Stay on the ERP Treadmill!

  • By Joseph C. Panettieri
  • 07/01/07

Enterprise resource planning systems are not easy to evolve, but regular upgrades will pay big dividends.

Stay on the ERP Treadmill

In some ways, success with enterprise resource planning (ERP) is like staying fit: You’ve got to remain on an upgrade treadmill in order to keep your university humming along. Skeptical? Talk to William Merck, VP of administration and finance at the University of Central Florida. During the 1990s, the state of Florida decided to decentralize operations, giving each university autonomy and more individual responsibility. “All of us had to have our own accounting solutions within a two-year time frame,” recalls Merck.

That was no small task. Today, through the effective implementation and management of ERP software, UCF carefully manages its $927 million operational budget, which serves nearly 50,000 students and more than 7,000 full-time-equivalent (FTE) employees. But back then, “Our legacy systems were held together with rubber bands and chewing gum,” quips Merck.

All that began to change in 1999, when the university deployed a new student admissions system from PeopleSoft (now owned by Oracle). Next up, UCF deployed a modern student financials system from the same vendor. But, importantly, the process did not stop there: UCF has continued regular PeopleSoft upgrades over the last few years. According to Rebecca Vilsack, UCF’s associate controller, the system has now evolved to a point where it has streamlined requisition and purchase order processes, enhanced purchasing card and vendor tracking information, increased reporting capabilities, eliminated unnecessary paper trails, and minimized redundant procedures.

Stop Playing Catch-Up

Unfortunately, many universities haven’t regarded their initial ERP deployment as only the first stage in an evolutionary process. In any number of cases, universities deploy new ERP systems every seven to 12 years, but don’t install incremental upgrades during the in-between years, notes Ed Golod, president of Revenue Accelerators, technology consultants. “It’s a case of being penny-wise and pound-foolish,” says Golod. “Universities try to save a bit on software each year by avoiding upgrades, but they wind up paying big lump sums for massive integration projects when they discover they haven’t kept pace with technology.” Case in point: Many universities continue to depend on antiquated client-server or mainframe-based applications that lack modern features such as web access or support for smart phones.

In stark contrast, however, UCF’s modern ERP system allows individual departments and employees to create online reports, thus freeing IT staff to focus on other activities. UCF also integrated its financial and supply chain management systems with PeopleSoft Enterprise applications for human capital management and campus solutions, further enhancing efficiency and improving constituent service, asserts Vilsack.

4 SECRETS TO HOSTED ERP SUCCESS

Rely on these four smart ways to cost-justify an outsourcing/hosted ERP strategy:

  1. Ongoing cost reductions. Hosted services often eliminate licensing and maintenance fees for relational databases, system software, and reporting software. They also can eliminate server hardware maintenance fees and training fees, while reducing support staff head count.
  2. Cost avoidance. Hosted software eliminates the need for such line-item costs as upgrades to existing server platforms (web, application, and database servers) to accommodate the increased capacity demands of a new ERP system. The hosted setup also can eliminate spending to implement ERP failover and disaster recovery capabilities, since the hosting provider should offer such services.
  3. Opportunity creation. Internal IT resources currently assigned maintenance and support can now be redirected toward IT innovation.
  4. Other benefits and intangibles. Existing service levels should without having to add additional resource expenditures.

“Becky [Vilsack] and her team have done a good job of keeping UCF current,” says Merck. “If you get behind in this game, catching up is extremely difficult. If you get behind on release versions, for instance, it snowballs. She hasn’t allowed us to get to that point.”

Still, many universities lack the inhouse expertise or deep pockets required for regular ERP upgrades (which can require six- and seven-figure investments). But the good news is that while the ERP software market has consolidated within recent years, numerous options remain for schools facing any number of challenges. They typically include:

  • Large enterprise options such as Oracle, SAP AG, SunGard, Datatel, and dozens more.
  • Hosted options that allow universities to pay a monthly fee to access programs via web browser.
  • Open source options that allow universities to license base platforms and then buy or build enhancements on their own.

