Deloitte SA Blog

Unlocking tangible value from your ERP implementation

Enterprise Resource Planning (“ERP”) provides an opportunity for companies to track and monitor business flows. While this creates a significant benefit across the highly regulated and diverse landscapes in which companies operate, there is additional value to be unlocked through a carefully designed ERP system.

If you have any questions or require a more detailed discussion, contact Clinton Eidelman (Associate Director – TMC Technology – Deloitte South Africa) at ceidelman@deloitte.co.za

Organisations in the midst of implementing or upgrading an ERP system often overlook the importance of the tax department as stakeholders of the system. The organisations invest in deep operational improvements, but ignore broader issues of structural tax planning or they make supply chain decisions without understanding their full tax implications.

Taxes are directly affected by a company’s overall operating model and as such, constitute a structural cost. The choices made today – how contracts are negotiated, who controls manufacturing processes, how inputs are sourced, how products are distributed – determine the structural tax obligations in future. Only when strategic tax planning forms an integral part of the overall business vision will it be possible to drive down a company’s structural tax rate.

However, effective and long term tax planning requires an understanding of the group’s strategic objectives, goals and constraints. Simultaneously, businesses increasingly require their tax functions to provide insight for critical decisions. Fast, accurate delivery of the tax provision and tax calculations for financial reporting purposes, as well as reporting on tax compliance filings and for management decision making, are all minimum expectations today.

Frequently, the unique needs and requirements of the tax function are not adequately addressed when implementing an ERP system, as the current “as is” tax structure is implemented with the new ERP system, relinquishing potential tax benefits and forcing the tax department to continue inefficient manual processes for tax compliance, planning and forecasting.

Therefore, according to Forrester, “Smart (technology) buyers have started to include a new factor in their sourcing decisions: tax implications. Understanding how taxes will be affected can help companies make better sourcing decisions and fund new projects.” In many cases cash tax savings can often deflect the cost of the overall ERP system implementation.

Tax Enabled ERP Solutions: Direct and Indirect Tax Benefits

A well designed Tax Enabled ERP Solution can increase speed, accuracy and data integrity — all of which are important, particularly when working through last minute updates at either quarter-end or year-end.

These improved data collection processes also help companies better manage workflow, which in turn increases visibility. Furthermore, it provides greater control over information and the associated movement or flow of work allows the tax function to be more effective and to report virtually in real time. This makes the organisation more nimble when it comes to business decisions and the related tax implications of such decisions and frees up the tax department to spend more time performing value-added activities such as strategic income tax planning.

A large building materials company recently implemented SAP globally. Tax SAP specialists conducted a systems audit of tax processes, including reviewing and documenting the tax processes end to end, highlighting any controls and training needs going forward and recommending changes required to reduce the risk of tax mis-declarations.

Deficiencies were identified in the following areas: missing/duplicate SAP master data, ownership of processes/data, limited documentation / training, manual processes without robust controls and incorrect tax coding within the Shared Service Centre.

A Tax Enabled ERP Solution provides opportunities to benefit from tax savings ideas directly and indirectly associated with ERP implementations such as: maximising R&D tax credits and deductions, training incentives, transfer pricing, customs and excise, VAT optimisation and other appropriate strategies.

By considering the tax implications during the ERP design or transformation process, companies are able to ensure that the ERP system produces the critical tax-relevant data and information needed to streamline tax compliance processes, more effectively identify and implement tax savings strategies, and provide better audit support. Currently many ERP-systems do not give visibility of many indirect taxes (VAT and Customs) which results in much data manipulation outside the system to effectively manage these taxes.

A Tax Enabled ERP Solution should be designed and configured to easily provide financial information that may historically have been inaccessible and enable improved capture processing and reporting throughout the financial and tax processes. In addition, it should enable improved data collection processes, allowing the tax department to work more efficiently and to deliver value to the organisation in new ways.

A large international retailer serving over 200 million customers weekly was suffering from tax issues that included inability to track provisions in sufficient detail, lack of fixed asset information and insufficient P&L granularity. Tax SAP specialists were brought in to run the full tax work stream with the responsibility for all tax design, build, testing, remediation and go-live activities with the end result of Tax savings running into the millions.

As organisations redesign processes and install enterprise-wide systems to create a competitive advantage, they often consolidate legacy systems and initiate process improvements that at best, do not enhance the tax reporting process, and at worst: actually impede access to tax-sensitive information and do not take advantage of potential tax savings.

