SNw 033 The coming demise of ERP in business Created by James on 6/12/2013 2:26:41 PM
It is clear that the demise of Enterprise Resource Planning (ERP), in the way we traditionally understand it, IS a real possibility.
The ERP industry stands at a watershed and is in the process of being redefined.
This discussion focuses on some of the key factors that are pointing in this direction:
We are rapidly seeing the advent of a new generation of tech-savvy executives. They are executives who have been around computers all of their lives. They do not necessarily know how to use them to best effect, but they are not scared of the technology and are quite willing to get hands-on.
Big brand ERP is rapidly reaching market saturation. Most corporations have a big brand ERP, some are on their second or third product. Many have been using those brand name products for a considerable period of time. Realization is building that it is not the brand or the tool but what is DONE with the brand or the tool that is the issue. Consequently, the prospects for new sales of brand name ERPs are diminishing rapidly.
Executive frustration with ERP
High levels of frustration with ERP remain. Fact is that at an operational level there is a reasonably high level of satisfaction in many organizations but at an executive level, most executives complain. The complaints include not being able get answers to their questions when they need them, that the quality of reports is dubious and that the cost of maintaining reports is excessive, etc.
Most business intelligence investments have also failed to deliver on expected returns.
Increasingly this is leading to a cynical view of ERP and reluctance to incur significant costs. This also points to a relatively bleak future for ERP vendors and implementers who do not adjust to the new reality.
Emphasis moves to IBIS – MAKE IT WORK
Increasingly there is a move towards what I call "IBIS" or ‘Integrated Business Information Systems’ – the mishmash of technology that represents the real world for most enterprises.
IBIS frequently, but not always, comprises a brandname ERP surrounded with a great diversity of third party specialist software, custom developed utilities and sometimes whole modules of custom development together with the ubiquitous Excel spreadsheets - all of which constitute a unique solution for the enterprise.
By now most have realized that this mishmash will always exist, whether it operates surreptitiously under the cloak of FRED (the name of your big brand ERP) or whether there is a realisation that FRED is NOT the total solution. There simply is NO silver bullet and if you replace FRED you are still left with all the surrounding stuff and frequently with the recreation of the surrounding stuff to fit the new FRED.
Precision taxonomies dominate
In recent years it has become increasingly apparent to me that the next BIG frontier in the ERP or IBIS space is the huge morass of badly configured systems out there.
Business has made huge investments in precision software only to have it populated with sloppily defined content. Whether the Chart of Accounts, the Material Master, the Product Class, the Customer Type or whatever the validation list is it frequently has little or no logic, highly variable granularity, duplication, etc.
The net effect is that precision ERP software operates at a fraction of its true potential. Processing that should take place within the ERP takes place in add-on's and Excel, even simple reports are difficult and time consuming to develop and maintain and management struggle to get the answers to simple questions. Complex models and analysis are frequently beyond the bounds of possibility.
The answer to this is NOT to replace the software, it is to reconfigure the existing software with precision taxonomies leading to precision configuration.
Decision support is paramount
Many years ago, long before ERP was coined as a term, we used to refer to MIS "Management Information Systems" and then EIS "Executive Information Systems".
When the MIS and EIS failed to deliver the MI or EI, the industry re-branded the technology as ERP "Enterprise Resource Planning", thereby adopting a label that was frequently inappropriate because it is a reality that few organizations actually DO RP in their ERP – most industries require specialist packages to RP their businesses.
In truth MIS and EIS WERE appropriate labels, the problem was that, because of the sloppiness referred to above, those systems could not deliver management or executive information.
Today the industry is coming full circle – executives and managers STILL want information on which to base decisions and, as much as the re-branding created a smoke screen for many years, the smoke is now clearing and tech savvy executives are demanding the information they need in order to support improved decision making.
Precision taxonomies and precision configuration is the only way to meet this need and this has nothing to do with which product is used.
Precision data warehouse data
Increasingly it is becoming apparent that the real opportunity for precision configuration lies with the data warehouse on top of the ERP. Because the ERP is working operationally, the cost of re-implementing it is beyond the realms of what is practical for most enterprises. Investment in excellent precision first principle taxonomies, what I call "Strategic Engineered Precision Taxonomies" or "SEPT" for short, in the data warehouse with remapping of the operational data is where the REAL opportunity lies for business information systems today.
Incremental beneficiation becomes the norm
The realization that re-implementation of an ERP is frequently too costly brings with it the realization that incremental beneficiation of operational data in the ERP underpinning the precision data in the data warehouse is an attractive option for many enterprises. This is likely to become the norm for most existing installations going forward.
Software company influence diminishes and implementers become re-furbishers.
As a consequence of these developments it is likely that the influence of large ERP companies will diminish, further take-overs are possible and shake outs and down-sizing are distinct possibilities.
The number of ERP implementations will reduce drastically and those implementers who survive will increasingly focus on developing high value taxonomies with associated data warehouse and business intelligence installations focusing increasingly on high value business information solutions.
In the ERP space it can be expected that implementers will increasingly become re-furbishers – fixing up sloppy configurations in a controlled manner over periods of years. It is likely that many implementers will fail to make the transition so a major shakeout in this area is to be expected. .
It is debatable whether the term ERP will be in the forefront of business-speak in twenty years' time and it is likely that the ERP industry will be radically re-defined in the next couple of decades.
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