ERP still the engine of business
11 December 2019 | 0
Enterprise resource planning (ERP) systems are still the engine of many businesses in Ireland, and irrespective of the prospect of post-modern ERP leading to some decoupling of functions, will remain so for quite some time.
This was a key theme in a recent discussion in the TechLeaders Roundtable series, in association with Dell Boomi. Tech leaders from government, public sector, manufacturing, logistics, engineering and financial services, gathered to discuss how ERP is changing and systems modernisation is now becoming a key enabler for broader digital transformation ambitions.
Opening up the data stored in ERP systems is seen as strong argument for modernisation, while others are looking to move to Gartner’s definition of the ‘post modern ERP’ system whereby administrative and operational capabilities are appropriately linked, as opposed to contained within a single system, as had been the case in the past. These systems can be cloud based, or on premises, but are more focused on how they are linked or integrated, rather than where they reside.
Among the attendees of the roundtable discussion, which took place under Chatham House rules, a show of hands confirmed that the strong majority considered themselves to be traditional ERP users, with one public sector speaker representative indicating their system had been largely developed in-house. The rest were mainly users of mainstream, commercially available systems, with this being particularly the case with the manufacturing industry representatives.
Present at the discussion, were Mark Clifton, chief enterprise architect, Dell Boomi, Manuela Alexander, account executive, Dell Boomi, and moderator Paul Hearns, editor, TechPro Magazine.
Clifton began by introducing some of the discussion themes around modernisation, change and development, as well as recounting his time looking after ERP systems, and as CIO in diverse organisations, such as a large credit card provider and an insurance firm.
In one of these previous roles, Clifton said there was the issue of a global company having multiple geographies and locations, with many disparate systems. Integrating these with application programming interfaces (API) had been a challenge but was seen as necessary to allow the value of the data held in the respective systems to be leveraged. He recounted diverse approaches where some enterprises made the realisation that they were, in effect, technology companies and yet others where the opposite was true, and IT was in place “because we heard we needed it”.
Opening the discussion up, the attendees were asked about their own usages, and motivations for change.
A representative from a large manufacturing firm said their system, though a commercial product, was highly customised and this brought challenges. Firstly, even the normal cycle of updates and point releases could sometimes mean customisations were lost or needed reworking, if not complete re-implementation. There was also the challenge of modernisation, such as with digital transformation, outside of the core system, which could be made more difficult because of the level of customisation in place. This was echoed by several other attendees.
Another representative of the manufacturing sector on the construction side, said that an issue with ERP is that having invested so much in it, there is both the fear of doing something that might bring disruption, at the same time as wanting to get more value from investments. The representative said that, in their experience, IT was and is bad at making good businesses cases for change and modernisation, the effect being compounded by the criticality of ERP.
However, even in moving to more as-a-service type options, there can be also issues. The traditional manufacturing representative said there are so many options now from cloud and as-a-service providers that it can be difficult to evaluate them comparatively, but always with the proviso of remaining flexible, without the spectre of lock in that was such a feature of older ERP systems.
Another consequence of the reliance on older systems, said a representative from the engineering sector, was despite their reliability and robustness, they can often have old and unappealing interfaces. When compared to the modern look and feel of more cloud-based alternatives, this can be an issue. However, others opined that bolt-on interfaces, or data exposure through APIs could mitigate this by allowing for another presentation layer to be added.
” It’s difficult to replicate the functionality of the old ERP systems with newer services, as there’s rarely a 1:1 mapping. It can be a core service with a range of different modules strapped on, making comparative analysis difficult”
Returning to the topic of customisation, Boomi’s Clifton said that major system updates, while sometimes impacting customisations, could also be an opportunity to introduce a wider change programme, with the ERP piece as a necessary element. This can sometimes remove the inertia around ERP when it is at the heart of an organisation.
A representative from manufacturing added that enterprises are innately conservative, but that the high level discussions that are needed around ERP and change are not easy if the CIO does not have a seat at the board. Contrasting the likes of Fortune 500 companies with some of the traditional manufacturing or construction companies here, the representative said that the CIO or equivalent is still often unable to engage on that level to make the case to the C-suite.
There was broad agreement with this observation, and a recent talk by Dr Joe Peppard, principal research scientist, Massachusetts Institute of Technology Center for Information Systems Research (CISR), was cited. Dr Peppard advises that IT would be better if it was not be a department, but a pervasive service throughout the business, meaning that it is no longer seen as an ‘other’. A representative from the financial services industry observed that IT should not been seen as distinct from the business. Finance does not talk about ‘the business’, said the representative, and so IT should also think of itself as integrated, negating many of these discussions.
Another show of hands revealed that more than a third of the attendees’ organisations were currently undergoing transformation programmes. In this context, ERP was discussed as a help and a hindrance. For most, it was seen as a help, with one representative expressing it succinctly, saying that ERP is still the engine of the business, in many cases, and is expected to be for some time. There was broad agreement with this, as well as the sentiment that the value held within any ERP system was the important element. As such, any move that would release more of that value to other systems and functions was to be regarded as a good thing. Failing to find or leverage that value was seen as a failure to keep up with external forces.
The changing nature of ERP was discussed, and the term post-modern ERP was mentioned. Referencing Gartner’s 2016 paper on the idea, around half of the attendees had not heard of specific term but were broadly familiar with the concept. Representatives from different aspects of manufacturing agreed that they had both moved towards removing what had been integrated capabilities of their ERP system, such as payroll and human resources, into other systems. While others had said such functions were always separate, there was broad agreement in the discussion that appropriately linking such functions, could also add value when supporting other areas of the business.
In discussing cloud-based options, the conversation inevitably came around to availability and the prospect of outages. A representative from the public sector said that while there were general worries about outages in cloud services, such vendors are better equipped and resourced to tackle the problems, and such fears are gradually waning. Another public service representative said that loss of control is another issue with such services, especially when it comes to exit strategies. They said this can be a particular issue for government, when potentially any contract can be reviewed on the basis of the election cycle.
“ERP is here to stay, but only if it can evolve in line with digital expectations”
Boomi’s Alexander asked if there was a still a reluctance in the market to move away from the monolithic-type ERP systems of the past. A public services representative opined that often, it is difficult to replicate the functionality of the old ERP systems with newer services, as there was rarely a 1:1 mapping. It can be a core service with a range of different modules strapped on, they said, making comparative analysis difficult.
Looking to the future, TechPro’s Hearns observed that automation in business is going to be heavily reliant on the kind of information stored and accessed from ERP systems. If businesses find that they cannot access that information or make it available to support such developments, they will find themselves being left behind, responded a representative from manufacturing. They added that while everyone wants a Formula 1 car, most settle on a family saloon that will still do the job.
Wrapping up the discussion, Hearns said that while everyone had reaffirmed the need for ERP systems, irrespective of the form they might take, the consensus seemed to be it was only within the context of being fit for purpose and as a platform for development and growth. As such, modernisation is necessary, despite any misgivings based on previous experiences. ERP is here to stay, but only if it can evolve in line with digital expectations.
For more on the TechLeaders event series and to sign up for updates visit techleaders.ie