The death of ERP systems
Modern day business is centered on three themes that drive it – Speed & Agility, Innovation and Customer Experience.
ERP’s of any form do not belong in it!
ERP technology evolved over the past few decades from a set of stand-alone, best-of-breed applications to a comprehensive end-to-end integrated suite that many enterprises expected would “do it all.” However, this vision has been rendered obsolete by the fact that, for most enterprises, the end-to-end approach did not deliver the value they expected and was observed as inflexible, slow, and costly to implement and maintain. The horror stories of failed ERP projects are the stuff of legends. As per a recent research, approximately 30% of ERP implementations fail to achieve even half the planned business benefits.
Examples include Waste Management suing SAP for $500 million, Hershey Foods’ 19% drop in profits from a failed SAP implementation, the complete FoxMeyer Drugs failed $100 million ERP implementation, and last but not least the over $1 billion spent by the US Navy on four different ERP systems, all of which have failed. Of course all of these big stores have been doing the rounds for a while now, and are somewhat dated, but the Digital innovation is likely to render this paradigm of development and their vendors irrelevant. What’s going on here?
Firstly, in the digital age Customer Centricity & Flexibility/Agility have become central to business
Businesses are becoming more outward-facing. Traditionally, ERP systems covered planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, transportation and e-business as such. Note the lack of any modules covering outward in approaches, such as Customer Experience capture, Journey mapping, Omni channel, end to end mobile experiences etc…
Modern businesses have increasing organizational appetite for digital business initiatives. Regardless of technology, new solutions must support more external interactions and variable interfaces to bring needed agility to enterprise processes. New IT requirements require a fundamental shift away from a single vendor mega suite toward a more loosely coupled and federated application environment.
ERP implementations are rife with duplicated effort, manual integration and inconsistent data. Resolving these issues was one of the benefits of ERP suites.
With Flexibility comes the need to manage multiple areas: integration requirements (for data, processes and applications), the management of multiple vendors, and increased testing frequency, to name a few.
Secondly, cracks in the ERP Foundation Cannot Be Just Patched Over
In many ways, approaching ERP is analogous to constructing a building. Many clients bypass the effort required to properly address fundamental issues underlying their existing ERP deployment — the “cracks in the foundation.” They assume that simply replacing poorly functioning areas with new applications will solve the problems. This is analogous to patching over cracks in a foundation — it may look good for a short while, but will have harmful effects in the long run.