Since the late ’70 and early ’80 of the previous century (yes, I am that old) organizations big and small all over the world have been introducing complex software solutions to automate internal administrative processes. When I started working, those type of solutions where called “MRP” (material requirement planning) and “MRPII” (manufacturing resource planning) software solutions. This illustrates their origin: discrete manufacturing industries where managing resources (raw materials, packing, machine capacity, …) was an important and complex topic. In the ’90 Gartner came up with the acronym ERP to describe these kind of solutions and this was later on used for any type of business management software, dealing with the automation and management of internal business processes.
ERP: old school stuff?
Now, almost 40 years later, ERP solutions are more alive & kicking than ever. They apply the newest IT technological evolutions (Cloud, SaaS, IoT, AI, …) and cover more and more domains and industries. Those ERP platforms are the necessary backbone in an organization to make sure that operations are under control and internal business processes are working faultless and efficiently. Without a proper ERP, no big data analysis, machine learning, predictive modelling or smart omni-channel customer experiences. If this backbone is not running smoothly and faultless, all other (more sexy) tools and applications won't work either.
Are you thinking of implementing an ERP solution into your organization? Than you have two main options: a “best-of-breed” architecture or one integrated platform. Best-of-breed means that you implement different solutions that each tackle a different functional domain or part of a business process. The best-of-breed strategy is a valid option if your organization is very specific and has a number of complex industry specific business processes.
- The advantage is that you will have solutions that solve very specific problems in an optimal and flexible way.
- The challenge is to integrate all the different applications that are coming from different vendors and to manage them efficiently.
The opposite is to have one integrated solution:
- It covers the complete set of backbone business processes or in other words, an ERP solution.
- The drawback of the opposite strategy (full ERP solution) is that ERP’s are a “one size fits all” type of solution. Off course every mature ERP vendor has industry specific versions of their solution but still not every functional domain will be fully covered. Which will lead to sup-optimal solutions with a lot of custom developments.
Next to the integration challenge, there is another big one : the common data model. API’s, web services and other application integration techniques can make the integration adventure less complex then it used to be, but still we are not (yet) in a “plug & play” type of situation:
- You need to have a common definition of the different data components (e.g. customer/supplier data, product data, unit of measures, …) otherwise the exchange of master data and transactional data between the different applications in a best-of-breed architecture will not work properly.
- The gains you might have thanks to the better functional fit, will probably not outweigh the IT costs that you might have due to the selection of the different solutions, the integration and the custom development that you might need to fill functional gaps.
To my opinion, the best situation is to combine an ERP solution with a number of solutions that could solve very specific problems. The application integration needs will be less and the ERP platform can provide you with a common data model ready made. Many ERP vendors have recently invested in building up a community of third party software providers that offer a wide range of very specific so called “apps” that are dealing with functional requirements. Those apps are certified by the ERP vendor and can be plugged in very easily. Salesforce.com was one of the first software vendors (in this case of CRM solutions) that did this.
Combining a solid ERP backbone with a limited number of “best-of-breed” solutions and third party add-on apps will result in a pretty good solution for your organization.Kris Meyfroot
But times are changing and new digital based business models and business processes might require a totally different application architecture than the above mentioned ones. Forrester sees even a new type of ERP architecture, which they call the DOP (Digital Operations Platform), that will more or less replace the traditional ERP solutions that are, according to Forrester, not able to fully support those new technological evolutions and possibilities.
ERP implementation project: boring IT stuff?
For once and for all: ERP implementations are business driven projects and not IT projects. The IT component is only a small part of the total budget and is becoming even smaller now with the arrival of Cloud based solutions and SaaS, PaaS and IaaS technologies.
It is more about analyzing and improving business processes, defining the most appropriate management reports and defining the correct KPI’s. All functional domains and organizational levels are implicated. No, it is not IT stuff and surely no boring stuff.