Regardless of which path you choose, the path to ERP success is littered with potholes, warn the experts, and approaching the process in Pollyanna fashion is always counterproductive. In point of fact, the typical ERP project, across both nonprofit and corporate sectors, costs 43 percent more than expected, and expends 82 percent more time than anticipated, according to The Standish Group International, a Boston-based IT research firm. Even worse, most ERP projects end up delivering only half of the functionality anticipated by the customer, these analysts estimate. But these statistics do not solely reflect what ERP vendors deliver to their customers; they also reflect how ERP customers evolve their own investments in the systems.

With hosted ERP, universities pay a monthly service fee to access and use online software, moving expenses from the capital budget to the operational budget, often improving cash flow and generating predictable costs for software.

It Starts at the Top

Fortunately, there are proven approaches for succeeding with ERP, whether an institution embraces a licensed software model, hosted model, or open source. Successful approaches start with executive leadership and sponsorship, require at least one in-house ERP guru, and demand careful consideration of new and emerging ERP software models.

In UCF’s case, President John Hitt and the board of trustees have been vocal supporters of “network-centric” software that empowers faculty, staff, and students. Moreover, university leadership hasn’t allowed the occasional short-term bump to distract the university from its long-term technology and academic goals.

One case in point: In 2002, UCF VP for Student Affairs Tom Huddleston conceded that glitches in PeopleSoft apps delayed financial aid to some students for about two weeks. The university provided short-term loans to tide over the impacted students until the financial aid could be allocated, Huddleston stated in a report given to the board that year.

Still, it’s important to keep that minor blip in perspective. Many prominent companies—including Hershey, Nike, and Symantec—have suffered major ERP setbacks that impacted sales and revenue. “We’ve all read the stories about early ERP pioneers having problems,” says UCF’s Merck. “Fortunately, we haven’t experienced any horror stories here because of our leadership and management experience.”

Indeed, UCF has attracted a deep bench of ERP experts to the university. In 2002, the university hired Vilsack in a bid to build out its ERP expertise. Vilsack, a veteran of ERP deployments in large businesses, brought strong credentials to the university. She is well-known throughout the financial software industry and even influences the strategic direction of Oracle’s applications. In fact, Vilsack is now a member of Oracle’s Customer Advisory Board (CAB) for the company’s Applications Unlimited initiative. The CAB helps to form recommendations to Oracle on future software development direction for current applications.

Models to Explore

While UCF deploys its ERP applications in-house, that isn’t an option for many universities. For those schools lacking in-house ERP expertise or deep pockets, a hosted option could be a far smarter approach.

In the hosted application world, universities pay a monthly service fee to access and use online software—much in the way that universities pay for electrical, cable, or internet service. This approach moves ERP expenses from the capital budget to the operational budget, often improving cash flow and generating predictable costs for software. Moreover, a hosted approach can help a university accelerate an ERP project because the entire deployment occurs in a third-party data center especially designed for ERP applications.

Just ask Max Davis-Johnson, associate VP of the University Technology Office at Arizona State University. The university is in rapid-growth mode, and expects to grow from 65,000 students today to about 95,000 by 2020. “We’re the only university among the top 10 in size that’s growing at this pace,” says Davis-Johnson.

THE SWEET 16

Follow these best practices for ERP success, adapted from Arizona State U tech project pros.

  1. For success, executive management must endorse and support the project.
  2. Always remember: ERP is not just a technology project, it’s a university project.
  3. In the functional vs. technical balance, functional weighs more than technical. Functional processes and needs are the core; technical serves the core.
  4. Always be cognizant of the need to adapt organizational changes.
  5. A project management team must be assigned full-time to the implementation.
  6. The project team composition will represent all functional areas of the university.
  7. Project team members must be focused full-time on the project, and normal job responsibilities must be reassigned. Backfill is required.
  8. Budget must not be the primary consideration in making project implementation decisions. The ability to track and reallocate budget in a timely manner within the overall project budget is what’s critical. Spending a little more early on can literally save you millions later.
  9. The project team must be empowered to make decisions, but a decision escalation process should also be in place.
  10. For true success, a separate, dedicated work environment, specifically created for the project team, is required.
  11. Reward, praise, and celebrate project achievements to keep the project momentum going, especially during challenging times.
  12. Milestones must drive the implementation schedule.
  13. Re-engineer business processes that need to be re-engineered, before changing the ERP software.
  14. Use experienced consultants to facilitate implementation efforts, and make sure to perform knowledge transfer. Core functional teams must have a full-time consultant for the duration of the initial implementation project.
  15. Implementation information should be continuously communicated to the campus community.
  16. Start data conversion and reporting early on.

