The value of an agile ERP and steps to get there

1. POINT OF VIEW
The Future
of ERP
January 2018
AN AGILE ERP POINT OF VIEW
It’s no secret that Enterprise
Resource Planning has been under
the microscope for more than a few
years now. As companies rush to
embrace more flexible solutions to
meet the demands of each business
domain, the old school method of a
tightly coupled ERP core has eroded.
The advantages of a tightly coupled
ERP is one where all modules share a
common database, technology base,
and shared integration points. While
this is a great approach for reducing
overall technologies and
consolidating processes to one
environment – it can slow adoption
of newer functionality. Individual
business domains have demanded
the agility that a point system
(usually SaaS) provides outside of the
tightly coupled ERP. This is often
with little regard to technical debt
mitigation. This now forces a shift in
ERP architecture to move to a more
loosely coupled solution wherein
different technology bases and
integration points need to be
addressed. This has left
technologists struggling to pick up
the technology integration pieces as
well as question where the ERP
roadmap is leading. Companies have
felt the pinch to move faster to meet
up with industry demands and
cannot wait on the ERP core to
"catch up" with adoption of this
approach. Agility is desired both in
functionality and in systems. What
are some of the ways to move
forward and address this so that you
have a thriving ERP core? This point
of view will explore the trends, some
of the challenges that technologists
face, and finally some actions to take
that should set your organization up
for an agile ERP. An agile ERP that
makes it easier for adoption of new
disruptive technologies while
enabling the ERP core to deliver
more value than ever before.
Trends
Trends can be represented in two
categories of purely disruptive
approaches to enabling existing
functionality in new ways. The key is
in defining which ones to embrace
now and the future along with the
interactions between the two. The
current disruptive technologies that
have a great deal of relevance to ERP
are Blockchain, Machine Learning,
Augmented/Virtual Reality, and IoT.
Some organizations have fully
embraced new approaches to
enabling their current systems –
some with complete
overhaul/replacement approaches.
But trends will continue to challenge
the ERP foundation even further.
Both disruptive and enabling
technologies should be planned out
together in order to address a robust
future state “core”.
Disruptors
Disruptors should have a symbiotic relationship with
enabling functions. Look for changes along the ERP
value chain that have the most significant cost benefit,
but with the enabling functions leading the way.
Significant adoption with only one or (a) few disruptors
at a time.

2. POINT OF VIEW 2
The ERP’s foundation needs to address a
more heterogeneous approach. Enabling
previously unlocked functionality and
augmenting with complimenting
technologies should be evaluated to
derive the best ERP roadmap.
Enabling a heterogeneous ERP
More and more vertical business units adopt SaaS
applications necessitating a robust heterogeneous
enabled platform underneath. Many vertical SaaS
applications have immature integration functionality
that need to consume full load copies of master data.
The approach to enabling a
heterogeneous ERP wherein all the
domain areas are in a concerted
chain is by having a well-defined
service/message environment. This
allows for consistency and flexibility
to meet each vertical solution needs.
Point to point integration is
minimized. Using standard
integration patterns and consistent
integration methods compliments
the services and messages
environment. These give flexibility in
adoption of disruptor technologies.
This also makes it easier to integrate
with immature vertical aligned
applications.
Cloud environments are
challenging today’s enterprise
systems
Business domains are not the only
drivers to cloud functionality. IT
functions are accelerating with
adoption of Infrastructure as a
Service (IaaS) and Platform as a
Service (PaaS) solutions to facilitate
their core ERP chain. While looking
at the ERP core as a chain of domain
components, IaaS and PaaS simply
become one more layer(s). One that
could be interchangeable just as the
business domain components aspire
to be. An organization should
evaluate the true cost of ownership
and analyze what needs to be an on
premise based solution in order to
meet your company and industry
requirements. Many times you could
have a fully functioning PaaS or core
system using Iaas wherein any on
premise needs are simply another
(smaller) component node hanging
off the cloud enabled platform. This
“breaking apart” of the ERP into
components residing in different
areas complicates integration but
allows the most agility and flexibility
for future business needs. It’s hard
to predict how much of your ERP
functionality should reside in the
cloud but plan for at least 60% within
the next two years. Each industry
and company has their own track.
Partnering with those in your
network to derive the best roadmap
for your company is an excellent way
to gauge how much change you can
absorb.
Agility as a differentiator
There is a trade off by breaking apart
an ERP to facilitate greater agility.
Cost for support (headcount and
development expertise) could
increase – if even for a short period
of time. Integration orchestration
will be necessary. Data discipline
and security stewardship become
much more important. These are
offset by a realized greater agility
across the whole ERP chain. Tightly
coupled and fully integrated software
generally offers business module
plugins for other functionality. But
you are mostly restricted on how
much and where (which module)
within the ERP the plugin can be
supported. Adopting an agile ERP
approach can help differentiate your
company from your competition. It
allows your organization the ability
to adopt enhancements faster at
those differentiation points. The
agile ERP can turn into a
differentiator itself compared to your
competitors by forcing deeper value
chain conversations. This can
facilitate necessary improvements
that ultimately increase your
company’s main differentiating
effectiveness.
Agile ERP – How to get there
How does an organization start
driving towards a more agile ERP?
Deriving value needs certain logical
steps in order to build a system for
future needs. You should not blindly
adopt the latest offering from your
old ERP vendor nor fall prey to a
combo of the best of breed
PaaS/SaaS leaders. Instead take
these steps to ensure the best value
for your company:
 Define the objective
An objective that supports the overall
organizational plan is a given, however,
targeting broad macro processes with
desired key performance indicators
should be defined.
 Roadmap the transformation
Identify the processes that have the
greatest cross business domains and
plan for change as a group.
 Identify mature technologies
Plan for sooner adoption of disruptors
but only if it has the most cross domain
enabling impact.
 Document data
Know what system is/will be the source
of record and where the data is going.
Data stewardship is critical for an agile
ERP.
 Develop integration standards

3. POINT OF VIEW 3
Defining consistent integration patterns
and objects to be used enterprise wide is
necessary for adoption of a
heterogeneous architecture. Technical
architecture should be firmly defined.
 Process simplification
Now is the time to deep dive into your
processes to standardize and simplify
your approach. This avoids technical
debt while allowing easier adoption of
both disruptive and enabling
technologies.
 Prototype
Constantly prototype emerging
technologies, especially those that have
the greatest cross domain capabilities.
This gives insight as to the direction of
industry along with future planning
during your cross domain
implementations.
The ERP architecture of the past is
simply not good enough to meet
future needs. Each organization
should take a critical viewpoint and
challenge the past ERP structure
while following a path towards more
agility. IT solutions have matured to
such a point where business units
and customers can demand and fulfill
functionality in extremely short
timelines. The key to supporting
these demands is developing a
strategy of agility built into the ERP
core. The steps outlined can bridge
those gaps setting you up for now
and the future.
REFERENCES
My perspective comes from decades of ERP
work along with collaboration within my
network. Additional information reviewed
from:
• Industry thought leaders
• Gartner
• Deloitte
• Harvard Business Review