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ERP's changing role in digital transformation strategy

Panorama Consulting Solutions' founder, Eric Kimberling, discusses why ERP remains central to organizations' digital transformation strategy, the roadblocks ahead for ERP vendors and strategies to mitigate them.

Many industries and organizations are at the threshold of digital transformation or at least investing heavily in digital technology, resources and upskilling of workers as part of their digital transformation strategy.

In its recent Digital Change Survey, enterprise software vendor IFS identified "internal process efficiency" as the crucial driving factor of digital transformation, and indicated that several companies in North America are now investing in big data and analytics, ERP, and internet of things in urgent efforts toward digital transformation.

SearchERP spoke with Eric Kimberling, an ERP expert and founder of Panorama Consulting Solutions, to understand more about the role of ERP in digital transformation.

What is digital transformation and what drives it?

Eric Kimberling: One of the biggest drivers [of digital transformation] is that technology has evolved to the point where there are so many options in the marketplace. There are traditional, sync-able, core ERP systems. There are mobile applications, apps and cloud solutions, and proliferation of all different types of enterprise solutions has really created an opportunity for organizations to look beyond the traditional ERP for their businesses. Along with proliferation of technology has come a lot of analysis and opportunities to potentially increase or improve your operations.

How significant is the role of ERP in organizations' digital transformation strategy?

Kimberling: I think ERP still plays a very significant role, particularly in relation to the traditional back-office functions -- financial, inventory management and accounting -- maybe even in manufacturing distribution if it's a manufacturing organization.

Eric KimberlingEric Kimberling

I think what digital transformation does is, it exposes some of the potential weaknesses of ERP and some of those outlying technologies like CRM, mobile devices and mobile applications, manufacturing execution systems, HCM systems -- all different types of systems that can be tied together in somewhat of a best-of-breed approach. Although in the past, [having multiple systems] had a negative connotation because people were concerned about single sources of truth and complex integration issues, I believe technology tool sets have evolved to better address those issues. Better integration, better value, better migration and business intelligence tools can help tie together different pieces of data throughout the organization.

So all of those tools and changes in technology, I don't say undermines the need for ERP -- it still plays a bigger role -- but I think ERP in some cases can be relegated to more of a back-office type of system. Whereas now, we have all these different technologies you can stack on top of ERP to help you with those non-back-office types of functions.

What are the challenges ahead for ERP vendors?  

Kimberling: The most obvious one is the technological changes. How do we keep our systems current and how do we keep up with all those changes and competition we're facing in different fronts, like Salesforce in the CRM space, for example? Salesforce has really shaken or threatened some of the ERP vendors because Salesforce now not only provides CRM systems, but now it's making inroads into what was traditionally considered ERP. The defensive side of the vendors is going to make them focus on how they can address all this increasing competition.

But along with that there is a risk of vendors trying to become everything to everyone. They're not going to be able to do it. I think ERP vendors are going to have to decide, especially vendors like SAP and Oracle who have a very broad customer base, very broad functionality. Are they going to focus on what they're good at? Focus on their competencies? Or are they going to try and be everything to everyone to kind of fend off some of those competitions?

What strategies could ERP vendors follow to overcome these challenges?

Kimberling: The main thing is they have to be more open to competition. They need to recognize that, as a software vendor I might say I want to beat Salesforce at CRM, or at least be as good as Salesforce but I should also be thinking about how I could interface better with Salesforce. How can I make my solutions more turnkey to work for customers that are using Salesforce or those who've decided they're going to use Salesforce.

ERP vendors are going to have to decide, are they going to focus on what they're good at?
Eric Kimberling

But I think vendors in general have to make their systems more open, flexible and capable of integrating with other solutions and recognizing that they're not always going to sell their solutions as a one-size-fits-all broad solution for [an] entire company like they did in the past. Now they might have to think about, well, maybe I am only selling licenses to half the organization, and the other half of the organization is going to use some other type of system or technology. My value proposition is that I can integrate with those technologies and still be that core foundation of their digital transformation [strategy].

Can you think of an ERP vendor successful in tackling these bottlenecks?

Kimberling: Yes, the first one that comes to mind is probably Microsoft, even though they have their own limitations and weaknesses as a solution. But Microsoft Dynamics generally is a more open platform. It's easier to integrate [and] has very robust integration tools, so it lends itself in some ways to this whole digital transformation concept.

Whereas a vendor like SAP on the flipside: great product, very robust, sophisticated, scalable but the downside is that it's not as open as Microsoft Dynamics and it's a bit harder to integrate and doesn't have much flexibility. There are pros and cons associated with that, but those are the two different philosophies or strategies they both pursued.

In terms of ERP vendors, the software and its role in an organization's digital transformation strategy, what are some trends to watch out for in coming months?

Kimberling: Probably the biggest one would be proving the maturity of their cloud solutions.

What I mean by that is so many vendors right now, especially SAP, Oracle [and] Infor are kind of betting a lot of money on these cloud solutions that they're assuming are going to materialize into viable products in the long term. But they're struggling right now in the marketplace because they don't have a strong user base yet. So it's kind of the chicken-and-the-egg problem. They're having trouble getting customers as they don't have a lot of references -- companies that are using it. So they're betting the farm ... in some ways on the cloud applications, but they need to prove that these cloud applications are mature, they're stable, scalable and flexible. They haven't quite proven it yet. Not to say it's not true, but the marketplace hasn't seen it yet.

Next Steps

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This was last published in August 2017

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I think Integration technologies also has a great role to play in digital transformation
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