Tax Enabled ERP Solutions: Overcoming the Challenges Faced by Global Organisations

Operating a global organisation poses very specific challenges in the area of tax management and reporting. These may include unusual taxes being imposed (such as withholding taxes on administrative and technical fees); regulatory approval that is required for certain types of transactions, combined with a lack of relief in terms of double tax agreements. Group Tax Managers need to constantly be up to date with the issues existing in those countries to avoid lengthy delays in payments and penalties. While it is not possible to foresee all challenges, organisations that have, or intend having, a multinational presence can reduce one of their significant risks by ensuring that their ERP solution is tax enabled.

If you have any questions or require a more detailed discussion, contact Clinton Eidelman (Associate Director – TMC Technology – Deloitte South Africa) at ceidelman@deloitte.co.za

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As consumers worldwide shift their media consumption from the tangible to the digital, they are taking their books, movies and music with them on one device, and leaving behind a tangle of tax implications – particularly when it comes to VAT in South Africa. That is why businesses that sell or distribute electronic products to overseas consumers via the Internet would benefit from a clear understanding of their increasing regulatory and financial exposure, as well as a strategy to turn these changes into a competitive advantage.

If you have any questions or require a more detailed discussion, contact Severus Smuts (Director – Value Added Tax at Deloitte South Africa) at ssmuts@deloitte.co.za

European countries have been slowly clarifying their position in relation to this type of service.  In November 2011, Iceland became the latest country to tax the electronic supply of services by non-resident businesses to domestic consumers. Norway introduced a similar rule in July 2011 and Switzerland at the beginning of 2010, as did the European Union (“EU”) in 2003. Additionally, tax authorities in other jurisdictions with a VAT or Goods and Services Tax system are looking to Europe with a keen eye on whether such steps would be practical in their own jurisdiction. Financial executives of global businesses, regardless of where they are based, should understand the compliance and planning implications of these new rules or suffer adverse financial consequences.

South Africa is one of those countries looking at what Europe is doing.  The present position in South Africa is one of uncertainty because there are no clearly defined rules and promises of clarity have been made but not fulfilled for a number of years. However, the legislation is so unclear that it is not possible to make any definitive statements for these global businesses except to say that they are likely to have a VAT liability in South Africa. It may be possible to obtain a ruling in certain circumstances that says otherwise.  One of the main issues for the tax authority in South Africa (SARS) is how to enforce the payment of VAT when the consumer is an individual not registered for VAT.   Strictly speaking under the terms of the present legislation, the individual should voluntarily pay the VAT owing where the purchase exceeds ZAR 100.  It is easier for the authorities to say that the global business should register and pay the VAT, which means that the ZAR 100 threshold will not apply.

Defining electronically supplies services

In South Africa there is no legislative definition of electronically supplied services for VAT purposes.  In South Africa it is clear that intangible goods are defined as services for the purpose of the VAT Act but that is as far as it goes.

In the EU, electronically supplied services include those which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology. The definition of services is wider than an ordinary definition and includes digitized products and what may be referred to as “intangible goods,” such as electronic publications, applications (or “apps”), and software.

The South African definition of services will cover the following affected businesses within the media and entertainment industries which include, but are not limited to:

• Publishers or distributors of electronic publications such as books, magazines or video content
• Suppliers of visual or audio media over the Internet

VAT and online gaming

Business scenario:

Video game suppliers regularly fall under the provisions of the electronically supplied services rules, even when supplying the actual game free of charge. While the games are free to play, players are often given the option to purchase additional credits – often referred to as “in-app purchases”– virtual currency or items that are supplied to continue game play.

Activity in this area has increased exponentially with the surge in sales of tablet devices such as the Apple iPad and the countless apps that market content directly to consumers.

VAT implications:

While the original supply of the game may not be subject to VAT, it is likely that for the purposes of South African legislation these are “imported services” and the unregistered individual is liable for the VAT.  However, the distributor could possibly also be liable for VAT registration and VAT at 14% if the business is carrying on an “enterprise” in South Africa.  The reasoning behind this is that the services are consumed in South Africa and VAT is a tax on consumption.  However, it could be argued that the services are not performed in South Africa (unless the server is here) and the activity is a passive one.  In that instance perhaps the liability should only fall on the individual.  It is important to determine who was liable to account for the VAT as the recipient may as a defence argue that the supplier was liable to collect the VAT.  While specific place of supplies are not forthcoming it would be prudent to obtain a ruling from SARS when these services are marketed to consumers in South Africa.

