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Why Activity Transactions matter. By David Carter

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2nd Nov 2006

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In his first article David Carter identified the latest trend in software design - go back to the beginning of the transaction and capture it at source. The inevitable result of this, he now argues, is that a new generation of ERP packages is required which embody a concept new to ERP - Activity Transactions

In the first article I mentioned the trend in recent years towards capturing transactions at source, and suggested that there were so many benefits to this approach that it would become standard practice.

One far-reaching consequence of capturing transactions at source is that the software now has to cater for multiple departments, not just one. For example, the traditional idea of a set of “Financial” modules (Sales, Purchase and Nominal Ledger) designed solely for the use of the Accounts department is now obsolete. Instead the concept of “Procurement” is taking over – capture the purchase transaction at source at the Requisition stage with the end-user, let the Purchasing department convert it later on into a Purchase Order, then let the end-user convert the purchase order into the final purchase invoice.

Welcome to the world of ERP
The concept of automating the entire purchasing process from requisition to purchase order to purchase invoice is fairly new. But on the sales side this same concept has been around for 20 years or more – it’s called ERP.

An ERP (“Enterprise Resource Planning”) package is best thought of as an integrated package which handles a customer’s order from beginning to end. It comprises numerous separate modules for each of the departments that are involved in processing the order. See the schematic.

The stages of any customer order are: Enquiry – Quotation – Order – Delivery – Invoice – Payment.

Various departments within the company handle each stage of the order. Companies differ but, roughly speaking, the initial stages (Enquiry to Quotation) are handled by Sales department, the middle stages (Order to Delivery to Invoice) by Sales Admin, the final stage (Payment) by Accounts.

Traditional ERP has failed
In theory ERP meets these latest design principles perfectly: it captures the transaction at source (Enquiry or Quotation stage), and eliminates re-keying as it automatically converts the quotation into an order, an order into a delivery note, a delivery note into an invoice.

However, in practice the current generation of ERP packages fail at the initial stages. In most of them, the accounting modules at the end of the order cycle are good, the order processing modules in the middle are moderate, while the pre-order modules at the front are abysmal.

The reason is that, when building a new ERP package, the designers usually tackle the ledgers first, then stock and orders, then pre-order. In other words, most ERP packages are designed backwards. The design principles suitable for ledgers (accurate recording of the past, quantitative transactions) are unsuitable for operational staff (real time, free format text transactions). The closer these packages get to the beginning of the transaction, the more inadequate they become.

Contact management ("CRM") systems for sales staff
In the absence of any decent modules in their ERP package, Sales departments have had to go out and buy their own. The first packages for sales reps appeared a decade ago in the form of Contact Management packages like ACT! or Goldmine. Sales reps used them to record conversations with prospects, and to schedule dates for their next meeting or sales call. These contact management packages have evolved into the classier-sounding “Customer Relationship Management” or “CRM” packages. They differ from ERP packages in several respects.

First, they are simple and easy to use, reflecting the non-admin background of sales people.

Second, they record different types of data. Instead of the “hard” data about a customer stored in an ERP package (quantitative data such as orders, invoices, payments), they record “soft” data about the customer such as conversations, notes, diary dates – most it free format text.

Because they record “Activities” to be done in the future, when that future date comes round they generate a “To Do“ list of all the tasks that need to be done that day.

Result – data silos
In practice, then, most organisations today are storing their customer data in several different databases. The "hard" information (invoices, payments, orders) sits in the ERP database, while "soft" information (records of sales calls, To Do lists) sits in the CRM database. And there will also be a third database of email messages to and from the customer - the MS Outlook database.

However, spreading customer data around in these “data silos” causes lots of problems because no-one has the complete picture. The sales reps, for example, may spend a lot of time getting new business from existing customers. But of course all the information about these customers is sitting in the ERP package, and they can’t access it. Or when Credit Control ring up a customer chasing an invoice, all they can see is the hard information on their ERP package; they’ve no access to conversations between the customer and Sales.

ERP, CRM and Email have to be combined
You cannot begin to give the customer good service until all the departments dealing with them are working from a single, unified system. Somehow ERP, CRM and email systems have to be combined into one. And that combined system has to be the ERP package, simply because it holds so much vital information about the customer already. Somehow ERP packages have to take on the functions of CRM packages, even though culturally they are so different.

Activities and To Do lists
Adapting an ERP package to store free text (notes of conversations etc) is easy and most have some sort of Notepad facility for this. But the really key feature of CRM packages like ACT! and Goldmine is that they allow the user to record Activities (sometimes also called “Tasks” or “Events”) and from this generate a To Do list.

For example, today is 11th November. Salesman A has just been talking on the telephone to Customer B and agreed that he will call him again in two weeks time. So on Customer B’s account he records an “Activity” – “make a telephone call” - to be carried out on November 25th.

This, at its simplest, is an Activity transaction. It records an Activity which is due to be made in the future - what the activity is, who is supposed to make it, for whom it is to be done, and when it is due to happen.

In fact, Activity transactions are remarkably simple. But once you add these elementary bits of data to a multi-departmental ERP package, then some remarkably sophisticated things become possible which will end up changing the entire face of ERP. I’ll look at these in the next article

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By dahowlett

03rd Nov 2006 12:26

Gents please
Andrew - I see you've been sucking up large doses of that SFdC Kool-Aid. A large bunch of us have talked about this in considerable depth in different ways. The group includes industry insiders, consultants, investment managers and practitioners. the ones you see there represent a fraction of the total group.

