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Composable ERP: What It Is and Why It’s Important – Part 1

IBPM Low-code RPAAnthony Cecchini is the President and CTO of Information Technology Partners (ITP), an ERP technology consulting company headquartered now in Virginia, with offices in Herndon.  ITP offers comprehensive planning, resource allocation, implementation, upgrade, and training assistance to companies. Anthony has over 20 years of experience in SAP business process analysis and SAP systems integration. ITP is an Appian, Pegasystems, and UIPath Low-code and RPA Value Added Service Partner. You can reach him at ajcecchini@itpfed.com.

 

Enterprise resource planning applications (ERPs) have routinely missed the mark in multiple ways. They have failed on the ability to plan, design and execute with real-time responsiveness. As an example, end of month processing often includes five to seven days to close the books, then another day or two to run the financial statements. The user experience (UX) of ERP often falls short of customer, employee and supplier expectations, which has led SAP to release SAP Personas and Fiori design. And what about customization? If you have been around as longs as me (I started in SAP 2.2g in 1994), you have seen the how innovation, delivery, and adaptability have been non-existent due to the SAP core being riddled with customization.

OK, OK, I can hear you saying Tony WTF is Composable ERP? I mean I am laughing along with you… BUT there may be something to this so I am asking for a few conciliation’s.  First you can see this will be in parts, two specifically. So hang in there and read both parts. Second, please suspend your suspicion long enough to allow what I am saying to seep in. Thanks in advance for this and lets get started!

Before I can talk about the latest vision of “Composable ERP”, I need to go back to about 2014 and lay some ground work in what back then was called  “PostModern ERP”. Stop laughing….

PostModern ERP Defined

The “postmodern” ERP system, defined by Gartner in 2014 as:

Postmodern ERP

The goal of a postmodern ERP strategy is to use the best applications possible in each particular area, while ensuring they adequately integrate with each other when necessary. These systems may be hosted either on-premise or in the cloud, based on the organization’s needs.

So how does this work exactly? For example, an organization might prefer to use a more robust industry-standard CRM system, such as Salesforce (which can integrate with most major ERP suites), instead of the CRM application bundled with their ERP system.

The PostModern ERP Strategy

The linchpin  of post modern ERP strategy is that it is not one highly defined, universal approach; it’s not necessarily a unified “system” you can buy from a vendor. Two similar organizations’ strategies could both be “postmodern,” yet still be wildly different from each other.

Broadly speaking, a postmodern approach actually includes two or more separate strategies—one for each category of applications the organization uses. According to Gartner, most ERP applications can be broken down into either the “administrative” or the “operational” category:

Postmodern ERP Categories

Enterprises need to identify an appropriate and distinct strategy for each category of applications they use, rather than using the monolithic strategy of a traditional ERP implementation. Thus, a postmodern ERP system will likely be comprised of applications from two or more vendors, and may include multiple deployment models.

Here is an example of what a postmodern ERP strategy might look like:

  • Your core financials and human resources are housed in one integrated suite, hosted on-premise.
  • Your manufacturing and sales operations, meanwhile, are served by a suite of cloud-based MRP and CRM applications, provided by various other vendors that can better meet the specific requirements and needs on the operational side of your organization.
  • Another  example might be using a platform technology like the Pega Platform as a customer engagement layer that has been abstracted from the ERP core, using the platform as a way to de-clutter the core from so many customization.

Using an approach like the above, brings several benefits. For one, it ensures your company is using the applications best suited to each particular process. The other benefit is agility, if something major happens with your company—such as rapid business growth—you might need to upgrade certain systems, such as your financial and CRM applications. With the postmodern strategy, this is generally much easier to accomplish; you can easily replace or upgrade only the specific applications affected by the change. But with an integrated ERP system, you would have to replace the whole suite of applications, or customize or upgrade several components.

PLEASE keep in mind that postmodern strategies rely on the integration capabilities of individual applications and suites provided by different vendors. Make sure the systems you purchase work well together; without sufficient communication between components, your ERP will resemble a collection of disparate applications instead of a fully integrated suite.

Using AI to Inform your PostModern ERP

In the last decade, artificial intelligence has evolved from impractical fantasy to practical reality, boosting operational efficiency and forever altering the businesses landscape. It’s shaping the future of ERP software more than any recent innovation in the market.

ERP vendors have already begun to implement AI into their products (i.e. SAP Leonardo). This means businesses considering the postmodern approach will have immediate access to the technology and its transformational benefits, including deeper analytical insight, process automation and an enhanced user experience.

To get those most out of your postmodern ERP strategy and acclimate your business to AI, Gartner recommends doing the following:

  • Familiarize your employees with the concept of automation by implementing some form of the technology within the next 18 months.
  • Gain a deeper understanding of AI by kickstarting initiatives within the next two years, especially in areas with an opportunity to gather insights quickly. Draw on your early successes to build a foundation for progress, and use your failures to identify opportunities for growth.
  • Get some hands-on experience with ERP’s AI-based features through workshops and incorporate any lessons learned into future postmodern ERP objectives.
  • Determine in the next two to five years the practical benefits and opportunities AI presents for your organization.

When it comes to AI, no one ERP vendor is likely to meet the needs of your business. Most standalone applications lack the customization and ease of integration needed to stay competitive in a rapidly evolving business landscape. But a postmodern ERP allows you to build your ideal system from the ground up, with the functionality you need to keep your organization agile and efficient.  Artificial intelligence will only become more prevalent, powerful and practical in the years to come

Summary

Many praise the aforementioned benefits of postmodern strategies. For example, Gartner’s Denise Ganly writes that “using a traditional ERP system” in this day and age “is like building a house on sand.” Please look at the date of this article on Postmodern ERP, it was 2015. She maintains that the benefits of ERP “should be preserved where it makes sense to do so,” but that businesses shouldn’t deploy an on-premise suite from a “single mega-vendor” just because that’s the way it has always been done.

Instead, opt for a strategy that will provide them with long-term agility over short-term operational efficiency. Beyond that, it’s up to business owners to determine the best deployment model for their needs. A good way to determine if postmodern ERP is right for your business is to consider size and operational needs.

So where is the Postmodern ERP in the Public Sector? This idea or concept was 2014 and its now 2021? It makes sense to me as a way to be agile, and remove the customization and complexity out of ERP, while increasing the efficiency and accuracy operationally. Well. while we have been slogging along our friends at Gartner have come up with a new concept that takes Postmodern ERP a few steps farther and have coined the concept of Composable ERP. Stay tuned as we dive into this in the Part 2.

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