ERPs concentrate all the information. From corporate goals and budgets, to whom has just been hired, to problems in the supply chain, to digital selling, invoicing, and accounting. Equipped with Machine Learning tools, could it make better decisions than a seasoned CEO? Could it completely replace a CEO?
Latin Trade asked this question to ZohoCorp’s Chief Evangelist Raju Vegesna. ZohoCorp is an Indian software developer of business management tools bought by more than 60 million users worldwide. One of these tools, Zoho One, is a popular ERP solution which now offers artificial intelligence tools to improve its performance. Here are his answers:
Can a Smart ERP” replace a CEO today?
To some extent, it might, but it depends on the business. I hope it doesn’t. The reason is that not everything is number-centric. Not everything is data-centric. Particularly when it comes to business decisions, not everything is data-centric.
Data-centric decisions typically have to do with processes. That is where systems can work and make decisions. But when it comes to people, software should not make decisions.
Running the business involves two things: processes, and dealing with people like customers, vendors, employees, suppliers, partners. Systems can make the decisions when it comes to machines, properties, efficiency, but should not make the decisions when it comes to people.
Fine, but I can imagine the head of HR programming its ERP to follow the performance of each employee, and to automatically send emails announcing promotions and firing slips…
Is that happening? Yes. Will that happen? Yes. Will there be push-back on it? I think so. I truly believe so. Is that the right way to do it? No. People-to-people interaction should be done in person. But that doesn’t prevent companies from doing it, unfortunately.
I think what will happen is that employees will vote with their feet. If a company follows that approach, they will simply quit. As simple as that.
One metric to track is employee attrition, that is, what percentage of your employees leave in the year. A typical industry average across industries is about 17%. In some cases, especially in the technology sector and particularly in companies that make these decisions based on numbers, emails, and whatnot, the attrition grows up to 25%, 30%-plus. For those that deal with employees as human beings, the attrition is significantly lower. It is a single-digit percentage.
In other words, you can look at an employee-attrition rate of a company and tell how much they value people within the organization; how are decisions made; how is the culture within the company. If you ask how do you run your HR system? How do you manage your employees? and the answer is ‘it is done through emails’, or one such thing, you can assume safely that the attrition is on the higher side.
What will happen is that companies will eventually realize that this is not the right thing to do, and they will revert back. I truly believe that will happen.
We do not follow that approach and we hope we never do, and we don’t plan to. People-to-people interaction is really important.
Just because something can be measured, does not mean that it should be measured, and does not mean that whatever you measure is important. Companies have to realize that.
I hope that intelligence, automation, get better on the systems side of things; but when it comes to people decisions, the control continues to remain with the people in the company.
So, how are Smart ERPs better than their not-so-clever, older counterparts?
If you look at the systems side of things. Let’s say you are an eCommerce, and you have a process that you set up for shipping your items whenever a customer orders. The ERP can look at your entire process and say ‘this is where your bottleneck is’, without you having to look at it. It will detect it, and send you a notification saying ‘looks like you have a bottleneck, and based on your order count during the holiday time, you’re going to keep this bottleneck’. So you may want to proactively act. ERPs today have the capability to proactively suggest to management where to fix.
If you look at the employee-side of things, the systems can look at employee activity and say ‘hey, the sentiment has been trending down, the comments that you receive within your public forums or private forums are trending down compared with historical records, you may want to correct that.’ Or, ‘Your employee attrition has gone up, you may want to look into that.’ It could be, not on a particular employee, but more broadly the trend.
On a different aspect like, let’s say, an expense tracking page. ‘It looks like your expenses are going up in this category, which is not in line with your previous year’s expenses. Do you want to look into that?’
Proactiveness has been the trend and will continue to be the trend. Historically, most ERP systems have been reactive. You had to analyze it, and then figure out what went wrong. Now these ERP systems allow you to proactively analyze these things and see how you can improve.
How will ERPs get better over the next two years?
In a year or two, I expect ERPs will go a little further on that front. Pulling all the data across various departments. Because to serve your customer it is not that the customer has a silo, an employee that is serving the customer. The customer touchpoints may touch multiple employees, multiple partners, your supply chain, your process, your vendors. So everything has to be seamlessly connected and seamlessly work to offer that touchpoint because that holistic approach is what is important. ERPs historically haven’t taken that holistic approach, and that is where we believe the industry is heading.
Any other ways in which ERPs are evolving?
Companies define how ERP systems work, not the other way around. But in a lot of cases, companies change the way they work, their process, based on how their ERP system works, not the other way around. So, that is the sad reality today. I hope we get to a point where the ERP systems, and the software in general, becomes like utilities. Like electricity or water. There is complexity in how it is produced, but as a consumer, you do not worry about it. You worry about how it works. You focus on what you are doing, your business.
That’s what we consider success in software: software just works. You do not have to worry about it and you focus on the business. That is the end goal.