Combine enterprise resource planning (ERP) with business intelligence (BI) and you have the “perfect storm” for improving performance and visibility in information management strategies, according to a new study from Aberdeen Group Inc.

The Boston-based business research firm gathered data from three surveys, including 520 responses to an ERP survey and 470 responses from two BI surveys, to form the August 2009 report, “ER/BI Connection: Adding Value Through Actionable Intelligence.”

“BI deployment as an integrated approach with enterprise applications is something that best-in-class companies are most likely to do than all others,” said David Hatch, vice-president and group director of technology research at Aberdeen Group.

Seventy-nine per cent of best-in-class companies assign cross-functional teams for selection and implementation of ERP and extensions such as BI, said Hatch. Best-in-class companies are also more than twice as likely to provide self-service BI capabilities to stakeholders and users within the organization, he said.

“The challenge companies have had is they want to ask questions about the data they haven’t been able to ask before and ERP systems haven’t provided the sophistication they need to do that,” said Hatch. “BI is the other half of the equation.”

According to Aberdeen’s research, through the use of ERP and BI, best-in-class companies experience 17 per cent reduction in operating costs and 18 per cent reduction in administrative costs; have eliminated or redeployed 12 full-time employee positions; are able to close a month in less than four days; and have driven 66 per cent better improvement in internal scheduling.

“If you’re going to make an investment in ERP, our contention is you ought to think about making an additional, much smaller investment — but potentially as powerful — in BI to draw value from the data you are collecting,” he said.

While the vendor-agnostic study found distinct advantages in applying BI to ERP data, a combined ERP-BI solution from a single vendor isn’t necessarily the answer.

“We are not necessarily seeing the distinct advantage in going with the BI solution of the ERP vendor versus an independent vendor, but I’m not saying there is a downside to taking that approach. It’s different for each company,” said Hatch.

Now’s the time to use BI tools to tap into that rich pool of data sitting unexamined on your ERP systems, says a new report from Aberdeen Group. The prize: Increased visibility into what actually makes your business tick.

Most businesses today have more data than they know how to use. And getting at that data and then presenting it in a useful manner for cogent analysis are two tasks that typically haunt organizations.

This is exactly the place and time for BI tools to step in, write Cindy Jutras and David Hatch, two Aberdeen VPs, in the July report, “The ERP/BI Connection: Adding Value through Actionable Intelligence”

“BI tools have reached a level of maturity which can elevate executives from the depth of the details, bringing them to a higher operating level where they can add strategic value to the organization,” Jutras and Hatch write. “The ability to provide better decision support with integrated enterprise data is an important factor in turning data into actionable intelligence.”

“The synergistic relationship between ERP and BI,” they add, “can indeed be the perfect storm, igniting improved performance and visibility.”

In many respects, companies have been facing a nasty storm when it comes to their standalone (un-integrated) enterprise systems: Many companies are “oversoftwared” right now, and there’s been a substantial backlash and pleas for real-world, usable innovation.

With BI, in particular, surveys have shown that 40 percent of executives still trusted their gut in decision making (as opposed to their BI systems), and many more are frustrated with CIOs and IT for failing to give the business what it needs and deserves with analytic and decision-making tools.

In recent Aberdeen surveys of enterprises with BI and ERP applications, BI has ranked number one (two years running) in terms of the technologies that will have the most impact in the next two to five years. Coming in second in the April 2009 survey was “Enterprise application enhancements / extensions.” According to Jutras and Hatch, that topic “refers to the ongoing improvements that drive extended value from ERP and CRM investments.”

Digging deeper into the data, Jutras and Hatch determined that BI tools were the top “enhancement or extension” that organizations planned to use to integrate systems and tap into data flows. “Think of [BI] as a layer on top of or embedded within ERP and other applications,” they write, “which wind up being giant repositories of data.”

To bring “order to the potential chaos, perhaps the most significant of the extensions to ERP is business intelligence (BI). In the Aberdeen report, the analysts preach an “integration” mindset when it comes to a more perfect ERP and BI union.

