2021 - the year in the future of ERP

Profile picture for user jreed By Jon Reed December 29, 2021
Summary:
Is it time to move past ERP? Or can ERP make a case for its own relevance? It's a question for every customer undertaking a business transformation. Use these top picks as a sounding board, and let's continue the debate.

JON2

The future of ERP debate reached a fever pitch in 2021. Some consider ERP a legacy term, best used for ring-fenced systems. Others are beyond bullish.

Here's the catch: they are both right. It all comes down to what type of ERP you're talking about. Looking back, I stand by my statement:

The future of ERP as a back office system of record is a bleak commodity. The future of ERP as an operational backbone for your industry - that's where ERP gets interesting.

Yes, some vendors avoid the ERP monicker entirely. It doesn't matter what we call these systems - what matters is giving customers the transformation options they need.

Whatever you call it, the functionality ERP covers can't be ignored - even by the trendy CX crowd. With supply chain disruptions undermining "customer experience" rhetoric all over the place, we know that siloed transformation doesn't work. It's about end-to-end, and ERP lands smack in the middle of that mix.

At diginomica, we make fun of tech predictions because the future doesn't like to be nailed down ahead of time. So why talk about the "future of ERP?" Because defining modern ERP provides buyers with a better checklist. Read on, and you'll see what I mean: back-office functionality comparisons are not the way to chart ERP's future.

There are more relevant articles than I can possibly list here - but hopefully this year-end selection shows the scope of the issues.

What constitutes modern ERP? Reacting to the views of Unit4 CEO Mike Ettling

  • The industry requirements of mid-market companies force cloud ERP companies to push into industry functionality as a must-have (Larger enterprises are more likely to build their own industry tools).
  • The same dynamic holds for AI and data science, with mid-market companies unlikely to have data science teams in house. They expect their ERP to be automated, with "intelligent" processes embedded.

Why? This piece builds on a dialogue begun by my colleague Phil Wainewright. The question: what are the characteristics of mid-market ERP, as Unit4's CEO defines them? I thought the list was a good start towards defining what all mid-market ERP should look like. Here's my additions and critique. Bonus: in the comment thread, I get into the differences in SMB, mid-market and large enterprise ERP futures with readers.

Extracting value from cloud ERP in a customer-first world - what should we be pushing for?

The pandemic exposed competitive weaknesses and supply chain vulnerabilities that motivated companies to change up - and invest in new software. But to the chagrin of ERP vendors, that urgency led buyers to invest in customer-facing projects with a more obvious return. Or: to invest in cloud apps that have a faster impact, and a more forgiving project timeline.

Why? With all the emphasis on customer-centricity, where does this leave ERP vendors? I also expand on my prior ERP maturity model, and fleshed out some oversights from prior versions, including "Empowering business users to automate workflows." Yes, that's where the low-code/no-code hype comes in. Beyond the hype, it's worth a look. Why care about a benefits model? Because just going live on cloud ERP isn't enough anymore.

Attention vendors - please stop the customer success hype train, unless you have these six proof points

Your supposedly great NPS score isn't enough. Why? The NPS score is a lagging indicator. It's too static. By the time your score comes in, it's way too late to intervene on a troubled project... And don't talk to me about value engineering: talk to me about "real-time value assessment." And by the way, can your customers see their own health score in a real-time dashboard? If not, we have work to do.

Why? This customer success challenge doesn't apply only to ERP vendors - but I definitely wrote it with ERP vendors in mind as well. Part of the challenge is: share/publish your project maturity model. Up to now, one vendor has taken me up on it - I'd love to hear from more vendors in 2022.

The future of cloud ERP is vertical - Acumatica customers share proof points

I've been carrying on about the micro-vertical future of cloud ERP - time to flesh this out. Enter Acumatica, with stats and customer stories that bring industry ERP to the forefront.

Why? Acumatica's 2021 analyst day gave me fresh data for my "future of ERP is vertical" stump speech. Including this data point: Acumatica's industry editions now make up 78% of their SKU mix - that's up from 20% four years ago. Acumatica is hardly the only one - if you're a cloud ERP vendor with a similar story - let's hear it.

