How to avoid ERP lock-in and seize the service imperative

Profile picture for user Claus Jepsen By Claus Jepsen November 28, 2018
Summary:
The shift to Everything-as-a-Service (XaaS) changes how businesses operate. Unit4's Claus Jepsen explains how to avoid ERP lock-in and seize the initiative

Driver looks up Uber Eats application on Samsung S7 © dennizn - shutterstock
The future is XaaS – Everything-as-a-Service. While XaaS stems from cloud computing, it has quickly evolved to something that embraces anything that can be delivered via the Internet that used to be delivered only physically. The benefits include lower costs, massive scalability and flexibility, low maintenance overheads, and simple access to new technologies. This means organizations can focus on their core business and value – and most importantly, serving customers well.

One of the biggest advantages is that new business models and services can be launched in a few weeks rather than months, so it affords greater responsiveness and agility. We are all in the midst of a transition to a modern, digital world that’s quite different from the one we used to operate in.

A global study Unit4 commissioned in April found that 85% of mid-sized and large service organizations are already seeing the impact of XaaS on their products, services and pricing models. Surprisingly, many are yet to undergo transformation and only a fifth say they have made significant changes. What’s really telling is that those that have made at least some change have seen increased income in 85% of cases, according to the research. It’s already clear that organizations embracing XaaS business model changes show significant service and revenue improvements.

But XaaS is more than a new smart revenue stream. It is a strategic and operational blueprint which significantly changes how companies need to look at their operation. Of course, a business exists to create value and profit. If your customers don’t see the value in your product, profits will fall and ultimately you will fail. Customers today expect to be served immediately and served well. Whether they are buying a movie or ordering a taxi, customers want it now. If an organization cannot meet this demand quickly, they will lose the order and potentially the customer and business will suffer.

But how do you become an everything-as-a-service company? And importantly what are the technology requirements to support the transition?

Becoming XaaS

The majority of companies operate in silos, each silo offering specific business capabilities, products, services and processes. In many cases, the silos also contain different technologies and solutions optimized towards maximum efficiency to deliver against a defined set of KPIs. A model that has worked perfectly fine in the past. However, in a world of increased “Uberization” – where there’s a very short distance between desire and gratification – this model works poorly, as the time of desire to gratification becomes too long, mired in complicated inter-silo processes.

Uber is an often-used example illustrating the changes extremely well. Pre-Uber, ordering a taxi required the requestee to call the dispatch – the customer service representative – who would take the order and provide an estimated time of arrival for the taxi. The dispatch would then broadcast the request on a radio and decide, based on feedback, which taxi would be the best one to do the trip, and hand over the request to the taxi. The taxi would then drive to the address and pick up the customer. Between the point where the customer hangs up and until the taxi arrives, the customer has no insights into the progress, where the taxi is, when they will be picked up and so forth. With Uber the whole experience changes, the different silos are broken down – and a new holistic view of the complete end-to-end process is created. There’s a short distance between desire and gratification, supplemented with constant knowledge about time-to-gratification.

This is exactly what XaaS means. Instead of having silos, services are perceived as a collection of horizontal services, that can be leveraged throughout the whole organization, not limited or constrained to operating within a specific organizational unit.

The net effect is, that XaaS is driven by customer expectations for instant gratification, as a function of increased digitization.

Technology supports transformation to XaaS

At the core, XaaS is about digital transformation as a process concerned with understanding, holistically, the inner workings of your businesses processes, coupled with market change and customer expectations. As market and user expectations change at an ever-increasing speed, it is imperative that businesses can be agile when external changes require changes to internal processes to stay competitive. Technology provides a catalyst for transforming an organization entirely, from the back-office to customer services, helping reinvent business processes and the ways people work.

However, up until now, enterprise software architectures typically have not been able to change fast enough to ensure companies stay relevant. Enterprise Resource Planning (ERP) software for example, critical for any sizeable organization, was always criticized for its complexity, being difficult to change without expensive coding. Customization was almost always required, which meant lock-in because those customizations were impossible to maintain. Even integration with third party systems meant a huge headache for IT managers when a system required an upgrade.

For businesses to thrive into the future, they must be able to abstract the functionality, data and business processes from existing enterprise solutions, and make them available for consumption by new purpose-built business services. Another equally critical element, apart from being able to extend the existing solutions, is an underlying architecture with capabilities for seamlessly integrating with 3rd party offerings. This supports businesses in integrating with new, emerging solutions and services that facilitate the transition to a XaaS supplier.

In a relatively short space of time, this whole dynamic has changed, and this approach to enterprise IT is entirely possible. Technology advancements and the proliferation of SaaS mean software is simpler to implement and run.

Your enterprise architecture can facilitate change

The purpose of IT systems hasn’t changed. They exist to automate business processes. If customers are demanding instant service then IT must automate the processes very quickly. What we’re seeing today with enterprise software, thanks to digital technology advancements, is a response to the limitations software vendors created. As organizations look to the XaaS future, they need to build a digital platform for their people – supporting and steering them to meet and exceed customer expectations. Irrelevant of the cloud service in the background, vendors have a duty to help customers build out from the core with loosely-coupled microservices that allow them and their partners to build their own ERP extensions. The technology is available today to democratize software and app development for everyone (often referred to as low code/no code), while benefiting from the critical business data, and the enterprise power behind it.

This democratic approach to software development will be one of the most disruptive elements in the enterprise digital story and could be the thing that differentiates your service organization. Like cloud, this concept is not entirely new, but the difference is we now have the technology to support it. Applications will be enterprise-powerful and have citizen-developer ease of use. And the possibilities of such solutions are endless when combined with AI and machine learning.

Visionary companies will start equipping their workforce with the right skills. People will start to see technology, really for the first time, as a way to create value in their work. It will open doors to innovation, and new ways of accomplishing goals at a critical time for services organizations.