ERP is dead . . . Long live ERP

Dinosaurs. Edsels. Consumer-grade Betamax players. All long gone. Is ERP about to wind up on the dust heap of history?

For executives disillusioned with the problems created by cumbersome enterprise resource planning (ERP) systems, it certainly seems that these platforms – once hailed as work-saving technology must-haves by the IT world – are on their way out.

What will replace the traditional ERP model? Nothing less than a completely reimagined ERP – one that takes full advantage of advances in cloud services and artificial intelligence to maximise resources, provide actionable data, and restore confidence in the ability of ERP to truly smooth out business processes across departments.

Customisation: ERP’s double-edged sword

ERP’s biggest benefit lies in providing integrated applications for common back office functions such as technology, human resources, and finance, as well as for production processes and manufacturing. All the facets of a business’ operations, such as project planning, product development, sales and marketing are part of a single database tied to an ERP application accessible through a user interface. Best of all, the enterprise has total governance of the system, rather than entrusting its critical data to servers on the public internet.

The ability to customise ERP to a specific enterprise’s operational needs is its most attractive feature, and one on which the biggest ERP vendors have built billion-dollar businesses.

That customisation, however, is also the traditional ERP system’s biggest weakness. Making sure an implementation meets a company’s requirements takes careful planning and a measured approach, which increases the turnaround time on new implementations, maintenance and updates. Most legacy ERP systems average just two updates per year. A decade ago, that pace may have been fine for most enterprises. In 2018, however, it’s far too slow to keep up with advances in technology.

That makes many traditional ERP systems nothing more than “hostageware” – software that holds a company hostage because a lot of money has already been sunk into it. An ERP system that can’t be updated quickly or cost-effectively can become a bottleneck, making it difficult to update the entire process and endangering future implementations.

What’s at stake?

Faced with the stark cost of current ERP systems, enterprises may be tempted to abandon or forego implementation and turn to a patchwork of third-party back-office management software, where they may have less control of their data and only surface-level business insights.

That in turn can put the enterprise at risk of more costly scenarios: misuse of customer data or data breaches, issues with government-sponsored contracts, and more.

For SMEs especially, making the right choice is important. That realisation can paralyse many small business owners, leaving them indecisive about which ERP to go with. And businesses need to be prepared to take the leap, or they’ll land short of their goal.

The future of ERP

Knowing what’s at stake has led a number of ERP providers to use the most promising advances in cloud technology and AI to solve many of the issues dogging traditional ERP.

These new generation platforms can reside securely on remote servers and take advantage of the increased computing power offered by dedicated facilities to give enterprises a real-time look at their data, along with AI-powered business intelligence.

And it's these next-gen ERP systems to which businesses are turning. A 2016 study by Panorama Consulting Solutions found 46 per cent of organisations were implementing new ERP systems to replace out-of-date ERP software, and 20 per cent were implementing ERP for the first time.

ERP providers are continually adding new features to make their systems easier and more attractive to use:

More device integration: ERP systems will be accessible by smartphone

Better business intelligence: Modules will not only store data, but provide deeper insights into that data

Internet of Things integration: The addition of IoT sensors will bring a raft of new data into ERP systems

Better automation: Repetitive, time-consuming tasks can be automated more quickly with next-generation ERP

Fragmented implementation: Multiple-point ERP solutions can be implemented in a shorter time, at lower cost and offer lower risk because of their modular nature

Many next-gen ERP system providers make the transition less painful by migrating the system as separate components – for example, separating finance, HR, and sales and marketing functions – shifting each component into a cloud-based system over time. This can cut CAPEX and allow the enterprise to amortise the cost of the shift over several months, if they desire.

To top it off, the best talent in the industry is bringing innovation to cloud-based ERP systems. Many are part of smaller teams where they can use precision skills to tackle difficult problems in just one component of cloud ERP, rather than general solutions at the enterprise level. All in all, the next generation of ERP may indeed deliver on its predecessors’ glowing promise, and that’s great news, but implementation and the technical competency around ERP will be more critical than ever.