Making an investment in your E-Business Suite today for a big pay-back tomorrow

Your friend must choose between two offers:

1. You offer your friend $1,000 to be paid a year from now.
2. You offer your friend a smaller amount today – maybe $900.

Your friend will choose the second offer: A dollar today is worth more than a dollar tomorrow.  The old adage rings true in IT organizations.

It is difficult to justify a project to streamline your EBS and make it align with business changes when money is tight.  An IT department is willing to spend more money over time maintaining current applications rather than making an investment today.  It is much easier to continue to spend money and effort reconciling systems with thousands of spreadsheets and custom reports because the money goes out in a slower stream and is less “visible”, doesn’t need approval from stakeholders, and the users have lived with the pain for so long that postponing a solution for a year or two later doesn’t really matter.  By investing a chunk up front to change their applications, companies can reduce long-term maintenance costs caused by having different EBS instances, thousands of operating units, and different charts of accounts, but companies choose not to spend the money now and to spend more over the course of a number of years.  One large cost today seems bigger than many smaller costs over time, but in reality, making an investment in streamlining systems ends up saving the business money in the long haul.

The cycle begins when implementing Oracle E-Business Suite.  To contain costs, and because a company didn’t understand how to utilize all the features of EBS, the original configuration was not scaled to accommodate growth.  Companies had already made the investment in Oracle’s E-Business Suite, only to find that with time, the business has changed and the implemented system hasn’t changed with it.  Instead, it is much more difficult to recognize a return on their ERP investment because multiple instances or operating units have been configured differently due to requirements that are different for parts of the business.  ERP doesn’t represent the “Enterprise” anymore, and the Total Cost of Ownership (TCO) is going up – money is spent on “running” the business, maintaining systems, and developing workarounds to meet changing regulatory and reporting requirements, rather than on innovation and on utilizing the system to get more revenue to the bottom line.  It is difficult to perceive the value in spending money on a project now rather than maintaining myriad configurations over a longer period of time.

Political attributes of management can also get in the way – consider when lines between budgets become blurred and spending buckets spill over into others.  It is common for companies to dip into other budgets and misuse funds not originally appropriated for maintaining current applications to do just that.  One company was spending 40 percent (about $2.5 million) of its application development budget to maintain interfaces between disparate systems, while it could have more aptly used the funds for their original purpose: removing – rather than promoting – silos and disparity.  In an E-Business Suite environment, such improvements include consolidating operating units, inventory organizations, or entire instances, or redesigning the current chart of accounts (moving to a single enterprise version) to minimize cross-validation rules, utilize logical ranges, and reduce data entry and spreadsheets.  Let’s return to the original offers and tweak them a bit:

1. You offer your friend $1,000 to be paid a year from now, if he is willing to invest $100 today.
2. You offer your friend $1,000 to be paid ten years from now if he is willing to pay $80 a year for the next ten years.

In this case, it is much easier to justify spending the money upfront and to go with the first option.  A dollar today is worth much more than a dollar tomorrow.  Unfortunately, the second scenario is much closer to the situation in IT than the original offers, but IT management fails to see it.  Projects to change existing applications invariably get pushed to the back burner.  The ongoing costs of maintaining current systems are so much higher than a comparative immediate investment to change systems that it is difficult to understand why so much capital is poured into maintenance.  It is wiser to develop an effective plan to change current applications and align them with future business requirements, as well as to use the money and effort saved in maintenance to respond to new opportunities and become more competitive in the long term.

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