Engagement vs Transactional Systems: Not a “from-to” especially for SME. SAP as an Example

I recently read Ray Wang’s Blog in the Harvard Business Review entitled “Moving from Transaction to Engagement” and something about it didn’t sit well with me. I wasn’t getting the “from – to” part. Recording transactions isn’t optional. Whatever tool you use to create your system of record (whether it is ERP or accounting applications or something else) is a necessary foundational tool. If you think tools that help you build relationships can replace transactional systems, then maybe you believed “eyeballs were everything” back in the dot-com boon and we all know how that story ended.

Since it troubled me I went back and read all the comments to Ray’s blog post and also a couple of pieces he referenced: Geoffrey Moore’s paper “Systems of Engagement and The Future of Enterprise IT: A Sea Change in Enterprise IT” and Dion Hinchcliffe’s “Moving Beyond Systems of Record to Systems of Engagement.” OK, I feel a little better now. But only a little.

I feel better because both Geoffrey Moore and Ray (in response to a comment) acknowledge that these transactional systems of record are necessary. And even Dion Hinchcliffe admits, “It’s safe to say that most firms would go out of business without the data within and automated capabilities of their systems of record.” But to say, they are all in maintenance mode, “ERP has hit its limit” and that “Transactional systems remain in a hard coded, rigid structured approach” ignore the change in how software is developed today and the real possibility of bringing better means of flexibility, engagement and communication to ERP. Yes, ERP must bring discipline and therefore must define data structures, but that doesn’t mean the application or implementation needs to be rigid.

I define ERP as an integrated suite of modules that form the transactional system of record for a business. So when we talk about transactions and systems of record, I assume we are largely talking about ERP. The trouble is, it has become harder and harder to tell where ERP ends and other applications begin. But that’s a good thing. It means software makers are providing added functionality and that ERP is seamlessly interacting with other applications. So why can’t we bring these characteristics of engagement systems (and maybe even experiential systems) to ERP? I’m not going to go down the route of “personal fulfillment” systems because we can’t lose sight of the fact that the purpose of the engagement is to generate transactions (because transactions mean revenue). I know I am over-simplifying but, I don’t think most executives want to discuss speed in the context of a time-space continuum and businesses can’t survive in a “feel good” environment where everyone gets a trophy for “engaging” regardless of whether revenue is flowing in.

SAP has gotten picked on a lot lately as a legacy application and as rigid, so let’s take SAP and its approach as an example of how transaction systems can be enhanced, not replaced by engagement systems. And let’s talk about it in a way that is not just for the large enterprise, because 78% (90,000) of SAP customers are small to midsize enterprises (SMEs). Customers are front and center of engagement, and to effectively engage you need to understand your customer. In order to understand your customer, you need data from a lot of different sources. Some of that data is structured and you are probably already sitting on a mountain of it from a variety of sources:

  • Your ERP system – what they bought, how much they paid, how well you performed in delivering product and collecting cash (all those pesky transactions).
  • Your support, contact or call center – including issues and resolution
  • Your Sales Force Automation solution – contacts, pipeline and quotes
  • Marketing Automation – how many times have you touched them?
  • Others might include document management, customer project management, engineering design and/or compliance specs, specific test results, etc.

SAP is approaching this by enhancing solutions from the outside in, rather than the inside out. What do I mean by that? I mean they are developing innovations SAP BusinessObjects Edge, business analytic applications and new dashboards and user interfaces that can be layered on any of their solutions, including those for SMEs like SAP Business All-in-One, SAP Business One and SAP Business ByDesign. That’s smart in two ways. First, they need only develop it once rather for each of their different ERP solutions. Secondly, by adding innovation in layers, they create the perfect environment for bringing data sources together from different applications. And in keeping these innovations on the “edge”, SAP can make them more “social” by tying in other sources of data, including “conversations” through chat and email, thereby supplying the “richer social orientation” of an engagement system. And once these new interfaces are placed on top of ERP, the user perceives them as a new and better ERP.

This also is the perfect opportunity to apply external business rules and event management, “smarter intelligence” that might otherwise be well beyond the reach of SMEs. Of course, looking beyond the conversations that might be shared between employees and customers, there is far more data out there about your customer than ever comes near your ERP and surrounding applications. There are Twitter streams and LinkedIn discussions and FaceBook pages. There are news feeds and stock watches. The list goes on and on. The trick is to put that data into the context of the data in ERP in order to put it into the context of your business.

And how you deliver it will be critical. Just constructing these focused dashboards is a good start. And perhaps good BI tools would be enough in the hands of a talented and well-staffed IT department, but SMEs won’t have that luxury. Part of “engagement” needs to be getting your employees, including business executives, to engage with the data that you have and that means engaging with applications -which is why it is more important for SAP to deliver business analytics as a configurable and ready to use application rather than just BI tools. But making these analytics accessible is also very important.

Business executives from large multi-billion dollar companies, down to the smallest startups want to be connected through mobile devices. And executives from smaller companies are just as likely to blur the lines between business hours and personal time, perhaps even more so because of the number of different hats they might wear in managing a small business. In our untethered world of mobile connectivity, we all become more tethered to work even in the “off hours.” And the older generation is now learning from younger generations and becoming more comfortable with specialized mobile consumer “apps.” In response, SAP is developing mobile apps and recognizes they must model consumer apps. That means they must be smaller in scope and more directly applicable to a particular function. No training required for the user interface and limited training required for the business process it is intended to perform.

SAP still has some decisions to make in making this type of mobility affordable to SMEs in a world increasingly moving away from corporate standards, producing a more “bring your own device” environment. But SAP has already delivered the SAP BusinessObjects Mobile app for iPad, in addition to the SAP BusinessObjects Explorer for iPad/iPhone , which is already one of the top downloaded apps for business with over 200,000 downloads from the Apple Apps store.

Of course no discussion of SAP would be complete today without mention of “in memory” but this is actually quite relevant in the context of both adding engagement characteristics to transactional systems and customer analytics. If you thought you were drowning in data before, once you open the door to capturing and channeling all these sources of public information, you will now be faced with a virtual tsunami of data. And make no mistake; this is not just a large enterprise problem. Once you open that door, you open the floodgates. So SMEs will need to deal with “big data” just as larger companies will. SAP is intending to bundle SAP HANA (its answer to big data) with SAP Business One for small companies, and SAP HANA will power SAP’s On Demand solutions, including By Design, but there might be a donut hole forming around Business All-in-One (BAiO). SAP HANA will be an option for both the Business Suite and BAiO and pricing has not yet been made public.

SAP is of course just one example, and I could have used other vendors as examples along the way. But SAP also has a very broad and deep footprint and has more irons in the innovation fire with more resources to bring to bear than your typical ERP solution provider. And SAP certainly touches a lot of SMEs (over 90,000).  But it also has a lot of history and a reputation of being rigid, in terms of both product and company. It hasn’t made the big splash about “Social” that Salesforce has recently. It’s been hard to miss Salesforce CEO Marc Benioff’s exhorting the virtues of the social enterprise.  But in the meantime SAP has been bringing more “engagement” to its transactional systems.

So the key takeaway here is that transactional systems can indeed take on some of the characteristics of an engagement system. While yes, they need to be structured, structured doesn’t necessarily mean rigid. I don’t think ERP has hit the wall – I think it still has a ways to go and many, including SAP still have the legs to take them there.

Disagree? Prove me wrong.

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