The transition from ERP towards composable services
13 Feb 23
13 Feb 23
We are currently finalizing our new market analysis of the Scandinavian market for ERP systems and will soon publish this extensive report covering 30 ERP systems. We will share with you a selection of the trends that are now evident in the Scandinavian market, starting with the trend that refers to the transition to composable services.
The term ERP has for a long-time characterized applications offering organizations a single system covering all business processes. These comprehensive systems appeared before the start of the millennium. At that point in time almost all organizations needed to replace their old and fragmented IT landscapes for a more fully integrated landscape, and often into one single system under the slogan “all-in-one”. The advantage of these applications has been that all processes and modules are fully integrated, but also becoming large monoliths that are complex and costly for the organization to maintain and upgrade. The result is that many organizations have refrained from upgrading and have chosen to continue using old versions even though there are new versions available on the market. Now, in a time of need for increased flexibility and rapid business changes, these monoliths have become obstacles to continuous business development.
Along with the transition towards a cloud-based infrastructure, the entire market is turning towards a more composable architecture. By composable architecture we refer to an IT landscape that provides greater flexibility to upgrade and replace applications and extensions, without affecting all business processes or the entire landscape of applications. As a result, the traditional and major players of ERP systems are also investing heavily in breaking up their large monolithic systems into more composable systems.
One practical significance of composable systems is that the vendor can issue new releases with a higher frequency, which is also expected in a cloud-based context. Being able to offer multiple releases per year, compared to one upgrade every second or third year, requires a more composable architecture. For the customers, this is an opportunity to gain access to new functionality, at a significantly higher speed, than previously possible. Organizations with cloud-based ERP systems simply receive more business value for the license fee.
The move towards composable systems is a clear trend with all leading vendors of ERP systems such as SAP, Microsoft, Oracle, Infor and IFS. As a part of the composable architecture concept, the ERP systems are also complemented with tools to add new extensions and integrate external applications (or services) based on low-code/no-code development. The consequence is that ERP systems are about to become more open and accessible to both customers and partners. However, this transition should not be misinterpreted as the vendors intending to break up the ERP system completely into very small entities for each module. It will still mostly continue to be large and fully integrated ERP systems, but process areas and extensions will be offered in the form of “plug & play” components.
A composable architecture will lead to increased activity on the partner market and we will see an increased pace in the development of extensions offered via app stores. Increased composability will also create conditions for better quality of master data when adding new extensions and integrations. In a time where we see increased use of cloud-based systems, both integration and master data will become a highly prioritized area of investments for all organizations.
As part of the transition towards a more composable architecture, the major ERP vendors are investing in building frameworks, (Platforms as a Service), with libraries of additional extensions and services which gives organizations the opportunity to develop and add services over time. These frameworks, or PaaS, will include support for a wide range of digital services such as machine learning, robotics, big data, NLP, IoT and security solutions.
For the foreseeable future, we will continue to consider ERP systems as large and rather comprehensive systems but built on a more flexible architecture, creating significantly greater flexibility for the organizations, compared to the original ERP systems that were offered on the market when the concept of ERP was conceived.