If there is a liability to account for the tax on these intangible goods by the business in question, it may fall on either the producer or distributor of the content depending on the distribution model – whether the distributor is acting as a disclosed agent or an undisclosed agent or commissionaire.

If you have any questions or require a more detailed discussion, contact Severus Smuts (Director – Value Added Tax at Deloitte South Africa) at ssmuts@deloitte.co.za

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The corporate world is currently debating the Protection of Personal Information Bill (PPI) which will soon be promulgated. Much of this debate centres on how onerous the minimum requirements for compliance will be, how long organisations will be given to comply and what the cost implications are likely to be.

Want to learn more about the Protection of Personal Information Bill? Visit the Deloitte Protection of Personal Information Bill website or contact Dean Chivers at dechivers@deloitte.co.za or Daniella Kafouris at dkafouris@deloitte.co.za.

Some companies have chosen to take a ‘wait and see’ approach. “Those companies that see regulatory changes as an opportunity for increasing business value adopt a more positive, proactive approach and also spend considerably less in achieving compliance over the long term,” comments Dean Chivers, Director Deloitte Legal, at Deloitte. “They are able to link compliance requirements to the entire value chain of the business so that each functional area buys into its importance, realises the value that can be delivered to the business and collectively bring about change to realise this value.”

Chivers cautions that companies should implement PPI compliance as prudently as possible. “Be realistic – your organisation may not be completely compliant by the time the Act is promulgated. PPI is not exclusively an IT or legal or a process or a security issue, it’s a combination of all of these. Create the framework within which PPI will be managed within your organisation, and then build awareness amongst staff around both PPI and your entities PPI compliance framework. This will start to drive PPI issues into your framework, thereby facilitating a proactive, self-regulating model.

Chivers recommends that a response strategy be established, with the responsible person being one who understands what the law requires.

“Decide on your corporate ethics policy and define and communicate it, teaching your organisation to look out for problems,” says Chivers. “If and when a problem arises, react quickly and correctly to deal with it and close the loophole. Look for triggers that indicate your processes are not working properly.”

According to Chivers, the PPI Bill will be the catalyst for companies to add value while achieving compliance. They should engage with their customers in the process and use it as an opportunity to build customer trust in the company by highlighting the company’s efforts to treat customer’s personal information with respect and confidentiality.

The following are just some of many opportunities:

There is tremendous advantage to be gained from proactively engaging customers ahead of promulgation, for example:

• Positive customer approvals are more likely to be obtained prior to promulgation and prior to the market being flooded with requests
• Valuable insights can be obtained from a company’s existing customer database now, ahead of customer requests for data deletion.
• Customers will become aware of the fact that PPI  will result in the protection of their personal information, something most  people will appreciate.
• Companies who lead the market in becoming PPI  compliant will gain customer respect and loyalty.

PPI can also deliver many potential positives within a company, to name a few:

• Technology gets the budget go-ahead for  middleware and data warehouses, new SAP modules, data security upgrades, etc, which  add value when linked to the overall business strategy.
• Data analysis of personal information for  purposes of PPI compliance can yield significant useful information around  customers and markets.
• Provides positive motivation to interface with  customers, alumni, potential employees, personal networks.
• Employee files get updated and remain up-to-date.
• Contracts are reviewed and updated and may even  be better than before.

Chivers recommends that the initial step should be a quick  start process prior to promulgation, followed by detailed design and implementation of value-adding initiatives. This will allow the company to gain  momentum and build a platform for future opportunities. Firstly, understand the  extent of PPI impact on customer and channel strategy, brand positioning and  employee proposition; determine possible impacts on people, processes,  technology and systems; and define key data requirements for business  sustainability.

Thereafter, look at the following opportunities:

• Identify value-adds beyond minimum compliance
• Design customer interactions to increase market share
• Realign processes for a more customer focused organisation
• Link to other initiatives such as process streamlining, productivity improvement and employee communication
• Select technology to support more than just data integration, e.g. non-intrusive technology options ranging from cloud technology, to separate software and simple upgrades
• Build the customer focused organisation by digging deeper into existing customer data
• Use an approach that first establishes the organisational needs and gaps before moving to an ‘all ends at once’ implementation
• Adopt a ‘build to last’ approach for ongoing organisational sustainability

In summary, organisations can gain measurable business performance improvements by approaching the Protection of Personal Information Bill as a strategic opportunity rather than an onerous compliance cost. Realising this potential value from the Bill, however, requires a shift in organisational mindset.

