5 Factors Facilitating the Transition to the Postmodern ERP Era
The increasing numbers of Software-as-a-Service (SaaS) ERP vendors offering low cost, subscription-based product offerings have become a disruptive force in the marketplace in the past few years. This raises a challenge to the dominance of on-premise, legacy ERP suites. As a result, global ERP software vendors such as SAP and Oracle have launched their own subscription-based SaaS offerings to stay in the game. Not surprisingly, enterprise cloud-subscription revenues are expected to reach 67 billion dollars by 2018.
The monolithic ERP suite that required immense IT resources to integrate and customize is morphing into what Gartner calls the postmodern ERP. Gartner describes it as a hybrid ERP ecosystem consisting of a loose confederation of on-premise software suites augmented with SaaS applications.
Businesses are rapidly embracing SaaS applications to augment their legacy ERP systems. This departure from on-premise solutions is quickly changing the ERP landscape; Gartner expects that 80 percent of IT organizations will be operating postmodern ERP models by 2018.
Postmodern ERP and HOOF defined
Last year, Gartner noted that the concept of a single ERP suite that meets all of an enterprise’s needs is dead. In the postmodern ERP era, heavily customized ERP systems are being re-architected to serve as systems of record, with differentiating processes and activities supplemented with SaaS applications that are integrated into the ERP system of record capabilities. SaaS-based vendor management system (VMS) solutions used for contingent workforce management such as PRO Unlimited’s omnichannel Wand platform are one example
Gartner delineates four different scenarios—with the acronym HOOP used to describe the aggregate—that are playing out in the postmodern ERP landscape.
Hybrid Reality-The Hybrid Reality is a mix of SaaS and on-premise applications. In this scenario, complex integrations between different SaaS applications and the ERP back office may be necessary. Here, in-memory requirements are addressed by unified computing platforms from vendors like Cisco and HP.
On-Premise Monolith-The On-Premise Monolith is still the most prevalent ERP model today. These legacy solutions are still the preferred model in certain industry segments and larger corporations. The value proposition of these highly customized solutions is simply greater than what the postmodern ERP offers right now. Outsourced Everything-ERP in the Outsourced Everything scenario becomes a set of process-enhancing technologies and services (PETS) for business process outsourcing (BPO) service providers.
Flip Model-The last model, called the Flip Model, states that everything will move to the cloud in the next decade, with SaaS and Platform-as-a-Service (PaaS) as the big winners. On-premise ERP systems will be replaced with cloud-based ERP solutions.
Trends driving the postmodern ERP transformation
There are a number of factors that are driving the transition to the postmodern ERP era. These different business applications address various business requirements. The following are some of the more significant ones:
Speed, agility, and flexibility-Frustrated with the inflexibility and cost of legacy ERP systems, business users are turning towards a federated SaaS model. They are increasingly tech-savvy and unwilling to wait for their IT departments to build further customizations on top of their legacy ERP systems.
As a result, they go around their IT departments and develop their own applications or engage directly with SaaS application providers. No wonder Gartner estimates that 40 percent of corporate IT spend is done outside of the control of the CIO today.
CITE-The experiences business users have with technology as consumers impact their expectations of the applications they use at work. Integration of what has become known as Consumerization of IT in the Enterprise (CITE) into legacy ERP systems requires substantial work. Using the ERP system as the system of record, organizations can easily and quickly add new business applications that embrace CITE principles around ease of use and mobile that might take years to develop within the legacy ERP platform.
Companies recognize the importance of CITE. According to a study by IDG Enterprise, user satisfaction, user productivity, process efficiency and collaboration, business agility, and access to critical business information are cited as the top five reasons organizations are using SaaS applications. Thirty-six percent of enterprise end users are adopting cloud-based solutions from software vendors and smaller startups, and the floodgates are just starting to open.
Mobile, wearables, and IoT-Mobile disruption is here to stay. And wearables and IoT (Internet of Things) are on the horizon and fast approaching. The vast majority of companies support employee-owned devices, and many have developed or are developing their own app stores.
Mobile is treated as a tactical gateway extension within the On-Premise Monolith model. However, offering an omnichannel user experience is at the core of postmodern ERP. Not only is mobile supported natively by the ERP architecture, but wearables and IoT are supported as well.
Advanced analytics-Data analytics and reporting are driven from business intelligence (BI) platforms under the legacy ERP model. For postmodern ERP, advanced analytics are embedded within the ERP applications. Further cross-pollination between the different business applications, in addition to the ERP system of record, provides business users with BI that spams multiple swim lanes.
Business users are able to generate their own data analytics and insights as well. This process is facilitated by the fact that BI tools are embedded within each of the business applications that form part of the new postmodern ERP ecosystem.
Integrated applications-The day of one vendor and one ERP suite that satisfies all business requirements is in the past. The postmodern ERP includes multiple, loosely federated applications that satisfy specific business requirements.
Integrations are particularly crucial here. It starts with connections between the ERP system of record and the different business applications within the postmodern ERP ecosystem. These produce a broader and enhanced set of capabilities and ultimately better user experience. But integrations also extend beyond the core ERP system to include intersections between the different applications within the ERP ecosystem.
New era with exciting business possibilities
In the postmodern ERP world, the legacy ERP suite is deconstructed into a more loosely set of integrated business functions. The pieces make up the whole, rather than the whole (or suite) comprising the pieces. As argued by Gartner, the roles of been reversed; innovation and differentiating functions use alternative models of delivery that are integrated into the ERP’s system of record.
IT leaders and business stakeholders have much to be excited about this role of reversals. The deconstruction of the legacy ERP world is transforming into a postmodern ERP world with business outcomes that hold great potential, ranging from greater agility and flexibility to faster time to deployment and enhanced user experience.