The Future of ERP - Sanjay Kumar

Unknown


The Enterprise Resource Planning (ERP) industry is continuously evolving to fit the needs of its users. Let’s take a look at four of the top ERP trends for 2014 and beyond.

1.     Mobility. The use of smartphones, tablets and other mobile devices is on the rise and showing no signs of slowing. Today’s workforce is increasingly becoming more and more mobile, driving demand for greater flexibility and the ability to access information from all sorts of remote locations. ERP offerings are evolving to accommodate a more mobile environment – giving business professionals remote access to critical information such as key performance indicators (KPIs), finances, inventory levels, sales orders, and customer information. We expect ERP mobile business intelligence solutions to remain a priority in 2014 and beyond.

 

2.     Cloud-based ERP. These days it seems everything is moving towards an “in the cloud” model, and ERP is not immune from that trend. Demand has been growing for cloud-based ERP solutions, which tend to be less expensive and quicker to implement than their on-premise counterparts. Many ERP vendors have jumped on the “in the cloud” bandwagon, and we expect this to continue to gather steam in 2014.

 

3.     More informed buyers. An abundance of ERP information, case studies, white papers and so forth are making it easier for businesses to do their due diligence and become better informed buyers of ERP software.

 

4.     Tough competition. In the ERP market, ERP vendors are divided loosely into or tiers, or types. Tier 1 vendors generally serve large global businesses, while Tier 2 serves mainly small to mid-market businesses. Even though the larger and well-known Tier 1 vendors have done a pretty good job retaining market share, Tier 2 vendors continue to gain momentum. It is often said that Tier 1 vendors “buy” innovations while Tier 2 vendors “create” it. This boost in innovation has lead Tier 2 to gain in market share and introduce some fierce competition into the mix.

 

The ERP Evolution

Fundamentally reshaping business processes using in-memory technologies

Data is exploding in size—with incredible volumes of varying forms and structures—and coming from inside and outside of your company’s walls. No matter what the application—on-premise or cloud, package or custom, transactional or analytical—data is at its core. Any foundational change in how data is stored, processed, and put to use is a big deal. Welcome to the in-memory revolution.

With in-memory, companies can crunch massive amounts of data, in real time, to improve relationships with their customers. As in-memory technologies move from analytical to transactional systems, the potential to fundamentally reshape business processes grows.

Technical upgrades of analytics and ERP engines may offer total cost of ownership improvements, but potential also lies in using in-memory technologies to solve tough business problems. CIOs can help the business identify new opportunities and provide the platform for the resulting process transformation.

 

Trends in Enterprise Resource Planning Systems

With a new year comes both reflection of the past and contemplation of the future. It is with these thoughts in mind that many manufacturing companies are now looking at the possibility of a new enterprise resource planning (ERP) system. Regardless of whether the ERP evaluation is to replace an existing system or to purchase a first system, knowing the trends in ERP can be a critical factor in decision making.

ERP has evolved through the years. What began as a Material Resource Planning (MRP) system has grown to include most aspects of the enterprise such as estimating, sales and distribution, quality, maintenance, and accounting. With so many ERP companies in business today, it is important to know what sets each package apart and the common trends among the ERP players.

One significant and recent trend is increased interest in Software as a Service (SaaS) applications as a solution to reduce workload for network administrators. Whether it is an online option (data hosted offsite) or a Managed Service (on-premise solution where the data resides locally), the ability to have an ERP system that doesn’t require any system administration has quickly gained momentum in the manufacturing ERP segment. Each option may have both advantages and disadvantages over the other and those may vary greatly by sales person or User Company. For instance, Saas and Managed Service solutions are much costlier in the long run because you pay “forever”, but appear cheaper up-front because of lower start-up costs. Additionally, some might find the automatic updates of SaaS versions a plus but others, like medical device manufacturers that require validation prior to software updates, may want to control their update frequency and therefore have a vastly different take.

Another trend that has gained momentum is mobility because people need to stay connected to their companies. As computers become smaller, manufacturing company employees are becoming more mobile and therefore ERP systems themselves are pushing to keep up. From laptops to smart phones, Blackberries to iPhones, people have never been more in touch technologically speaking. With mobility on the rise, many ERP companies have found the need to create applications that focus solely on the need to have information on the go, even while away from a facility. A smart phone, Blackberry, or iPhone application will be a must for an ERP company to stay viable and relevant.