Inside the Catena-X automotive industry consortium - the biggest story SAP isn't talking about (yet)

Openness and neutrality - not what you typically see from enterprise software vendors. I believe the future of ERP is not back office, but vertical backbone. That's why industry consortiums built on open standards really catch my eye.

Why? Serving an ERP vertical is much more than modernizing the functionality for clouds/networks - an issue vendors often overlook in their "industry cloud" marketing. This piece on SAP's Catena-X initiative provoked me to expand my thinking.

Has large enterprise cloud ERP adoption finally turned a corner? Inside the Oracle Cloud ERP Virtual Summit

Has large enterprise cloud ERP adoption finally turned a corner? No - I'm not talking about lift-and-shift into a private cloud. No, I'm not talking about a transitional "public cloud" move that keeps customizations in place. I'm talking about what some call "true cloud ERP" - of the multi-tenant variety that has been so successful in the SME market.

Why? The quote says it all - but we are still waiting to see the extent of the large enterprise ERP market - for the "industry cloud ERP" that is taking over the mid-market. One vendor, however, is airing out their confidence.

Can low-code ERP free SaaS from the vanilla constraints of ERP standardization? Acumatica's Ali Jani says yes

SaaS ERP has been great for moving customers out of the legacy customization trap, but: SaaS has been too vanilla. Keeping SaaS to standard comes at a user-unfriendly cost. Customizing your SaaS workflows is a potent way of changing that.

Why? Low-code can be overhyped, but this notion of personalized ERP matters. As does automating your own workflows, without custom code or IT change requests. Acumatica focuses on the mid-market, but I chose this piece because if multi-tenant ERP ever achieves dominance in the large enterprise, then we must get out of this "SaaS is vanilla; I need my customizations" dilemma.

Workday comes to bury ERP and prise finance from its grip

Workday is done with cloud ERP. Not the cloud aspect, but the ERP acronym, which is weighed down by too many negative connotations that simply don't fit the image of a modern enterprise system.

Why? When a large enterprise ERP player distances itself from the monicker, we'd best pay attention. This collection would not be complete without my colleague Phil Wainewright's terrific run down of why Workday's co-CEO Aneel Bhusri is looking to put the term to rest. But reading between the lines, what I get from this is why large enterprise ERP will be componentized. Large companies will look to solve specific problems (e.g. finance transformation), not suite problems.

IFS - customers don't buy acronyms, they want to solve problems (1/2)

I think that one of the reasons that we've been so successful over the last few years, even during COVID, is the capabilities that we sell being a single solution. The customer is able to avail themselves of traditional field service capability, plus supply chain, plus projects, plus MRO, plus asset management, in a single solution, and to pick and choose the modules that they need.

Why? Another piece on why we need to outgrow acronyms, again by my estimable colleague Wainewright. The quote above is from IFS CEO Darren Roos, who has helped lead IFS into a notable growth story. But as Wainewright notes,  Does that mean ERP is irrelevant to the IFS vision? No, ERP still factors heavily into the new IFS focal point, "the moment of service." But this "moment of service" still serves as a wake-up call for old-school ERP approaches. Batch processes anyone?

Security is now job one for SAP operations teams - lessons from Avantra Summit 2021

Three of their customers actually had this ransomware installed, and it was starting to worm its way through the network. As a result, they were able to get out ahead of it and protect those customers... This is, as you say, job number one. And it's becoming such a thing that they are worrying about it on a constant basis.

Why? The prior quote, from Avantra's Chief Customer Officer Brenton O'Callaghan, is not about security teams. It's about ERP operations managers. We can talk all we want about next-gen ERP, but security is now job one. Lose track of that, and we're not going to be working on cloud ERP projects; we'll be updating our job status on LinkedIn.


Honorable mention - many other pieces factored into this discussion, I couldn't possibly list them all. But these in particular could have easily been included:

End note: diginomica contributor Brian Sommer has written a number of essential pieces on the future of ERP. They are not included here, because Sommer is doing a year-end piece on "The year in PSA and ERP."