Many organisations are still running enterprise resource planning (ERP) systems that were first rolled out many years ago, no doubt put off making any major changes by the memories of a previous complex and expensive installation.
But modern ERP systems have changed all that. Firms no longer need to select an ERP system and then be stuck doing hefty upgrades at times convenient to the supplier – but not necessarily to the customer – or paying for large amounts of software that they are not even using.
This shift means there is more thirst to switch to a modern platform. According to software analysis firm TEC, as of March this year, 50% of companies are soon acquiring, upgrading or planning to update ERP systems.
There is certainly huge potential for businesses to benefit from such a move. In its 2020 ERP report, Panorama Consulting Group noted that home-grown systems are still prevalent, with 34% of organisations moving away from legacy ERP systems.
So, what is modern ERP and how does it differ from the traditional version?
Earlier versions of enterprise software were built for a world that ran on disk-based computers, which meant there were certain architectural constraints that forced suppliers to build ERP systems in a certain way, says Simon Carpenter, Rise GTM & strategy lead at SAP Emea North.
This created the need for data warehouses, because you couldn’t fire complex queries into the database at the same time as doing transactions – everything would have ground to a halt. SAP’s version of a modern ERP, based on its Hana in-memory computing platform, overcame the fundamental performance challenges of the disc.
“Suddenly we were operating in an environment that is hundreds of thousands of times faster when it comes to basic data operations,” says Carpenter. “We could start to think about bringing the transactions and analytics back together on the same data [platform], because we now have the performance to be able to do that.”
Intuitive user interface
As well as the in-memory compute platform aspect, a modern ERP system needs an easy-to-consume, intuitive user interface, so it can be accessed just as easily via a mobile phone or tablet as via a PC.
“A modern ERP system must also offer much higher levels of automation than was possible in the past,” says Carpenter. “Now that we have the data supporting both analytics and transactions, we can start to apply machine learning algorithms in flight to the business process, and we can drive the levels of process automation up significantly.”
This offers businesses a number of advantages: reducing cycle times inside the business that makes it more responsive; a better customer and employee experience in a world where people want instant gratification; and driving down cost by automating tasks that historically would have been carried out by people.
“We are also well on the way now to being able to automate not just processes, but decision-making,” says Carpenter. “As we apply more and more predictive analytics and machine learning to the processes of the business, we can start to have the system – if not taking the whole decision in itself as to what to do next – certainly providing very high levels of augmentation to the human decision.”
But the most important characteristic of a modern ERP system is that you can consume it from the cloud. Instead of buying a perpetual licence in a big chunk of capital upfront, it is a subscription-based model, consumed as a service.
“You no longer have to concern yourself with running the datacentre and all of the technical services that go into getting the hardware, mounting the operating system, the database, the backups,” he says. “All of that is taken care of by your cloud vendor, which leaves you freer to focus on actually applying it to your business, rather than running the IT shop.”
Carpenter has two key pieces of advice for any business considering an ERP upgrade project. First, a mindset shift is needed away from the old approach of customising the core application and instead getting used to the idea that a move into the cloud world means sticking to the standard software. Second, “it’s dangerous and stupid” to look at moving to a modern ERP system as an IT project, he says.
“Whether you simply want to optimise what your business is already doing, or you want to get completely disruptive and change your whole business model, those are all business-led initiatives and this needs to be viewed as a business project.”
Freedom to build
According to Claus Jepsen, CTO at Unit4, modern ERP is enterprise software that is cloud-native, open, extensible, integratable and automated. It has an advantage over legacy ERP systems in that companies get all the latest innovations when they come out, there is no need to update, they don’t have to worry about keeping systems up and running, and all the security is handled for them.
“There is also a way higher degree of freedom to build,” says Jepsen. “Most enterprises need to build a specific solution that fits for them. If you build any of this in today’s legacy systems, whenever the vendor comes out with an upgrade, you have to go through a very horrendous test space because what you build may now be destroying some new feature the vendor came out with.
“But in the new model, because it’s all through a backward-compatible API [application programming interface], the vendor can move forward the ERP solution itself, we can update every quarter or whatever we want, and the customer doesn’t need to do anything. All the additional functions they added, whatever they have done outside the core through the APIs, will continue. You can always get the new innovation and whatever you build yourself or whatever you’ve integrated, that’s going to continue working.”
