Enterprise Resource Planning has quickly grown from a luxury item available only to the largest and most complex organizations to a necessity for even the most rudimentary data environment. Along the way, however, it has also evolved from a relatively simple means of managing the growth of systems and platforms to a highly integrated solution encompassing physical, virtual and cloud deployments, as well as multiple software stacks, product development, logistics and even the knowledge workforce.
Given all of these moving parts, it has become difficult to ascertain what is crucial in any given ERP deployment and what can be considered superfluous. And perhaps even more challenging is the need to integrate ERP into legacy environments rather than rebuild the functional core of the business model in order to implement someone else’s vision of efficiency and productivity.
What Does Enterprise Resource Planning Do?
The first question to ask when evaluating any ERP solution is: What is this technology supposed to do? In a nutshell, ERP is intended to bring order to the business process by aligning key objectives with any and all resources at the enterprise’s disposal: the tighter the integration, the more efficient the process and, hopefully, the more productive the enterprise.
The reality can be quite different, however. Even small operations, such as a doctor’s office or a parts supplier, can have complex operational burdens, everything from multiple partner/client relationships to multi-layer regulatory frameworks. In most cases, the individual processes governing these functions have evolved organically to suit highly targeted objectives, while at the same time they exist in distinct spheres with little to no concern over how they affect other processes or overall functionality as a whole. Most knowledge workers, meanwhile, have grown accustomed to this state of affairs, even overlooking times when their own workflows are more complicated or cumbersome in order to accommodate the needs of others.
Learn More: What Are the Key ERP System Modules?
Successful ERP Strategy Integrates Without Disruption
To overcome this inertia, therefore, the enterprise needs a clear strategy that stresses the eventual integration of multiple processes without too much disruption to the business model. Any change of this magnitude will disrupt something, of course, so the challenge will be to foster a gradual implementation that begins with measurable improvements in targeted areas, such as finance or supply-chain management. Ideally, this should produce a more streamlined workflow for employees that also results in a positive outcome on the backend – something like a noticeable cost reduction or faster time to completion.
From there, the system can be expanded to other areas, with a typical roll-out encompassing back-office functions at first so that the enterprise builds up a sizeable knowledge base of what works and what doesn’t before attempting to alter core functions like sales and marketing. Along the way, of course, executives will have to make a number of hard decisions, many of which will please some knowledge workers while disappointing others. Change is difficult, after all, and while attempts to streamline operations will ultimately deliver greater worker productivity, some will invariably view it as a means to cut labor.
ERP Platforms Evolving on Multiple Tracks
From a platform perspective, ERP is evolving along multiple tracks, offering a variety of deployment models, features and integration choices. Gartner analyst Chris Pang notes that the ERP sector generated $31 billion in sales last year, and 11 percent growth, and that $34 billion is not out of the question for 2018. Much of the recent activity is due to scaled up SaaS deployments, which are now close to overtaking traditional license and maintenance revenue models.
ERP and the Cloud
Going forward, it seems unlikely that many ERP deployments will not incorporate some level of cloud support using public, private or hybrid resources. The top challenge here is to determine whether a given solution is optimized for the cloud or is simply a hosted version of a traditionally licensed platform. Cloud resources are consumed differently from those found in the traditional data center, so even though a repurposed solution may function perfectly well in the cloud, it might not be operating at an optimal cost/resource level.
ERP and Cost Calculations
Even with a cloud-native solution, nailing down the full cost can be difficult. Many solutions feature variable pricing models depending on the complexity of the deployment. Basic packages may require a flat fee or a per user/month calculation, but these can be augmented by various tools and modules targeting specific processes, like accounting. While this makes it easier to foster a gradual deployment scheme as described above, it leads to the very real possibility that final costs will not be known until the transition is complete, and even then it will likely fluctuate over time as business activity ebbs and flows.
ERP: Proprietary or Open Source Platforms, General Purpose or Vertical
Other platform considerations include whether to go with a proprietary solution or an open-source system, and whether a general-purpose offering will provide superior service than the growing number of vertical releases hitting the channel.
The open vs. proprietary debate is the same as it has always been: If you have the skills to manage and integrate software on your own, an open solution might be cheaper; if not, it’s probably best to partner with a good provider.
The jury is still out on the GP vs. vertical question. No doubt, vertical solutions have their champions, but most of these platforms are still too new to make any informed decisions as to whether they provide an intrinsic value for a given process. Billing is billing, after all, regardless of whether the product is sneakers, oil or a life-saving medical device.
ERP Key in Digital Business
Despite its complexity, ERP is likely to remain a key business asset going forward simply because today’s digital marketplace is merciless when it comes to driving out waste and inefficiency. Organizations that lose time, money and overall cohesiveness in the hand-off of workflows from one process to another will quickly find themselves out-performed by those who can craft a more streamlined operation. The individual gain from any given improvement may be miniscule, but replication over time in an increasingly scaled-out environment can deliver a substantial competitive advantage.
At the same time, a more integrated series of processes also makes it easier to incorporate new workflows designed around new products, new markets and even entirely new business models. So putting an effective ERP solution in place is not only smart business for today but can help propel the enterprise into the economy of tomorrow as well.
Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata and Carpathia. Follow Art on Twitter @acole602.