ERP – isn’t it becoming a bit “old school”?
An ERP system is a broad, wall-to-wall IT solution capable of supporting most of a company’s business processes. Everything from finance, procurement, logistics, sales, production, HR, and more—brought together in a single integrated IT platform. Data entered in one place flows throughout the system, allowing its impact to be seen elsewhere. One unified user interface, one data model, one security framework, and so on. This makes a great deal of sense in most companies where workflows and data cut across functions and departments. Such systems are often referred to as “suites.” In contrast, “best-of-breed” systems typically support a smaller number of processes within a specific functional area - for example, HR, payroll, time registration, or reporting. Best-of-breed solutions place different demands on integrations and data models, but they can often solve the specific task more effectively than an ERP system.
The term “ERP” has existed since the mid-1990s, when Gartner introduced it as Enterprise Resource Planning - referring to IT systems that cover all company’s resources. But already in the 1980s, we saw the first ERP-like systems in Denmark and internationally, even though they were not called ERP. Systems such as Concorde and Navigator—developed in Denmark for small and medium-sized businesses—are good examples, and SAP also emerged with its large mainframe ERP solution, R/2. Given such a long history in a world where digitalization moves so quickly, it is fair to ask: Is ERP becoming a bit “old school”?
Where companies once purchased large, broad ERP suites, we are now seeing them invest in narrower ERP solutions that are designed to work much more closely with apps and other business systems.
Since the 1980s, the systems have undergone rapid development. Up through the 1990s, the focus was on enhancing system functionality and process support. In the 2000s, development shifted toward integration interfaces, improved user interfaces, mobile access, and industry-specific adaptations. In recent years, the focus has changed again in line with broader technological trends: ERP systems now include apps, robotic technologies, artificial intelligence, and are delivered in various cloud-based forms. With the latest technologies, modern systems increasingly incorporate smart algorithms so that repetitive and standardized tasks are handled automatically, and the systems can reason their way to decisions based on large amounts of historical data. As a result, we are beginning to see more or less “self-driving” systems.
Today’s ERP solution is therefore radically different from what we saw just ten years ago. As companies launch digital transformation programs, ERP systems form the foundation for making these transformations successful. While many new digital solutions are customer-facing, the ERP system manages the entire underlying infrastructure in the form of logistics, finance, and more. This does not mean that the ERP system itself is excluded from the digital transition—on the contrary, ERP increasingly delivers solutions to customers, suppliers, employees, and partners, as we see in many of our client projects.
There is therefore no doubt that ERP is not “old school,” but customer needs are changing, and that companies no longer purchase and implement ERP systems the way they once did. Where businesses previously bought large, broad ERP suites, we now see them selecting narrower ERP platforms that must work seamlessly with apps and other business systems. This creates greater freedom and flexibility as market competition evolves. However, it also places greater demands on IT architecture, master data, and business intelligence.
As solutions move into the cloud, the ability to make extensive customizations becomes more limited. This is positive for the lifespan of the solution, but it creates new demands for managing the organizational changes required to go from A to B. Change management has always been on the agenda, but it is becoming harder to cut corners in this area.
When companies procure ERP alongside other digital solutions, we see a fundamental shift from a “single vendor” ERP strategy to strategies that involve multiple vendors. Whereas many companies previously had an ERP strategy simply called “SAP” or “Microsoft,” critically selecting only within that vendor’s software palette, customers today are far less loyal and purchase solutions from multiple providers.