“Don’t be limited or restricted by your existing database,” says Chivers. “Use it as a contact list and first cut segmentation, design a meaningful database for future strategy and populate it by means of an automated permission campaign; don’t be restricted to a single tool or methodology – select those which are most appropriate for your needs; ensure your approach is strategic. Include change management in your implementation; don’t be purely focused on data analytics, ensure that your approach is aligned to your business priorities as well as people, process, technology and system enablers.

Chivers goes on to say “Understand how PPI affects your IT, legal, process and security options before jumping on the analysis bandwagon. Analyse the options and consider the best process for your company. There are a number of options, so give yourself the best chance of adopting the most appropriate one for your company.”

Want to learn more about the Protection of Personal Information Bill? Visit the Deloitte Protection of Personal Information Bill website or contact Dean Chivers at dechivers@deloitte.co.za or Daniella Kafouris at dkafouris@deloitte.co.za.

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Any experienced leader knows that little is accomplished by those who try to get things done. That’s because good leaders don’t confuse effort with results. Yet when it comes to security risks associated with technology, where a critical breach can bring a business to its knees, there’s a great deal of trying going on. And not nearly enough doing.

Not surprisingly, many executives today believe their organizations are well-protected. With broad policies in place for technology governance, risk and compliance, most have assigned responsibility for security to their IT shops, confident that their fiduciary and legal obligations are being met. But a closer look at the real risks and threats reveals a different picture. Organizations that take a compliance-oriented approach to enterprise and IT risk may not be managing many of the threats that matter most.

It’s not uncommon for companies to equate compliance and security. That’s what happened recently when a major retailer was hacked, exposing several million debit and credit card numbers to the risk of theft. The company appeared to have a rock-solid compliance program in place, asserting that they followed all the security requirements mandated by the credit card brands and others. But that wasn’t enough. A number of back-end systems were left unpatched, leaving some of their software vulnerable to exploitation. Hackers were able to penetrate the company’s systems despite their most diligent compliance efforts. Thousands of cases of fraud were linked to the breach, exposing the company to legal, reputational and financial risks.

A risk-based approach using a layered defense could have helped prevent such an incident.

Download the full article . . . .  Evolve or fail

We welcome you to visit the Deloitte South Africa Technology Risk Advisory website. If you have any questions or require a more detailed conversation, contact Cathy Gibson at cgibson@deloitte.co.za

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Water is our most precious resource. Its availability transcends political borders. While the challenge for increased competition is global, the issues must be solved on a local level by governments, businesses, non-governmental organisations (NGOs) and domestic consumers, all working together.

The aim of this report is to highlight the top issues that the Deloitte Global Deloitte Energy and Resources Water practice regard as the most important for the water sector. These issues are of course all interconnected with each other and with other resource issues, and should not be considered in isolation.

Rapid growth in demand for for this finite resource is a central theme and is reflected in all of the issues we discuss. The global water sector’s future will be characterised by efforts to manage demand and increase supply. We thank that continued awareness campaigns, more effective water pricing, a better understanding of the relationship between water, energy and food, and technology advances will play an important role in these efforts.

Climate change is also a key theme. It increases the risk of volatility in the availability of water resources and exacerbates the impact of forces driving demand. Unpredictable weather conditions also adversely affect the functioning of water assets and make planning and investment in water infrastructure more expensive.

To meet further demand, trillions of dollars will be needed on a global level to update aging infrastructure and expand water related assets. With government funding and borrowing capabilities severely impaired as a result of the ongoing financial crisis, the private sector is likely to play a bigger role in the water industry in the future. More water suppliers may be privatised, and it may be necessary to find mechanisms that allow water to be priced as a true commodity.

Efforts to demonstrate water stewardship will be a key theme for utilities and water users in coming years. Close collaboration between utilities, regulators and all users of water is required to address the ultimate issue – the scarcity of water resources in many parts of the world.

