Whatever one's views of ERP systems (Enterprise Resource Planning) it is undeniably a fact that they have made a very made a very deep impression on the corporate landscape for transaction processing. In the early to mid-nineties, multinational organisations welcomed the broad reach of ERP applications and in the run-up to the millennium spent vast sums of money on re-engineering their processes, implementing new systems and establishing shared service centres. Since those heady days, the ERP bubble has burst and private sector organisations are facing the twin challenges of more moderate growth prospects and intense global competition. On the other hand, public sector organisations are equally challenged by government reform and pressure on budgets. In these circumstances business systems need to be nimble and adaptable to change, yet the reality is that many are saddled with high fixed costs, a bloated IT organisation and monolithic ERP system developed for a different era.
In many cases, the huge investment in these nineties ERP projects was justified by the replacement of multiple legacy systems and the benefits that would accrue from a standardised platform for data management, transaction processing and reporting. Fuelled by rampant globalisation and increased government spending around the world, almost every organisation appeared to be implementing, an SAP, Oracle, Baan or PeopleSoft system. In the feeding frenzy that followed, ERP quickly became synonymous with large scale business process engineering, high consultancy fees and lengthy projects.
Whilst many CEO's seized on ERP as an enabler of business transformation, relatively few businesses have undertaken change on this scale post-millennium. So it is only now, in a period of less dramatic change and tighter budgets that the true cost of ERP is being exposed. Organisations that benefited from ERP systems when contemplating massive change, now find themselves less flexibly positioned in the face of incremental change. Where ERP systems were once regarded as technology 'investments' they are increasingly viewed as sunk costs, since every incremental change requires fresh investment.
Unsurprisingly, now that the ERP bubble has burst, many organisations that were once natural candidates for traditional ERP systems have shunned this approach in favour of more agile ERP alternatives. 3i, a world leader in private equity and venture capital, is among them. Darryl Goodwin, Group Financial Systems Controller, told FSN, "Whilst the large scale ERP systems could do everything we required, we would have had to spend too much time configuring and maintaining them. Furthermore, much of that maintenance effort would have required an IT specialist."
With the benefit of hindsight, the decision to invest in an ERP system from Agresso appears to have been a sound move. "Although our core business has not changed fundamentally since our selection of Agresso, we have had to accommodate IFRS which has been something of a moving target. However we successfully anticipated most of the changes and were able to build considerable flexibility into the system. By using the dimensionality and added analysis within the system we have been able to reduce the size of our chart of accounts yet retain flexibility of reporting. Effectively, we have an account code and 7 dimensions to work with, which provide us with huge analytical capability."
One organisation that has taken very substantial business change in its stride using Agresso Business Systems is LogicaCMG the global IT services group. Remarkably, globalisation, a substantial merger, the introduction of IFRS and the growing demands of an expanding products and services organisation have all been satisfied at a local and Group level without any bespoke modifications. Andrew Smith-West, Director of Group Financial Systems, at LogicaCMG told FSN that he puts the success of Agresso down to the flexibility of the software, especially its post-implementation agility which has consistently allowed the group to respond rapidly to both change and growth.
Halcrow, the UK-based infrastructure planning, design and management specialist, is another example of an acquisitive company with big ambitions. It has a turnover in excess of £300 million with 6000 employees based across a global network of 70 offices, supporting projects in over 130 countries. It continues to achieve its growth targets, almost doubling in size in the last three years alone, through its ability to analyse and make strategic decisions based on data in which everyone has confidence, from the chief executive to the local administrators in the overseas offices.
Central to that is Halcrow's core business system, Agresso Business World, which ensures that its global operations have a consistent approach to financial reporting and project accounting, giving an accurate, real-time picture of the business' performance by sector, region or client.
Jim Billinghurst, finance director of Halcrow's water and utilities business group, who led the Agresso implementation project, says: "Introducing Agresso as our core business system was critical in helping us move forward. It's been a major contributor that Agresso is so agile and changes with us so we can structure and run the group in the way we want."
But it is the ability of the system to cope with significant complexity without recourse to bespoke programming that has impressed Goodwin. "We have a number of non-standard requirements, such as the need for capital reserves and revenue reserves. So on revaluation, we need much more analysis around the original transactions so that we can attribute the revaluation journals to the correct reserve account. We achieve this using 'triggers' within Agresso, which on the happening of a specified event, produce transactions automatically in accordance with business rules we have defined in the system. So we have a 'revaluation' event which says that if there is a revaluation movement on one particular account then put an equal and opposite movement in the relevant reserve account. We define the rules ourselves and the system manages the whole thing, without any bespoke programming," he adds.
