The death of ERP as we know it

Sometimes I feel the only people who like an ERP are those that sell it. For years, everyone from Gartner to Forbes have talked about the death of the ERP. Despite this they are still being sold as the panacea to all problems. If you listen to the naysayers, 80% of ERP projects fail (no they do not) and post-ERP go-live, you’d have lost your will to live, half your staff will secretly be back to running calculations on spreadsheets whilst the other half will be riffling through training manuals trying to recall that 6-hour training session on PO creation.

So, let’s talk about the elephant in the room – are ERPs dying? And if so, why are we still trying to sell them? The answer is not straight-forward. In some sense, yes, old-school ERPs are a dying out, but like a phoenix rising from the ashes – a new ERP is emerging, with an altered purpose.

ERPs rose to power around 30 years ago. In those dark ages, the different departments of a business worked in their own silos. If they used technology, it was a stand-alone program meant for their department only. Paperwork was shifted from one department to another. It was this issue that an ERP fixed. If Sales captured a customer order on the same system as Procurement, it could pop up on procurement screens without the need for a phone call from Sales. There were screens for Sales and others for Procurement, but they all had the same backend. And it was a finance dream come true because every transaction hit the books as and when it happened. The fundamentally good idea behind an ERP is the interconnectedness of all your systems.

The first stumbling block of an ERP is its size. Since the 90’s ERPs have exponentially expanded. Big businesses bought them and incorporated practices that were proven to succeed in various industries. Thus, ERPs could tout industry “best practice”. As time went on, ERPs gobbled up more and more – more industries, more departments, more technologies, more functionality, more customizability. In 2009, research showed that 50% of standard functionality was regularly unused. Setting up these gargantuan systems takes months or years and requires skilled consultants, mystical ERP whisperers, to gently coax workable solutions out of the infinite abyss of possibilities.

It really is like having a physical elephant in the office. You’d need months to get the office ready for it, it wouldn’t know how to use the coffee machine and imagine the tight squeeze in the lift on the way to the daily stand up.

The second stumbling block is that by trying to be everything, everywhere, all at once, ERPs became a jack of all trades. Weighed down by their own complexity, ERPs became rigid and slow, unable to keep pace with the svelte new technologies racing past them. ERPs would try to incorporate the latest technological trends, but their sheer size meant the process took far too long. Whilst new tech changed towards being customer centric and responsive, ERPs were still busy ironing out the kinks in outdated tech ideas from five years ago.

Elephants are pretty slow on the uptake (no offence meant).

So where does that put us now? The interconnectedness of all your systems is still a fundamentally good idea. But ERPs are no longer needed for such a holistic system. This can be achieved through good platforms and APIs. So, is this the beginning of the end of the ERP?

No, not at all. Instead, the role of the ERP needs to be re-imagined. An ERP should not be your only system. Instead, an ERP should be the backbone of your business. They are good, solid, stable systems with outstanding standard processes. Use preconfigured best practices as much as possible within the ERP. Even though sluggish to incorporate radical changes, ERP preconfigured solutions usually stay up to date with current industry best practices across core business processes. They are good solutions within traditional domains. With the move towards cloud architecture and SaaS, they are more streamlined, scalable and less customizable. Keep it simple. This is not where you need to be innovative. If you feel you need to write your own code or design your own application, an ERP is not the place to do it. Even if a separate product seems pricier at the outset, once you’ve considered implementation time, upgrades, testing and so on, you are better off keeping your ERP as “plug and play” as possible. Those ERP whisperers don’t come cheap.

Besides, once that elephant is inside your office, it is far too difficult to get it out again. Too many large companies have invested way too much money for ERPs to either change radically or disappear altogether.

Elephants are majestic creatures, capable of relentless hard work and stamina. They just shouldn’t be expected to do pirouettes in the air.

For the most mercurial and innovative areas of your unique business model, find best of breed products that suit that niche. You will probably find that there is a vast range of digital solutions available, some easy and quick to implement. You do not have to be wedded to such systems for decades. You can choose the best fit for now. Try to be system agnostic when choosing the best fit. ERPs often claim the benefits of buying their own edge products, integration being a purported plus, but most edge products are third party applications that have been consumed by ERP companies. If it’s the not the best fit for you, simply choose something else.

Now trying to get a vast array of disparate systems to communicate with each other, even in the world of APIs, is no small task. If you tried to do this in-house without a solid ERP as your backbone, you’d probably end up with an IT department larger than Sales, with so much shoddy custom code that if Matthew from cubicle 6 got hit by a bus (poor Matthew) you’d have to bin the whole thing and start again.

Here your ERP can act as the platform that facilitates the interconnectedness of all your systems. ERPs have had to deal with this problem a lot. They have evolved to handle it well. Through tried and tested APIs, ERPs can connect customer experience, internal information systems, partner systems, and data and analytics.

One of the biggest issues with old-school ERP implementations is cost. More than half go over budget, with 6% going over by more than 50%. Using your ERP together with other products that closely suit your business objectives can mitigate this risk. Using each system for what it is best at, and focusing your implementation time on the backend, means that most user functionality is out of the box – which means standardized and easy to use UX, training and reporting.

You’ll get a second chance to pat yourself on the back, when it comes to upgrades. Software needs constant updating to stay relevant. Custom code (especially if written by poor Matthew, may he rest in peace) are an upgrade nightmare. The system architecture we’ve talked about is better able to handle change and disruption, which makes it an architecture that can stand the test of time.

ERPs cannot solve all your problems, and neither should they. But ERPs are not dead either. Let your elephant do what it is good for – the heavy lifting. But leave the deft athletics to the gazelles and cheetahs. Then just watch as the wonders of that biodiverse ecosystem unfold.