Download the report . . . . Water Tight 2012 – The top issues in the global water sector

Do you require a more detailed discussion? Contact Deloitte Consulting Director, Shamal Sivasanker, at ssivasanker@deloitte.co.za

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Mining companies today face challenges on several fronts when it comes to addressing supply risk effectively. There are people challenges, which include high turnover rates, a limited supply of skilled labour and service providers, and the logistics around getting personnel to mining sites in remote locations. There are process challenges throughout the mining supply chain that include: limited negotiating power in sourcing and procurement; coordination of complex global distribution networks across multiple regions and modes; a lack of upstream information necessary to perform adequate planning and forecasting; and ineffective processes to assess and quantify the magnitude of various risk types. Finally, there are technology challenges related to poor quality of data and a lack of effective analytical tools to support the modelling and evaluation of risk.

Leading practices in supply risk management address risk quantitatively and strategically, and take an integrated view of risk across the value chain and the enterprise. Strategic risks need to be segmented and separated from financial and operational risks in the current environment. Identifying the key drivers of change can help organisations prepare for changes across different time durations. Core supply chain and supply management capabilities must include an organisation, with the appropriate skills and abilities, charged with managing and reducing overall supply risk. In addition, core supply chain processes in the areas of forecasting and planning, inventory management, strategic sourcing, contract management, and supplier relationship management are a basic first line of defence to combat supply risk.

Those organisations who are more advanced in addressing supply risk deploy specialised risk management capabilities to address the more complex threats posed by regulatory and geopolitical shifts. These advanced capabilities include: focusing on market intelligence by partnering with strategic suppliers to share and evaluate data on market and economic conditions; enhancing internal systems to capture data that supports dynamic decision making; and intelligent risk modelling tools to conduct scenario analysis and optimise supply decisions.

Overall, mining companies today are faced with pressure to meet rising demand for mining commodities in a climate where the cost of supply disruptions is greater than ever. Mining companies that effectively develop the capability to manage supply risk will be better positioned to meet market demand and exceed stakeholder expectations amid volatility and uncertainty.

Download the full article . . . .  A guide to effective supply risk management in the mining industry

If you require a more information on the topic of supply risk management, the South African members of the Deloitte Global Mining Team will be more than happy to have a more detailed discussion with you. Their contact details are Werner van Antwerpen, Manager – wvanantwerpen@deloitte.co.za, Genevieve de Carcenac, Manager – gdecarcenac@deloitte.co.za and Tomek Jekot, Senior Manager – tjekot@deloitte.co.za.

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Any number of pandemic threats such as power outages and floods, pose a threat to your business. The question is: is your company ready?

“Risk Intelligence in the Age of Global Uncertainty: Prudent Preparedness for Myriad Threats” suggests that responding to the threat of a pandemic is not something effectively done in isolation. Rather, it should be viewed in a larger assessment of potential business impacts – such as people, supply chain, and finances – and alongside the development of appropriate risk management plans.

Companies that take steps to improve their shock resilience before an event takes place will clearly have an easier and faster recovery, as well as competitive advantage in the marketplace. This white paper contains essential reading for companies that hope to successfully navigate the business challenges of the 21st century. The stakes are enormous, because we believe organisations that are most effective and efficient in managing risks — both to existing assets and to future growth — will outperform those that are less so.

Download the paper . . . .  Risk Intelligence in the age of global uncertainty

For more information contact Cathy Gibson at cgibson@deloitte.co.za or Braam Pretorius at abpretorius@deloitte.co.za.

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by Coenrad Alberts and Georgina Stubbs of Deloitte Consulting

There has been talk about the demise of Enterprise Resource Planning (ERP), however the ERP industry is thriving. Major ERP vendors are reporting healthy profits and organisations globally are currently implementing or re-implementing ERP systems or going through the planning phase.

The playing field has changed however. There are fewer ERP software vendors and the ERP solutions out there are robust, rich in functionality and stable. Organisations no longer have to make grudge purchases (classic example was the millennium bug) and are a lot more tech-savvy. ERP investments now have to be backed with a solid and sound business case.

This paper provides insight into the key cost considerations of an ERP investment and some of the crucial decisions that should be considered regarding the organisation’s ERP strategy going forward – in order to implement a sustainable, scalable and cost-effective solution that will cater for the organisation’s future growth and requirements.

Here are 8 key drivers to consider when reviewing your enterprise resource planning investment strategy:

1. Software

Select the right solution for the right job.

