An overlooked data opportunity
Many large organisations fund AI strategies to become data-driven organisations, while their most significant data-related opportunity is often overlooked and underfunded: Feeding managers with near real-time operational data to improve decision-making.
As of today, one of the biggest IT challenges for companies, with many independent business lines, lies in real-time enterprise reporting. Since the widespread emergence of cloud-based ERP and CRM systems, real-time operational data is taken for granted. In fact, this is the reality for most cloud-native organizations with straightforward business models and limited product lines.
However, in larger organisations, complexity adds up. Investment managers (i.e. Private Equity, Venture Capital, Family Offices) and large corporations face a similar problem. Each acquisition of another enterprise brings a new set of tools and probably a different ERP.
While the business is pushing its technology leaders to migrate the subsidiaries onto the central ERP, finance teams pull all-nighters at the quarter’s end to mash together content from tons of spreadsheets from each portfolio company.
The problem? While the current ERP migration project is far from completion, investors and senior management are sending LOIs to the next prospective acquisition target.
Most of the technology budget and team are now tied up with ERP migration. An ERP migration cost is usually a seven-figure budget and a multi-year personnel commitment. But those are only the first-order consequences. The actual costs lie in the opportunity costs:
- Managers make blind decisions because their analytic teams build reportings based on figures often older than 30 days.
- Lack of proper analysis causes suboptimal performance of the subsidiaries and, thus, the entire portfolio.
- IT departments dismiss critical technology opportunities because they are single-mindedly focused on the ERP migration while keeping the lights on. This misaligned focus causes the company to fall even further behind in the technology race.
Since the inception of buy & build and corporate M&A, the problem of ERP migration and consolidation has been a large part of post-merger integration. So what are the options?
- Change nothing and accept.
- Consolidation of ERP-Systems. This is a viable approach when a small number of larger companies merge in one or the other way. Technological debt from outdated systems can be eradicated and the total number of interfaces will be reduced.
- One alternative solution is to utilise a modern management approach, empowering data analytics & security teams to build a resilient, yet flexible centralised data platform feeding from decentralised data sources and data pipelines. This is probably the best strategy when managing a large portfolio of subsidiaries.
Successful data strategy transformations are mandated by the CEO, supported by the board, and focus on a homogenous platform system with a heterogeneous pool of data sources. To make this happen, enterprises need up-to-date data technology (i.e. ETL software, data catalog, data lake/lakehouse, data quality checks, BI software, and data classification tools).
Proper enterprise software can speed up the process but won’t alleviate the need for a dedicated analytics, data engineering, and security team. Many will argue that the investment in a new data stack is as high as the consolidation of every single ERP system. While this might be true in some cases, the upside of having a modern stack, flexibility and speed outweighs the investment cost by far, if implemented successfully.