Hot Trends to Watch in ERP
There are three major trends impacting Enterprise Resource Planning (ERP) systems today.
- The emergence of new business models that require ERP support.
- The broadening interest in cloud computing for ERP systems.
- The growing need to push ERP functionality out to mobile devices.
Keeping Pace with the New Business Models
Throughout much of our economic history, competition between companies was driven by who produced the best products and services. Today, success in dominating a market is influenced more from behind the scenes (back offices, cubicles, factory floors and warehouses, etc.), than from who builds the better product or service.
Companies compete far more aggressively on trying to understand their customers and prospects as individuals rather than selling to cold buyers. Getting close to customers by developing better relationships has become the primary aim of most companies, even more than convincing buyers how excellent their products or services are. Those companies that possess a solid understanding of their customer-base, and apply that knowledge to build brand loyalty, often dominate their respective markets.
The closeness a company can get to their customer-base compared to is determined by how well their business model matches the needs of the market. The closer a company is to their target audience – the more competitive they are in the marketplace. Ultimately, this comes down to competing business models for market share, not products as one may think.
Taking this idea one step further, in complex organizations the business models need ERP systems to manage the information flow throughout the entire company and its supply chain. Without ERP systems, most large and mid-size companies simply could not compete.
ERP systems are now one of the most powerful weapons in the battle to win customers and keep them coming back. By supporting business models and enabling companies to adapt to changing market conditions, ERP has emerged as the central player in Information Technology ecosystems. Whether the ERP product is from Oracle, SAP, Microsoft, Epicor, Plex Online, Sage ERP X3, QAD Enterprise, or a host of other vendors; they all have one thing is common – ERP systems must always be transformed to satisfy constantly evolving business models.
However, most ERP solutions in use today were designed years ago and, although they have been enhanced and updated, the logic behind much of the source code still reflects the business mindset of the mid and late 20th century. As a result, one of the biggest challenges for ERP has been to keep pace with a manufacturing sector that has been rapidly moving from a product-centric focus to a customer-centric focus. This change in attitude required most ERP vendors to add a variety of functions and modules on top of their core systems, while the basic design of most ERP systems remained product-centric.
ERP in the Cloud
The ERP vendors are gradually re-designing their systems, in some cases completely rebuilding them, to accommodate the change in business perspectives supporting different industries. This redesign effort is also being influenced by new infrastructure outsourcing trends for ERP systems. Many buyers of ERP software want to maintain their systems in either public or private clouds. They are also more likely to look for third-party hosting providers that can offer technical assistance and ongoing support, in addition to a stable physical infrastructure.
Since updating old ERP designs to meet the needs of the new business models requires a considerable amount of programming, building in the additional functionality to support cloud computing at the same time makes sense. The variety of trends that drive organizations to change are the same trends that drive ERP systems and vendors to consistently innovate and improve their products and services.
Modern programming technologies and new access technologies like cloud computing have made ERP more accessible and with a broader appeal than they were just 5 years ago. The cloud delivery model has reduced IT costs since implementation is fast, and data storage and management are handled by a third party outsourcing providers. The cloud has also made ERP affordable to many more businesses, which enables companies to replace old accounting packages with more robust financial tools.
One example of how ERP vendors are innovating to stay current is SAP’s Business One. This product, which is a smaller version of the full SAP ERP system, is aimed at meeting the needs of small businesses. It is also available on-premises or hosted by a third-party enterprise outsourcing firm.
Another significant trend related to ERP is mobility. Most ERP vendors offer their solutions on mobile devices, but some have simply enabled their web interface to be accessible from web browsers. Others have created mobile applications, or applets, which provide the same functionality as their core ERP product. No matter how an ERP vendor chooses to provide mobile computing options to their users, it is difficult to deliver all the functionality of an ERP system via mobile devices with the technology available today. However, the mobility trend is still in its infancy, but ERP vendors large and small are providing apps that plug into their core ERP systems, causing the mobility trend to rapidly evolve and mature.
ERP has been and still is the cornerstone of the corporate computing environment, but its full potential can only be realized through integration with 21st century business models. Contemporary enterprises now depend on customer relationship management (CRM), product lifecycle management (PLM), human capital management (HCM), supply chain management (SCM), and many other modules that take them beyond the core ERP functionality that was sufficient just a few years ago.
ERP vendors are scrambling to bring their products and services in line with the new needs of their customers and prospective customers. Of course, the product development struggle never ends because the world is constantly changing. However, the trends mentioned here are particularly challenging for traditional ERP vendors because meeting these new needs requires a deeper commitment and a significant amount of time to make adjustments to their software. These trends also open the door for niche competitors to enter the fray. These new competitors have the advantage of building applications from the ground up and in perfect alignment with current trends; so there is no need to retrofit and redesign anything.