Shop floor integration and automation continue to gain traction in a growing number of ERP systems. From true, real-time shop floor-to-ERP compatibility to extremely basic batch data transfers, ERP system companies understand that packages that can reach down into the plant floor are more valuable than packages that do not place as much emphasis on this. The challenge for the manufacturing company is to understand the vital difference between a simple claim of shop floor automation and integration and the actual reality of execution. Some ERP systems today are capable of updating schedules in real-time based on machine output, providing two-way communication with shop floor equipment, automating shop floor equipment based on preset indicators (such as box count, etc.), and providing alerts via facility PA systems. It is important to keep in mind that while some ERP companies can do this, others just make claims. Due diligence will be key for manufacturing companies to weed out the “who can” and the “who cannot” when it comes to shop floor integration and automation.

Trends in manufacturing are like trends in everything else – everything old is new again. Some might say this idea can be attributed to Service Oriented Architecture (SOA). While losing some of its steam over the last few months, this catchphrase for how disparate systems will now communicate is reminiscent of the old best of breed idea that ‘interfaces’ between systems would make seamless transitions. Many ERP companies claim their SOA system can create better communication from totally unrelated software packages – Quality from ERP Company X can talk to Payroll from ERP Company K. But, like the old best of breed interface talk, what happens when upgrade paths are not the same? No one can pinpoint or explain exactly how it works. For every ERP company that claims SOA, there is an article, blog, or comment from a reporter or analyst that counters with a “SOA what?”

In the last few years, the consolidation of ERP companies has subsided. Gone are the times when a new buy-out was announced almost every week. The ERP graveyard websites (i.e., http://www.erpgraveyard.com/tombs.html) are updated less regularly and it is easier to remember who owns which package and who bought what. With that in mind, ERP systems are being thought of as more of a commodity now. Because there are still many ERP companies in the manufacturing segments, manufacturers aren’t cognizant of the variances that lie in the ERP systems and companies themselves. Yes, it is true that all ERP systems have bills of material, inventory management, scheduling and shipping functions, and even an AR and AP capability. But is having that module or function enough to say there is no variance between the ERP packages? Not really. It is still an “apples to oranges” comparison for some. On the plus side, at least for the manufacturer, ERP systems are becoming less expensive due to the commoditization. The key point to remember here is that, regardless of how low the entry cost is, if the ERP can’t reach beyond the core features inherent in all packages and show true value or developmental growth potential for the future, then it really shouldn’t be compared to a system that can.

The last trend is the need for scalability. Perhaps it is a by-product of one of the toughest manufacturing times in history, but people want to manage cash-flow like never before. Purchasing an ERP system is no different. It used to be that people would buy everything they needed, regardless of when they planned to implement it. The thought was, “get the best deal I can now and implement when the company is ready.” This is not the case anymore. If a manufacturing company makes the leap to a new ERP, the change that could doom a project is best handled in smaller doses. Therefore, the realization that companies should only pay for what they plan to use now and in the near future is a strong negotiation point. Why put out money for a quality system that will not begin implementation for another four or five months? Therefore, an ERP system that is scalable and modular has a big advantage over a system that isn’t. Cash flow is handled in a smarter way, change is more manageable, and the process changes that always come with a new system are employed and more valued. Think of scalability as the small, continuous improvement steps in the ERP journey. A steadier pace is realized and is more likely to achieve a successful implementation.

There are certainly more trends in the ERP industry, including hot button topics like industry specificity and the shift in database popularity. The key point is that the manufacturing industry itself is poised for recovery. An ERP system can be a make or break factor in the success of a company. Knowing the trends, evaluating an ERP system based on all the facts, and separating the hype from the real value is essential in choosing and sustaining an ERP vendor relationship.

Daniele Fresca is director of marketing for IQMS. Since 1989, IQMS has been designing and developing ERP software for the repetitive, process, and discrete manufacturing industries. Today, IQMS provides leading real-time manufacturing, accounting, production monitoring, quality control, supply chain, CRM, and eBusiness solutions to the automotive, medical, packaging, consumer goods, and other manufacturing markets. The innovative, single-source enterprise software solution, EnterpriseIQ offers complete functionality and scalable solutions all in a single database. With offices across North America, Europe and Asia, IQMS serves manufacturers around the world. For more information, visit www.iqms.com.

 

There are three major trends impacting Enterprise Resource Planning (ERP) systems today.

1.The emergence of new business models that require ERP support.

2.The broadening interest in cloud computing for ERP systems.

3.The growing need to push ERP functionality out to mobile devices.

 

Keeping Pace with the New Business Models

Throughout much of our economic history, competition between companies was driven by who produced the best products and services.   Today, success in dominating a market is influenced more from behind the scenes (back offices, cubicles, factory floors and warehouses, etc.), than from who builds the better product or service.

