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Tesla CIO Builds ERP In-House in 4 Months, Says No Time for ERP Upgrades

on November 6, 2013

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On Friday, CIO Journal reporter Rachel King elucidated a trend in the enterprise ERP space that has many CIO’s rethinking their approach to complex systems development. For decades, ERP giant SAP has been the go-to vendor for these implementations, particularly in big auto and manufacturing. The post raises the question: is the ‘Buy’ option in your Build vs. Buy decision really worth it anymore? “It can take more than a year and millions of dollars to roll out SAP software because of all the integration required,” explains Tesla CIO Jay Vijayan. Instead, Elon Musk – the man behind SpaceX, PayPal, and now Tesla – reportedly told Vijayan to build it himself.

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This thought process is coming out of organizations that don’t have time to dredge through multi-year, multi-million dollar configuration projects. While the ERP giants certainly have their place in enterprise IT, smart CIOs are choosing in-house development for strategic and differentiating projects in order to avoid technical debt, and get their system to market faster. In this case, what could easily have taken over a year to implement took only 4 months. Using the right technology, the notion of a 4-month ERP extension or even an extensive upgrade, is certainly plausible. To put it kindly, enabling quick innovation isn’t what SAP is known for, and anyone who has looked to upgrade their ERP system in a pinch knows they better either have cash to burn or a very forgiving deadline.

What I think is really exciting here is that Elon Musk, one of the most well-known innovators of our time, is getting talked about for building a mission-critical system in-house in order to be more agile, rather than conforming to the traditional Buy-and-Configure method. This build strategy is rising up out of the trenches following a decade-long war between imperialistic ERP vendors. Leave it to Musk to be one of the high-profile first-movers in the crusade. He certainly isn’t shy when it comes to telling the media what he think is or isn’t possible.

In response to Box Inc CIO Ben Haines’ warning about trying to scale a home-grown, light-weight ERP system, Vijayan says “I’m super confident that it’s going to be able to scale very well” and that “It’s now one of the best systems we have.” My guess is that most CIOs say this about their latest big-impact project. That being said, we’ll have to wait and see what happens at Tesla down the road. We do however have to keep in mind just how much scaling Tesla plans to do. To that end, I’d ask – why buy the ERP system GM needs when you’re Tesla? To me, it sounds as though Vijaya built what he needed, not what the industry deemed appropriate.

King further explains, “Because Mr. Musk made a clear decision, it also helped Vijayan get immediate cooperation from business leaders.” He demonstrates a seriously underrated influencer in big software implementations that we frequently see at Mendix: top-level business buy-in is as important, if not more, than any one team’s capacity to build software. Cutting through red tape and aligning business needs from the start is the difference between a tediously long project that almost inevitably fails and a quickly accelerating burst of output that propels the business forward.

Business leaders can really learn something from Musk, the world-renowned rocket scientist: you need to put power behind a project if you want it to take off.

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  • inder sharma

    Musk is very smart to hire only the best. Keep it up Vijaya. Indian are proud of you.

  • BadDog40

    I compare this to being your own attorney at your own murder trial because you think you’re the smartest guy in the room.

  • Hurrya

    This is big news, Tesla will disrupt one more industry.Things have changed radically since the 1980s when SAP started its ERP system. New Languages, Tools, Components and methods make building software apps far more predictable and a lot easier. This subject deserves more in-depth analysis, it could be a game changer for the IT industry.

  • What does SAP specifically know about the re-invisioned ‘electric-infrastructure’ car marketplace that Tesla senior staff and Elon Musk doesn’t?
    Your smartest guy in the room argument smells like a ‘paid-for’ SAP fan boy jab… or perhaps just a pretty dumb comment from a lawyer (ROFLOL).

