The End of ERP…. Again?
There have been some lively discussions recently about the demise of ERP. The concept is not new and, no, ERP is not dead this time either. Though there has been a dramatic shift in the applicability and deployment of enterprise applications for SMBs.
What ERP has learned
Having been involved in mid-market ERP sales and consulting for many years, what I do know is that professional services and recurrent maintenance were always more important than the initial software sale. A discounted product price could almost always be negotiated, but there was very little wavering on the contingent implementation and support contracts. The buyer feels like they are getting a deal at the outset, the seller gives a concession but profits in the longer term. But is this really a win-win?
The jig was up and in stepped subscription and cloud-based options. For many small to medium sized businesses, a predictable and recurring use-fee without concern for in-house infrastructure is a more attractive alternative. Essentially SAAS has stripped away the lump sum outlay of cash and worked the total cost into the subscription price, and simplified system deployment by removing installation, updating and upgrade costs.
That said, companies are still spending huge dollars on on-premises enterprise applications. The platform is working quite well for industries with huge transactional volume and multiple integrations, where decision makers are more comfortable having their applications in house for them to do with what they wish.
The bottom line is there is a time and a place for each type of ERP offering, on-premises and software-as-a-service, though I suspect as SME’s do the math on the former and as the technologies become more mainstream, we will see even more of a shift towards subscriptions. Whether deployed via cloud, hosted, in-house or a hybrid scenario.
How ERP is using this knowledge
It is clear that the way enterprise applications are used is undergoing a rapid change. It is all about innovation at the point of business impact and offering deployment options to suit different needs: what you need to know, delivered where you need it, when you need it.
The new ERP buyer and seller watch list:
1. Focus on Recurring Relationships
“Success is no longer gauged by counting how many units of your product you have sold. Rather, success is measuring how many customers are using your service on a recurring basis and how successful you are monetizing those recurring relationships.” ERP vendors who embrace this concept are the most successful.
2. Application Specialization
“Traditional ERP with its heavy requirement for customization and consultants is going the way of the mainframe computer, purpose-built ERP that meets the specific business requirements of a particular industry will be more important than ever in the coming years.” ERP buyers’ businesses are changing. While there is still a place for traditional ERP in traditional industries, there is no place for rigid systems in a services-based knowledge economy.
3. Holistic Organizational View
ERP is a business transformation which involves the entire organization from end to end. As software installation and infrastructure becomes more standardized, more consulting time can be spent focussing on the critical success factors. It is necessary to follow a proven Software Project Methodology to ensure that people, process and technology are in line with the goals of the organization.
4. Provide Meaningful Information
Decision makers want information systems to proactively answer their business questions, not simply provide data after the fact. And they want to access this information anywhere. Business Intelligence has provided the tools to analyze data in meaningful ways, but we also see ERP trending towards mobility and collaboration. Modularized data silos are ineffective, information must be integrated and available across all areas of the organization.
5. Be Process Oriented
ERP provides a controlled and systematic way of entering data from multiple sources, so we can report results to business stakeholders and make informed decisions about the business. However, service driven organizations think in terms of workflow and not in terms of data entry. Many of today’s ERP systems connect disparate systems and business processes via workflow, thereby providing meaningful input for the end user.
6. Promote Sustainability
Hardware producers are getting pressure to create longer lasting devices and provides means for proper disposal (Waste Not, Want Not explores the concept of e-waste and extended producer responsibility). Many software companies are now heading towards a more sustainable model providing shared resource and shared infrastructure options. The premise is to tap the excess of someone else’s unused resources and share yours, promoting a more collaborative and efficient way to work.
The next installment: There are so many ERP options available today, and it is not always clear which is the right system for your business. A successful outcome requires an assessment of your business and thorough evaluation of options, under the guidance of a process expert. Plan in Motion, Inc., helps you focus on key business requirements, in addition to technology, when selecting and deploying ERP software. The upcoming posts review the next steps in the software selection process.
Suanne McGrath-Kelly is President of Plan in Motion Inc. in Toronto. Her passion for problem solving and commitment to help clients achieve successful outcomes has made her a trusted executive advisor. She is a known thought leader and mentor in the business community with active involvement on boards and professional associations. She has published dozens of business technology papers and presented on the topics such as Digital Transformation, C-suite Alignment, and Women in Technology. Beyond her love of all things strategy, she enjoys creativity, cooking and the great outdoors.