Companies compete far more aggressively on trying to understand their customers and prospects as individuals rather than selling to cold buyers.  Getting close to customers by developing better relationships has become the primary aim of most companies, even more than convincing buyers how excellent their products or services are.  Those companies that possess a solid understanding of their customer-base, and apply that knowledge to build brand loyalty, often dominate their respective markets.

The closeness a company can get to their customer-base compared to  is determined by how well their business model matches the needs of the market. The closer a company is to their target audience – the more competitive they are in the marketplace. Ultimately, this comes down to competing business models for market share, not products as one may think.

Taking this idea one step further, in complex organizations the business models need ERP systems to manage the information flow throughout the entire company and its supply chain.  Without ERP systems, most large and mid-size companies simply could not compete.

ERP systems are now one of the most powerful weapons in the battle to win customers and keep them coming back.  By supporting business models and enabling companies to adapt to changing market conditions, ERP has emerged as the central player in Information Technology ecosystems.  Whether the ERP product is from Oracle, SAP, Microsoft, Epicor, Plex Online, Sage ERP X3, QAD Enterprise, or a host of other vendors; they all have one thing is common – ERP systems must always be transformed to satisfy constantly evolving business models.

However, most ERP solutions in use today were designed years ago and, although they have been enhanced and updated, the logic behind much of the source code still reflects the business mindset of the mid and late 20th century.  As a result, one of the biggest challenges for ERP has been to keep pace with a manufacturing sector that has been rapidly moving from a product-centric focus to a customer-centric focus.  This change in attitude required most ERP vendors to add a variety of functions and modules on top of their core systems, while the basic design of most ERP systems remained product-centric.

ERP in the Cloud

The ERP vendors are gradually re-designing their systems, in some cases completely rebuilding them, to accommodate the change in business perspectives supporting different industries.  This redesign effort is also being influenced by new infrastructure outsourcing trends for ERP systems.  Many buyers of ERP software want to maintain their systems in either public or private clouds.   They are also more likely to look for third-party hosting providers that can offer technical assistance and ongoing support, in addition to a stable physical infrastructure.

Since updating old ERP designs to meet the needs of the new business models requires a considerable amount of programming, building in the additional functionality to support cloud computing at the same time makes sense.   The variety of trends that drive organizations to change are the same trends that drive ERP systems and vendors to consistently innovate and improve their products and services.

Modern programming technologies and new access technologies like cloud computing have made ERP more accessible and with a broader appeal than they were just 5 years ago. The cloud delivery model has reduced IT costs since implementation is fast, and data storage and management are handled by a third party outsourcing providers.   The cloud has also made ERP affordable to many more businesses, which enables companies to replace old accounting packages with more robust financial tools.

One example of how ERP vendors are innovating to stay current is SAP’s Business One.  This product, which is a smaller version of the full SAP ERP system, is aimed at meeting the needs of small businesses. It is also available on-premises or hosted by a third-party enterprise outsourcing firm.

Chasing Mobility

Another significant trend related to ERP is mobility.  Most ERP vendors offer their solutions on mobile devices, but some have simply enabled their web interface to be accessible from web browsers.  Others have created mobile applications, or applets, which provide the same functionality as their core ERP product.   No matter how an ERP vendor chooses to provide mobile computing options to their users, it is difficult to deliver all the functionality of an ERP system via mobile devices with the technology available today.  However, the mobility trend is still in its infancy, but ERP vendors large and small are providing apps that plug into their core ERP systems, causing the mobility trend to rapidly evolve and mature.

Key Takeaways

ERP has been and still is the cornerstone of the corporate computing environment, but its full potential can only be realized through integration with 21st century business models.  Contemporary enterprises now depend on customer relationship management (CRM), product lifecycle management (PLM), human capital management (HCM), supply chain management (SCM), and many other modules that take them beyond the core ERP functionality that was sufficient just a few years ago.

ERP vendors are scrambling to bring their products and services in line with the new needs of their customers and prospective customers.  Of course, the product development struggle never ends because the world is constantly changing.  However, the trends mentioned here are particularly challenging for traditional ERP vendors because meeting these new needs requires a deeper commitment and a significant amount of time to make adjustments to their software.  These trends also open the door for niche competitors to enter the fray.  These new competitors have the advantage of building applications from the ground up and in perfect alignment with current trends; so there is no need to retrofit and redesign anything.



© Sanjay Kumar 2016