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Postmodern ERP countered by continued appeal of single suite
The loosely coupled enterprise applications that Gartner predicted may indeed be here, but integration and data integrity challenges make them inferior to monolithic ERP for some.
In 2013, research firm Gartner recognized that the once-settled world of ERP was changing and a new era was emerging, one in which the single-vendor, monolithic ERP megasuite was being deconstructed and replaced by a more federated, loosely coupled ERP. Gartner called this postmodern ERP.
The goal of a postmodern approach to ERP is to use the best applications possible -- likely from two or more vendors -- in each area of a business, such as finance, warehouse management, manufacturing and administration, while ensuring that the applications can integrate with each other as necessary.
Such a strategy enables more flexibility and agility through new business applications designed to support a domain or line of business with easy-to-use, intuitive functionality, according to Gartner.
"Most organizations now are getting their heads around [the advantages of postmodern ERP] and understanding that what they really need to do is not focus on the commoditized-type functionality but start to focus on the value-added stuff, the differentiating stuff that they do," said Denise Ganly, research director at Gartner.
Gartner found steady move away from monolithic ERP
Through 2019, more companies will move away from the traditional, monolithic type of ERP in favor of adopting a postmodern ERP strategy, according to a report written by Ganly. As a result, less than 10% of all ERP software will reside solely on premises.
By 2020, the number of enterprises adopting a "governed, business-led postmodern ERP strategy" will increase from approximately 15% today to over 40%, Ganly wrote in another report. And by 2022, leading digital organizations will no longer rely on traditional ERP.
Consequently, what Gartner saw is a wave of activity around stripping out the customizations that companies have made to their ERP systems to handle such commoditized processes, she said.
"Largely speaking, finance is finance, and general ledger is general ledger, and companies shouldn't be customizing in those areas," Ganly said. "So, finding those out of the box is important -- and then concentrating on the stuff that drives the business value and gives you the best bang for your buck."
For example, SAP tends to dominate the ERP market for asset-intensive organizations and sells an asset management component, Ganly said. While there's nothing wrong with the component, some organizations can make the business case that that function is differentiated enough for them, and they'll opt for specialized products, like IBM's Maximo enterprise asset management system, instead of the SAP ERP component.
That is a clear break from the past when enterprise IT departments opted to deploy the SAP component because SAP was their incumbent vendor, Ganly said. "That's where organizations that are undergoing digital transformations are moving toward," she said.
Dissenters see continued appeal of single ERP system
But R. "Ray" Wang, principal analyst, founder and chairman of Constellation Research, based in Cupertino, Calif., disagreed with Gartner's assertions about postmodern ERP.
"For a lot of folks, they would still rather buy from one vendor," he said. "That's because they're being offered some really, really good deals to do that. We don't think that Gartner's predictions are panning out. We think the options to do [postmodern ERP] are there, but it's just that the buying behaviors tend to show that companies are sticking with one vendor when it comes to ERP."
George Lawrie, vice president and principal analyst at Forrester Research, another Gartner competitor based in Cambridge, Mass., said his company isn't quite as "bullish" as Gartner on the concept of a postmodern ERP strategy.
"We still see a lot of people buying ERP applications and deploying them in the cloud, and yes, they're injecting some predictive analytics into it and mobilizing it," he said. "But generally speaking, I wouldn't say that they're composing new applications all the time. They do it for things that really make sense for them."
Forrester's view is that organizations can increase agility or reduce complexity, but it's hard to do both of them together, Lawrie said. "The thing our clients worry about a lot is data integrity ... because it's hard to do the integration," he said.
Lawrie said there's another reason he's a bit leery about telling organizations that ERP is going the way of postmodern ERP: the lack of interoperability of the vendors' own products.
"For example, Oracle and SAP have e-commerce products. What's the level of interoperability or integration between the e-commerce and the ERP? It's quite limited really," he said. "If it was really that easy, why wouldn't they have done it?"
However, Himanshu Palsule, CTO of Epicor Software, an ERP vendor based in Austin, Texas, said his company is on the same curve as Gartner when it comes to postmodern ERP. Most of his customers who are on their second or third ERP system are following the strategy.
"Their first one was typically legacy, the second one was probably a more generic ERP and now they're looking for something that solves their specific business problems," Palsule said. "They may not call it postmodern ERP but ... they're looking for something that provides that flexibility."
Postmodern ERP for Epicor is loosely coupled but tightly integrated open systems that provide end-to-end value, Palsule said. And while Epicor provides modules for CRM and payroll, some customers prefer to continue using Salesforce or ADP for those functions. "We are very open to communicating with them," and Epicor has an integration platform containing plug-ins that work with specific products, he said.
While Paul Farrell, vice president of product marketing at Oracle NetSuite, based in San Mateo, Calif., agreed companies are moving toward a postmodern ERP strategy, he pointed out that larger businesses have always been postmodern.
"They ended up having lots of applications, except they had to manage them themselves," Farrell said. "I think the emergence of the cloud allowed businesses to go and get [products] that would fit the purpose. And I think Gartner was just tracking that natural progression."
But even in the world of postmodern ERP, some things never change. Farrell noted that, at a Gartner conference, one of the analysts said that, in the postmodern world, even if systems are in the cloud, many of the integration issues are as complex as they were previously.
