ERP is not a **** letter word

Vogues come and go in all industries. The world of haute couture is most well-known for this, keeping celebrities on their toes and treading carefully to avoid making a fashion faux pas at the latest premiere. You’ll no doubt be surprised to hear that the enterprise technology industry also dips its killer heels into this game of cat and mouse, but peculiarly, by denying that they are actually in the industry at all.  

This seemingly irrational identify crisis makes perfect sense (in their eyes, anyway), as Enterprise Resource Planning (ERP) becomes a byword for expensive, slow, and immovable technology. Players instead identify themselves as compostable (or is that composable?), provide ‘suites’ or, if all else fails, just repeatedly add AI before, during or after their product name.  
 
Those who are old hands at ERP will not be surprised at this. The industry has been honing its reverse-education-based selling practice for many years. It manages to obfuscate an already complicated market, to the point where making an educated decision on a solution vendor and a systems integrator is a seemingly impossible task.  

In this article we’ll attempt to bring clarity to ERP, explaining why, for example, having a solution vendor implement its own solution might not be the straightforward answer it appears; what Tier 1 means compared to, say, Tier 2, and why AI is so dependent on having a functioning system.

So what even is ERP, anyway? 

Boiled down, ERP solutions manage the financial and accounting side of an organisation. An organisation doesn’t exist just to produce financial statements though. They exist to deliver valuable services, create great products and need to pay suppliers. The financial implications of these activities enable the production of financial statements. ERP solutions provided a way for organisations to do this in one system.  

As business and information systems became more advanced and competitive, a single system to do everything became too complex and software vendors made (or acquired) separate solutions for specific areas that could be integrated into the ERP system. Integrations added complexity but the additional functionality wooed customer organisations to follow regardless.  

Now, integrations are more developed and trusted, and the market is essentially ignoring them. Software vendors are offering a financial management solution, a procurement solution or a sales solution, but what isn’t explicitly mentioned anymore, is that they’re all connected to make those wonderful financial statements a reality. 

This homogenisation of enterprise software and the according blurring of lines between ERP and ‘peripheral’ system is leading to increased instances of the ‘tail wagging the dog’ in organisations. This situation has two drivers – the forgotten importance of having a clear data structure in information systems, and the prospect of a quick win (over a slow loss) of implementing a smaller system (such as a CRM solution) rather than an ERP.  

ERP buzzword bingo: let’s explain what some of the latest market lingo actually means. 

Composable – apologies to our green-fingered readers, but this one isn’t really compostable. This word is used in a similar way to how ‘modular’ is used in other industries. In reality, ERP systems have been ‘composable’ for many years, with customers having the option to either utilise the ERP vendor’s procurement solution (or module) or integrate with a separate best of breed solution, as an example. Extra apologies for the anti-climax, but there’s really not much more to say on this one, so we’ll move on. 

Tier 1 – You will not be that enlightened to hear that this is a way to group ERP vendors and products, largely based on functionality scope, and the size of business it can handle. And cost, obviously. The enlightened bit, if we may say so, is that this tiering should be used strictly for products. Vendors typically have product offerings in different tiers to widen the scope of customers they can sell to, and to build a loyal grassroots customer base that will flourish into big-spending corporations. We will explain more on tiering later. 

Clean core – Breaking this down into its component parts, ‘core’ refers to the most important processes an organisation runs (think standard ordering and purchasing, end of period financials), and the most important data the organisation stores (think product data, customer data). ‘Clean’ means that the processes are standard (not customised) and the data is maintained (e.g. archived appropriately, uses ‘their’, ‘they’re’ and ‘there’ correctly). Vendors promise that if these are true for your organisation, you’re on the cusp of AI-powered self-actualisation and will have competitive advantages galore. In reality, although being in that place is good for an organisation, the benefits fall lower down Maslow’s hierarchy of (ERP)-needs. 

Wait, I shouldn’t pick a solution vendor to implement its own solution? 