  • perilun

    Good for them! When COTS (Commercial Off The Shelf) becomes very complicated and you only use use a small fraction of that complexity for what you need then building, especially today, do it yourself is a real option to consider. With ERPs you really need to adopt them as your architecture and process … trying to adapt and integrate is expensive and risky. But I don’t see this as a product space for Elon Musk to get into (pun intended). In fact the build-your-own-ERP means you have a small A-grade team ($200K/year programmer/architects) great tools, a simple but scale-able architecture, good software libraries and a focused mission. You don’t end up with a system that is easily to translate This is the Musk philosophy applied to an ERP project.

  • Matt

    I second that. Musk is smart, and he achieves outrageous things through innovation, guts, intuition and going against tradition. Look at what he has achieved in 2 decades that is real innovation and compare that to what the ERP guys have done. We should look to Musk to tell us how to build and deliver, not consultants and not monolithic systems.
    Personally I think he is a heroic figure in a world full of people and business leaders without foresight, courage or innovation. The world needs more Elon Musks.

  • Spot on. Analogy 2: Brain surgeon who decides to build his own stereotaxis. At least he could have bought components from here and there. I’d be rethinking a Tesla investment. Microsoft, who has many of the components needed, bought SAP.Oracle bought several companies and developed their apps over years to make it happen.

  • The guy in knickers

    musk for prez!

  • Dzydvl

    This is a phenomenal idea, even though it would eventually put me out of a job. I’m a technical consultant that deals with JD Edwards Enterprise One. I will admit it it’s not nearly as complex as SAP, but since Oracle bought it out, the price has gone higher and higher, while support has shot through the roof for mediocre support t best, as while trying to cram the oracle brand into it, whether it fits or not, whether it needed it or not, and worst of all we all suffer while Larry Ellison gets rich.

  • Jon

    THIS IS NOT A NEW IDEA!!! As a CTO of a tech company for 13 years, we always look for ways to get what we need as cost effective as possible. Thats just good business. AND more often, the CEO always asks me if this is something we can do in-house. Thats his job. We run a very lean office with few having anytime to work outside of our current core business. Sometimes we can develop in-house, sometimes we can’t. However, If a company has resources to develop a large scale project in-house that is outside of their core business model, I will question the companies leadership and where financial resources are allocated. Investors should take note of where money is being spent. Tesla is not profitable at this time. Tesla is still living on VC money.

  • Dru Flex

    Don’t we all know that ERP systems are overly bloated and broken into hard-to-configure modules because it improves the solution provider’s revenues? Any system honestly architected in 2014 will be infinitely more efficient than the incumbent dinosaurs. I have no doubt Musk will slay them effortlessly.

  • All this shows is that the major ERP vendors are not agile, flexible innovators anymore. ERP systems constantly paralyze business performance and hold organizations to ransom. It’s astonishing that over 15 years, that these top end providers don’t have “templates of industry” success to deliver to the vertical markets. However on the other side, I cannot recommend “building your own”, as a business your business is building a brand not a technology platform. It appears there is room in the middle for ERP based on a scaled platform, but who will fit the mould.

  • David, your ‘ransom’ comment reminds me of a keynote at Mendix World 2012 by Ron Tolido (Capgemini CTO). He compared big rigid enterprise systems and IT’s relationship with them to a form of Stockholm Synrdom. They’re held captive by the system, but become entrenched in maintaining and /caring/ for them.

  • CaptD

    One thing that this article leaves unsaid, is that the CIO in this case is really a great CIO and not “just” someone given the CIO title that was appointed because he/she is friendly with the President and/or Board of Directors.

    If other Companies had to “Self-Build” we would see an entirely new breed of CIO, that were far more expert at “Hands-On,” and that would help re-energize US Companies, who are now being held back because they are tied to mediocre “one size fits all” software, which effects everything they do from Customer Relations to their Bottom Line…

  • I couldn’t agree more. Right now Vijayan is a rockstar CIO – the kind companies like Tesla need to achieve their ambitions. I’m hoping that he inspires that new breed of CIO, people who want to really be a strategic offensive player for the company, rather than an order-taker/IT maintenance role. We had a webinar on this topic recently, here is the recap: http://www.mendix.com/blog/webinar-recap-cio-paradox-battling-contradictions-leadership/

  • CaptD

    You and your Company nave your work cut out for you since I had never even hard of Mendix.com before this Tesla article!

