Evolution of postmodern ERP to composable ERP explained

What is composable ERP and why do companies need it?

Gartner defines composable ERP as an adaptive technology strategy for building a foundation of administrative and operational capabilities that lets organizations respond more quickly to changes in the business environment. It often means assembling a hybrid of on-premises and cloud applications. To explain why this latest iteration of ERP has caught fire, Guay described the scenario of a large manufacturer with a highly customized, 20-year-old ERP that manages important functions like quality control and federal regulations, and in which it has invested substantial intellectual property.

Mike Guay

"Is there a reason to rip that out just to rip that out? No," he said. "At the same time, the commensurate financial application and HR applications are really not suitable for what you want to be able to do."

He said Gartner clients who wanted to keep their supply chain and manufacturing systems but replace their ERP finance module found the ties to their ERP system's purchasing and accounts payable features difficult to disconnect, in part because that's where companies have maintained vendor data, a critical element in supply chain management.

"Any time you're breaking a major business process that's got a significant transaction flow and significant data elements that you need to keep consistent, you really need to think about whether you want to break apart a vendor-delivered capability," he said.

Flash forward to today's composable ERP, and advancements in supply chain software that can be too enticing to pass up. These products often have AI and IoT capabilities for real-time shop floor monitoring and predictive maintenance of machines. Manufacturing execution systems (MESes) are becoming more modern and flexible, according to Guay.

"What was in 2013 a no-brainer decision, to leave that system in place on premise forever, now isn't such a clear decision," he said. Indeed, companies that have already moved HR and finance to the cloud might decide that today's cloud-based configuration tools and software extensions are capable enough to finally move their MES to the cloud and have a new system that lasts another 25 years.

Enterprise application architecture holds it all together

Composable ERP is a key concept in an emerging era of applications in which traditional, core ERP functions like accounting and order management are surrounded by "enterprise business capabilities," which Guay explained in a guest blog post shortly before leaving Gartner.

"An ERP system is essentially this massive bundle of reliable, bulletproof business processes that have been in the market 15-20 years that just work," he said, naming inventory distribution, order-to-cash and procure-to-pay as examples. They're also part of the clusters of capabilities that Gartner says make sense to buy from a vendor.

Other capabilities that are based on emerging technologies will help to differentiate an organization and can be assembled by users and in-house developers using low-code development methods. "I don't have to be an expert at writing code to be able to plug an application into my ERP system," he said.

The primary tool supporting such "citizen integrators and developers" is the enterprise application platform (EAP), according to Guay. Vendors in Gartner's leader quadrant for ERP, including Infor, Microsoft and Oracle, have all made it easy to integrate new capabilities into their ERP suites by providing EAPs, he said.

EAPs make integrating applications and accessing metadata as easy as building a form in Microsoft Access, Guay said. Data warehousing and other data management features typically come from the public cloud the ERP runs on, such as Amazon Web Services in Infor's case and Microsoft Azure for Microsoft Dynamics ERP, while Oracle uses its own public cloud.

The industry's evolution from postmodern to composable ERP has also been influenced by the fraught efforts of vendors to move their on-premises ERP code to the cloud.

Between 2014 and 2018, Guay said, Infor went through a three-stage process, first hosting its on-premises ERP products, such as LN and M3, then making them single-tenant SaaS and eventually multi-tenant SaaS. The core code for the application is, in many cases, the same, though ERP systems often had to be changed when they were moved to multi-tenant SaaS.

"We used to get the question, 'Can I have composable ERP without SaaS ERP?' -- cloud -- and the answer is, technically yes, but most of those on-premise applications were not architected to be as easy to integrate," he said.

Also discussed in the podcast:

• benefits and drawbacks of multi-tenant SaaS ERP;
• Infor's architecture for vertical-industry ERP;
• why the frequent updates of SaaS ERP force buyers to make difficult decisions about the timing of their ERP deployments; and
• the importance of low-code development in making composable ERP feasible and the risks it brings of building ERP that becomes too complex to manage and vulnerable to changes in vendor updates.