Where to now for innovation in ERP?

Let’s not beat around the bush. Reading between the lines of our latest ERP Buyers Guide, there isn’t a huge amount of innovation in the Enterprise Resource Planning space. And that’s quite OK, with the overriding lesson being a simple one. Don’t be distracted when it comes to ERP solutions. Instead, look for solid, proven value and a cornerstone upon which you as a business can innovate.

Let us also be fair. Innovation in ERP systems is constrained by the nature of the beast: Systems of record are, by definition, bound by solidly set principles – IFRS 9, great read that it is, could hardly be described as an ode to innovation and agility.

Striving for differentiation is the reason that ERP vendors (not uniquely among packaged software vendors it must be noted) tend to jump on any ‘innovation’ bandwagon riding the cycle. We’ve seen it with the cloud (it’s just someone else’s computers). We’ve seen it with big data (it’s just data). We’ve seen it with the Internet of Things (it’s just more devices creating more data).

This therefore begs the question: Is yet more innovation really necessary in the ERP space? The short answer is ‘no’. It is far more distraction, hype and buzzword, than it is reality. But nonetheless ERP is fundamentally important to innovation.

SAP partner Zag’s CEO Nick Mulcahy put it thus: “With everyone focused on the Digital Economy we are seeing a resurgence in ERP because you cannot deliver transformative change and exceptional customer experiences if your back office isn’t matched.”

He’s on the money here, in a ‘you should walk before you run’ way. Don’t look for innovation in the ERP solution, instead look there for the sort of stability and dependability associated with the foundation of a new building.

On a modern platform, your business will be able to do clever stuff which wins more fans with staff and customers alike, creates efficiencies or addresses the market in new ways (let’s bear in mind that a great deal of innovation is merely selling the same things in a different way: Amazon, Lyft, AirBnb, etc, we’re looking at you).

Shannon Moir, director of digital innovation at Oracle and Microsoft specialist Fusion5 confirms Mulcahy’s view. “We are keeping our clients’ ERP as a central focus but taking a cloud first approach for extension of the ERP’s capabilities,” she explained.

The innovation such as it may be, is therefore happening outside the ERP, Not within.

“We are finding that the core ERP cannot keep up with innovation, so you need to use modern integration and public cloud to get better insights – not just better data – that the ERP can transform into better decisions,” Moir added.

As for what is being integrated, it is the sort of acronym salad one comes to expect with any discussion about technology on the bleeding edge. Said Moir: “At a high level we are using modern integration to augment insights and decision making by integrating things like mobility, IoT, big data, AI and RPA [Robotic Process Automation].”

The innovation, such as it may be, is therefore happening outside the ERP. Not within.

ERP is invaluable
It may not be sexy, but a good ERP system becomes essential for just about every business which reaches – or aspires to reach – a certain scale. Where that inflection point is varies widely from one business to another, and from one vertical market to another.

That’s what underpins the value of the ERP market. In its Market Share Analysis released this May, Gartner put it at US$35 billion for the full 2018 year. The leading vendors come as no surprise, with SAP, Oracle, Sage and Infor making four of the top 5. Workday is in there too, distinguished as the only one founded post-2000, and, arguably, one innovator that is disrupting traditional views of what an ERP is or should be, focusing not on orders and invoices but on what you need to do your job.

There is, therefore, a ton of money in the ‘if it ain’t broke, don’t fix it’ model; in fact, Gartner confirms precisely this view, when it notes a ‘slow but incremental move to latest version ERPs’. The researcher even has a short but sweet blog, seductively titled ‘Do you really have to upgrade your ERP to innovate’. Answer: Not really, but let’s assume you’re already past that point.

ERP upgrades or total replacements are, as anyone in the industry is likely to attest, painful. Dollars and cents determine if the juice is worth the squeeze and that is why companies tend towards reluctance when it comes to tinkering with core systems of record.

But you can only avoid the pain for so long, and no doubt, dear reader, that is what brings you here.

Addressing ‘recent’ ERP innovations
It would be entirely inaccurate to say nothing changes in terms of ERP capabilities. Of course it does. But is it innovation? Or is it evolution? A review of online articles covering ERP innovation serve up the same themes (this one leads with ‘You may not think of innovation when you consider ERP’), over and over again. You’ll recognise them all, because we’ve mentioned them already.

‘Form follows function’, as the design principle goes, holds equally true in the world of ERP software.

Yes, there have been leaps and bounds made in the reliability, usability and accessibility of ERP systems, but looking forward from here ERP product strategists should caution themselves against heeding marketing’s call for innovation for innovation’s sake. And you as a buyer should be similarly cautious about the claims made versus value gained.

Let’s examine some of the more prominent developments and see if they are truly important in determining the right solution for you.

