to, as Schoeman points out, because people were against the idea at the start. ERP isn’t a destination, he adds, it’s a journey.
The need to revitalise an ailing ERP has never been more under the spotlight than the one running the City of Johannesburg. The SAP system underwent maintenance and is back up and running after a lengthy delay, but the red flag here is that instead of modernising, it was slapping a plaster on an old system.
Bruce Turvey, executive, Change Logic, says change management in the planning phases caters for both business involvement and technology adoption. It should also reduce the disruption to staff. “It ensures people remain part of the process from the start.”
Bolting people on at the end of the technology integration usually ends up with the project collapsing inward or not delivering to expected levels. Gartner’s research points to how 70% of ERP initiatives won’t meet their business goals, and 25% will fail catastrophically. Why? Because ERP isn’t strategic and doesn’t show the users “what’s in it for them”, so there’s a lack of engagement.
Says Jeff Ryan, managing director, AWCape: “There are so many case studies of companies that have gone out of business thanks to an ERP implementation. In South Africa, there’s also the concern that most ERPs aren’t built here and, aside from cost, there’s the perception that they’re black boxes, implemented by professional firms you’re beholden to until eternity.”
This is particularly true for companies that have had their ERP systems customised to their needs. Maintenance costs, upgrades, everything is entrenched within one complex ecosystem. It’s no wonder people don’t want to change. But, there is value when companies get it right.
“Jumbo Cash & Carry had outdated technology and poor decision-making, which made it slow to move forward,” says Schoeman. “When we migrated the company onto the Makro ERP platform, we accelerated its evolution, moving 45 stores in South Africa. Now we have data we can rely on; we can enable strategies and undertake in-depth analyses. This is the key reason we went for an ERP – we have one integrated solution with comprehensive visibility and IT management.”
The question is, how can companies move in the same direction as Massmart and other success stories and avoid the pitfalls that ultimately lead to failure or unexpected costs and delays? Schoeman believes the business needs to adopt a mindset of constant change, taking users on a journey while building expertise within the business. “If you have experts within your organisation, they can achieve results very quickly.”
“What differentiates you from your competitors? Start your ERP planning there.”
Jeff Ryan, AWCape
For Van der Westhuizen, it lies in having complete visibility into exactly what systems will be affected by the ERP – stock, finance, HR, customers – and be aware of how the integration will affect the business and what needs to be done to minimise that impact.
“If anyone tells you implementing an ERP is a painless process, they’re lying,” he says. “It’s like having open heart surgery with no anaesthetic because your business is still running and you’re taking the core out and replacing it with another core. Solving for success means looking at the bigger picture, ensuring it’s interoperable, and getting user acceptance. You want people to use the system the way they should.”
Finally, it’s important to recognise that ERP shouldn’t be a Band-Aid.
It should be a living part of the business capable of interrogating data and improving quality of business processes and decision-making and this means that before you even open the door to a new ERP, you need to know exactly what you need it to do.
“What differentiates you from your competitors?” asks Ryan. “Start your ERP planning there.”
* Article first published on brainstorm.itweb.co.za
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