Source: Arizona State University

To manage—and even accelerate— that growth, in February 2006 the university decided to standardize on People-Soft for student and HR services. By March 2007, ASU was already registering students through the new system, reports Davis-Johnson. “Using a third party to host the system allowed us to get it online a lot quicker,” he adds.

In this case, the hosting partner is CedarCrestone of Alpharetta, GA. With its state-of-the-art hosting facility for university and government clients, the solution provider has deep experience in the ERP sector. (Weighing the pros and cons of using a hosting partner? See “4 Secrets to Hosted ERP Success.” )

Of course, the hosted application market has hit a few bumps over the years. Earlier this decade, many hosted software providers—known as application service providers (ASPs)—imploded when dotcom companies went bust. But several factors (including improved broadband and enhanced ERP software designed with “Web 2.0” capabilities) have paved the way for hosted ERP software to bounce back and thrive. “A couple of product releases ago, we couldn’t have moved this fast,” concedes Davis- Johnson. “But the software has matured. The big variable now is university leadership. If you have that, you’re ahead of the game.” In fact, executive leadership is the top item in ASU’s 16 best practices for ERP success.

Open Source Alternatives

Despite the careful adoption of ERP best practices, even the savviest universities can struggle to define their ERP strategies. Some institutions, frustrated by the size and complexity of traditional ERP software, are now testing open source alternatives.

North Carolina State University, for one, has deployed an open source constituent relationship management (CRM) platform from SugarCRM. The software allows NC State to manage contacts and student recruitment within a single database; e-mail marketing functionality allows the school to create more targeted communications and track responses; and a hosted approach enables access to the application through a managed online service, according to David Crouse, an associate professor at the university.

This open source approach offers several potential benefits to universities. First, there’s the issue of cost: In a typical licensing model, schools can try a basic version of the software for free. If a university wants to move forward in a big way, it can license an enterprise release for a fee that’s often considerably lower than that of traditional ERP software.

Another key consideration: In the open source world, universities can enhance and share code across departments and even across universities. Such is the case with Kuali and Sakai, two open source platforms that allow universities to build financial and teaching applications, respectively, on their own (see “Breaking Away,” CT April 2007).

But open source ERP providers aren’t exactly household names—at least not yet. SugarCRM, for instance, is just three years old and has only 100 employees. Yet, because software developers around the world can add value to the platform, SugarCRM is available in 30 different localized versions and now is installed in 1,200 customer environments.

“You’ve got to be strategic about upgrades. We prioritize our deployments based on which software modules deliver the most value to our university.” -- William Merck, University of Central Florida

Focus Factor

Regardless of which software model university administrators choose, it’s important to stay focused. During a typical year, an ERP software supplier or hosting service introduces dozens of new features and functions.

“You’ve got to be strategic about it,” says UCF’s Merck. “Sure, you can be a kid on Christmas and try to grab everything under the tree. But we prioritize our deployments based on which software modules deliver the most value to our university.” For instance, the university is currently focusing on new eProcurement, vendor self-registration, and expense modules to replace manual forms for travel reimbursements, notes Vilsack. And most of all, UCF strives to ensure its ERP system will scale to match the university’s own growth. “For the foreseeable future, UCF will continue to grow,” says Merck. “We’re right in central Florida in a high-growth area. As our transactions—and complexity of transactions—increase, it will remain important for us to sharpen our business intelligence practices and our tools.” In the world of ERP, it seems, there’s no stepping off the upgrade treadmill.

:: web extra:

Partnering up with a consortium can help member schools fast-track an ERP implementation and save on cost, too.

Community colleges getting the edge on institutional ERP goals.

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