Enterprise Resource Planning (ERP)
THE ACADEMY OF BUSINESS STRATEGY
BUSINESS INTERNATIONALIZATION BLOG
Enterprise Resource Planning (ERP) as an enabling factor in internationalisation
AUTHOR
Luis da Silva (CBS) MA BSc BA
Many of us can recall the days of complex and time-consuming systems development. Anything from stock control, to maintenance, to notice deposit solutions, to sales management, well, in fact, any and every function within a business that needed to be designed, developed, tested and implemented in a bespoke or individualised way, was reflected in thousands of lines of code. The advent of the integrated system put paid to the need for man-months of programming activity (and in the process to very lucrative consulting development engagements).
Since the nineties, when integrated systems truly came into their own, the use of coding and programming work to develop central functions within computer-based solutions has significantly diminished. Through phases that saw programming relegated firstly to interface development, then to adaptation for industry-specific solutions, and then to support for outsourced solutions, the integrated business system, or enterprise application, emerged on a global basis as the substitute for systems development. As a result, rather than create an individualised solution for every company, often very similar to another in the same (or different) sector, companies began to implement packaged applications that contained a core set of functionality which, broadly speaking, could be equally applied to a number of market sectors and to many companies within each. As a result, companies across the globe could access the same set of electronic processes and procedures to which their counterparts in other countries might up until that moment have had exclusive access, primarily by accessing skilled computer developers. It also meant that the same business could now quickly implement the same procedures and processes simply by toggling a language switch on a programme interface (clearly implementing an ERP is not a simple nor problem-free process, as I can bear witness to after more than a decade of running programmes as a consultant with Andersen Consulting (now Accenture), Plaut, Emeritis and other firms. However, across multiple industries and on different continents and involving businesses with multiple sites, it’s definitely more efficient than developing every single business function through millions of lines of code.
As the model and its market penetration entered the phase of consolidation, the industry settled on the term Enterprise Resource Planning to describe a set of broad-based functions, covering almost all aspects of any business’s activities. In this sector, a clear leader emerged. The German powerhouse SAP was then, as it is now, the leader in providing integrated solutions for international businesses. While SAP, and indeed the ERP market as a whole, has over the intervening decades evolved to occupy the SME market, and provided vertical-market solutions which deal with the specificities of everything from pharmaceutical research to oil & gas exploration, and from hotel management to wine production, the main benefit that this sort of solution has achieved is the standardisation across sectors (and complementarily albeit contradictorily, the ability to also address specificity by sector).
Importantly, the development and improvement of these solutions has meant that very similar answers can be applied to different businesses in the same sector, in a similar way. While some companies have argued that this homogeneity eliminates the possibility of differentiation, I would argue that precisely the opposite occurs. For most businesses, technology is an enabling platform on top of which the business’s core offerings can be delivered. If there is no differentiation after the technology has been implemented, then clearly the business is not in the right sector or it simply does not have a sufficiently unique or competitive offering to survive. However, for those businesses that capitulate on technology as an enabling mechanism for their processes, it is an excellent way of quickly delivering the underlying infrastructure and basic business processes without the need to expend excessive amounts of time and energy on those aspects. When a business grows internationally, it is important in operationally and psychologically, for the senior executives involved to know that the administrative tasks of implementing a business in a new country can be done quickly and with consistency.
This ability will have an immediate impact in a few key areas:
• Any team members in the new region will be able to more quickly assimilate the company’s standard procedures and, to an extent, any corporate ethos that can be conveyed via the written word (or even the spoken word if senior executives’ presentations are loaded onto an intranet, for example);
• Preparatory work such as the creation of account structures, sales and purchasing procedures, and contracts including translated versions, can be completed in advance of any physical expansion or the commencement of the hiring of the local team;
• Any (corporate) cultural or procedural homogeneity can be assured;
• Consolidation of financial and management reporting information is much easier from an early stage of the new business;
• Help is likely to be more readily available;
It is likely that skills exist within the organisation (or via a partner who has accompanied the implementation of the ERP system) to ensure that the new region is seamlessly integrated into a global network of offices. Further, if the choice of ERP is made in favour of one which is globally recognised as a market leader, such as SAP or Peoplesoft, then the likelihood of a choice of support resources from a global pool is more likely.
With the ERP system and its associated procedures providing a solid foundation for any new international presence, this will allow senior executive to concentrate on the core tasks of business expansion. It also means that any expert advice which the business may seek as it expands into a new region, can focus on support for the business’s executives and/or help with the development of the people and client related aspects of doing business, rather than expending valuable effort on support for administrative or bureaucratic processes.
ERP has transitioned over the last decade and a half from an emerging technology to an essential component of any business serious about simplifying and improving the way it does business. If a business is international or has aspirations to be, the selection and implementation of a suitable ERP system is almost fundamental to ensuring that the business is not at a disadvantage when it moves beyond its home market.
ABOUT THE AUTHOR
Luis da Silva (CBS) MA BSc BA is an approved Certified Business Specialist (CBS) with the Academy of Business Strategy and his specialist subject is business internationalization. He has achieved an MA, and BA from UNISA and a BSc from the University of the Witwatersrand. He has been employed as a CEO and board member of a listed company with a turnover of €250 million and value of €1 billion and has experience within the Manufacturing, Electronics, Banking, Agribusiness, Travel/Airlines and real estate industries. His clients or employers have included Fractional Villas Inc, Invest CV Limited, BGR Ltd, API Undercliffe Ltd, DMS Lda, Emeritis, Quillion Ltd, Datanomic Ltd, E-business Partners, PLAUT and Andersen Consulting. He has geographical working experience in the USA, UK and Brazil. His language skills include English, Spanish and Portuguese. His service skills incorporate business management, business expansion or turnaround and people management. To contact Luis da Silva, please contact the Academy of Business Strategy by forwarding an email.
