Enterprise Resource Planning (ERP) systems seem to have been around since the dawn of man. I’m pretty sure Neanderthals used an ERP system to note down how many bison or deer they killed during their last hunt.
Despite the dominance of ERP systems throughout the business world, we regularly see headlines with proclamations of their imminent demise, as though they are soon to be replaced by new software developed by another teenage whizzkid in his bedroom during his downtime between stints on World of Warcraft. These headlines may seem harsh, premature and even unspeakable, but is there any truth to them? Do you need to start considering a replacement for your much loved/hated (delete as appropriate) ERP system?
Why is there even talk about the end for ERP systems?
Most users have a love/hate relationship with ERP systems mainly because they promise so much and, for many businesses, deliver very little. Criticism can be justified though as ERP systems are complex, expensive and prone to deployment and operational challenges.
The evolution of Big Data is also changing the landscape for ERP systems as new Cloud based platforms are starting to affirm their position in the market at a much lower cost too. There is more competition and new platforms designed specifically for each industry. This seemingly leaves ERP systems as a ‘one size fits all’ model, which simply doesn’t work.
The market is saturated to such an extent that everyone who needs an ERP system has one, and this can cause problems for businesses. For example, other systems have been inherited during mergers or acquisitions, meaning many companies end up having several instances of the same ERP system or worse, a variety of different systems altogether. This is the point when the IT Manager will crawl into a corner and weep uncontrollably for hours because of the complications the ERP systems will pose. In the end, ERP systems become just another subset of the legacy systems that were supposed to be replaced.
So why won’t ERP systems die out yet?
Regardless of the criticism we have seen, ERP systems continue to be at the core of the majority of businesses. They are starting to adapt too; no longer are ERP systems aimed purely for large enterprises- SMBs are adopting them too.
Over the years, the impact of the big players like SAP and Oracle has been substantial, going beyond core back-office processes with more front-end features for customer service, sales, and procurement; especially when partnering with third party software add-ons. Because the ERP system has now become a more complete platform, it is ingrained into many business’ long-term plans, most noticeably manufacturing, distribution and wholesale firms.
Long gone are the days when it took an army of IT guys to configure an ERP system, as today’s systems are much simpler and becoming more integrated with the Cloud. This is a big plus for the ERP faithful, who already trust their system but are starting to see the benefits of innovations such as SaaS-based business intelligence and CRM, because their ERP system is the enabler of these platforms.
In the coming years you will no doubt hear more talk about ‘the death of the ERP system’, but it is my belief that they will be around for the foreseeable future, especially with the continuing growth of additional software integration.
What next for the ERP system?
So if ERP systems are to stay, what does the future hold for them? Firstly, all vendors will need to meet market demands by moving away from traditional deployment and look to the Cloud. This will be most true in SMBs with hybrid systems being the main focus due to cost constraints and ease of configuration. The hybrid model will suit many businesses as their ERP system will be too costly to replace and the additional features via the Cloud will prolong their life.
ERP systems also have another valuable asset: the data they capture. Until recently this data was unmanageable, time-consuming to analyze and was only available to senior management. Now however, there are tools available to evaluate this ‘Big Data’ and provide actionable tasks based purely on business statistics.