    BTW: I hope you are a “rockstar” since I sent you a tweet with a BIG idea for you to consider and hope to hear back from you.

  • I’m not sure I fully understood your tweet! Please do explain further. : )

  • CaptD

    Have Mendix start doing for people what you are now doing for Companies, then you will model the way toward the future for all of US.

  • Seer Clearly

    This article leaves the biggest question unanswered; HOW did Vijayan do it? I’ve rolled out a number of ERP systems and have been able in the last few years to do it with either a commercial or open source BPA engine (business process automation engine) or more recently with BPA/CRM/ERP engine from a small company in the Bay Area called Agiloft. However, this was not from “scratch” but rather leveraging extensive automation tools built exactly for this task, so that things like scheduling, process automation, user interaction, and historic data storage were already available as building blocks. With these tools, the challenge becomes defining what you want them to do, instead of figuring out how to get them to do it. What I can tell you is that in 4 months, even if you complete the roll-out, you will have missed a lot of essential features or done things in ways that upset your users: a few iterations to fix the system are still required, so you can expect the “1.0” release – the first one people like and use productively – will still take close to a year to achieve.

  • jbrunner007

    $500k a year Perilun for the A-Grade Team members in 2014 🙂 otherwise great comment.

  • jbrunner007

    Well said! imagine the glutton of $375 and $575 an hour “Project Architects” the local SAP partner would have billed in there.

  • John

    You obviously aren’t a software developer, or you’d understand that choosing to build the exact tool you want, in house (instead of licensing a set of generalized tools built by others) is not at all comparable to being your own attorney.

  • John

    Yes, thank you for posting this. I don’t understand these apologists on this page. In house code that does exactly what you want it to do, and no more, has so many advantages over using providers who have made an art out of bleeding those that have become dependant on them.

    > I have no doubt Musk will slay them effortlessly.

    Well… that part may be wishful thinking. 😉

  • John

    >> However, this was not from “scratch” but rather leveraging extensive automation tools built exactly for this task

    I assumed that this is what they meant. You and I would not consider this ‘doing it yourself, from scratch’, but when compared to buying off the shelf, this approach is often called (by some people) ‘doing it yourself, from scratch’.

    I mean, if you are going to “make dinner at home” instead of going out to eat, does that mean you have to plant a garden? Its semantics, but obviously he didn’t write *everything* himself.

  • Joleen Allis

    This story is the perfect answer to the question – “why do your customers use you?” Our technology at the company I work with enables this type of development for organizations. It is a succinct answer to why does Triumph/Coke, etc. want your products. We have a toolset that makes this possible for “mortal” IT organizations. We make it possible for them to build onto their existing tools in a robust way.

  • Alok Ahuja

    Elon is a true visionary! While large COTS ERP systems offer many features and functionalities, there are only limited features and functions an organization need for their needs. Reality is that under pressures of aggressive selling many CIOs end up buying more COTS technology than what is needed, thereby adding to inefficiencies. With over committed promises and with limited ‘holistic’ consulting expertise most COTS ERP engagements go way over budget and are often plagued with excessive and unnecessary customizations. With the time and effort spent in customizing and configuring to the needs and then upgrading, it is sometimes better to build solutions ground up. Hats off to Elon and Vijayan for making this bold and rational decision!

  • mattpaul

    As an SAP Staffing Specialist since 2002 and CFO for a global SAP Implementation firm before that, I can say that I have NEVER seen any SAP rates approaching $575 and hour — I routinely place SAP Architects for 20% of that $

  • mattpaul

    The days of multi year multi million implementations are ending for SAP. Today, in my staffing space, we see more use of the pre configured client or so called Industry Solutions ( IS- ___). These save both time and money. I Liken the SAP preconfigured client approach to buying a suit off the rack and having a fine tailor custom fit it to the customer so it works vs picking out an expensive piece of fabric, and having a tailor make it from scratch…

  • cheesewhiz

    I’ve worked with SAP off and on for 15 yrs. I hate it…with a passion. Overbloated and inflexible don’t even begin to describe the monstrosity that it is.