Forest Research: seeing the wood
Unit4 customer Forest Research decided to standardise on a unified finance and HR ERP platform when its previous shared-service agreement came to an end. Previously, the central government organisation for forestry was using a standard financial package and various in-house, bespoke systems, which were all operating in silos.
“That’s why we wanted to get everything under one umbrella in terms of the ERP,” says Meirion Nelson, finance director at Forest Research.
The organisation is now running a comprehensive, connected finance and HR platform from Unit4 that is all cloud-based and offers a single, integrated view. The project took about nine months in all, and Forest Research has been reaping the rewards since the roll-out in 2019.
“We’re seeing benefits around real-time information, one source of truth in terms of the data, and the automation of the business processes,” says Nelson.
“With the impact of the Covid-19 pandemic, I don’t think we would have been able to operate successfully without the Unit4 product. Everybody is used to working in an office and having access to systems and manual processes and paper files. We were very fortunate that business continuity was enabled because the products are on the cloud and offer remote access.”
Scientists can now complete timesheets when out in the forest and submit them via an app on their mobile phones, which is integrated into the ERP system, says Nelson, adding: “Some of our processes weren’t up to modern standards, it was more of a paper-based and manual processing type of organisation, which has effectively been revolutionised overnight.”
One note of caution from Nelson is that the ERP implementation required a lot of re-educating users, due to the revision and automation of business processes. Forest Research has now made certain aspects of the training mandatory, to try to change the culture of the organisation so that everyone embraces the new system.
But taking advantage of modern ERP doesn’t necessarily entail a major software upgrade.
The Metropolitan Water Reclamation District (MWRD) of Greater Chicago had been running the same SAP ERP system for 17 years. When carrying out research into how to streamline and improve the technology, MWRD discovered that it wasn’t using all the functionality of its SAP ECC system, and that support consumed more than a quarter of its multimillion-dollar software maintenance budget.
John Sudduth, director of IT at MWRD, said there were issues with the SAP system because it was heavily customised, and there were difficulties in trying to get issues resolved or functionality improved.
The firm decided to switch support to third-party support supplier Rimini Street, aimed at both cost-cutting and modernising the business to become more service-centric. The move freed up 50% of the funds previously consumed by the annual SAP maintenance commitment.
Sudduth invested some of this newly available budget into a cloud-based IT service management system, and created service-level agreements (SLAs) with stakeholders to improve the quality of IT support.
“For our modernisation, we took a bit of a different approach to most organisations,” says Sudduth. “What we ended up doing in the realm of our ERP solution was to get us stabilised to allow us to focus on some other areas of IT that needed to be modernised. We’re a government agency that has been around for almost 140 years now, so some of our processes were a bit antiquated and we were behind as far as technology goes.”
The next stage in MWRD’s ERP improvement project is to do a “lift and shift” to a hosted environment, which will take place over the next 18 months. It is currently running a full on-premise system, with about 20 servers just for its ERP – the capital cost involved is substantial. Also, because it is on-premise, the organisation has to go through a refresh cycle every five years or so.
“By moving to the cloud, while the technology essentially stays the same, we can scale based off need, and there is also the supportability of it,” says Sudduth.
“With Covid, to give our users remote access to our ERP, we had to go with the Citrix environment because it was on-premise. So that was a big lesson learned, in that had we been in the cloud environment, they would have been able to come in just directly over a web browser. As we look towards the future, I do foresee that we will have some sort of remote work component, so a lift and shift to the cloud makes sense from that aspect.”
Sudduth was surprised about the “fairly rapid timescale” that has been mooted for the move to the cloud – six to eight months once the project starts. And there won’t be a need for a large-scale retraining programme for staff because, apart from a new interface, everything will work in the same way.
“One of the reasons that we’re looking to do it the way that we’re doing it is that we keep the existing functionality, we don’t have to completely retrain all of our users,” says Sudduth. “We get that flexibility to being in the cloud, and it buys us time for when we’re ready to do a full ERP replacement that we actually have the time to do the due diligence, which would include re-architecting business processes, running parallel environments, getting our users trained and everything that goes with a fully fledged replacement.”
Sudduth expects this major ERP upgrade project to take place about five years down the line. In the meantime, MWRD will continue to use Rimini Street for support and rent ECC 6 until it figures out what the next evolution of its ERP offering will be for the organisation as a whole.
Whether opting for a new install or a move to the cloud, modern ERP systems offer myriad potential benefits for organisations – and if nothing else, you’ll never have to deal with a forced update again.