Tom: - the linkages you make to the larger apps are right. CastIron supports Oracle DB, on which SFdC runs (sic - Larry Ellison is an investor). Unfortunately, that's not where David and SAP BusinessOne play. SFdC doesn't have links to B1. There is an R/3 adapter I believe.

There are other issues aorund SFdC/AppExchange and the ecosystem but they are more to do with whehter SFdC actually makes the ecosystem work. So they can say as much as they like, but who's making money off AppExchange except SFdC?

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By dahowlett

03rd Nov 2006 09:57

Lots of answers
Tom: do you know what CastIron specialises in? Hint: I know the most recent past CEO. Why would you want an appliance in this context? What would you be hooking it between?
John C: collective sigh
Shaun: It is FAR from easy to integrate different file systems. In addition there's the issue of data mapping. Don't be fooled into thinking it is any different. There's an $8billion business out there dedicated to this stuff. think IBM.
Lee: You're flogging an internal business process tool that has nothing to with customer relations and is all about internal sale and service process management. Bonus points for SOAP/XML
Andy: Data silos may be here to stay in your world but not in that of Salesforce.com
David: you say - "In other words, most ERP packages are designed backwards" as a reason for ERP failure. Fancy telling that to the R/3 people who are now the world's leading CRM vendor and provide integrations back to the remainder of the R/3 suite?

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By User deleted

03rd Nov 2006 15:01

Salesforce.com..another silo
Dennis - unless you run a complete business on salesforce, surely it becomes 'just another data silo', only the silo is sat in a server farm somewhere outside the business.

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By User deleted

02nd Nov 2006 17:02

Data silos are here to stay
Very few of us really get the chance to replace all existing systems with one new all encompassing solution, so we will continue to work in an imperfect world and have to find ways to ensure that our users can see the information they need to see when they need to see it whichever data silo it has to come from. An apparently more flexible and cheaper (£25 pm) option to Cast Iron is SmartPoint

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By Tomcogswell

03rd Nov 2006 11:53

Cast Iron
Admittedly my comments on Cast Iron are purely based on a conversations at the Dreamforce event in San Francisco. However, my understanding is that they take a "configuration" approach to data integration - and you can use this either to have two separate data silos talking to each other, or you can use it to transfer information from one legacy system to another.

However, the main thrust does seem to be within the On-Demand market - i.e. getting the likes of Salesforce.com to link to your legacy Oracle/SAP/Microsoft etc systems.

I'm not entirely sure if this is comparable with SmartPoint - unless I am thinking of the wrong company, SmartPoint is an additional piece of software that pulls this information together.

As per the point made by Andrew - CRM is there to free up time so that staff can be more creative and so that businesses can grow. Adding another process into a working day does the complete opposite.

I'm happy to be corrected if I'm wrong though!

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By Tomcogswell

02nd Nov 2006 12:18

CRM is much more complex than that - and there is another option
CRM encompasses far, far more than to-do lists and activities. This essentially covers the basics of a contact management system, but true CRM provides a marriage between all of the departments that have conact with those outside of your own company. Namely, Sales, Marketing and Customer Service (plus partner management and supplier management).

These three areas are complicated enough in their own right - managing "cases" for customers making a complaint can span multiple individuals and business units. Marketing activity has to be monitored across digital, print, outdoor, and other activity - not to mention the ananlysis of markets.

Finally sales, whilst on the surface seeming to be the easiest to manage, has the potential to become the biggest can of worms. What routes to market do you use? How do you manage multiple channels, price lists, ways of selling, markets, teams, etc? Do you know which customers are profitable, and which are actually costing you money?

For me, and I would have thought for the majority of the community I work in ( The CMC), the answer isn't to bundle limited functionality onto ERP. The answer is to find a provider that has dedicated units focussed on CRM as a discipline in it's own right (and as it should be) such as SAP, Oracle and Microsoft, OR it's to use companies that focus purely on their respective elements, and then use providers such as Cast Iron Systems to get the two talking to each other.

For any IT consultants out there, or anyone paying a fortune for their time for exaclty this type of activity, it's time to take a look at these types of solutions - Cast Iron Systems. You can rent a box, which you plug two leads into, which then makes your ERP and CRM talk to each other. And it may only cost you around £500.

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By jacp400

02nd Nov 2006 12:48

Sigh...
Thinking of any products in particular David?

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By dahowlett

04th Nov 2006 03:58

response 2.0
Andy - did you follow the link thorugh to other places?

Lee - I'd be delighted to help you with market positioning. Blaring capability without context in the name of PR ain't the way to do it. In context - what has this to do with clients?

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By BLUENOSESTEVE

13th Nov 2006 11:54

Activities and ERP in one
I agree with David’s argument that traditional ERP has failed. Most ERP packages provide some degree of integration either with a third party accounts package or with a CRM module. Few offer both and even fewer offer true working solutions.

The really excellent ERP vendors provide integrated solutions. That is they provide accounting and CRM solutions that are fully integrated with the other business functionality within the system such as marketing, order processing and fulfilment.

PRIAM Software has been providing fully integrated ERP solutions for many years. The accounting modules are integrated into the business processes and are updated in real-time.

The CRM module forms part of a single unified system that provides contact management, customer services, order processing, workflow (tasks and events) all linked to an email client.

The workflow management functionality provides the basis of activity transactions. Assigning tasks to specific people or groups, telling them what they need to do and when they need to do it. Associating goals and results with tasks not only ensures that tasks are completed but also forms the basis for reporting and analysis

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