Vendors no longer advocate ERP solutions as cure-alls. They rather recommend that organisations implement ERP solutions to provide core enterprise functionality and select best-of-breed point solutions to meet specific requirements, e.g. specific billing requirements.

The advent of SOA has made integration of multiple systems easier and more efficient. It is, therefore, often advisable to implement a solution that fits the problem rather than to manipulate both the solution and the problem in an effort to make them fit, sometimes at the expense of critical business requirements.

By carefully selecting a hybrid of solutions that will directly address best-practice business requirements, the initial implementation effort will be reduced, user adoption will be increased and because customised development will be reduced, so will the ongoing cost of ownership.

Investigate Software as a Service offering.

Many ERP software vendors these days offer “Software as a Service” (SaaS).

By subscribing to a SaaS application, rather than purchasing licences outright, you avoid the initial overhead associated with implementing conventional software. You don’t incur the capital investment of a typical software implementation, such as purchasing and maintaining servers, housing them securely, and installing and maintaining the software – an overhead that can be four to five times the cost of the original licence fees.

SaaS applications also leverage economies of scale achieved by “multi-tenancy”, because many customers can run their applications on the same unit of software and even on the same infrastructure, e.g. advances in security and virtualisation make it possible for multiple customers to share databases.

When you subscribe to a SaaS application, you pay a monthly or annual subscription fee. Compared to a traditional software licence, this subscription payment structure can work to your advantage. An ongoing monthly expense is often easier to incorporate into your budget than a large one-time outlay, and if you cancel or change your subscription, you do not lose a large initial investment. And, as SaaS subscriptions are based on metered usage, you pay for what you use.

Another key aspect of SaaS is that you gain immediate access to the latest innovations and upgrades, however the potential downside of SaaS is that you cannot customise the solution to meet your specific requirements.

2. Hardware and Infrastructure

Consider hosting.

Even if you don’t subscribe to SaaS, one option to contain your investment in hardware and infrastructure is hosting, whereby you rent servers and the associated infrastructure from a third party and pay on a monthly basis, rather than investing in the equipment upfront.

Reputable hosting service providers offer holistic IT infrastructure support, meaning that your organisation can have access to a fully redundant IT infrastructure, including disaster recovery facilities, delivered on the latest technology platform and maintained by highly skilled IT technicians, without the associated costs and risks. Service providers guarantee uptime to suit your requirements and often offer other services such as domain management and registration, internet connectivity, 365/24/7 operations monitoring of your servers, physical and information security services, UPS and generator power, daily tape back-up facilities, provision of statistics, reports on bandwidth and network utilisation, fault correction initiation, encryption and LAN and WAN support.

Not only do these services reduce your investment in the actual infrastructure, they also reduce the need for your organisation to have a large IT department with the expertise to service all the different components of the infrastructure, and the availability to provide 24/7 support.

The duration of your implementation is also reduced, as the hardware infrastructure is already in place.

3. Implementation costs

Investigate available industry-specific preconfigured solutions.

By selecting an industry-specific preconfigured solution, you can reduce the impact on your business, the implementation costs and the duration of the implementation, while ensuring that your solution is based on industry best practices. The customisation effort is also reduced because industry specific components are already pre-built, e.g. specific costing models, data templates and load programmes, banking interfaces and workflow.

Quality preconfigured solutions provide organisations with an accelerated implementation that starts with a working and fully pre-documented and preconfigured system, which can be rapidly configured into a productive solution.

These solutions have been developed based on years of hands-on industry experience and are based on best practices which are continually refined over the years.

Choose your implementation partner with care.

Ensure that you have consultants who understand your business and industry and are “business led, but also technology enabled”. Consultants that understand your industry will be able to facilitate design discussions and make meaningful contributions to functional and technical documentation. They will also be better equipped to anticipate and manage scope changes based on a deeper understanding of industry-specific requirements.

4. Training and change management

Ensure that your investment in training and change management provides a real return.

Although it is strongly recommended that you do not reduce the investment in training and change management, it is also important to ensure that the return on that investment adds tangible value to the implementation project and the organisation. Don’t be afraid to ask your service provider for detailed training and change plans that identify clear deliverables aligned to tangible and measurable outcomes.

It is also critical to ensure that you don’t pay lip service to these items and that there is executive sponsorship, without which your investment will be wasted.

