The future of ERP
The majority of legacy enterprise resource planning (ERP) investments fail in today’s digital era. They don’t move quickly enough, or have enough intelligence built in, and are riddled with too much complexity to meet the expectations of today’s demanding customers in our ‘digital- first’ world.
In reality, digital transformation is not easy, and most businesses are complex, have intricate value chains, and yet need a simple and clear path to digitalisation, says Emma Murray, COO for APJMEA at IFS. “Many companies are still carrying out pilots rather than consuming digital technology as part of their everyday operations. Furthermore, the way organisations consume technology has changed; they’re no longer looking for a single provider as different areas of the business will make separate choices and opt for best of breed solutions. This has created a need for composable architecture and building applications in a consistent and understandable way. The future of ERP is not integrated, ‘stitched together’ products; it is the simplicity of one single solution with functionality that can be turned on and off as and when an organisation needs it. Organisations also recognise the potential burden of technical debt within their businesses and this is also shaping their decision-making in the evaluation of new technologies. Using old applications costs too much – organisations want ease of deployment, they want ease of use, and they want lower total cost of ownership.”
Looking ahead, ERP will have a greater focus on the customer, says Myen Pather, business manager: ERP at Decision Inc. “The transition will bridge the gap between improving backend operations to customer demands. There will be a greater need for materials handling, stock management, manufacturing, and distribution to be flexible yet efficient as customer needs change. ERP solutions will move to becoming more intelligent with predictive features and functionality to aid business owners in marking company decisions. In addition, cloud adoption is on the rise and ERP is following suit. Companies are favouring cloud with SaaS options to reduce in-company ERP maintenance. Post-implementation costs (maintenance, updates, disaster recovery) have regularly hurt business with escalating system maintenance costs. SaaS options provide hosting, software maintenance, and disaster recovery at lower monthly costs. Also, keep an eye on the inclusion of blockchain technology into ERP systems. With an increase in online purchases, distribution and tracking systems become more important and blockchain solutions will be the way forward.”
Archaic environments were clunky and restrictive, and that not only made working cumbersome, but also kept users from becoming ‘intelligent’ users of the system.Myen Pather, Decision Inc.
Alex Pryor, head of Digital Innovation at iOCO, believes that the future of ERP lies in a broadly integrated workforce management solution that can adapt to meet the demands of digital organisations. “What every company should be working towards is a self-contained system that offers a single view that makes it easier for organisations to work smarter and faster. Organisations try to make their ERP systems do everything. However, in an integration-led world, you don’t have to make the system do everything. Instead, bring relevant data and insights from other best of breed systems via API integration. This gives you the flexibility to choose products and services that truly meet your needs, and the adaptability to change them when you need them, while still giving a single view of your data. In fact, an API-first approach would allow the business to easily test what works and what doesn’t, and be agile enough to add to the functionality of the ERP system as it’s needed, without having to do a massive implementation,” she says. “Currently, organisations’ biggest pain points when it comes to ERP solutions include trying to bastardise the system to be something it’s not in order to get the functionality they need. A modular approach would not only make this easier, but help with another common challenge – change management. However, another common issue is that companies embark on their ERP implementations without clarifying their business requirements. While the easier customisation offered by an API-driven approach will go some way to mitigating this, businesses should ensure that they establish their business requirements from the start.
So how does ERP need to adapt to meet the demands of the digital organisation? According to Pather, digital organisations have several key directives, like being efficient, being flexible, creating immersive customer experiences while being available 24/7.“ERP integration between systems such as CRM, social platforms, and automation will be vital for data-driven companies. A single view of a customer’s needs matched to the granular level of operations. Also, improving system experiences, an enhanced reach into ERP systems is another avenue that digital organisations will focus on. Customers will want real-time tracking of their orders and services while employees will want to work from anywhere and access to business systems must be readily available, and across time zones.”
Cloud, AI and mobile app development are changing ERP too. Murray says there’s an obvious benefit of shifting costs from capex to opex with a cloud solution ; there’s nothing new in that. “What is new is the opportunity for customers to enjoy the same functionality with their cloud deployment as they would with an on-premise solution. We believe that more value can be derived in the cloud, but we recognise that this may not be possible for customers operating in regulated industries. Therefore, it’s important that organisations still have a choice, choice of deployment model, and portability between the two. Organisations want to be able to embrace new technologies to differentiate, diversify and better serve their customers. This means making it practical and affordable for customers to take advantage of technologies such as machine learning, augmented and mixed reality, AI, and IoT, ready to use ‘out of the box’. And even if intelligence is artificial, human comprehension and discretion must be organic. So, ERP vendors need tools to make explainable AI omnipresent in the system, shortening time to value and baking in ‘explainability’.”