While this isn’t a universal truth, it isn’t as crazy as it sounds. 

ERP vendors are the original software engineers - writing code and optimising algorithms - which requires a very unique human skillset of (and not limited to) problem solving, mathematics and databases. Building an ERP system is one thing, integrating into a business is another.  

Understanding what a business does, and moulding the software to support it, requires great communication skills, stakeholder management and business savvy. Some organisations can become highly competent in all these areas, but usually it’s too much of an ask, meaning you’ll probably get a substandard service in at least one or more areas.  

Building on this, it’s not uncommon for vendors to raid or acquire system integrators to build up their own practice. You may think that this is the best of both worlds - you have SI skills with the deeper knowledge of the software from the vendor. This isn’t often true in practice. Good system integrators know just about as much there is to know about the software and are able to reach out to the vendor for any tricky questions easily. There isn’t a hidden lush forest hiding, waiting to be found by the vendor’s own integration team.  

Finally, we’ll mention the word risk. Organisations differ on whether they agree with Warren Buffett’s approach (he famously said, ‘put all your eggs in one basket and watch that basket’). Speaking from experience, one thing that can be easily argued for, is that SIs are more likely to admit where the software’s functionality is lacking rather than hide it, leading to quicker resolutions and a smoother implementation process, ceteris paribus.

Tiering enlightenment 

We are much too enlightened to state which vendors and products fit into which tier. This is because it doesn’t really matter and there is no clear agreement. If you’re a very large organisation with a correspondingly large budget, then you can expect to be presented with SAP (S/4HANA) and Oracle (Fusion Cloud) as a minimum. If you’re a smaller organisation, you’ll be presented with a wide array of vendor names and some specialists to your industry. You may also be given Oracle’s name, but their NetSuite product. SAP may also be mentioned, but their ByDesign or BusinessOne products. For those in between, you’ll get them all… 

So, starting with a ‘Tier X’ aim is not advised. We instead suggest organisations ask not what their ERP can do for them, but what they can do to state their functionality scope, business size requirements and budget range for their ERP selection process. 

While we’re talking about functionality, we’ve found it common for customers to get a little carried away with feature lists, perhaps choosing a vendor because it ticks a novel and isolated function-box deep in the software. Our advice here is to go in with the aim of doing the fundamentals right and be grateful when you uncover a cool functionality. If not, you’re likely to end up with a solution that cannot do the basics that enable the advanced features. 

We’ve also found that fit-gap assessments play a role like feature lists, and are usually based on a ‘level 3’ level of granularity. At this degree, there’s still a lot of devil hiding in the detail which will only truly come out in design workshops. While this type of assessment is still useful, it shouldn’t raise confidence levels too high; the organisation should still be prepared to adapt their processes to meet the standard processes. 

Finally, AI 

Adhering to Grandma’s rule, you had to eat the basics before getting to the AI-powered dessert. As ERPs are essentially very large databases, storing granular information about your business in all its facets, AI models are drooling at their GPUs to get scanning, indexing and whatever else they do to train. Linking back to a ‘Clean Core’, if the data is in tip-top shape, then this learning and modelling will be much easier.  

Likewise, if the processes follow standard procedure, it’s more likely that the data collected through the process’s life will be granular and stored well. The result will obviously be a fully autonomous 2000 IQ AI model and everyone can work just 1 day a week (from home, of course). Unfortunately, this is where reality rears its ugly head, and the answer can be summed up as ‘hmmmm…. not just yet’.  

For those hardy souls that have endured ERP implementation projects, it is likely that the data workstream ended up being quite busy. Migrating data from the old system to the new is where the rubber meets the road. Data cleansing, data structure differences and real vs. intended data usage by users are some examples that are tackled by these intrepid data specialists, and this is just to get a ’base‘ level of usage from the system. AI will demand an even greater effort in this area just to enable proof of concepts to begin, without a clear road to value.