What will a postmodern ERP look like and how will it compare with earlier generations of ERP?

15th August 2016

Decades have passed since the research giant Gartner first used the phrase enterprise resource planning (ERP) to describe the integrated systems emerging from the primeval sludge of material requirements planning, manufacturing resource planning and core financials. Over the years, the ERP label has stuck, while the systems it describes have broadened their horizons, adding human capital management (HCM), professional services and other functionality along the way). They have evolved in other ways too and over the past five or so years, the latest incarnation ‘postmodern ERP’ has emerged (which Gartner defines in detail here). 

 

 

 

In a briefer explanation, Carole Hardcastle, research VP at Gartner says: “Postmodern ERP represents a fundamental shift away from a single vendor megasuite toward a more loosely coupled and federated ERP environment.” Some CFOs may be familiar with the concepts (and characteristics) of ‘loosely coupled’ environments and ‘federated ERP’; some CFOs may need these terms of reference deciphering. Detailed explanations abound and Google can point you in their direction (and that of the accompanying technology minutiae, such as the differences between components, elements and objects).

Some CFOs may settle for a more simplistic (if less precise) explanation. Traditional ERP offers a single centralised suite of ‘tightly integrated’ components from a single provider; with the federated approach, ‘loosely coupled’ components (from individual and multiple providers) are pulled together to form the ERP and delivered using a mix of cloud and on-premise deployment. This takes us a hop, skip and a jump closer to postmodern ERP and its attempts to enable organisations to get the most from their legacy ERPs as well as getting the most from emerging technologies and trends.

Achieving this is a balancing act – and one that is reflected in the growing trend towards hybrid enterprise IT environments that mix old and new software, deployed on- and off-premise, in public and private clouds (something FSN explores here). For CFOs this balancing act may need to reconcile some of the (often competing) demands they face (to do more with less, be more of a strategist than a scorekeeper, reduce time to insight, and support faster and better informed decision-making), as well as enabling organisations to be more agile in the face of fast-paced business change and inflexible legacy ERP systems.

Some CFOs may already be benefiting from some incarnations of postmodern ERP. It is not unusual for enterprises to surround/connect their legacy ERP with newer systems (with varying degrees of application, conceptual and data integration). “Many of our large enterprise customers are successfully using this approach,” says Kevin Roberts, director of platform, FinancialForce. “We see processes such as billing and HCM moved closer to the customer or employee, whilst the detailed transaction accounting rolls up into the legacy corporate general ledger for financial reporting.”

This may help to make some postmodern ERP implementations more successful than some of their traditional predecessors, which struggled to be all things to all processes. In an FSN LinkedIn group discussion, Asoke Papaly, financial controller at Port Townsend Paper Corporation says of his experiences with one particular ERP: “Corporate accounting loved it, because it made it easier to look at plant financials and to do consolidations. Customer service hated it because it took longer to do the same tasks with results that were not as good. Maintenance and purchasing also felt the same way.”

Postmodern ERP may offer the means to avoid such shortfalls by helping deploy solutions and services that are a better fit for users and better enable organisations to respond to new business opportunities as they arise. “This new postmodern ERP environment promises more business agility, but only if the increased complexity is recognised and addressed.” This may be one of the things that traditional and post-modern ERPs have in common. “Twenty five or more years after ERP solutions entered the applications market, many ERP projects are still compromised in time, cost and more insidiously in business outcomes,” says Hardcastle.

So how can organisations minimise the risk that their postmodern ERPs will result in many of the same headaches as traditional ERP, such as complexity, failed integrations and ever increasing costs? According to Gartner, a business-agreed ERP strategy and an appropriate application integration strategy are vital. Gartner suggests that most ERP applications can be categorised as administrative (finance, HCM, indirect procurement), or operational (manufacturing, supply chain management, order management), and that each of these categories should have its own strategy.

The skills to do develop these strategies are also vital; a postmodern ERP is not a product you can buy off-the-shelf from a single vendor. Gartner reports that although end-user organisations that are moving away from on-premise monoliths towards postmodern ERP often acknowledge their lack of the necessary skills or strategy, they appear to expect vendors to take care of this – then end up struggling to integrate applications. Hardcastle says: “ERP vendors and systems integrators must up their game on implementation approaches.” But they are not alone in needing to do more. “Business leaders must understand what it will take to ensure success.”

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