ERP Redux : Part I; The Case for ERP or is ERP Really Dead?
The decline of ERP has been widely proclaimed, however both market and “real world” evidence suggests that “the rumors of ERP’s death have been greatly exaggerated”. According to Gartner, the global ERP market grew at 10% in 2018 to $35BN with projected growth forecasted at ~9% CAGR through 2024. Companies and organizations across all market segments and industries are embarking on new ERP implementations for a variety of reasons, both IT and business-led.
There are several factors driving this ERP renaissance:
1. Green field or reimplementation of ERP by global enterprise companies:
During the ERP boom of the ‘90s, thousands of companies around the world undertook major ERP projects, many with mixed results, often resulting in significant cost overruns, missed expectations, or in some cases (we all know the horror stories) major business disruption. Even those ERP implementations that were deemed moderately successful resulted in highly customized platforms with limited flexibility. Organizations have struggled over the years to complete technical upgrades for these legacy ERP instances just to maintain vendor support, however, these highly custom ERP platforms have major functionality and use-ability gaps resulting in sub-optimal processes, lost opportunities and frustrated users. This situation opened the door to vendors such as SalesForce.com, WorkDay, Coupa, Kinaxis etc. to provide “best of breed” solutions to address sales productivity, HR,CRM, supply chain and procurement capability gaps. Shadow or business managed IT application also exploded as techno-savvy business users implemented “one off” solutions to address business pain points. These be-spoke solutions have created legacy sprawl, fragile architecture, complex integrations, and data silos – introducing business risk and higher-costs. IT organizations are left struggling to maintain this complex landscape and have little capacity or funding to deliver new business capabilities. A standardized ERP platform can enable application rationalization significantly reducing IT costs.
2. Vendor Driven – upgrade or risk losing support and maintenance:
While the large ERP vendors (SAP/Oracle) have introduced new platforms, and/or cloud solutions and are enticing their customer base to upgrade to take advantage of these new capabilities, the threat of losing support and maintenance is becoming a bigger stick.Although vendors are playing an important role in driving new ERP activity, the practice of ending support for older versions of software puts customers in a tough spot, seemingly with little leverage, and actually creates opportunities for new players. When customers feel trapped, they still have choices – the key is to make decisions before there is a crisis. Both IT and business executives fail to find this rationale compelling as there are several viable third-party ERP software support options, and they may have adopted a “surround and squeeze” strategy of surrounding the legacy ERP system with best of breed platforms as noted above. Effectively minimizing the ERP system as a critical platform.
Factors #1 and 2 are often driven by IT leadership, however, CIOs find it very challenging making the case to their board and creating the burning platform for a multi-million $, lengthy and disruptive ERP program on these factors alone.
3. Digital Transformation:
An aging, heavily customized ERP system is often a major blocker to a firm’s digital transformation effort, while a modern ERP platform can serve as catalyst for process optimization. A global ERP platform is the central nervous system for your organization and impacts every “end-to-end” business process in some way. Understanding the limitations and pain points of existing systems and processes is a critical step in a digital transformation. Some focus areas include:
Optimize internal operations: improve productivity through process simplification and standardization. A standard ERP platform can serve as a foundation for the implementation of shared services or outsourcing.
Improve customer experience and engagement. Integrate ecosystem of customers and suppliers with streamlined transaction flow, proactive intervention and access to data.
Enhance the employee experience by eliminating redundant process steps, improving usability and enabling “on-demand” access to the information required to perform their job.