The end of classic ERP systems - can it really be so? How do you choose modern ERP systems in the future?
In the words of the band R.E.M : "It is the end of the world as we know it, and I feel fine".
After a lifetime of more than 50 years, we have also reached the end of ERP software as we have known it so far.
Coming from a consulting company that has been successfully providing independent consulting for definition, process optimisation, specification and implementation consulting as a core business for 30 years, it may sound ironic when we predict the death of "ERP software as we know it".
This may come as a shock or news to many, but if you look at history, it is actually no real surprise. We now experience this upheaval every time we consult with our clients.
A Brief History of ERP Systems ...
Around 1960, the first designs for ERP systems were developed. Based on the theories and techniques of Material Resource Planning (MRP). These were intended to help manufacturing companies better plan their use of materials for their production. At the same time, this idea of using planning systems could help to better manage and administer material stocks and inventory. Over time, the MRP I was developed into the MRP II system in 1980 and 1990. This made it possible to plan not only merchandise management, but also financial reporting, purchasing management and personnel deployment. This was a big step that was quickly adopted by the ERP providers of the time. The late 1990s saw the growth of ERP vendors such as SAP, Oracle, Abbas, PSI Penta and many more. From the year 2000 onwards, strong growth figures were added by Microsoft Dynamics, Infor and other ERP software systems. Microsoft in particular had triggered a strong growth spurt with its focus on enterprise customers.
What Does the Current ERP Software Landscape Look Like?
In the last 25 years, since Dreher Consulting was founded, there have been a number of signs that have cast their shadows and that a trend is emerging that the end of ERP systems as we know them today is coming
For Example: - Consolidation of ERP Providers:
The hurdle to enter the ERP software market has become smaller. But the trend and the necessity to position oneself internationally and also to offer international service leads to more consolidation on the provider side than in the past years for investment reasons alone. More options for users: Nowadays it is no longer necessary for a user to rely on a huge, all-encompassing ERP system from one provider.
There are enough alternatives:
- on premise (own hosting),
- best of breed, (the idea of taking the best from different systems and putting them together into a new whole),
- point solution software,
- business intelligence software, and a large number of individual approaches are available today as a matter of course. ERP systems are accessible and applicable to companies of all sizes and industries.
When Dreher Consulting started consulting on ERP systems, ERP systems were very expensive, complicated and really only applicable in large manufacturing companies. A weakening global economy has caused many companies to evaluate the risks of a large ERP implementation more closely. The willingness to take risks has decreased. This was clearly felt in 2008-2009, when companies scaled back their investment plans for the introduction of new ERP systems. The tolerance and risk appetite for deciding on a large, expensive, time-consuming versus risky ERP rollout has diminished. The focus on a demonstrable ROI is more pronounced again (according to Dreher-Consulting consultants).
What Does This Lead to?
The focus on ROI automatically leads to questions of process support and process quality. Not so much on evolutionary development - here a few percentage points improvement in this or that process, but directly into the questioning of the entire process. In the sense of a real, verifiable improvement in competitiveness, we focus on precisely those points that are important for an ERP investment decision. These changes in the way companies looking to implement ERP systems view their investments inevitably lead to changes or problems for one or the other ERP software supplier. And indeed, our assessment of the longer-term impact (greater than 3 years) is leading to the extinction of ERP software as we know it today.
What Does This Mean For the Future of ERP Enterprise Software?
Don't be alarmed, it's not all as black as it looks. The future of enterprise software seems brighter and brighter than in the past. But it looks completely different from today, and many ERP consultants and IT managers are far from equipped for it.
Here are some points that IT leaders and CIOs and entrepreneurs should consider and implement in order not to be surprised by the new realities of the post-ERP era.
Make your business strategy the centre of your ERP strategy. With these alternatives available today, you can map the fast demands in your business environment much more efficiently in your processes than in the past. What does this show? In the past, companies rushed headlong into ERP selection and then went through the implementation process. Today, companies tend to be flexible and define an intelligent roadmap to support the available technology, the processes and the decisions of the employees.
Technology is a driver of business process improvements, organisational optimisation and overall business model changes. As stated elsewhere in this article, ERP implementations have suffered for too long from implementations that were too expensive and fell short of process support expectations. The reason was often a strong focus on the technology, the functions (especially in ERP selection processes with Excel lists where the functions are the main criterion for ERP selection) instead of the processes and the people in the business process. Today, intelligent selection processes focus on technology as one of the components of an overall business strategy and business transformation.
When in doubt, focus on technology. In times of uncertainty, of tight budgets, the last thing they want is to invest in an overblown ERP system that can only deliver a weak or barely noticeable ROI. This explains why so many companies let themselves be guided and steered by technology or the name of the software supplier when making investment decisions, instead of doing their homework, optimising and redesigning processes to improve the efficiency of the company, the supply chain and the organisation. An investment in technology can always be made later, but improving processes, redesigning workflows and process optimisation can, in our experience, deliver better and faster results with less effort. And at a lower cost, too.
What Results Follow On From this?
Companies no longer need to feel trapped in a "big bang" and extremely large and extensive ERP implementation. On the contrary, there are many more opportunities today than in the past to realise the "low hanging fruits". As a company that has established itself in the niche of independent ERP consulting and developed into a leading company for process and digitalisation consulting, we feel the changes on the customer side immediately. This enables us to improve the competitiveness of our customers with our expert knowledge.
This includes support: -
- in defining the IT strategy,
- business reengineering (process optimisation),
- organisational optimisation and
- support in the implementation of measures.
Requirements for the support of business processes through IT technologies will always exist and Dreher Consulting, as one of the leading independent consulting companies, will immediately transform this expertise, knowledge and best practice to our customers.
But this approach is the end of ERP systems and ERP implementations as we know them.
And we are convinced it feels good, (for our clients).