I thought that having left the ERP industry I would not have any reason or inspiration to write about it, but I was wrong. My experiences since I started working in the cloud application market have led me to believe that the era of the monolithic systems of record, as typified by ERP, might be coming to an end.
When I started in the ERP field as it was taking off in the late 1990s, only large organizations could afford, or saw the rationale for, ERP. It took another ten years for ERP systems to penetrate most sizes of business. Now, because moving off ERP is a mindset change, and organizations have invested hugely in enterprise software, I don’t believe that change will happen overnight. But as the economics and business benefit of cloud become more apparent, and a younger generation assume decision-making roles, it could occur over the coming decade. Several writers have commented that the growth of cloud computing bears many similarities to the expansion of electrification in the early 1900s.
Here some of my reasons for believing that monolithic systems will disappear.
1. You don’t need an ERP as single source for company truth
Many organizations use specialized applications for key customer-facing operations, and increasingly these are SaaS (software-as-a-service) systems. With modern iPaaS (integration platform-as-a-service) apps, software integrations can allow different systems to be a system of record for a set of business functions. The only system that needs to be centralized is accounting, and with companies are already using iPaaS to synch operational data into the accounts system.
2. Legacy systems diminish the ability to innovate
According to a recent survey, 90% of IT decision-makers say legacy systems prevent them from adopting new digital technologies that they need.
3. The push to digital disruption requires new approaches
An article by Constellation Research explains that ERP arose out of the business process re-engineering movement and the disruptive innovation caused by the PC. In its day the emergence of ERP software disrupted the existing business model, but there is now the new disruptive influence arising as a result of cloud and mobile computing. It would be unlikely that a new company these days would opt for an on-premise ERP; more likely it would look for a SaaS solution. “New business model = new ERP model!”
4. The cloud is now acceptable for many business-critical solutions
Analyst companies are reporting a change in the way the cloud is perceived. Gartner notes that fears about the suitability of the cloud for critical applications is now a thing of the past. Forrester Research found that agility is the most important driver of cloud adoption. The fact that many cloud providers are now certified for compliance and security regulations has also made them more acceptable.
5. Ease of SaaS upgrades
SaaS software has the advantage of “bite sized, frequent, managed- by-the-vendor upgrades“, compared to the headaches of managing on-premise upgrades. I am noticing a proliferation of SaaS applications with a fairly narrow industry focus. What enables that is that is a relatively easier to develop and maintain cloud-based applications (compared to on-premise), and SaaS subscription model enables profitability at an earlier stage than the traditional license fee model.
6. ERP consultant recommends alternatives
When ERP consulting firm Panorama recommends alternatives to typical ERP solutions you start to ask whether ERP may be close to its sell-by date.
Companies are increasingly being made aware of the possibility of digital disruption to their business. It’s difficult to cope with a disruptive business model that requires agility by staying with a monolithic legacy system like an ERP.