The Return of ERP—Not Your Father’s ERP

Four years ago, Eric Berridge declared in his book Iterate or Die that traditional ERP systems were dinosaurs headed for extinction. He was right, but before ERP completely disappeared some products began to morph into something else. It took a few years and now we are witnessing the return of ERP. But this is not your father’s ERP.

As Gartner explains: Business applications are undergoing many changes. The realities of cloud computing, the accessibility provided by mobile technologies, and the impact of social paradigms are affecting the business application environment. And ERP is the business application most affected.

The recent recession and painstakingly slow recovery hurt the ERP business. Even worse, the costly, cumbersome, inflexible, outdated ERP systems the vendors were hawking hurt the businesses saddled with them. Now the survivors are creeping back and finding a radically changed ERP landscape.

ERP systems run many companies. Your company probably has one or, more likely, several. They combine business process with software and integrate numerous critical back-office functions across a company. The tight integration of the various functions and the use of a common database gave ERP systems their power to coordinate the organization’s core activities based on a single set of shared, consistent data. Having multiple ERP systems certainly complicates things but with decentralized organizations or those that inherited multiple ERP systems along with acquisitions and never got around to standardizing, it is a mess many, sadly, continue to struggle with.

The ERP idea is still good, but the old implementations were too costly, too slow to implement, and too rigid, and hard to use. Rather than help the business they prevented organizations from changing quickly. Today, the inability to change fast is disastrous. That’s why Berridge titled his book Iterate or Die. Many businesses that failed to heed his words did just that.

The latest twist to the ERP saga has been the marriage of ERP with social networking. As one ERP observer put it: Social media and ERP make good financial sense. Not only is social media being taken seriously as a proper business tool, but useful new tools, especially when engaging in conversation with customers, are emerging. For example, Salesforce.com acquired Radian6, which focuses on B2C needs, effectively allowing companies to participate in consumer conversations on the social web.  Expect to see a bigger convergence of CRM and social media. The integration of the enterprise CRM and Twitter, Facebook, and LinkedIn will allow organizations to bolster both internal and external customer relationship functions.

When Berridge wrote his book he mainly had in mind Software-as-a-Service (SaaS).  SaaS has moved into the mainstream for ERP, CRM, supply chain management, and financial systems.  Notes Roger Borek, Borek Business Solutions, a Microsoft ERP provider, the growth of SaaS ERP software is accelerating and analysts predict continued growth of through 2012. For most companies, this hosted delivery model requires no initial cash outlay for IT resources while enabling a faster software implementation, on-demand scalability, and improved ROI. These factors collectively reduce the total cost of ownership (TCO) and accelerate time-to-market benefits.

Typical of the new breed of ERP is Plex Online, ERP for manufacturers, and NetSuite, an integrated collection of SaaS applications including ERP.

Compare that to the ERP of the past that took armies of consultants several years to implement and tailor to the company’s needs at a cost of millions of dollars.  And even then many went widely unused, giving rise to the pejorative term shelfware.

The new ERP ideally will incorporate social networking, add gamification to make it easy to use and measure, and deliver it as a SaaS offering to make it fast and cost efficient. Gamification, notes Gartner, will drive process innovation—that’s something you would never associate with the old ERP. The result certainly won’t be your father’s ERP.

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