Revenue and Receivables Management: Myths and Truths About ERP

Six myths about ERP debunked


Enterprise resource planning (ERP) technology has a proven history of delivering value to today's corporations by enabling a centralized information warehouse to be leveraged enterprise-wide. However, ERP has a broad focus, and best-of-breed (BoB) applications have been developed to provide the depth of functionality required by key functional areas, such as accounts receivable. As a result, corporations have long recognized the need for best-of-breed applications to bridge fill the void of ERP's functional limitations.

With ERP's broad focus, it is easy to believe that it can provide a single solution to all of your corporation's challenges. However, it is important to know where the lines of reality and myth collide. There is no doubt that ERP plays a very crucial role in today's enterprise, but as with any technology, naturally there are functional limitations. It is crucial to understand what these limitations are.

MYTH 1: ERP can do everything that best-of-breed products can do.

It is a common belief that an ERP system can provide the same functionality as a BoB solution. However, this is not the case in most organizations because ERPs were designed to work in a simplified, uniform environment. The problem is that a "vanilla" ERP implementation may not be able to address business requirements, but customization for one business application could preclude configuration options for another.

Furthermore, evaluating ERP software on a scorecard basis without considering the real-life application can misrepresent the actual value of the solution as a whole. For example, both ERP and BoB may provide access to a full set of information, but users may need to navigate through multiple layers of screens to gather all the information they would need for a collections call in an ERP system, where a BoB application provides a more streamlined solution.

MYTH 2: I've already purchased the module as a part of a bundle, so there is little or no cost to implement the ERP collections solution.

Many people believe — for good reason — that because they have the license for the accounts receivable (AR) modules that are typically sold as a part of a suite of offerings, there is no barrier to immediately using the modules, since they are provided by the same developer as the ERP. But ERP systems are very complex.

The truth is a module that is designed by the ERP provider is a double-edged sword. Although the module is designed to work with other ERP modules, it is also designed to depend on other modules. This dependency creates implementation complications and increases costs when organizations are forced to implement the dependent modules in order to access the collections module. So, even if you already have a license for a collections module, you may incur additional license, service and support costs for any underlying modules.

Furthermore, according to CIO Magazine, only 35 percent of ERP implementations are on schedule, whereas, according to the Rockford Consulting Group, more than 60 percent of ERP implementations fail.

MYTH 3: ERP is easier and cheaper to support.

To accurately evaluate support costs, the system's total cost of ownership (TCO) must be considered. This includes the cost impact on an organization's internal resources, such as the typically overburdened IT staff, as well as the ongoing maintenance cost above and beyond routine system administration.

Whereas BoB technology is commonly designed to be supported by business users, ERP systems — given its complexities and heavy ancillary dependencies — often require a high level of IT involvement for even basic tasks, thereby driving up support costs. ERP support costs skyrocket if any customization is required.

For example, with an ERP system any changes in strategy, reporting, processes, security or usage requirements must involve IT. Furthermore, because standard reports are limited in ERP implementation, companies are typically forced to employ either custom reports or a third-party reporting package, which further drives custom development. As a result, the ERP system becomes even more difficult to support.

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