Integrating ERP and Business Intelligence

This is a transcipt of a Webinar hosted by InetSoft. The speaker is Mark Flaherty, CMO at InetSoft on the topic of "The Value of Integrating ERP and Business Intelligence".

Mark Flaherty: In the last few years we have seen Oracle acquire Hyperion and SELinux and IBM acquire Cognos and SAP acquire Business Objects and Outlooksoft. Clearly those firms think there is value in the integration. I would like to talk a little bit about the benefits to be gained by better linking ERP and Business Intelligence, and why ERP vendors are acquiring the BI vendors the value in such integration.

Let’s start off right away with Oracle and SAP: the two largest ERP vendors. They realized that BI solutions can help companies unlock the value of the data within ERP systems. ERP’s value has traditionally been in the standardization of business processes and providing a transaction audit trail and helping companies comply with regulatory requirements. ERP was considered necessary infrastructure. BI, Business intelligence or reporting and analytics can integrate, manipulate and present sets of data contained within these systems.

So the value that these companies are seeing is the same value that their customers are seeing and it's really the customers - the ERP customers - that were driving this. They were investing in BI all along and these companies certainly saw the opportunity to have that investment be part of their solution set. So in the past the ERP and BI were often viewed as separate initiatives, now they are really being seen as mutually required as evidenced by what the big software company mergers have shown us.

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The impact of integrating ERP and BI can be felt in many ways. Companies that have integrated BI and ERP together are seeing a 67% decrease in administrative costs and improvement in on-time shipment, so lots of the tactical areas of the business are improving. Best in class performers are those that perform in the top 20% of all survey respondents that we measure are seeing an improved ease of use as the functional users can perform self-service data analysis. So in the days when BI and ERP were separate there was a report request made and IT had to get involved and then you were told it will take two hours or two days or two weeks and then it came back. Now there is a lot more self-service through the automation of access into the data and manipulation of it that BI offers.

As an example, I know a large labor intensive business with over 22,000 employees. The windows for decision making at this company were shrinking and the data for that decision making was in their ERP system. So they looked for a BI solution that could give them detailed analysis of headcount turnover and other important human capital metrics faster than they were able to get before. They considered implementing an internet-based BI tool but decided that wasn’t the best fit so they implemented an in-house solution that allows more flexibility. And they have their first set of dashboards up and running and the HR group can now see the resource allocation across the organization. And they integrated customer demand with their HR planning and they are now making decisions based on factual data, not just gut level and they are moving towards reaching a return on this investment in just 18 months.

We have a similar story with a client that has combined an ERP with their BI processes by evaluating accounts receivable and their credit that they allow to their customers. And one of the things that they looked at was wanting to know their credit limit or how to establish their credit limit, looking at the credit history and also outstanding receivables for that client and then combine that into what has been the trend of the customer behavior over the last six months, 12 months, and things of that nature. And so one of the things that this company did was they pulled together that information into an ERP module also combining it with how they evaluate and look at their customer hierarchy and then also the BI component looking at the trend of customer behavior. And the most interesting part of that story is that the customer didn’t look at, the client didn’t look at this as three separate projects but they actually looked at this as one project that combined elements of ERP master data and BI.

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We are seeing the top performing companies are setting up what's called a center of excellence around Business Intelligence that allows the whole company to benefit from the lessons learned. The best in class (again, the top 20% of performers) are four and a half times more likely to have a center of excellence ,so the investment is justified, especially if you have acquired other companies recently because the BI center of excellence can help drive consistent business roles within the company. The second thing to think about is to make sure you have the technical capability to understand summary data and be able to drill down to detail level data to exceptions to keep decision makers out of the weeds until necessary and to have that data available real time when needed.

One of the technology approaches to take and to kind of raise this to higher level is the requirement that companies should have a Master Data Management (MDM) capability. And that really is defined as the ability to look at all of the data sets across an organization and standardize on them. So without an MDM strategy it's hard to get a good grip on things like product names and customer identifiers. This often leads to erroneous data and decisions. The fourth step is to develop a mechanism for notifying decision makers about exceptions so automated alerts. If you built in BI with your ERP implementation an alert should go to a product manager when an inventory goes below a threshold for example. All of these steps on their own may seem pretty direct and obvious. Together they are very difficult and this is an area where company should consider seeking some outside help from organizations or consulting firms with such expertise.