Is Traditional ERP Unnecessary?

Posted in Trends & Technologies and tagged , , , , , , , .

In many cases I think traditional ERP is becoming more and more unnecessary.

I don’t mean that the concept of ERP is become unnecessary, just the traditional ERP on the traditional platform as we have known it for the past 15 years. In the future I imagine the following trends will bring about this prediction:

  • Enterprises will no longer be willing to spend huge sums for year(s)-long projects where they end up owning, hosting and caring for software that requires upgrades every 18 to 24 months, not to mention the expense and management of IT staff to support the data center, integrations, system backups and nonstop user demand for new features and changes to the software.
  • Organizations will trend away from capital investments in software and toward paying for software as an operating expense. This is because: 1) a large capital project is much harder to sell than a relatively small long-term increase in operating expense; 2) associating software expense directly to the function that uses it is a better accounting practice; 3) in an ROI calculation, the added operating expense of a SaaS model only has to be offset by yearly savings brought about by the new application, instead of requiring that three or so years of annual savings pay for the entire cost of the new system.
  • The software market will continue to offer new products and services that, while not a complete ERP system, could replace large components of an on-premise ERP.
  • Companies will begin to piece together “point” solutions – single-purpose applications – in the cloud as SaaS solutions. By networking their applications in the cloud, they will achieve better functionality, far greater flexibility and lower cost than a traditional ERP system

This trend is not where the big ERP software vendors want to go. To them, the traditional model is quite profitable enough, thank you.

So there is opportunity for you.

  • Identify the parts of your enterprise that gain the most from new software solutions
  • Identify the information or transaction flows that must be integrated to realize the full value of your project
  • Concentrate on software that helps you achieve 1) and 2); if it is a full ERP system then so be it, but I think the value can be isolated and realized in those important areas without making the huge investment a traditional ERP project requires.
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