No ERP system lives forever
26 Jan 21
26 Jan 21
The increasing speed of continuous change has a major impact on the way we relate to our time and our own capacity for development. Many years ago it used to be common for organizations to make plans and goals with a 5-10 year perspective and sometimes even longer. And it was then also possible to follow these plans based on the fact that the general pace of change was rather low and the need for constant re-planning was less. As a result of technological development and our increasing integration with the outside world, however, we are entering a new phase where constant changes occur every day instead of exceptions.
What happens both at a distance and in our immediate vicinity today more or less immediately has an impact on our ability to run and develop our businesses. And the opportunity to stand out is non-existent. All businesses today need to work with a significantly shorter horizon when setting plans and goals. For the simple reason that the competitive situation in 5-10 years can no longer be predicted. Now it is instead about the competition today and the next 1-3 years. The consequence of the above is that the shift from one strategy to a new strategy comes more frequently, which presupposes an organization that has the ability to be mobile and flexible.
The challenge with mobility and flexibility, however, is that it requires more than just capital from the owners and the will of the management. What creates success for a business can be summed up in the concepts of management, organization, IT and culture. These four cornerstones are each difficult to change and all the more difficult to develop and change in parallel. At the same time, this is what is required to maintain mobility and flexibility as the world around them changes.
Somewhere in this, the ERP System has its role and acting as the engine and hub for the transactions that arise as a result of the daily business. Although tomorrow it may no longer be called the ERP system (ERP), a central hub will still be needed to create a stable platform for all information that is created, exchanged and refined.
Many of today’s older ERP systems emerged in the late 1970s and early 1980s. And at that time, it was quite common and natural that the time horizon for an ERP system was at least 30 years. And at this time, major technical generational shifts came with an interval of about 10-15 years. The situation today is different. The pace of development is so high that what we previously called generational shifts in the future will take place perhaps every 3-5 years. The reason for this is simply that the new technological innovations will be available to very many in a very short time and at a very low cost. If we then continue to relate to ERP systems, these will be subjected to challenges much more often than before.
There was a time when it was almost unthinkable that large global organizations would ever replace their large and heavy SAP R3 which often cost hundreds of millions (sometimes well over a billion) to implement and in many cases took several years to complete. And the same challenge could also be seen in organizations that have chosen other large business systems. The large organizations could not risk their stability by starting to replace these large and cemented systems. Now we see that this is happening after all. SAP has also kept up with the times and is now investing heavily in S/4HANA as a successor to the older SAP. Likewise, Microsoft, Infor, Oracle and most other vendors are now trying to turn their extensive applications into something new that is meant to be more “flexible” and open.
At the other end of the scale, we have all new and small applications that have emerged in the cloud, having great flexibility and built with modern technology, but which in many cases lack large parts of the strengths and features that are in the applications that have +25 years of experience. It is between these new and still quite “thin” ERP systems and the old heavy and rigid ERP systems that customers must choose and find their future platform.
The choice is not easy. It is easy to believe or claim that, for example, Microsoft with its strategy, platform and holistic thinking in business applications has the solution and will be able to offer everything the customer wants and needs for the future. That will not be the case. Microsoft is a competent and goal-oriented vendor, but Microsoft also has and will face challenges in offering flexible solutions to its customers. What was previously called NAV and AX is now entering new plans with continuous upgrades and additions via apps. However, this is not the same as the applications not being based on old program code and structures that have been around for many years.
It is important for the customer to understand that the choice of ERP system and the choice of “infrastructure”, ie the landscape under and around the ERP system, will set the limits for what changes the organization is able to make in the coming years. And after 5-7 years, it has usually ended up in the situation that parts of the applications would need to be “turned around” to fit the new conditions that prevail for the customer. And this is difficult regardless of whether the system has been delivered by the global vendors or by a small local vendor.
What is becoming increasingly clear and given for today’s operations is that it is only a disadvantage to build too much into a single application. The combined experience today indicates that the customer develops better with a landscape of applications based on several parts where change of each part becomes easier to implement without the total infrastructure (as within an ERP system) having to be stopped or rebuilt. No ERP system or application lives forever and every few years the environment needs to be rebuilt to fit the customer’s changing needs. By partially breaking up the environment into several parts, you increase the opportunities for continuous development without having to put a heavy wet blanket over the entire business while the change is implemented.
The entry into the cloud-based world facilitates the above in that most young and modern applications are often designed to exchange information in a simpler and more standardized way compared to the old heavy applications. We often also see that the young applications do not require the customer to see their application as a “master” for all data, but that their application can be part of a landscape where data is exchanged via standardized interfaces and services.
We are in an exciting time where the pace of innovation is high and where the opportunities are greater than ever before. At the same time, the new era requires the customer to receive insight and knowledge to find the right way forward and ensure a long-term strategy for how the old application environment should be moved to something modern and flexible. Even if everything is getting better, it does not mean that things will be easier.