  • John Parker

    Actually it is. The ERP backend is about financial transactions and proving to auditors your numbers. A benefit to the ERP players is that auditors can understand those systems and so focus on your specific numbers and setup instead of decoding your system first then verifying your accounting practices and entries. I also heard SAP remained the financial back end to their internal system, I wonder how far past the 4 months quoted here that it continued to be and if it is still the case. I also wonder how crappy the other systems they may have are if this is the champ.

  • Dieselox

    PLEASE open source that ERP. We use an Oracle based client that suuuucks. We spend more time usimg workarounds than using the system itself.

    My life is spent linking excel spreadsheets to combine data that is arbitrarily segregated, just to try to get more money out of us.

    We are a relatively small company, 200 people, 60M/yr in sales, but we manage 15,000 part numbers to create 5000 sales parts. Change management is choking us.

    We have few people who could ever hope to build our system, an they are all over worked just keeping everything going. We barely have the competece to use the system we have.

  • BlackTalon53 .

    I am not from the industry and the article didn’t say a single time what an ERP actually is .. it would have been nice if the article had been intelligible outside an arcane circle of experts …

  • Lee Antoine

    Hello Steve Jobs!!!!

  • ex-IT guy

    I was down-sized out of the IT industry several years ago, but I was an onlooker to to a fairly large-scale SAP implementation. The way the project was sold was that the SAP package incorporated “best-practices” from the manufacturing industry and would tranform the business. Well, it would have if they would have allowed it to! Rather than changing their business practices to make their business better, extensive ABAP customization was used to transform SAP to the existing business practices. So in the end, what they ended up with was a very expensively customized system, based on SAP, that did not take advantage of the improvements SAP had to offer. Anyone who has worked with these types of systems also knows that, sooner or later, because of a myriad of factors, upgrades become necessary. Upgrades of a rather generic (minimally customized) system can be fairly cut-and-dried. However, when huge amounts of customization are involved the amount of labor and schedule time involved increase almost exponentially! I was involved with testing during the migration/upgrade of a much smaller system and we had a small group devoted just to testing the customization to make sure it still worked. My advice to those considering COTS products is to consider whether how much you are willing to change your business to match the standard product. In the end, there is not a lot of difference between the costs of managing a totally custom system and managing a COTS, totally customized system.

  • pjk

    oracle runs on Excel spreadsheets!

  • Mike Hubbard

    Screw SAP! Go NetSuite! Implement it in months not costly YEARS!

  • TP

    Matt I agree with you. I have never heard that number/hour in 20 years of my recruiting career. Yes SAP consultants are expensive but not outrageous like these numbers. I have heard big guys (Deloitte/Accenture) charging $300 or more however if you are smart enough you will use these wisely and not for the entire duration of the project

  • Esther George

    True. Wait until all ‘in house’ experts leave. They will be up a creek.

  • ClnD

    “Hands-on” – you are right on.

    Not only CIO, but also CEO. Most are either 2 types – excel sheet types (manage by the numbers, don’t have a clue how to actually improve the business – depend on hired hands), or powerpoint types (strategy etc.).

    Its the hands-on CEO who can take such a courageous decision, because only these guy actually “know” whats happening and what to do. The excel and ppt types will hedge their bets with analyst recommendations.

  • chan mouli

    Thanks for your details and explanations..I want more information from your side..I Am working in erp development companies in chennaishould you need for any other clarification please call in this number.044-6565 6523.

  • Tony

    Amazon developed a lot of Systems in house and in doing so created new revenue streams in the process outside of their core business. I know its like comparing potatoes to apples but you never know what could come of it