By Pat Garrehy
From enterprise resource planning (ERP) legacy systems to the cloud to hybrid solutions, manufacturing firms have had to keep pace with rapidly evolving ERP technology over the last several years. Recent analyses by Gartner now promise to shake things up further. The research firm is promoting an ERP strategy called Postmodern ERP, which calls for a decentralized hybrid system that generally consists of a core ERP solution integrated with a mix of different cloud-based software. As manufacturers have more choices than ever before, they can count on cloud ERP vendors to help them implement their own Postmodern ERP strategy.
Gartner’s latest analysis of ERP, Postmodern ERP Strategy Is Key to Success with ERP Initiative, introduces the idea of Postmodern ERP as the next step in the evolution of ERP software.
According to Gartner, Postmodern ERP is a technology strategy that automates and links administrative and operational business capabilities—such as finance, human resources, purchasing, manufacturing, and distribution—with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility. In Postmodern ERP, ERP is neither defined as a single integrated suite nor a specific set of modules. It is no longer a thing. “Instead, each organization must define its own ERP strategy in terms of the administrative and operational capabilities it encompasses, which applications will be used to support these business capabilities, and how they will be integrated, which may range from tightly integrated to very loosely coupled,” says the report.
Gartner indicates that as large on-premises ERP systems are becoming obsolete, companies are looking for a more decentralized, hybrid system of mixed vendors, mixed functionality and, in some cases, an even split of onsite and online systems. Gartner believes that businesses can take advantage of the lower costs, better functionality, and increased flexibility provided by mixing cloud applications with on-premises applications. This is the essence of Postmodern ERP.
Whatever it is called, manufacturers have known for a while that to succeed in today’s dynamic, evolving markets, they need a system that allows them to be agile, active, mobile, and connected to the real-time data they need. The result is that more firms are moving toward a hybrid ERP solution that combines their existing legacy on-premises system with cloud-based ERP software. Such a hybrid solution that meets each firm’s particular business would be considered part of a Postmodern ERP strategy.
From Legacy to Cloud to Hybrid: How Did We Get Here?
When ERP first appeared, it focused on resource planning and inventory accuracy, as well as visibility throughout a manufacturing enterprise. In the 1990s, ERP was expanded beyond its manufacturing focus to include other business functions such as human resources, financials, order management, and manufacturing. These integrated single ERP suites dominated the market in the late 1990s and early 2000s.
Over the years, maintaining these large integrated ERP suites became more important than finding the best ERP solution that met the business requirements of these firms. Companies with these older, so-called legacy ERP systems—especially manufacturing firms—have been trying to keep up with expanding global markets by continually updating and customizing on-premise systems. But high operating costs, limited functionality, poor access to critical information, and outdated hardware and software have turned these on-premise, monolithic suites into dinosaurs.
Enter the cloud. Cloud-based ERP solutions provide centralized data storage, the sharing of data-processing tasks, and Internet-based access to services and resources. The flexibility of the cloud and the speed of deployment are ideal for today’s manufacturing firms, which must be able to react to changing markets with agility and efficiency.
Companies that have moved completely to the cloud for their ERP have found that they can now focus on delivering the customized products and services presently in demand instead of worry about the limitations of an aging legacy ERP system.
But what about all those legacy ERP systems? Companies with these systems have invested heavily in these systems and are reluctant to simply give up on years of investment. Many of these companies are intrigued by cloud-based ERP and have begun to move some of their functions to cloud ERP software, effectively creating two-tier hybrid ERP systems. These firms perceive hybrid systems as a way to modernize their systems without completely abandoning their on-premise ERP system.
In another recent study by Gartner, cloud-based manufacturing and distribution software will increase from 22 percent in 2013 to 45 percent by 2023. Gartner predicts that most of this growth will be driven by the adoption of hybrid ERP systems. However, the same study also predicted that by 2017, 70 percent of organizations adopting hybrid ERP systems would fail to improve cost-benefit outcomes unless their cloud applications provide differentiating functionality.
According to Gartner, companies need to move beyond simple two-tier hybrid ERP systems by adopting a Postmodern ERP strategy. Postmodern ERP deconstructs the old suite-centric ERP into loosely connected applications that are increasingly cloud-based and integrated as needed, but driven solely by functional need and agility instead of the IT needs of a monolithic, legacy ERP suite.
Advantages of a Postmodern ERP Strategy
According to Gartner, a successful Postmodern ERP strategy must support business agility and flexibility. With specialist applications from the cloud, firms can leverage upgrades applied by the software vendor and allows users to make configuration changes and replace applications within a two- to five-year time frame.
Reduced complexity of the core ERP—implementing a hybrid set of solutions frees companies from having to customize a monolithic ERP suite to meet a differentiating business need or drive user adoption.
One benefit is improved usability and user adoption where users’ needs for a Web-based application-like interface can be satisfied by providing specialist cloud applications.
Successful Postmodern ERP also provides business-appropriate integration. Integration of functions such as order management and materials planning can be tight where needed, yet loose for other functions.
Postmodern ERP can also deliver measurable improvements in business outcomes. ERP modules intended for integrated suites often lack the depth of domain-specific functionality delivered by specialist cloud applications. A Postmodern ERP strategy can deliver greater business process improvements faster than the ERP suite alone.
Additionally, Postmodern ERP allows IT resources to focus on enabling innovation and differentiation instead of spending most of their time maintaining a bloated legacy system.
Simplifying the Migration to Postmodern ERP
A manufacturing cloud ERP solution can help manufacturers plan and implement a Postmodern ERP strategy. Such a cloud ERP system, designed for the Salesforce ecosystem and is 100 percent native to that platform, means that the software runs 100 percent within Salesforce. The ability to select the right specialist ERP application from the vast Salesforce ecosystem is a significant advantage for firms looking at a Postmodern ERP solution.
A powerful manufacturing cloud ERP solution represents every step in the manufacturing process, increasing efficiencies, controlling costs, and increasing revenue. It includes ERP modules for sales order management, purchase order management, production engineering, inventory management, lot and serial control, scheduling and capacity planning, shop floor control, material requirements planning, manufacturing cost control, project control modules, as well as financial integration and customer service. Such cloud ERP software supports multiple companies, multiple divisions, and multiple sites—all within a single tenant on the Salesforce platform.
Monolithic legacy on-premises ERP systems have become more of a burden than a help to manufacturers trying to remain competitive and successful in the rapidly changing markets of today’s global economy. Adopting a Postmodern ERP allows firms to leverage their investment in those old integrated ERP suites by combining some of their core functions with the more agile and efficient cloud-based ERP solutions. SW
Pat Garrehy is the CEO/founder/president for Rootstock Software and has an extensive background as a software architect and engineer. With more than 30 years of management, sales, and technical experience, Garrehy brings a unique blend of analytical focus and business savvy to the table.