ERP – isn’t it becoming a bit “old school”?
An ERP system is a broad, wall-to-wall ITsolution capable of supporting most of a company’s business processes.Everything from finance, procurement, logistics, sales, production, HR, andmore—brought together in a single integrated IT platform. Data entered in oneplace 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 cutacross functions and departments. Such systems are often referred to as“suites.” In contrast, “best-of-breed” systems typically support a smallernumber of processes within a specific functional area - for example, HR,payroll, time registration, or reporting. Best-of-breed solutions placedifferent demands on integrations and data models, but they can often solve thespecific task more effectively than an ERP system.
The term “ERP” has existed since the mid-1990s,when Gartner introduced it as Enterprise Resource Planning - referringto IT systems that cover all company’s resources. But already in the 1980s, wesaw the first ERP-like systems in Denmark and internationally, even though theywere not called ERP. Systems such as Concorde and Navigator—developed inDenmark for small and medium-sized businesses—are good examples, and SAP alsoemerged with its large mainframe ERP solution, R/2. Given such a long historyin a world where digitalization moves so quickly, it is fair to ask: Is ERPbecoming a bit “old school”?Since the 1980s, the systems have undergonerapid development. Up through the 1990s, the focus was on enhancing systemfunctionality and process support. In the 2000s, development shifted towardintegration interfaces, improved user interfaces, mobile access, andindustry-specific adaptations. In recent years, the focus has changed again inline with broader technological trends: ERP systems now include apps, robotictechnologies, artificial intelligence, and are delivered in various cloud-basedforms. With the latest technologies, modern systems increasingly incorporatesmart algorithms so that repetitive and standardized tasks are handledautomatically, and the systems can reason their way to decisions based on largeamounts of historical data. As a result, we are beginning to see more or less“self-driving” systems.
Today’s ERP solution is therefore radicallydifferent from what we saw just ten years ago. As companies launch digitaltransformation programs, ERP systems form the foundation for making thesetransformations successful. While many new digital solutions arecustomer-facing, the ERP system manages the entire underlying infrastructure inthe form of logistics, finance, and more. This does not mean that the ERPsystem itself is excluded from the digital transition—on the contrary, ERPincreasingly delivers solutions to customers, suppliers, employees, andpartners, as we see in many of our client projects.
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 undergonerapid development. Up through the 1990s, the focus was on enhancing systemfunctionality and process support. In the 2000s, development shifted towardintegration interfaces, improved user interfaces, mobile access, andindustry-specific adaptations. In recent years, the focus has changed again inline with broader technological trends: ERP systems now include apps, robotictechnologies, artificial intelligence, and are delivered in various cloud-basedforms. With the latest technologies, modern systems increasingly incorporatesmart algorithms so that repetitive and standardized tasks are handledautomatically, and the systems can reason their way to decisions based on largeamounts of historical data. As a result, we are beginning to see more or less“self-driving” systems.
Today’s ERP solution is therefore radicallydifferent from what we saw just ten years ago. As companies launch digitaltransformation programs, ERP systems form the foundation for making thesetransformations successful. While many new digital solutions arecustomer-facing, the ERP system manages the entire underlying infrastructure inthe form of logistics, finance, and more. This does not mean that the ERPsystem itself is excluded from the digital transition—on the contrary, ERPincreasingly delivers solutions to customers, suppliers, employees, andpartners, as we see in many of our client projects.
There is therefore no doubt that ERP is not “oldschool,” but customer needs are changing, and that companies no longer purchaseand implement ERP systems the way they once did. Where businesses previouslybought large, broad ERP suites, we now see them selecting narrower ERPplatforms that must work seamlessly with apps and other business systems. Thiscreates greater freedom and flexibility as market competition evolves. However,it also places greater demands on IT architecture, master data, and businessintelligence.
As solutions move into the cloud, the ability tomake extensive customizations becomes more limited. This is positive for thelifespan of the solution, but it creates new demands for managing theorganizational changes required to go from A to B. Change management has alwaysbeen on the agenda, but it is becoming harder to cut corners in this area.
When companies procure ERP alongside otherdigital solutions, we see a fundamental shift from a “single vendor” ERPstrategy to strategies that involve multiple vendors. Whereas many companiespreviously had an ERP strategy simply called “SAP” or “Microsoft,” criticallyselecting only within that vendor’s software palette, customers today are farless loyal and purchase solutions from multiple providers.
