10 ugly truths about postmodern ERP
- 20 October, 2016 09:19
Postmodern ERP is a strategy, not a software suite. This new approach has transformed a tightly integrated and inflexible environment into something that offers much more flexibility and potential business value. Unfortunately the complexity inherent in its deployment carries with it the risk of failure and mounting costs if best practices aren’t rigorously observed.
Postmodern ERP requires a strategic, holistic approach that can support business outcomes, but many organisations are still taking a tactical approach. In doing so, they’re uncovering some ugly but undeniable truths.
1.You can increase flexibility and agility, or reduce complexity, but you can’t do both
Postmodern ERP provides a fundamental shift away from a single vendor megasuite toward a more loosely coupled and federated ERP environment. While this offers more business agility, business objectives will only be realised if the resulting complexity is managed properly.
Despite the rigid nature of ERP suites, they solved some key issues, including the need for consistency and integrity of data and processes. Conversely, in a postmodern federated ERP environment, flexibility comes at the price of increased complexity and workload in multiple areas. Left unaddressed, these issues could quickly erode the value users expect to get from it.
2. SaaS applications won’t solve every problem with traditional ERP approaches and will introduce new challenges
Many enterprises fall into the trap of believing that software-as-a-service (SaaS) will deliver innovation on its own. While SaaS provides a potential platform, innovation is a process, not a software application. A business process change mindset is essential to achieve value through the flexibility SaaS offers. Organisations must have a well-defined strategy to help identify where SaaS applications can truly provide increased value.
3. Data integrity is often overlooked in tactical decisions
Maintaining data integrity is a top concern when dealing with a fragmented postmodern ERP environment. As digital business and the Internet of Things (IoT) move to the forefront, proper data governance and data quality will increase in importance. The usefulness of sophisticated high-speed analytics and algorithms will be undermined if the underlying data quality is not maintained.
4. Integration is not necessarily easy, despite what vendors are saying and selling
Integration has emerged as a critical component of postmodern ERP strategies, but solid integration strategies remain elusive for many organisations. You can’t have both flexibility/agility and less complexity. There will be more integration challenges with postmodern ERP in hybrid environments than with on-premises, monolithic approaches.
5. Bimodal IT provides a great approach for postmodern ERP, but few organisations have considered
The agility required to support postmodern ERP isn’t something that most organisations have automatically; it must be planned for. Bimodal IT provides a great foundation to address that challenge, operating two separate, coherent modes of IT delivery — one focused on stability and the other on agility. Many consider bimodal approaches for smaller projects, but haven’t considered it as a means of managing postmodern ERP, since ERP suites of the past weren’t flexible and agile.
6. Many organisations aren’t prepared for the pervasive change necessary to take advantage of postmodern ERP
Users like SaaS business applications because new features are automatically delivered on a regular basis — they don't have to wait years for vendor delivered improvements. However, true change requires postmodern ERP to adopt ongoing change, which most organisations are not prepared for and generally not very good at. Organisations underestimate the impact of change that it requires. Despite acquiring applications with frequent updates, many organisations still have not altered their "on-premises suite mindset" toward ERP and business applications.
7. Most organisations aren’t prepared to manage multiple vendors and sourcing strategies
Organisations will likely acquire applications from different vendors through multiple sourcing methods for postmodern ERP. Complex ecosystems require enterprises to retrofit a multi-sourcing service integrator and service integration and management role into outsourced environments. This alone increases complexity, but is exacerbated by many SaaS vendors selling directly to line of business (LOB) leaders. This increases the need for IT and business units to understand that managing multiple sources is more complex and difficult.
8. Selling SaaS applications directly to LOB leaders increases risk of mounting costs
Many CIOs and CFOs aren’t quantitatively aware of the extent of decentralised IT spending that comes from vendors selling SaaS applications directly to LOB leaders. Inattention to life cycle governance over SaaS utilisation results in widespread inability to take full business advantage of cost savings, flexibility and opportunity. It’s also manifested by escalating costs partly due to overlapping effort, delayed deployment and conflicting approaches in integration.
9. Cracks in the ERP foundation can’t be just patched over
In many ways, approaching ERP is analogous to constructing a building. While it’s important to renovate core ERP prior to engaging in a postmodern approach to suite deconstruction, many businesses still bypass the effort required to properly address fundamental issues underlying their existing ERP deployment. They assume that simply replacing poorly functioning areas with new applications will solve the problems. This is analogous to patching over cracks in a foundation — it may look good for a short while, but will have harmful effects in the long run.
10. The new postmodern ERP game can't be played under the old rules
Postmodern ERP requires approaches that are much more collaborative, comprehensive and agile than in the past, as well as less time and resource intensive. This is especially important since ERP has evolved from the monolithic suite to a more loosely coupled and federated approach, which in itself implies a new set of rules. Unfortunately, the deconstruction of monolithic ERP is happening by stealth in many organisations, as business users procure SaaS solutions outside of IT control. This tactical approach fails to consider issues requiring IT involvement (such as integration), resulting in problems.
Denise Ganly is a research director at Gartner, covering life cycle challenges for postmodern ERP and how these challenges are being met globally. Ganly will be speaking on ’10 Ugly Truths of Postmodern ERP’ at Gartner Symposium/ITxpo 2016 on the Gold Coast, 24-27 October.