5. Ongoing maintenance

Consider outsourcing to meet ongoing maintenance requirements.

By outsourcing the management and maintenance of your applications, you will reduce the need to build, maintain and train a team of specialised and senior application consultants, which is becoming a more cumbersome task as organisations implement a hybrid of solutions, thereby increasing the diversity of skills required.

Ensure that your application management service providers proactively add value through their support services, rather than just react to problems. By providing you with statistics on which types of problems occur frequently, value adding service providers enable you to address those problems at source, i.e. by identifying the root cause – for example: where more training is required or where a different solution should be considered. These statistics can also be used to optimise your support contract by reducing the support hours required over a period, as the solution beds down or your users become more skilled.

6. Process efficiencies

Measure potential process efficiencies.

Effective business process design, based on industry best practices (such as the Deloitte best practice IndustryPrints), is essential to ensure that process efficiencies are achieved and to reap the real benefit of your ERP implementation.

Processes can be measured, costed, benchmarked to similar organisations and then mapped to solutions to identify where real process efficiencies will be achieved, and where manual manipulation, duplicate transaction processing, etc. can be eliminated.

When considering the ERP investment, this tangible benefit should be accounted for.

7. Tax efficiencies

Don’t overlook potential tax efficiencies.

A well-designed, tax-enabled ERP Solution can increase speed, accuracy and data integrity, all of which are important, particularly when working through last-minute updates at either quarter-end or year-end. These improved data collection processes also help companies better manage workflow, which, in turn, increases visibility. Furthermore, it provides greater control over information, and the associated movement or flow of work allows the tax function to be more effective and to report virtually in real time. This makes the organisation more nimble when it comes to business decisions and the related tax implications of such decisions and frees up the tax department to spend more time performing value-added activities, such as strategic income tax planning.

A tax-enabled ERP solution provides opportunities to benefit from tax savings ideas directly and indirectly associated with ERP implementations, such as maximising R&D tax credits and deductions, training incentives, transfer pricing, customs and excise, VAT optimisation and other appropriate strategies.

As organisations redesign processes and install enterprise-wide systems to create a competitive advantage, they often consolidate legacy systems and initiate process improvements that, at best, do not enhance the tax reporting process and, at worst, actually impede access to tax-sensitive information and do not take advantage of potential tax savings.

8. Shared services

Ensure that you implement the most efficient and effective operating model.

A large number of support processes in IT, finance, procurement and HR (including payroll) are repetitive and not unique to the individual business but rather add value through operational excellence, delivering zero defect at the lowest cost. Other processes are more ad hoc and knowledge involved, adding value through maximum benefits at appropriate cost, only when necessary. Both transactional and knowledge-involved processes can take advantage of benefits through a shared services model, either internal or outsourced.

An example of such a model is the Deloitte Mining Shared Services (DMSS) platform, which provides cost-effective back-office process support to mining companies with a need to focus on core business operations and also to create a low, fixed-cost overhead structure.

This service delivery model allows mining companies to co-source and/or outsource transactional and knowledge processes and take advantage of the cost benefits offered by consolidating and streamlining back-office processes. While the shared services centre runs these processes, mining companies retain some functionality based on the individual organisation’s requirements and business case.

Summary

So – far from dying – ERP is alive and well and back on the Executive Committee’s agenda. But the conversation today is very different to that of 10 to 12 years ago. Traditionally, organisations invested time and money selecting the right ERP solution to meet their needs; however, nowadays there are fewer Tier 1 products to choose from – and most of them offer similar functionality with some minor variations in their value propositions.

This means that, while it is important to select the right product (whether an organisation is considering an upgrade, reimplementation or replacement), there are other discussions to be had and decisions to be made. The decisions will have a more significant impact on the initial and ongoing cost of the investment and the impact to the business.

These decisions need to consider all the innovative and varied options available to finance this investment, and derive maximum value, and this is what will drive the business case. And, whereas a robust business case was not a requirement when the implementation of a new ERP was not an option, it has now become critical to justify this semi-discretionary investment.

If you have any questions or require a more detailed discussion, contact Coenrad Alberts at calberts@deloitte.co.za or Georgina Stubbs at gstubbs@deloitte.co.za

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Rapid technology developments in wireless connectivity and mobile devices marked the beginning of the mobility revolution. Next came the apps renaissance, when intuitive, engaging pieces of software, tailored for smartphones and tablets, began to change our day-to-day lives. The revolution has now reached business. Many organizations today find mobile initiatives popping up in every business unit, in every region and in every department. The floodgates have opened. Now what?

