One of the themes of the Coupa Inspire conference in Paris last week was the idea that organizations are entering a Postmodern ERP world, one that doesn’t change the fundamental value proposition of ERP itself, but which does raise new questions for the buy and sell sides.
Inevitably it’s a concept that’s being pushed hard by research house Gartner, whose Research Director Magnus Bergfors was on hand to lay out what the firm is pitching as the new rules of the game.
The Gartner thesis has a familiarity about it. ERP emerged from a best-of-breed world, where users got to choose software, but integration was a nightmare. This led to the rise of integrated ERP suites, but these, says Bergfors, got out of control:
They grew. They became bloated. They lost business relevance. Integration became seen as more important than the need for fit-for-purpose systems.
So now, with the rise of cloud competitors, comes Postmodern ERP, which according to Gartner's definition, is :
a deconstruction of suite-centric ERP. Postmodern ERP is a technology strategy, not a system. It means that you can find the best solutions for each domain and maximise the value that you can create, but balanced against integration.
Gartner’s thinking around Postmodern ERP is built around a number of axioms, the first being that the mega-suite is dead, killed by the rise of cloud alternatives. Bergfors posits:
ERP suites emerged over 20 years, then came cloud vendors and disrupted this.
No vendor can build a mega-suite fast enough to keep up with the cloud specialists.
But what this does mean is that integration complexity increases. Bergfors argues:
Vendors hide this in the cloud in many cases. They let customers assume there are no problems around this. The integration issues that we might see in broader ERP are not that big though in procurement. In the procurement space, processes are pretty much defined.
Purchase-To-Pay (P2P) systems, such as Coupa, are a good example of Postmodern ERP, says Bergfors, with the whole space clearly dominated by specialist vendors after the mega-vendors missed out on key trends.
The first of these is the ‘cool’ nature of cloud and its acceptance. Bergfors notes:
We see 90% of new procurement solutions are cloud-delivered and every new vendor is in the cloud.
There are differing expectations coming from the buy-side however, dependent on job title, he adds:
CIOs mention agility, then cost, then innovation. A Chief Purchasing Officer’s answer would be slightly different, looking for something fit-for-purpose that matches what they need to do.
We had one client recently which was considered two options for P2P, one cloud, one their existing on-premise ERP provider. They ran pilots for both. Before the on-premise pilot even got up-and-running ,they were all done with the cloud pilot.
A second important factor is that usability is no longer a ‘nice to have’ but an essential. Bergfors says:
Usability is the number one criteria for P2P solutions. If a solution is not easy to use, then it doesn’t matter if you have functionality. What good does that do if you can’t log on? There are increasing expectations for no user training at all.
There’s also a shift from purchase to Purchase-To-Pay:
P2P has been the number one topic over the past year because it automates the entire process and maximizes efficiency. As we see more collaboration between finance and procurement, invoicing remains a challenge around the world.
Organizations are deploying a multiple workstream approach. Organizations are deploying ‘no PO, no pay’ policies. They want to capture everything in P2P systems. Not everything is suited to the PO process. Some spend is well-suited to catalog solutions. So leading P2P vendors are increasingly supporting multiple workstreams.
There are challenges ahead for this new generation of specialist vendors, warned Bergfors:
It can be hard for small firms to execute on a global scale. There are many modules that are needed, but if you have less than 100 employees you’re going to have to prioritise. But some enterprises buyers can be concerned about having faith in vendors so small. Vendors need to be able to offer support locally and keep up to speed with changes in various countries.
On the buy side, it’s vital to understand spend needs and processes so as to have a system in place that will encourage as many users as possible to adopt it. It’s important to understand what data needs to be in the system and what the security implications are. But when it comes to security, be realistic, cautions Bergsfor:
Work with IT to make sure your needs are met. We often see quite unrealistic requirements. The biggest risk we see is not someone hacking into P2P systems. It’s more around phishing, in which case it doesn’t matter if it’s on-premise or in the cloud.
Finally, the user community needs to work with IT colleagues to influence the broader ERP strategy, advised Bergfors:
Establish an integration strategy that avoids unnecessary complexity.
Consider specialist P2P providers. Postmodern ERP is moving from an IT-centric to business-centric perspective.
Disclosure - at time of writing, Coupa is a partner of diginomica.