ERP Systems

June 21, 2018

ERP Systems

ERP stands for Enterprise Resource Planning. Think of all the individual functions that are required to run a company, regardless of size or industry: Finance, Human Resources, Supply Chain, Procurement, Customer Relationship Management to name but a few.

At its most simple level, an ERP system seeks to integrate and automate such business processes into one single system, resulting in greater transparency and higher efficiency.

The business case for adopting such a system is compelling. According to IDC, companies lose 20%-30% in revenue every year due to business process inefficiencies.

At its peak, SAP was selling 60-70 new US ERP installations per month in the late 1990s. Since the 1990s, oil and gas companies have invested heavily in implementing ERP systems, in response to cost and productivity pressures within the industry.

ERP systems promised to eradicate the need for incompatible bespoke solutions, unreliable reporting, expensive mainframe systems, multiple databases and Excel spreadsheets. Consequently, almost all oil and gas companies now rely on an ERP system to manage their business processes.

The global oil and gas industry has fundamentally changed since the 1990s; dramatic oil price fluctuations, increased complexity, tighter regulations and significant merger & acquisition (M&A) activity. These challenges have resulted in companies being forced to react, consequently operating heavily modified ERP systems that are onerous and costly to maintain.

M&A activity means some companies may have multiple ERP solutions in parallel, with multiple different business processes to achieve the same end goal. In response, workaround integration solutions, more often than not Excel spreadsheets, are implemented to try to keep data synchronised and business processes aligned.

There’s a sense of ERP fatigue in the industry. What once promised to simplify business processes and increase productivity has instead rendered many companies with cumbersome systems that are bypassed by employees and cost inordinate amounts of money to keep running for little reward.

“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
—Steve Jobs

The industry challenges in the 1990s that prompted the advent of ERP systems have not fundamentally changed. What has changed is the landscape in which we operate today: the digital world. The last decade has seen the emergence of new technologies such as mobile, social, and cloud. ERP systems were designed in the era of the desktop.

Today’s workforce is increasingly mobile and connected, with nimble smart devices and tablets. ERP systems were designed such that the customer would host associated machine rooms, networks, back up files internally. Cloud computing is now widely used and accepted, reducing the need for expensive hardware.

The move of ERP systems to the cloud has accelerated the pace of innovation, with software releases coming out every 6 to 9 months instead of 18 to 24 months.

Whilst there remains a demand for ERP systems to keep pace with technological advances, there is also an overwhelming push for simplicity to encourage users to use such systems to their full capacity. Traditional ERP providers have not kept up with customer demands.

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