Pather says cloud enablement has been supporting the digital transformation for many organisations over the decade. “It’s not new, but the increased adoption is. Coupled with AI and machine learning, the intelligent business application ecosystem is morphing to become more ingrained on how businesses operate. ERP has always been the centre of an organisation’s business applications suite, so it’s obvious the impact of surrounding intelligent development will influence the direction of today’s ERP. Cloud-based ERP solutions has extended the reach of employees, from the C-suite to low-level processors of systems, and has further broken down the global access barriers for central processing. Chatbots, automated mailers, and customer insights are becoming a norm and ERP systems need to incorporate this to be part of the connected business ecosystem. This reduces the reliance on a larger workforce for routine tasks.”
The future of ERP is not integrated, ‘stitched together’ products. It is the simplicity of one single solution with functionality that can be turned on and off as and when an organisation needs it.Emma Murray, IFS
The ‘data first’ organisation is also having an impact on ERP solutions. Murray says getting better data is key to eliminating the unknowns of a digital transformation programme. Across the board, organisations are looking to improve and simplify their ‘moment of service’, which means they need to take action to improve reliability, reduce time to market, and streamline core business processes to better manage costs. This means a profound shift in the way organisations manage themselves and create visibility to orchestrate customers, people and assets. Decision-making is critical, particularly during an economic downturn or challenging business environment, and having accurate, timely data is vital for making business decisions.
Although we are swiftly moving to a data-led world, this does not mean that you have to have all of your information sitting in a single place, adds Pryor. “A good BI solution will ingest the information sitting in an ERP system and all the other integrated solutions, and give you an insightful view across all your data sources. But – and this is a big but – while you can get better insights faster with data analytics, your results are only as good as the data you put into it, which means that you have to trust your data. Right upfront, you have to know what your ‘golden record’ is, and understand that the first step to a new ERP might be a massive data clean-up exercise. Data-first does not mean you have to have all the data consumed by the same system. As with all other data-dependent implementations, it’s important to remember ‘garbage in, garbage out’, and ensure that the data being used is not only clean, but relevant to what the business is trying to achieve. Finally, the most important thing for organisations to remember is that regardless of how tech improves and develops, any ERP implementation will be made or broken by the people involved. Get buy-in, choose your champions, manage the change in your organisation, and communicate, communicate, communicate. The world’s best solution is useless if people don’t use it.”
Taking data and converting it to business intelligence and knowledge is the state of play for today, comments Pather. Business owners want to invest in intelligent systems where an ERP can predict customer and supplier needs based on historic trends and patterns. Understanding customer needs and supplier processes is dictating to ERP systems to be able to interpret data and provide the necessary views to enable faster decision-making. With most companies being able to transact on a global scale, the rate at which data is digested and presented back is absolutely key in competing at the forefront of industries.
In terms of how ERP systems are being consumerised, Pather says these systems have significantly evolved over the last decade to allow users to work in a more user-friendly, connected, functional environment. “Archaic environments were clunky and restrictive, and that not only made working cumbersome, but also kept users from becoming ‘intelligent’ users of the system. The integrated/connected ERP systems allows users to be more in control and able to track their own transactions and also have 360 views of their departments. And as ERP systems evolve, users will want a more holistic view of their transactions, for decision-making and future planning.”
Gartner predicts that by combining a seamless customer, employee and user experience to transform each business outcome, by 2024, organisations providing a total experience will outperform competitors by 25% in satisfaction metrics for both customer and employee experience, says Murray. “The movement towards a total experience should be the single most important consideration for any company today. Think about the experiences you’ve had with companies you buy from, and what makes certain ones more special than others. Think about how you judge them, and, importantly, when you judge them. Think about the moment you unboxed your new smartphone, the moment your last flight landed on time, or perhaps the moment you picked up a new car. They are all different scenarios, but the common denominator is that there’s a point in time when a company needs to bring it all together: when the supply chain works effectively, the choices in materials are paying off, the production process is delivering as expected, and, of course, the moment when all after-sales elements need to kick in. These points in time are the moments of service for customers, and the moments when you are of service to your customers. Given the complexity inherent in their delivery, businesses need to ask themselves if they’re properly equipped and capable of delivering those moments, as well as what success and failure look like in this context, and what distinguishes them from each other.”
* This feature was first published in the June edition of ITWeb's Brainstorm magazine.