The history of the, now ubiquitous, ERP is an interesting one. The term, Enterprise Resource Planning, itself was first used by Gartner in the 1990s for software that added to the functionalities of older MRP and MRP II systems. The acronym was needed as resource planning software was evolving to address more business functions than manufacturing alone.
By the mid 1990s, ERP systems had modules for all core enterprise functions including finance, human resources and maintenance as well. The era of monolithic ERP was upon us where a single on-premise system with a unitary database was used to manage all core business functions.
What went wrong with monolithic ERP
While the functionalities provided by these early systems sufficed and have been behind many of the innovations today, their shortcomings became painfully obvious. Customization became a huge bottleneck as companies had to design workflows around their ERPs limitations costing them time, money and overall competitiveness.
In 1998, for example, Nike decided to implement an ERP system to take on the new millennium with new technology. The company spent $400 million in getting the suite in place, yet lost roughly $100 million in sales, faced numerous lawsuits and forfeited 20 percent market share.
The failure was traced to an order management module. As the system used a prediction algorithm unsuited to managing large order volumes, it could not “tally” with Nike’s entrepreneurial operations. The bug was eventually fixed in late 2000. Coupled with overhead costs, reliance on one vendor, lack of integration with modern business intelligence, monolithic ERPs were facing issues too big to be ignored.
In retrospect, the problem with monolithic architecture was easy to predict. Using a “one size fits all” approach to inherently dissimilar business practices was bound to adversely affect bottom lines somewhere. While tradeoffs in such implementation can be countered with training and planning, many have wondered if they could be avoided altogether. After all, companies are better off looking for tools that suit their ways of working rather than adapting to them.
This need paved the way back to a “best of breed” approach where companies invested in a core, data management solution, which was then integrated with specialized suites as needed. The phrase, postmodern ERP, was coined by Gartner in 2014 signifying a move towards highly scalable, agile and integrated business suites rather than one giant gift box of productivity goodies that may or may not suffice.
Using the postmodern approach, a company can purchase tools designed to be a better fit to their industry and methods. As many software vendors make their suites integration friendly through APIs out of the box, adopting a best-of-breed approach becomes easy with a basic system of records underlying their IT infrastructure.
Upgrades to such suites are usually faster and more comprehensive as specialized vendors will devote their entire R&D to their units rather than standalone ERP providers who spread their budgets over multiple modules.
Finally, the postmodern approach also lightens the load on the IT department as many modules are cloud based and managed by their respective providers. Simply put, you are not locked into a provider’s version of how to do something. You can, instead, find the best solution for the job and start using it with (comparably) minimum training.
You have most likely already gone Postmodern
While new jargon might give the impression there is something unique going on here, the truth is “postmodern” is but the latest buzzword indicating a move to the cloud. If you are using Gmail, Google Docs, Dropbox, Asana or Basecamp, then you are already aware of how the cloud can make your life a lot easier. So, why should a legacy ERP be excluded from the advantages of cloud?
Cloud-based architecture offers numerous advantages over on-prem solutions including significantly reduced costs, low barrier to entry, a move away from CAPEX to OPEX, increased flexibility and scalability, enhanced collaboration and enduring data security. Cloud adoption is also increasing far faster than anticipated and, in fact, as much as 83 percent of all enterprise workloads are expected to be cloud based by the next year.
This points to certain interesting findings. First, confidence in the cloud’s security is strengthening, which 66 percent of respondents had stated it was their greatest concern.
Secondly, more companies are realizing the monetary benefits of moving to the cloud. Little to no on-prem facilities are required, so companies can forgo expenses that were previously an operational necessity.
Enterprises are also recognizing the need to remain nimble to respond to fast changing market conditions swiftly. Agile best practices and devops are all the rage today as they allow companies to create and execute projects that leverage their resources in creative ways. Old school ERP systems are woefully inadequate to handle such MO.
Getting an ERP system is obviously an involved and painstakingly long decision. In fact, resistance to change is the primary foe you will face when selling an ERP to company management. Paralysis by analysis can easily set in when faced with studying a gargantuan piece of software and understanding its impact. The problem is even a thorough analysis cannot perfectly predict how an ERP will affect your bottom line.
But what if there was an easier way in? Instead of implementing a complete system right from the get-go, start by getting a foundational system of records in place first. Then, either add software you are already familiar with on top of it or test newer suites and integrate them as they prove their worth. Not only can you move with greater confidence, but create a digital system that actually compliments your business practices rather than give you one more hurdle to overcome.
We are barely scratching the surface of what postmodern ERP can do. If you are curious to learn more, feel free to leave questions below or contact us directly. We will be glad to help.