Cloud…and mobility
‘Cloud’ and mobility architectures have to be the first cab off the rank. Innovation? Perhaps when the idea of connecting directly to the back office using a WAP-enabled Nokia was first floated. Or perhaps when NetSuite commenced business – but both these events took place in the 1990s. A quarter of a century ago, these may have been innovations, but today, we’re merely seeing maturity of concepts which were probably ahead of their time and ahead of the necessary enabling infrastructure.

That’s why every ERP software maker, including dyed-in-the-wool on-premise vendors, offer cloud-hosted options, subscription licensing and web-accessible screens. It explains Workday and it explains NetSuite (part of Oracle since 2016) and it explains the ‘web-native’ investments made by a slew of vendors, including SAP’s Business by Design, Infor’s CloudSuite and Microsoft Dynamics 365. It’s a recent phenomenon that will continue to evolve, but users should now understand that building for web doesn’t necessarily mean building better.

‘Form follows function’, as the design principle goes, holds equally true in the world of ERP software.

Pronto product marketing manager Kashyap Patel notes that “Cloud deployments for ERP are now quite common. The one-solution-fits-all approach for ERPs will continue to gain momentum, especially when offered primarily on the multi-tenant cloud.”

Put bluntly, when something is no longer a differentiator, it can’t be called an innovation.

The question to ask: Do you need cloud ERP? The answer: It should definitely be on your radar. In fact, it probably is. But taking an approach of ‘browser-based or die’ will limit your selection options, perhaps to your detriment. And be very cautious about the benefits sold versus the ongoing cost of ownership when considering subscription licensing and full vendor-managed SaaS cloud. Likewise be very clear what type of ‘cloud’ you are considering – they come in lots of shapes and sizes. Ask your own questions, but the ‘Hosting, Architecture and Licensing’ section of the ERP Buyer’s Guide lays this out consistently by vendor and summarised in the Cloud ERP table.

Industry-specific: Necessary, but not sufficient
The next promise vendors will tout is that their solution is preconfigured to suit vertical industries – captured in the clunky pretext ‘verticalisation’. In much the same way that cloud has now been around for an awfully long time, ERP solutions have been able to be configured to address the needs of specific industries so long it is more norm than exception.

There’s another reality which won’t be tackled in the marketing brochures. No matter how preconfigured the solution, it isn’t going to fit your business perfectly. While the principles of business are fairly universal, the way it is done is not. Even within the same vertical, two companies can routinely do things very differently. In some cases, that’s the sole thing which differentiates one from another. And that’s also why, despite industry-specific solutions, you’re still going to pay for the expertise of a configuration consultant or team.

There’s slightly more to it, though. Patel notes that as systems mature the user experience is likely to become more customisable, which is a level beyond tweaking a system to meet your business’ needs: “ERPs are known for their customisations implemented according to the business processes and organisation structure. To marry the scalability of cloud ERP with its core benefit of customisability, innovation will arise in the user’s ability to customise or personalise their ERP accounts without writing a single line of code or any spending on development efforts.”

As an example, the founder of JD Edwards, Ed McVarney, has founded an ERP solution ‘Nextworld.net’ that takes this principle to its conclusion, joining an emerging category called “codeless” software. The idea is that the platform allows business processes to be created though drag & drop configuration, which then also creates the application screens needed to run them. The Salesforce ‘Lightning’ platform offers a similar app development environment, which after years of the vendor attaching itself to a ‘No Software’ moniker, it now describes as ‘low-code’. While the flexibility and customisation will appeal, for many the effort needed to start from a blank canvas will be a deterrent – you are looking for an ERP after all, an application development framework is a different beast.

Patel says user-driven actions might include screen customisation and layouts, custom fields for data entry, do-it-yourself software integrations, and personalised mobile app configuration. “Users will be able to personalise a very large aspect of their ERP experience without waiting for customisations to be delivered to them.”

We can extend that to include ‘…or wait on expert consultants to configure the solution the way users want.’ Self-service and user-defined dashboards and ease of configuration are indeed innovations in ERP architecture worthy of investigation.

The question to ask: Do you need an industry specific ERP? Absolutely. But question any vendor that says they are delivering you an ERP that is pre-configured especially for your industry. Chances are what you are actually being sold is simply a combination of modules in a bundle. Or a product that is, in fact, suited to your industry. For vendors like Infor, with multiple unique ERP products in its quiver, that is what ‘verticalisation’ actually means. Do however look for flexible, configurable user dashboards, DIY application builders and integration wizards as these will allow you to, at low cost, build tools and capability that differentiate your business from the next.

Open integration
ERP vendors like to punt integration as innovation, but it isn’t really, because systems integration has a long history. The concept of the Enterprise Service Bus (and the related concept of Service Oriented Architecture) dates back to the late 1990s, and ‘SI’ has a far longer tail than that.

No matter how preconfigured the solution, it isn’t going to fit your business perfectly.

