The choice between the six leading ERP software vendors is largely irrelevant in a company's efforts to drive towards world-class performance in finance, according to new research from The Hackett Group, a business advisory firm and an Answerthink company.
If improving finance performance is the primary goal of a company's ERP implementation efforts, it should not agonize over small differences between the core finance features of the various packages, because all of the leading packages offer fairly similar functionality in this area, Hackett recommends. Instead, companies should pick a package then concentrate on process improvements and configuring to enable best practices in order to ensure significant ROI from their investment.
The Hackett Group, a business advisory firm, is a world leader in best practices research and process benchmarking, helping clients achieve world-class performance through continuous improvement initiatives. The Hackett Group's analysis is backed by research into best practices in use at more than 2,400 client organizations, including 93 percent of the Dow Jones Industrials. To receive Hackett's world-class designation, an organization must score in the top 25 percent of Hackett's database in both efficiency (cost and productivity) and effectiveness (quality and value) output metrics in a given functional area. In this way, Hackett defines "world-class" with empirical data, isolating the characteristics shared by today's world-class organizations in IT, finance, HR, procurement and other areas.
The new research report, which is only available to members of Hackett's Application ROI Business Advisory Service, is based on statistical analysis of Hackett's comprehensive database of finance benchmarks. The research examined companies that implemented one of six leading ERP packages: SAP, PeopleSoft, Oracle, Baan, JD Edwards and Lawson. Key findings include:
· Implementing the Technology Alone is no Guarantee of World-Class Performance - Hackett's research found that there is no direct correlation between the software package chosen and a company's ability to achieve world-class performance in finance, particularly for the three leading package vendors: SAP, PeopleSoft and Oracle. These three packages, taken together, are used at more than 80 percent of all finance organizations in Hackett's database and at over 92 percent of all companies that achieve world-class performance levels in finance. But none of these vendors truly dominate, and all similarly support best practices in finance. In addition, 96 percent of all companies that implement one of these three packages do not achieve world-class performance in finance.
"Many companies delude themselves into believing that ERP packages will solve all their problems and automatically help them cut finance costs and improve effectiveness. This is understandable given the millions of dollars they're spending to implement the software. But the reality is, to a large extent, when it comes to finance the ERP software you choose simply doesn't matter," said Hackett IT Practice Leader Beth Hayes. "There are certainly other areas where the ERP packages do differ significantly. But if companies are focused on getting to world-class in finance, they need to improve how they do things, not simply change the tools they use to get things done."
· Recipe for World Class - Focus on Best Practices - Since ERP package selection does not correlate with world-class finance performance, what does? Hackett's research found that companies seeking to become world-class in finance must incorporate best practice processes, organization design and enabling technology. Hackett's research stressed the importance of making process, organization, and policy changes, and proactively configuring ERP to support best practices in finance as part of any implementation effort. This is a key element in maximizing the return on investment from a company's ERP investment.
To illustrate this point, Hackett looked at six organizational and process areas in the purchase-to-pay area of finance, and found clear correlation between companies that relied on proven best practices and the attainment of world-class performance. Some of the purchase-to-pay best practices analyzed included centralization of payables processing, end-to-end process ownership, and minimization of low-value tasks.
Hackett Recommendations: Fix Problems, Pick Software Quickly, Integrate - Companies can reap benefits from Hackett's analysis even if they have already implemented in ERP solution for finance by taking a range of actions. Hackett recommends that companies address processes and organizational structure before investing additional time and money in application upgrades or other technology. If companies are selecting an ERP vendor, Hackett recommends that they simply "pick and move" and not waste time over small differences in core finance features and functionality unless they are of critical importance to the company's business. Finally, Hackett recommends that companies focus on creating an environment that facilitates easy integration of incremental applications, as this capability is quickly becoming a differentiating criterion.
"Companies can reap tremendous benefits by taking an ERP implementation approach driven by best practices," said Hackett Chief Research Officer Richard T. Roth. "By avoiding common pitfalls, companies can put systems in place more quickly, get significantly higher ROI, and most importantly, dramatically improve the ability of their finance organization to provide strategic insight that supports their business goals."
More information on The Hackett Group's Application ROI Business Advisory Service is available: by phone at (404) 682-2323; by e-mail at firstname.lastname@example.org
or on the Web at www.thehackettgroup.com.
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