In deciding on ERP, EAM systems, time is more important than turf

Today, it’s a rare business executive who doesn’t have at least some IT understanding, and a healthy respect for people who know more than he does.

10/15/2008


Today, it’s a rare business executive who doesn’t have at least some IT understanding, and a healthy respect for people who know more than he does. And IT managers play a full part in decisions on business planning and strategy. They are all part of the same team.

So why is it that the two sides often don’t see eye to eye when it comes to Enterprise Resource Planning and Enterprise Asset Management? For those not involved in the argument, it can sometimes seem like a distinction without a difference.

Everyone accepts that managing human, financial, and physical assets is a high priority for most organizations. ERP systems were originally built around finance, HR, and supply chain modules, but they claim now to have developed enterprise class asset management tools that go in the same ERP toolbox.

From an IT standpoint, that single toolbox is a tempting prospect. There are financial savings to be made, and operational efficiencies to be enjoyed from having all the company’s applications on a single system.

Best-of-breed EAM systems, on the other hand, which have developed out of work management and asset maintenance and management, have extended their range to include the whole range of the organization’s assets, whether those are the human assets of the workforce, the IT equipment that increasingly drives the company’s operational assets, or the mobile assets such as trucks, cars, delivery vans, cranes, or mobile plant that carry the goods and services to the customers.

But the efficiency with which these assets are deployed often makes the difference between a successful company and one which comes second %%MDASSML%% and there are no prizes for second place in business. From a business standpoint, the best-of-breed providers offer not just a single toolbox, but a whole collection of integrated tools.

They all work together, so they offer similar efficiency savings %%MDASSML%% but they have the advantage of each being designed for the individual job that they have to do.

But in the end, the IT specialist will tell you, both best-of-breed and ERP systems claim to do much the same thing. So is there a real choice to be made?

What are the differences?

Increasingly, managers on the business side %%MDASSML%% the ones who actually have to deal with all those assets %%MDASSML%% are pointing to long delays in implementation of ERP systems.

By the time the consultants and the IT staff have worked through the financial, budgetary, inventory, and manufacturing applications that are at the heart of an ERP system, it may be as long as six or seven years before they reach the asset management functionality.

For companies faced with fast-changing technology-enabled assets, time is of the essence. Their systems need to be upgraded to cope with new assets and to offer the improved functionality of the latest versions, or they will quickly start to lag behind the opposition in productivity, efficiency, and profitability. Typically ERP systems have long upgrade cycles %%MDASSML%% again, up to six or seven years in some cases %%MDASSML%% delaying still further the eventual implementation of a fully functional asset management system.

So that’s the first question: can the organization afford to wait? Is the management of its various assets central to its operations, and will the delays cost money, reliability, and safety? Will they compromise profitability? And if the idea of a comprehensive asset and work management system that the ERP vendors describe seems attractive, it has to be genuinely comprehensive.

It has to be integrated with everything that the organization does, with all the IT-enabled assets, and with mobile equipment such as trucks, cranes, or in-the-field handheld devices. For ERP vendors, asset management is a tiny piece of a very large business; for the best-of-breed suppliers, on the other hand, it’s the area of business that they were designed for.

So, it’s another choice to be made. EAM systems have a clear advantage here, particularly when dealing with asset-intensive organizations such as utilities or large manufacturing companies, which have dispersed workforces and assets spread over wide geographical areas. That’s where the best-of-breed supplier comes into his own.

Then, how specifically are the ERP systems targeted on individual firms and industry sectors? Generally, they deal with traditional, largely production assets. Facilities, buildings, or transportation assets can be included in the system, but there is no extended functionality to cope with the management of these different types of asset. If getting the best from your company’s assets is a priority, that question can be crucial.

And some companies have particular requirements %%MDASSML%% in the oil and gas industry, companies typically require ISO standards to be built into their management systems; pharmaceutical and other manufacturers in the life science sector are likely to need the capability to document their activities to comply with strict regulatory auditing and reporting requirements.

For the best-of-breed suppliers focused on servicing a complex and varied market, such differences between various customers are not a problem. With ERP, the customer may be referred to a third party for modifications to the system, or he may even have to design his own customizations. Avoiding delays like that is one of the big attractions of a best-of-breed solution.

An interim proposal…

But if these business advantages are clear across much of the organization, many IT specialists still point to the elegance of the “one toolbox” approach. It’s not taking us back to the old stand-off between IT and non-IT, but it is a source of tension in many companies.

One answer that has been tried is to go ahead with ERP %%MDASSML%% but to cover the time-lag before it can be applied to the management of the company’s assets by installing a best-of-breed solution as well. A best-of-breed implementation can start immediately and typically be carried out much sooner than the ERP’s asset management component. That is, you will be up and running on your asset management years before your ERP gets to it.

Use it for five years or so, while the consultants are gradually working their way through the other applications and getting around to asset management in the ERP system, and then take a look at the option to change over to a full ERP system.

Most business managers, bearing in mind the depth of functionality you will have been enjoying, and the speed, scalability, and flexibility that you will have got used to with your best-of-breed system, say that you won’t want to make the change.

But don’t tell that to the IT department.

Excerpt from the book, “The Business Impact of Enterprise Asset Management,” by IBM Software Group, IBM Corp. For a copy of the book, go to www.eamresourcecenter.com .





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