“Whether BI tools are currently embedded within your ERP solution, tightly integrated, bolted on after-the-fact or non-existent, don’t treat ERP and BI as separate projects,” Jutras and Hatch write. “Take the approach of using BI as a means to extract enhanced value from data within ERP (as well as other enterprise applications). ERP can transform data into information but BI tools are required to complete the transformation from information to intelligence.”

A good first step: Form cross-functional teams for both ERP and BI projects. “When left entirely to IT, the success of projects is often measured by cost and speed of implementation,” Jutras and Hatch write. “These are important factors but using them as the exclusive measure of success loses sight of the original business goals of the project.”

Hatch and Jutras warn enterprises not to think of BI and ERP as separate initiatives. In fact, ERP and BI projects have similar goals: “The top requirement of a BI deployment … coincides with the need to extract additional value from the relevant business data which is inherent to an ERP implementation. Improving the speed of access to this data is the key to transparency, visibility, and informed decision-making.”

What were the secrets of Best-in-Class companies in achieving their exceptional results? The report notes that to reduce costs and provide transparency through speed of access to business data, best-in-class companies “provide visibility across functions and departments pervasively across the enterprise, standardize business processes, and streamline and accelerate business processes.” Best-in-Class enterprises:

- Provide decision-makers the ability to drill down from summary data to transactions that form the fiscal and operational audit trail; 67 percent of Best-in-Class companies provide drill-down into fiscal and operational audit trails versus just 38% for Laggards
- Offer real-time visibility of all processes from quote to cash
- Use ROI estimates to justify ERP projects; ROI is designed to measure business value and measurement doesn’t stop after they have been achieved.
- Integrate BI with other enterprise applications
- Provide self-service BI capabilities to stakeholders (so users are able to work with BI systems with a minimum of IT help)

“Companies that implement ERP solutions have two basic options when it comes to integrating BI capabilities”, states Hatch. “Our research has found that top performing companies are embedding BI within ERP solutions rather than deploying BI applications as separate implementations that ’sit on top’ of ERP systems.” Additional behaviors contribute to how Best-in-Class enterprises distinguish themselves. For example, they were more likely to standardize implementation of ERP across a potentially distributed enterprise (68 percent versus just 46 percent for Laggards). Best-in-Class companies have learned to maximize their use of ERP by using features familiar to them from their BI systems; they are more likely to use their ERP system to notify users in real time of exceptions occur (53 percent compared to just 33 percent of Average companies).

Based on its study, Aberdeen says its analysis of “Best-in-Class companies shows that a combination of capabilities are necessary to derive the most value from integrating and deploying BI within an ERP environment.”

The behavior of Best-in-Class companies is clearly paying off. Such companies “are achieving 100 percent (or greater) ROI faster than their peers, reaching this milestone on average within the first six months as opposed to timeframes that start at a year and go well beyond two years for Average and Laggard companies.”

The study advises all companies to take “an integrated approach to ERP and BI. Whether BI tools are currently embedded within your ERP solution, tightly integrated, bolted on after-the-fact, or non-existent, don’t treat ERP and BI as separate projects. Take the approach of using BI as a means to extract enhanced value from data within ERP (as well as other enterprise applications).”

Hatch and Jutras point out that “ERP can transform data into information but BI tools are required to complete the transformation from information to intelligence.”

There’s much more work ahead, the authors point out and fully examine in their report, but time is of the essence. “Achieving transparency and visibility is no longer simply a lofty goal,” Jutras and Hatch write, “but a core necessity of the business.”

Source: (http://www.aberdeen.com/launch/report/benchmark/6082-RA-enterprise-business-intelligence-erp.asp /  http://www.aberdeen.com/link/sponsor.asp?spid=30410737&cid=6082).

Posted on October 26th, 2009 by Dhiren Gala
Filed under: Business Intelligence

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