ERP systems perhaps were to deliver on three promises;
- Automate more business processes; perhaps approaching all of them. ERP systems have added great automation to a lot of new business processes since their introduction 25+ years ago.
- Consistent IT Tooling. ERP systems in some industries significantly increased the IT tooling consistency.
- Increase reporting ease and analysis. The thought was that with all the data under consistent tooling and automated by the same kinds of system, reporting processes would become much easier.
This last goal has not been achieved to the same extent as the first two goals. I don’t find having data in an ERP system necessarily makes it easier to use in reporting, and the ERP tooling has not significantly improved total reporting.
Why is that?
The major reason is that ERP systems, because of their operational nature, chose data structures that were efficient for operations, but inefficient for reporting. They tend to be highly normalized, which breaks data up into at times very small tables for descriptive data, and inconsistent structures for the larger business event data.
A great deal of business reporting processes demand consistency. An alternative would have been to expand the ledgers, increasing the levels of detail maintained in the ledgers, keep customer, vendor, employee, process attribution associated with the business events.
This is Episode 140 of Conversations with Kip, the best financial system vlog there is.