The Evolution of ERP: From Beginnings to Next Generation ERP
ERP evolution has sped up of late and is now more advanced than ever before. The last decade has seen enterprise resource planning (ERP) solutions evolve into versatile and multi-faceted tools that help small, medium and large organizations run their business.
By focusing on innovation and utility, developers have managed to ensure ERP stays current at a time when the technology focus has largely been on social, mobile and the cloud. Indeed, ERP systems are now more evolved than ever, offering users a more comprehensive experience than many of their counterparts. The rise of technologies and frameworks like Artificial Intelligence – especially Machine Learning – and blockchain mean that high security, predictive data analysis and automation are cornerstones of the modern ERP. Many cloud-native and cloud-enabled modules are built on an open API infrastructure, making integration across products easier and quicker.
However, this hasn’t always been the case. “Historically, ERP implementations have been expensive and time-consuming,” Deloitte explained in ‘Reinventing the ERP Engine‘. Indeed, media reports of failed implementations and rising costs have served to create a culture of trepidation when it comes to ERP, while newer technologies have held more appeal.
Yet ERP has its origins in fulfilling a need and by keeping the software closely tied to changing user requirements, the tools have continued to find their niche in the changing technological landscape.
The beginnings of ERP
ERP systems as we know them began in the late 1980s. Targeted at large businesses and focusing primarily on finance/accounting, the software was “complex, expensive [and] powerful,” Rashid, Hossain and Patrick explained in ‘The Evolution of ERP Systems: A Historical Perspective‘.
ERP was designed as an off-the-shelf solution to replace in-house company-specific systems, which made both collaboration and data management challenging. They began as – and continue to be – “multi-module commercial packages suitable for tailoring and adding ‘add-ons’ as and when required”.
However, as technology changed and data volumes increased, existing ERP systems came under even more pressure to support different functionalities and facilitate collaboration. Rashid, Hossain and Patrick state in their report that ERP needed to be redesigned to break the “barrier of proprietorship and customization”, ensuring business collaboration could take place over the intranet, extranet and the internet seamlessly.
ERP systems rose to the challenge, recognizing the importance of open architecture, interchangeable modules, customization and user interfacing, Rashid, Hossain and Patrick explained.
Appealing to customers
The ERP evolution was about more than changing technology, however. Users had different priorities that needed to be addressed in one solution.
“Technology leaders new to the world of ERP want to know what they can minimally get by on, so they can move on to focus the latest and greatest tools to hit the market and appeal to their business users,” Deloitte explained in ‘Reinventing the ERP Engine’, adding that they also needed to decide between ERP and the latest technologies to give a competitive edge.
Meanwhile, “seasoned veterans want to know how they can improve their systems and keep up with new technology without starting the process from scratch”.
However, the reinvented ERP model allows businesses to address all of their pain points while supporting the latest technology. The rise of cloud technology, while definitely a technological advancement, was also sped up by consumer desires and a shifting model of working environments. As society moved more towards a workforce that was more remote and mobile device use became ubiquitous, the move to cloud was logical.
“More ubiquitous, more responsive, and more flexible than ever before, the engine of ERP is the force behind many newer technologies,” Deloitte has declared. Since then, the evolution of ERPs has been rocked by new technologies that seemed far away just 10 years ago.
Indeed, modern ERP systems work in a way not previously experienced. They offer collaboration and ease of use through mobile, social and traditional platforms. Big data is much more manageable, thanks to advances in compression, storage and memory costs, while distributed computing allows for real-time processing and analysis of internal and external data feeds.
Organizations are better placed than ever before to gain insight and value from their data, generating a return on investment. Heightened visibility also helps with compliance and gaining oversight of often-complex organizational structures, while automation capabilities drive efficiencies and reduce administration.
Using developments in machine learning and the Internet of Things, processing huge amounts of data to return actionable insights is easy in Next-Gen ERPs. Full-organization integration also allows you to operate leaner; for example, by managing inventory levels with an inventory module integrated with your core product, you can assess the truly required levels on inventory, set automated reordering points, and help you plan for natural variance in buying trends. You can, if you want, even use a droid to do your stocktake. Have a storefront? Integrate your POS with live inventory and your back office to provide customers with the best experience possible.
Deloitte claims in ‘The Future of ERP’ that arguably the most significant change is the shift from an automation-based model to an agile, adaptable system that can upscale as a company grows and reacts to changing events.
The current architectural trends give tremendous flexibility to a system when it comes to adopting cloud-based solutions. For example, an industry may, for reasons of security of its critical data, maintain its ERP on-site as well as its financial management system. At the same time, it could benefit from innovative applications in the cloud, like HR or management time and attendance applications that can be deployed quickly and at low cost.
Such a hybrid environment provides comfort, flexibility and freedom of choice to the company, in line with its needs. So a company can upgrade an application without fear of repercussions in other applications. It may also choose to upgrade an application in the cloud during the deployment phase and testing, and then switch back to the site. In the end, the choice belongs to the company and not the supplier.
Getting the right ERP solution
As ERP has evolved, its business case has also changed. Consequently, it has become even more important that companies get the right solution to suit their needs. Offerings vary and different models suit specific organizational structures.