Andrew Kinder of Infor draws bold lines around what ERP should mean to today’s industry users.
The last 18 months have been a painful lesson. Companies have wanted to change, particularly by adopting new business processes but many have been held back by Enterprise Resource Planning (ERP) systems that are deep rooted in the 80’s and are just not geared up to change and fostering the necessary agility for today. In the past a ‘rip and replace’ policy might be the only answer. But that is not now a viable option. There is another way.
ERP software has its roots in manufacturing where it was used for materials requirements planning (MRP) and computer integrated manufacturing (CIM). ERP has been extended beyond the four walls of the enterprise but is still ultimately designed to provide head office/central control over each operating business unit.
But in reality there has not been a single IT vendor or ERP system that could support all the needs of a company so many turned to products from niche technology vendors for best-in-class solutions that could be bolted on to the ERP, like supply chain planning, warehouse management or financial management.
Today almost all companies have heterogeneous IT environments with a mishmash of applications, custom built interfaces and numerous disparate platforms. Keeping them all in synchronisation has been one gigantic headache. Even upgrading any one part has often been an ordeal.
To date many companies have stuck to using these old, proven, sometimes heavily modified ERP systems that have served their purpose well over the years, and have not upgraded to the latest version – but at the expense of now needed agility.
But the agility required to collaborate with other supply chain partners does not necessarily require a complete overhaul of an ERP – which could be deemed an unnecessary burden on a company to upgrade the entire system. It is a sledge hammer to crack a nut if indeed many aspects of the ERP are still perfectly suited to the business. So another option might be to keep the ERP and extend its value by simply upgrading or uplifting some of its components.
Many software suppliers have not really helped customers upgrade either their entire ERP or components of it. As a simple illustration liken it to buying a new kitchen for the home. Instead of swapping the new for the old, traditionally the software supplier would have said: “Yes, you can have your new kitchen but first we need to take down your whole house, install your new kitchen and then we’ll rebuild the house again! Oh, and we’re not sure how long it’ll take but it will probably be a few months!”
Instead, using the same analogy, customers should be able to have their new kitchen built adjacent to their house, so they can experiment with it until fully happy before agreeing a date to swap them out, overnight, without interrupting the household.
There is a shift in software development that is occurring right now to help make this possible. It’s a move from application-centric development to services oriented architecture (SOA) -centric development.
In the application-centric approach, the vendor releases regular updates to your software. Sometimes these are major upgrades but more often they are minor features or bug fixes. One of the problems with this approach is that there is no way to deliver an upgrade to the financial module (the kitchen), for instance, without affecting the other departments that depend on the ERP system (the rest of the house).
SOA-centric development can help fix this problem. This model doesn’t deliver new functionality to the core product or through tightly-coupled modules but as components that augment or enhance the ERP. They can operate as dependents to the core ERP, replacing functionality that used to reside in the main system, or independently to support a completely new set of business processes. This model gives customers much more flexibility as to when and how they adopt new functionality.
The real transformation here is that the ERP system, as we know it, could become a thing of the past. This has already been happening to some degree but too many vendors are clinging to the old paradigm of central control, largely because they’re still rooted in business paradigms from the 90’s. The reality today is that businesses operate both centrally and in a distributed way, so their enterprise applications must be able to do so too. That’s the beauty of SOA-centric development – customers can remain agile and adapt to whatever environmental changes the future holds.
It’s the ultimate flexibility.
Unlike just a few years ago, an ERP overhaul is no longer the only choice. Services Oriented Architectures now provide the flexibility that has been so heavily debated in the press over the years. But now, it is a commercially proven option, and available today, to provide real choices to move forward.
Andrew will be speaking at ERP Connect on this and other key business issues surrounding ERP implementation in 2010. The event is taking place on April 22 and is FREE to attend.