Enterprise Resource Planning to Optimise Operations

Enterprise resource planning applications automate and support multiple administrative and operational business processes, including line-of-business, customer-facing, administrative and the asset management aspects of an enterprise. Modernising them can be a challenge for many reasons, especially if you lack a documented ERP strategy, driven by business value.

Although ERP is considered a “strategic investment”, confusion has grown and alignment to business strategy has only weakened with the fast pace of ERP technology changes in recent years (e.g. SaaS, aPaaS and embedded AI capabilities). 

Gartner research predicts widespread failure among ERP initiatives:

• By 2027, more than 70% of recently implemented ERP initiatives will fail to fully meet their original business case goals.

• As many as 25% of these will fail catastrophically.

And according to a recent survey, 75% of ERP strategies are not strongly aligned with overall business strategy, leading to confusion and lacklustre results.

This scenario makes it even more important to create a clear ERP strategy and set of principles to assess the fitness of new technologies to the projected business strategy outcomes, and answers the key question from business stakeholders of “what is in it for us?”

Done right, ERP provides the organisation with unrivalled visibility into and control of current operations, but it is more complicated than ever to deal with the agility that shifting business strategy requires when using monolithic application architectures. 

This makes composable ERP, a strategic approach that targets gradual but continuous value achievement, increasingly important to ensure the business capabilities delivered in ERP applications are business enablers not inhibitors.

Composable ERP is an adaptive technology strategy that enables foundational, administrative and operational digital capabilities through which an enterprise can keep up with the pace of fast business change.

Given the operational nature of ERP, generative AI (GenAI) has the potential to enhance and improve business outcomes and work with other AI technologies, such as predictive analytics or machine learning (ML), to automate process execution and thus create productivity efficiencies and data insights. 

With GenAI, the ability to derive business value from novel combinations of content and data, ERP solutions and other sources should also become significantly easier.

ERP vendors are starting pilot use cases that drive GenAI and other AI and ML capabilities already in use. Examples of GenAI within ERP use cases include:

• Human capital management (HCM): It can help derive position-description text for a newly open position based on the skills required for the role or derive text for documenting performance reviews.

• Supply chain and customer order processes: It can use analytics to highlight supply chain issues that may impact existing open orders and autonomously produce an email or text message to customers.

• Manufacturing: It can use analytics to predict shop floor equipment failure, which could prompt a repair work order along with GenAI-produced documentation on troubleshooting and repairing the equipment.

• Finance: It can produce periodic reporting and narratives explaining variances.

Take a pragmatic position as you guide your organisation in assessing the opportunities and risks of GenAI. Before committing to solutions, make sure to:

• develop and curate an ERP strategy that is directly connected to the overall enterprise strategy and goals. Ensure alignment between the adoption of GenAI goals and the enablement of any ERP SaaS, platform as a service (PaaS) or infrastructure as a service (IaaS);

• understand the data requirements to support credible insights into the GenAI mechanism under consideration. Ensure relevant and credible data is available (or insights will not be reliable);

When it comes to ERP, the goal of business domains was often to establish a “once and done” block of software, with sporadic upgrades done just before the current version is going out of support. The latest generations of cloud ERP SaaS products move away from this strategy.

Gartner expects cloud ERP SaaS vendors to deliver at least two major application updates per year. Vendors must install the updates to the production tenants; although, the customer may have some leeway around the activation of the new features. Composable businesses are consistently evaluating their processes and capabilities for improvement.

As organisations move ERP applications to the cloud, business areas take on more involvement in supporting ERP. This is most evident in the financial and HCM domains, and the ERP market can be difficult to navigate for these stakeholders.  

Selecting a cloud ERP solution results in a multiyear commitment, and choosing the best-fit cloud ERP solution can consume a considerable amount of money, time and resources. 

If planned poorly, your project will become protracted and exceed the budget, resulting in an ERP that is a poor fit for your organisation.

When developing your vision for ERP in the broader context of a composable application strategy, keep in mind that you may need to make compromises when standardising on a suite. No single ERP suite vendor has best-in-class capabilities in all areas. 

Many products offered by suite vendors are maturing quickly, becoming more stable and approaching parity with best-of-breed solutions. 

• IT systems risks. Outdated IT infrastructure, including hardware, software and network resources, may render the ERP investment obsolete. Example: Legacy infrastructure with outdated security and controls that fail to prevent data breaches.

• Cloud migration risks. Transitioning from on-premises ERP to a cloud-based solution may result in delays, additional costs and security risks. Example: Public exposure of data, weak access credentials, weak security of APIs, cloud-based denial of service attacks and malicious cloud service provider intent.