We Have Been Here Before Benefits of ERP and the Post-recession Business

Date:   Wednesday , September 01, 2010

Never has it been more imperative for companies to tightly integrate their business goals and vision with their IT systems. The business environment is characterised by the need to improve productivity, efficiency, and innovation. Companies that fail to achieve these goals have a greater than ever probability of not just being left behind but facing annihilation altogether. Fortunately, there are multiple solutions available to accomplish these goals and it is just a matter of having the corporate zeal and focus to translate ideas and goals into execution.
Learning is eternal; not just for humans but for businesses as well. Businesses will learn in soft and hard ways and the best businesses learn in both. The soft way of learning comes from the day-to-day operations, from managers, colleagues, clients, and various internal stakeholders. The hard way is learned from the external world, characterized by Michael Porter as the five forces (Supplier Power, Barriers to Entry, Buyer Power, Threat of Substitutes, and Rivalry). The Depression of 1930s brought a large amount of spikes and volatility. The businesses that succeeded were able to adapt and learn at every stage. The current economic trials and tribulations have as many lessons to teach.

Are Businesses Being Fooled by the Randomness of the Economy?

The bubble and bust in the IT sector some eight years back brought with it layoffs and criticism of the technology industry from which it still hasn’t recovered. Cornered, most IT companies tried diversifying their business – some succeeded, some stretched so much that they confused the offering and ended up closing altogether. Rescue came from a variety of sources and the lucky, resourceful businesses started growing as part of a new industry bubble.

Once the recession showed its face again in the summer of 2007, the busts were noticed across the board as the financial system, the root of the economy, collapsed.

The geographic markets did not all react the same way. The western world witnessed as an ‘economic storm’ what the eastern world experienced as a slowdown. Businesses totally dependent on markets in the west were the worst victims. Arab countries stood erect in the storm, with their businesses the least affected. This may be because many here practice a family-run business model, which is less affected by an international recession and generally behaves more cautiously. The economists were unable to predict the randomness of the economy and were forced to rewrite their financial forecasts.

We Have Been Here Before

The highly volatile markets provided many lessons to the business world. Businesses found themselves standing on the same ground but with different opponents and opportunities. The two major concerns were how to sustain the business in the recession and how to flourish once the economy recovers. Similar to policies followed in the 1930’s, the world’s governments looked to fiscal stimulus to end the recession and found ways to support the public players and the major private players in their region to support their growth. Gartner is predicting a growth rate of at most 7 percent in UAE and Africa and 9 percent in Latin America. People who were thinking of investing in new products are rethinking their strategies and planning to invest more in retaining their customers.
The end customers have also been affected by the recession and have begun saving and spending with more purpose than before. Service providers needed to improve productivity deliver a better service and become more closely tied with their customers to maintain a better customer relationship. One way of improving the productivity and the relationship was by ensuring a seamless flow of data between suppliers and customers and integrating information across the enterprises. This task is made easier by ERP which also focuses on CRM.

Where the Investments Will Be
It has been predicted that around €140 billion will be spent by the manufacturing sector to link up the data systems with the ERP and CRM systems. (Analysts - Pierre Audoin Consultants (PAC), February 2010).

Companies are looking to tighten their technical integration with the customers and suppliers, irrespective of the sectors they are in. Even region-wide, spending in IT plays a lead. For example, IT spending in UAE will go up to $15.91 billion. (Source: RNCOS Industry Research Solutions, March 2010).

It is interesting to note where the IT investment will be going. Again, it depends on the sectors and of course the geographies. As discussed, the Arab style of business remains cautious during the recession, so they will focus on increasing sales and customer support. Their IT investments will be customer-focused and specific to the ongoing projects they are involved in. As far as the western countries are concerned, though the consumers are saving and spending less, the retail brand values have increased overall. (Consumers in a Post-Recession World: A Nielsen Report, September 2009). So we can expect some investments in the retail sector to attract new customers. Public and private sector investments can be expected in IaaS, SaaS, cloud computing, and Web 2.x technologies. But the basis of any integration between the customer and the supplier (either forward or backward integration) can be done effectively by simple ERP. There are a variety of flavors of ERP systems available to suit the needs of almost all categories of industries. These can be deployed to great effect in achieving the stated goals and business strategies of companies, big and small. Since these ERP systems encapsulate the most widely practised business practices, they are best of breed solutions.

The author is CEO, Inatech Solutions