Agility such as this is also valued by the public sector. Anwen Robinson, director of public sector at Agresso notes the renewed vigour with which the government in the UK is pursuing an agenda of transformational government. "There is much more emphasis on shared services between government departments and this can put strain on traditional ERP providers who have implemented a 'one size fits all' model. When you bring different organisations together to share systems then you need commonality of standard processes but with an ability to support their diverse needs – a collaboration without comprise approach.' she says.
Being able to take change in its stride illustrates the crucial difference between an agile ERP system and its forerunners. Core flexibility in analysis, multidimensionality, work-flow and event management means that all sorts of unexpected changes can be accommodated within the system and implemented without specialist IT knowledge. The knock-on effect is that the systems are malleable, reactive to change and ultimately prolong the useful life of the system. Clive Woodward, Commercial Business Director, Agresso, told FSN, "The great thing about the Agresso solution is its ability to quickly and easily adapt to new and different business scenarios. It is this post implementation agility which gives the customer a long term solution that keeps the cost of ownership low."
It's a view that seems to be supported by Goodwin's experience with the Agresso system. Despite the size and complexity of 3i, Goodwin says that they have never needed to modify the system. "Our policy is that we will use the standard Agresso Business World system and whereas other applications have fallen short of our requirements we have been able to do virtually anything we need within Agresso. We can embed SQL statements within triggers, which one could argue is bespoke, but it is a capability within the standard product. In the main, we have found that if it is not in the package it is because we are trying to do something that is non-standard and we have adapted our processes to fit."
In common with all major systems implementations 3i has discovered issues along the way which with the benefit of hindsight may have been handled differently. Implementing workflow around purchase invoice approval was especially challenging and Goodwin acknowledges that there is still work to be done to achieve the full benefits of the implementation. "Workflow was one of the most visible parts of the implementation for most users and initially we did not fully appreciate the optimum way to configure the software and the approval process. For a time we had too many invoices being escalated to senior directors for approval."
As an international organisation, 3i has to cope with the full gamut of IFRS complexity as well as the intricacies of its own specialised business. "The Group has adopted the policy that it would apply IFRS in any entity where it is allowed, but in certain international countries we are not permitted to apply IFRS," adds Goodwin. "This means that the Group has had to deal with a variety of different charts of accounts, different regulations and local-GAAP standards. It requires lots of manipulation to get, say, the French view and the Group view of the accounts but we manage it within the standard functionality in Agresso in a way that meets both local and group needs" adds Goodwin.
Smith-West has faced similar issues at LogicaCMG, for example, managing the fine balance between global management reporting requirements and local operational needs. He told FSN, "The core system supports consistent reporting around the Group's principle lines of business but local entities can use the 'attributes' within Agresso to tailor reporting to their needs. For example, the French operation needed analysis by geographic region to support applications for government grants in different geographies."
"Every subsidiary within the organisation has its own statutory and local operational requirements. But we have never had to settle for an unsatisfactory compromise. The flexibility of the Agresso solution has always allowed group and local requirements to sit side by side, without undermining the core system," he said.
3i's experience of anticipating and handling change as it occurs has given Goodwin the confidence that the Agresso suite will not only grow in line with developments in the business but also keep the total cost of ownership to a minimum. "It was not the cheapest system when we selected it but over the longer term we considered that it would be a better fit and we would save on configuration and resources to maintain it," he adds.
Jeremy Burroughs, Halcrow's systems accountant, who manages the Agresso system, says, "Agresso does have a low cost of ownership. It's not a capital intensive system, it is well supported and constantly being developed, so there are real business benefits to upgrading and fine tuning it. Time spent doing that is much more cost effective than searching for a new system every couple of years."
Smith-West also values the close relationship with Agresso. He told FSN, that he and his team work closely with Agresso. "I couldn't imagine other organisations working so closely with their ERP providers, particularly around future product development," he said.
For example, Agresso and LogicaCMG have been able to share experiences around high volume timesheet entry and complex international billing between operating units in order to develop the next generation of Agresso's web based offerings. "Agresso has responded very well to our suggestions and in return, we have been piloting the new product," says Smith-West.
In response to their traditional markets maturing, ERP vendors are merging and seeking more fertile territory in the mid-market. Competition in this space is intense and post –implementation agility will be the key differentiator in this price sensitive sector of the economy. ERP systems that are flexible and amenable to change throughout the life of the systems will be preferred over those that are merely configurable on day one. The market itself has changed and traditional ERP may be facing extinction.
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Interview with Chris Ouwinga - CEO UNIT 4 Agresso
Meeting the implementation challenge of IFRS using Agresso Business World