Granted, integration has come a long way, particularly with the standardisation of web services and APIs, along with the toolsets to set up and manage them, which means for the most part, integration gateways are open and modern. That’s great and should definitely be a feature in any modern ERP. Again, however, the constraint isn’t likely to be the software you choose, but instead the skill levels of the people available to actually build the integrations which make sense for your business. And with the real value to be gained in extended value chain integration – that is, with your partners and suppliers – the issue is more likely to be gaining their cooperation and buy in.

Patel puts it this way: “While ERPs aim to target every business function, deep specialisation in a particular area will continue to be elusive [this comment applies to ‘Industry-Specific’, too]. Integrations into specialised software will be the way forward. API-driven and API-first development will be the approach to add further functionality into the product suites.”

The question to ask: Does integration matter? Undoubtedly. But the capacity for integration isn’t the same thing as the integration itself. With the right technical skills, any integration is possible, with any software, so it will typically not be a differentiating factor in your decision.

Aah, the blockchain
We’ll come right out and say it: despite the mountain of hype associated with the blockchain, it is impractical when it comes to in-house business software and doesn’t do anything existing technologies don’t already do better. Time will tell on this one, and some say it already is (and the Estonian example of blockchain in action is largely a retcon/marketing effort).

The question to ask: Do you need a blockchain? The answer: Unequivocally no. And that answer isn’t restricted to your choice of ERP solution. Here’s a decision tree which helps draw your own conclusions. Next please.

The Internet of Things…and big data
IoT has enjoyed about as much hype as the blockchain. In its favour, it is real, it delivers value and – on top of it all – everything connected to the internet has always been a thing, anyway. In a post-IPv6 world, IoT just means lots more things, probably cheap ones, and new streams of data. It also means new specialised networks, like LoRaWan and SigFox, which don’t need SIMs or other expensive means by which to exchange data with those things.

Innovation? See the sentence in italics. More things? Certainly, but that’s been the story of computing since the days of Colossus. More data? See Colossus and everything after.

It is no secret that the capability of the tech industry to both produce, handle and store massive volumes of data increases exponentially, with Moore’s Law the usual yardstick. ‘Big Data’ in the 90s was measured in terabytes. These days, it’s petabytes or more.

But Moore is just more. Is it innovation in the ERP context? You probably know the answer already.

The question to ask:  Does IoT and big data capability matter to you? For most, probably not in the context of an ERP procurement decision. Can your choice of ERP system handle it should it become important to you? Almost certainly. It is just data, after all, and producing/handling data is what ERP has done since day dot. More likely your issue will be the integration aspect, and once integrated, how well you can configure the analytics tools in the software to ensure IoT data is embedded into processes, not just collected for its own sake. So the innovation to look for is strong analytics tools beyond report writing, that allow you to look at any data within or collected by the ERP, in any way you want. It’s your data – make sure you can get to it.

Robotic Process Automation, ‘AI’ and other clever computers
Artificial Intelligence is half way there. It is artificial. Intelligent? Not so much.

The very first computer programmes do more or less the same thing that modern AI does. Input, output. AI handles a ton more inputs and is capable of adding context and much more to the processing. Does that make it intelligent? No. Does that make for more useful software? Absolutely.

Pronto’s Patel comments on analytics and its hot sister, AI: “More will be sought from data. ERP is expected to the play the role [of] advisor, providing actionable recommendations. AI, especially deep learning, would be an enabler to help ERP evolve into being an advisor. Again, data science will always continue to be a decision aid rather than decision maker…over time, this would become a standard offering rather than a premium one.”

So the innovation to look for is strong analytics tools beyond report writing.

Given that your ERP holds data in context, it will be central to such augmented decision assistance. MRP, advanced production scheduling and route optimisation tools are examples that are already well embedded inside ERP solutions and were so well before modern AI and machine learning laid claim to such capability.

What about RPA? The benefits of removing rote processes from the daily tedium has to be a good thing. But as Mulcahy points out, your ERP project is the opportunity to digitise your processes before they need to be patched up with an RPA solution.

The question to ask: Are AI, machine learning and RPA etc important to your ERP decision? The answer right now is probably not. But it is, arguably, the answer to the question this article poses, once the intelligence part is sorted out.

A final word
The information technology space is very large, very confusing, full of hype and marketing distractions. It also delivers massive value and the various components have become essential to our way of life will only grow in importance.

ERP is a cornerstone and a foundation for business at scale. It should be seen as such. It doesn’t have to be sexy and innovative; it has to be robust, reliable and accessible. And, in this day and age, easy to use. Beyond that, look for product innovations that are not bleeding edge, but well tested, customer-proven and which deliver real value to the business or the end user.

Download the 2019-20 edition of the ERP Buyer’s Guide to get analysis of how the top solutions compare, along with detailed product and partner fact sheets for the leading ERP systems in the A/NZ region.