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 ERP JOURNEY

What's Next in the ERP Evolution?

Enterprise Resource Planning (ERP) software applications have long been regarded as unexciting albeit mission critical business systems which permit organizations to perform their daily processing. Their mission and delivery have largely stood steadfast with incremental advancements providing a slow but steady evolution. In this post, we look at several innovations which offer the potential to accelerate ERP software advancements beyond the pace of prior years. The most compelling advancements from the current market of ERP applications include:

  1. Changes in delivery, pricing and management from on-premise to the cloud.
    Cloud computing and Software as a Service (SaaS) have changed the delivery, pricing, management and support of computing resources and information systems across the IT spectrum. Business systems which are remotely managed by a third party and delivered over the Internet have boomed for software applications such as CRM and HR, however, back office accounting and ERP systems have largely adopted a more cautious approach. Despite the slow start, this wait and see posture will now dissipate as SaaS solutions have demonstrated a proven value proposition while at the same type dispelling the risk of information security compromise. ERP decision makers need not be SaaS pioneers and still take advantage of the ROI derived from the not-so-new delivery model.

  2. On-demand technology architectures receive new interest.
    CRM software evaluators and pundits have debated the merits of multi-tenant versus single-tenant on-demand architectures with the most common outcome being ‘who cares’. Multi-tenant advocates point to system administration economies when all clients share the same database and delivery platform. Single tenant advocates reference assured privacy, superior information security, predictable performance and overall reliability when customer data is not commingled and each customer operates in an autonomous database. Hosted accounting and ERP systems are generally regarded as more mission critical than their front office counterparts. These back office systems also house more sensitive data and will therefore bring a renewed emphasis in the on-demand architecture division. SMB companies tend to deemphasize technology architecture in favor of costs and functions and will remain neutral. However, middle market and enterprise companies, as well as those industries such as financial services and government which place an increased emphasis on data privacy and information security, will also place a greater preference for single tenant hosted solutions.

  3. ERP begins to embrace Enterprise 2.0.
    Social media strategies and customer engagement tools are not just for CRM systems. Enterprise 2.0, an internally applied extension to Web 2.0, represents a convergence of widely available social networking technologies used within the enterprise for organizational purposes. This social media phenomenon is a disruptive change, which converges technology with socially influenced business practices using new tools such as search, blogs, wikis, RSS feeds, social networks, tagging and folksonomies. ERP systems which leverage social media tools to promote communication and collaboration among internal lines of business or affiliated groups by sharing and promoting common back office data points such as customers, products, vendors and financial information will better engage their stakeholders and elevate their perceived roles from number crunchers to key strategy contributors.

  4. Increased value proposition and ROI.
    ERP systems are maturing in a way that new technology advances don’t imply the beginning of a new system life cycle. Advances in ERP systems are far more evolutional than revolutional. With new delivery options and new browser-based interfaces, traditionally complex ERP business systems have achieved greater ease of use and faster user adoption. Implementation periods are shorter. Tasks such as system integration are simpler, faster and cheaper. Initial user learning curves are far more accelerated. Work flow designers and business process automation tools have finally empowered companies to modify their ERP software to accommodate their business processes; not the other way around. With hosted solutions, fork lift upgrades and their associated interruptions to the business are no longer necessary. The end result is clearly far more value and increased ROI for the information systems investment.

  5. Tighter integration with CRM.
    Customer relationships don’t stop with sales people, help desk staff and other traditional front-office CRM users. The customer experience is heavily influenced by back office processes such as sale order processing, inventory fulfillment, invoicing, credit memo processing, return merchandise authorizations, periodic customer statements, collections correspondence and other customer touch points performed by back office staff. Unfortunately, enterprise-wide integrated systems are still the exception and not the rule. However, the gap is lessening as software manufacturers extend line of business applications in order to deliver fully integrated, enterprise wide business systems. When front and back office systems are truly integrated, all staff share and contribute to a 360 degree customer view, work sequences can be streamlined, business processes can be fully automated, period cycles times are reduced, information reporting can deliver enterprise wide visibility and rekeying data becomes a thing of the past. Expect an increase in customer demand and availability of enterprise-wide, integrated business systems.

