How to stay agile and scalable in a postmodern ERP era
Posted by Sjoerd-Jaap Westra
We’ve come a long way since the dawn of enterprise computing in a relatively short time. As every new technological development comes along, and cloud and digital technologies have changed what’s possible again, it is clear that organizations have been missing the clarity and visibility to easily ensure compliance, efficiency and optimum performance.
IT was focused but fragmented
It wasn’t all that long ago when organizations started to embrace IT for data processing. In the early days, systems were dedicated to specific transactions and data processing. It was typical for organizations to work off a fragmented landscape of non-integrated best of breed systems, all doing their specific jobs with little or no integration. It worked because the world didn’t change as fast as it does today, and it was possible to compensate for a lack of integration with a lot of manual activities. What it meant was these very expensive and complex systems delivered some departmental benefits. So much so, that companies built a number of system islands, housing islands of data that could never be shared company-wide. Financial reporting therefore remained an onerous and inefficient activity. CFOs and management teams have effectively been flying their companies with blinkers on for the past few decades.
Modern ERP software promised consistency and availability
When inaccuracy and incompleteness of data became a real issue, some vendors responded with companywide systems that supported all processes with data stored in one central database, accessible by all company departments. This was modern ERP and became the favored model for large organizations. The drawback, however, was that implementations were complex, costly, and lengthy…or they failed completely because either the system was too rigid or the organization was unable to adapt to the system.
However, organizations that succeeded in adapting their processes to fit the ERP system capabilities realized more efficiency and central availability of consistent company wide data. As long as circumstances were relatively constant and processes didn’t need to change too often, efficiency and consistency benefits prevailed. In other words, the concept of one company wide system based on one central database was great…as long as the world didn’t change too fast and processes remained static.
Technology became a catalyst for change and agility became the holy grail
Then – all of a sudden – the world became technology driven. The internet made new technologies available for everyone, and business models started to change continuously with ever increasing speed… The only certainty for business became the increasing speed of change. New, disruptive business models have emerged and every day hundreds of new apps and systems are being created and accessed by thousands of citizens, customers and employees. In order to be successful, or even survive, companies nowadays feel the constant pressure to adapt to these changing circumstances as quickly as possible. To disrupt or to be disrupted, that’s today’s reality. At the same time, the need for efficient processes and 24/7 intelligence stays as important as it was. Many companies experience difficulties in adapting their modern ERP systems to these changing circumstances because they have been built for circumstances of the past while the ability to replace just one or some of the components – to adapt to the changed circumstances – often does not exist. The usual benefits of full integration appear to be a disadvantage when it comes down to the need for change or the wish to replace just some components.
Postmodern ERP strategies combine the best of all worlds
The question is: What IT strategy would combine the best of everything - realizing operational efficiency and effectiveness; integrated processes and consistent data; central availability of decision intelligence; the ability to adapt when the business changes; and the ability to scale when the business grows. All with a minimal level of business disruption when one of the IT components needs to be replaced. This is where a well-defined postmodern ERP strategy based on loosely coupled best-in-class systems could bring you the benefits you are looking for.
Gartner defines postmodern ERP as “a technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.”
Once you overcome the potential complexity of integration - which is made simpler with systems that are ‘born for integration’ instead of running completely isolated in your datacenter or in the cloud - a postmodern ERP strategy can offer you the following benefits:
- Optimal efficiency of the transactional processes within your company;
- Central availability of data and intelligence within the financial heart of your company, e.g. the unified ledger that contains data for backward looking disclosure, and the performance management system that converts the same data into intelligence to drive future performance;
- Minimum disruption of your daily business when one of your systems needs to be replaced.
- Maximum agility when your business is required to respond to market changes.
- Maximum scalability as the business grows and the volume of data transactions increases.
Stay agile and scalable while ensuring compliance and driving performance
In summary, if you adopt a postmodern ERP strategy based on loosely coupled best-in-class systems - which might be a very effective IT strategy to stay agile and scalable - it’s important to select best-in-class systems that have been developed for and “are born” for interoperability, connectivity, and integration with other systems. By doing so you will be able to manage potential integration complexity in the most efficient way while ensuring post-implementation agility of your systems and your organization. In other words, a postmodern ERP strategy might be the most appropriate strategy to remain agile, connected and scalable in the future while ensuring efficiency, compliance, and future performance. It may allow you to capture data as soon as it is created in the real world in a landscape of integrated apps, to store this data in a real time unified financial ledger, and to turn it into real time intelligence in a performance management system for backward looking disclosure and forward driving performance execution.