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ERP functionality now often attained piecemeal in cloud applications

More organizations are foregoing monolithic ERP systems for easy-to-deploy cloud applications that do most of what they need in nimble microservices and access to customer data.

There was a time, not that long ago, when the mere mention of having to deploy an ERP system sent shudders down the spines of IT executives. ERP functionality was never easily attained.

ERP was instinctively associated with multimillion-dollar deployments that often took years, rarely delivered the value to justify the investment, and frequently resulted in a system characterized by inflexible customizations, overdependence on underlying code, overly complicated business processes, and users grumbling about how they couldn't get at the data they needed anyway.

Well, to borrow a tired cliché, it's not your grandmother's ERP market anymore.

ERP has evolved with the times, and companies today have the option of injecting their organizations with ERP-like capabilities, but without the pain of an expensive and trying ERP deployment.

"The difference between ERP today and ERP 10 to 15 years ago is massive," said Jim McGeever, executive vice president of Oracle NetSuite's global business unit. "The challenge with ERP still is that what you're doing for companies is very complex and difficult. What we focus very heavily on is making it easy for customers to consume."

ERP functionality with less pain

It's that theme of easy consumption that's driving not only the design of ERP features and capabilities, but also the decision-making of the companies buying those features and capabilities.

Gone are the days of adding complex modules to boost the ERP functionality of a siloed system, an approach that led to many an integration nightmare. Today, companies are looking for ERP-like solutions that can be added as services embedded in business processes or as features that live where the associated data resides.

The reality is that most companies can't find an ERP system that will cover everything they need.
Paul Hamermanvice president and principal analyst, Forrester Research

The result, when done right, delivers nimbleness and real-time insight instead of isolated processes that can only be completed through complex integrations and accessed through clunky and antiquated interfaces.

For example, Oracle NetSuite's well-established cloud-based approach emphasizes flexibility, choice and ease-of-use.

"You don't have to install the whole thing, and then this module and that module," McGeever said. "We have features you can turn on and off. There is no code base. If you do the order-to-cash piece, you get financials for free."

That said, just because a new generation of component-oriented ERP options is available doesn't mean it's the right answer for every company. But Paul Hamerman, vice president and principal analyst at Forrester Research, said finding an all-encompassing ERP system that will address all of a company's needs is an uphill struggle.

"There's still a lot of value in having a complete ERP suite if you can get one, where all the applications natively work together," Hamerman said. "But the reality is that most companies can't find an ERP system that will cover everything they need."

The less-than-promising prospects of finding a system that's a good fit has spurred many companies to look for ERP functionality that's designed to integrate with some critical existing piece of their IT architecture. That's why companies like Kenandy Inc. and FinancialForce -- two Salesforce partners that take different approaches to bringing ERP to Salesforce environments -- have been able to carve out successful niches in a market that used to be dominated by monolithic systems from legacy companies like SAP, Oracle and JD Edwards (which was acquired in 2003 by PeopleSoft, which itself was acquired by Oracle two years later).

"The world of ERP, as it's been traditionally defined, is in many respects different from what we're trying to achieve," said Rod Butters, CTO of Kenandy. "We took this approach of saying, 'Hey, let's first break the assumption that building ERP involves building a bunch of modules.'"

Kenandy opted to bypass the software module approach, which Butters believes leads to brittle, hard-to-change nests of complex integrations, and instead built its ERP functionality as microservices that can easily be linked with the data residing in a company's Salesforce applications. This no-module approach instead emphasizes a schema built around object-oriented tables, and Kenandy has 150 such tables that Butters claimed can do everything a company needs from its ERP system. The vendor starts by tracing through a customer's business processes, mapping the needed tables to the business needs.

"We have all the information together in one place, not in one module or another module," Butters said. "It's an information-centric view rather than a module-centric view."

As an example, Butters said one of Kenandy's larger customers had 120 different applications running in its ERP environment when it came to the company for help. It had added all of those modules to handle things its core ERP system couldn't do, but because it was using such a small portion of each module's capabilities, Kenandy was able to help the company eliminate 90 modules, replacing them with its more lightweight and nimble tables, he said, and keeping 30 specialized applications that offered functionality the company couldn't find elsewhere or do without.

Customer-centric ERP replacing product-centric model

The bigger issue, according to Kevin Roberts, director of platform technology at FinancialForce, is that ERP historically has been built for what is now an antiquated view of business: build a product, deliver it and bill for it. Today, however, companies are organizing themselves more around the customer than the product, and they are bundling services into their offering, turning the old ERP model on its head.

"The reason people aren't buying ERP in a traditional way is that traditional ERP isn't built for the business models our customers are trying to move to," Roberts said.

That view reflects FinancialForce's market position, which takes advantage of the fact that Salesforce customers tend to organize their businesses around the abundant access to data and analytics provided by the Salesforce platform. This enables FinancialForce to tightly integrate its ERP offerings with its customer relationship management environments.

Roberts pointed to GE, which was once known for the products it makes, but which now refers to itself as "the digital industrial company." GE used to focus on sales of devices or units, while now those products are just part of an overarching solution bundle designed to sell business outcomes.

"Now I'm including the software that maintains and monitors, or that can change capacity," Roberts said, playing the role of a GE executive. "I'll sell you -- for a monthly fee -- ambient air as a service."

Naturally, GE is far from the only company making this transition.

"A lot of traditional businesses are evolving into digital businesses," said Forrester's Hamerman. "Products with high-tech software in them create things that business models have to adapt to."

It's that fast-changing business reality that has companies ranging from young startups to stalwarts like GE discovering that grandma's ERP just won't cut it anymore. Now, there's a new generation of ERP providers eager to help them cut the cord.

Next Steps

Choose hybrid ERP processes

Understand trends in cloud financials

Plan a cloud migration strategy

This was last published in April 2017

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How does your organization use multiple integrated applications for ERP functionality?
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I would be interested to find any organisations that are - as someone that works in the ERP space then I have yet to find anyone that deploys the multiple integrated applications approach.
Your article makes a number of points that aren't strictly true about ERP systems/solutions - you don't necessarily need to use all modules in an ERP solution so have flexibility within ERP itself.

Also the data does not reside in module siloes but instead shares common data across the ERP system without need for any integration - a compelling reason to move.

Why would you then move to multiple integrated applications with their own master data - with the numerous headaches of data integrity and creating interfaces and maintaining these - other than for the reason that the vendor market keeps spinning the myth that this is better than the current model?

I agree that a number of the individual applications may be better for specific tasks however no one has yet been able to persuade me that a best of breed approach for each individual function has been able to knit together into a manageable solution.

I look forward to the examples of organisations who have replaced ERP with multiple integrated applications (across the piece rather than for a Finance or Sales function)
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I was wondering if any implementation of Theory of Constraints ERP was going on here.
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