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READER COMMENTS

By Stephen Barthalameu
You reference the ability to change the software, not your business processes. However, shouldn’t new users consider changing their business processes as part of an ERP implementation?

Absolutely. An ERP implementation is an ideal time to review long held business processes for streamlining or reengineering. The one-two punch of business process improvement with new automation software delivers a powerful and synergistic effect. However, as almost all ERP implementers have learned, packaged application software often falls short in accommodating unique or sophisticated business processes. Historically, most users favored modifying their business processes to accommodate the ERP software rather than the other way around in order to mitigate costs and implementation risk. Sometimes this practice was perpetuated by software vendors promoting their particular work flow routines under the guise of operational ‘best practices’. The new ERP workflow designers permit far greater flexibility and adaptability in order to straightforwardly change the software to accommodate more complex business processes.

comments

By Lilian Campbell
What’s the difference between software as a service and cloud computing?

There are no universally accepted definitions for SaaS or cloud computing. However, according to Gartner, cloud computing is "a style of computing whose massively scalable and elastic, IT-related capabilities are provided 'as a service' to external customers using Internet technologies." Cloud computing effectively offers software, hardware, processing, storage, IT management and similar computing resources over the Internet on a pay-as-you-go basis.

Software as a service (SaaS) solutions are generally delivered from application software suppliers such as Salesforce.com or NetSuite. SaaS solutions are normally software solutions (hence the first "S" in the phrase "SaaS"), manufactured by the vendor, deployed using a multi-tenant hosting architecture, accompanied with a wide range of professional services and supported with a Service Level Agreement (SLA).

comments

By Allan Walker
I think I have been left behind with software as a service. What are the business benefits of SaaS - in business terms please?

While gains vary by recipient, the most commonly cited SaaS benefits include:

  • Lower up-front costs; SaaS changes the pricing model from an up-front capital investment to a subscription.
  • Lower total cost of ownership (TCO); TCO varies by customer, but several recognized analysts firms have demonstrated superior TCO when comparing on-demand with on-premise business systems.
  • Accelerated implementation time and time-to-value. With no servers to configure and software to install, the implementation time and costs are reduced. Shorter software implementations also reduce risk.
  • On-demand scalability. Computing resources can be dynamically provisioned and scaled as needed. Companies are no longer required to procure, implement, manage and upgrade incremental servers and hardware just in case the company grows.
  • Increased focus on core competencies; On-demand systems deliver a dramatic reduction or elimination of IT administration, maintenance and management. When company management are not required to manage IT, they are freed to focus on core company competencies.
  • True vendor partnerships; The SaaS business model is predicated on customers actually using the applications. If the customer is not successful in implementation or thereafter is not satisfied and chooses not to renew their subscription, the SaaS vendor’s business model fails. On-premise systems charge the full purchase investment in advance and there are no refunds if the implementation fails or the client is dissatisfied – which contributes to the massive amount of ERP shelfware (ERP software which has been purchased, never implemented and stored on a shelf). The SaaS business model finally evolves the customer-vendor partnership past the historical lip service and to a true point of interdependence.

While SaaS is gaining market momentum at an increasing rate, it is not a panacea and must be carefully evaluated against clear objectives and company specific constraints. Below are some of the drawbacks of SaaS.

  • While SaaS has several high profile success stories such as Amazon's web service stack, Yahoo's Build Your Own Search service, Google's App Engine and Salesforce.com's Force.com for CRM software systems, each of these technologies and APIs are largely proprietary and reside on private clouds.
  • Continuing the above point, today's SaaS vendors operate private clouds. For companies acquiring multiple line of business or piecemeal SaaS solutions, replacing stovepipe applications with stovepipe clouds will continue the need for system integration projects and management.
  • Hardware and platform software (i.e. operating systems, databases, backup, security, etc.) costs can be small relative to enterprise application software. For this reason, Infrastructure as a Service (IaaS) solutions will deliver a lesser payback than SaaS solutions.
  • Several pundits (and vested interests) have suggested that SaaS business software systems are less accommodating to system integration and software customization than on-premise systems. However, while that may have been the case in years past, these arguments are unfounded with the current portfolio of SaaS enterprise software systems.

Send comments to blog[at]Vantivemedia.com.

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