For some, the path forward might begin by pushing existing solutions and processes to mobile channels, without blue-sky thinking of how business might change if location constraints disappeared. For others, disciplined experimentation can reveal compelling scenarios, which can lead to doing traditional things differently, as well as doing fundamentally different things. When left to its own devices, each faction – individual, department or organization – will struggle through the learning process towards its own vision of mobile enlightenment.

In this chaotic environment, CIOs face three challenges. First, they need to build capabilities to deliver intuitive, user-friendly mobile applications that can meet or exceed expectations set by consumer technologies. Mobile delivery requires new skills, new mindsets, new application architectures, new methodologies and new approaches to problem-solving. Above all, solutions must focus on usability – design-led thinking with mobile mentalities. Scope should be reined in to create well-defined, elegant solutions that address explicit problems, not broad collections of functionality. User experiences should be mobile-centric, based on touch/swipe/talk, not point/click/type. Leonardo da Vinci’s description of simplicity as the ultimate form of sophistication might be a foreign concept to many central IT departments today, but it is also a prime directive. As mobile becomes increasingly important in customer and employee interactions, the complexity of applications, or apps, will naturally grow with heightened integration, security and maintenance needs.

The second challenge for CIOs is to help the business deliver innovative applications with significant potential for positive disruption. Experimentation can be a good way to show progress and help crystalize opportunities, but many use cases remain uncharted. Until users interact with an early prototype, they may not know what they want, much less what they need. CIOs can become beacons of big-picture thinking and tactical adjudication by embracing the proliferation of mobile initiatives, and accelerating the mobile adoption learning curve across the organization.

The third challenge is that mobility introduces yet another level of complexity that CIOs must manage and support at an enterprise scale. What’s an effective way to deal with pressure to get behind each “next big thing”? Should employee-owned devices be allowed on enterprise networks? And if so, what data, applications and services should they be permitted to access? How should IT practices change to support mobile applications? True enterprise-class mobility requires governance, security, privacy and compliance policies – with effective management of mobile devices, enterprise app stores, mobile middleware and more. The trick is to build a solid foundational infrastructure without throttling the business. As you likely know, the business can’t – and won’t – wait for a fully formed mobile enablement roadmap to be defined and put into place.

If you have any questions relating to this article, or require a more detailed discussion, contact Kamal Ramsingh (Head of Technology – Deloitte South Africa) at kramsingh@deloitte.co.za

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Is your organisation’s strategy yielding results?

Most organisations are currently seeking growth, be it growing into new premises and new markets (particularly across Africa) or growing in terms of adopting new methods of working, that requires a mind-shift in how their workforces operate in an increasingly connected and digital world.

With regulatory, technological, consumer behaviour and workforce changes afoot, organisations are increasingly finding that getting to the ‘heart of the change’ is of paramount importance to drive sustainable strategy realisation. Strategic projects are the engines of growth, while people are the engine of projects, says Vanessa Vermeulen, Executive Lead at Deloitte Consulting.

Deloitte has experienced that most projects fail due to people problems more than technical problems. People within large, complex organisational structures are often exposed to organisational processes and policies that are counterproductive, which in turn makes them change apprehensive. Programme Management Offices (PMOs) are often perceived as adding administrative costs and bureaucracy without a clear correlation to business benefits. Furthermore, the ability to achieve strategic alignment and integrate results from strategic imperatives has proven to be very challenging.

Results Management Offices (RMOs) strip away the inessentials, minimise the hierarchical approach to projects and embraces communities of practice (COPs) to develop pragmatic methods that are consistent, measurable and effective. The RMO provides a foundation to deliver integrated and strategy-aligned programmes and projects, through improved strategic and tactical decision-making, as well as greater transparency to business benefits and decisions. The project managers remain responsible for execution; however, the RMO will actively support results-driven execution by embedding strategy into operations and budgets, managing the critical path and outcomes, ensuring organisational readiness and measuring shareholder return.

If you would like to discuss the Results Management Office in more detail, contact Vanessa Vermeulen at vvermeulen@deloitte.co.za. If you want to learn more, download the Results Management Office infographic and the “Moving from Process to Outcome Management” article. 

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