How enterprise resource planning (ERP) can help you prepare for the next normal
Enterprise resource planning (ERP) software has traditionally advanced at a measured pace, always a few steps behind emerging technologies and the advanced progression of digital transformation, the cloud, and artificial intelligence. COVID-19 changed all that.
Unlike the iterative march of ERPs, the pandemic hit like a seismic explosion that immediately impacted industries across the globe. COVID-19 remains an unprecedented – and powerful – force for change.
Amid renewed attention to workspace safety, employee well-being, work-from-anywhere strategies, and environmental, social, and corporate governance (ESG) considerations, a new normal is imminent. As industries stand at the brink of change, the need for ERP has never been greater. That’s because ERP is designed to streamline and integrate many business processes and functions that have been upended by the pandemic: finance, human resources, sales, procurement, distribution, and the supply chain, among others.
In early 2020, the global ERP market was forecast to climb to $71.63 billion by 2026, up from $38.15 billion in 2018, according to Fortune Business Insights. That’s a compound annual growth rate of 8.5%. This forecast was published before COVID-19, and while more recent numbers are not yet available, we’ve seen that the need to mitigate COVID-19 disruptions is further fueling the adoption of modern cloud-based ERP systems.
Organizations that are implementing ERP solutions face formidable challenges, however. The funding and resources needed to design and implement complex ERP systems are daunting. While costs vary by business size and industry, the cost to implement an ERP system can range into the millions. What’s more, budget overruns are common, often because businesses fail to factor in the costs of additional modules, customization, reporting and analytics, integration, and training. Organizations also frequently don’t allow enough time to complete the initiative, which can stretch from six months to two years or more.
Nonetheless, as businesses begin to reopen, many are rushing to start or re-start postponed implementations – which will likely further stretch tight tech staff. We have already seen that increasing demand for advanced IT skills is creating a very competitive market in which the fees of independent implementation consultants are climbing. Potential cost savings may encourage more organizations to use system implementation specialists who can help limit the risks associated with independent contractors, leverage lower-cost resources when needed, and flex up and down as necessary.
ERP empowers remote work
When COVID-19 was declared a global pandemic in March 2020, businesses shifted to a remote-work model virtually overnight. These models were often based on hastily implemented processes and untested technologies. In particular, few companies updated their ERP systems.
As businesses prepare for reopening, now’s the time to modify remote-work programs to accommodate what will likely be a hybrid model. In this environment, IT staff must be able to remotely access, manage, and troubleshoot ERP systems via VPN or web-based portals. Configurations for remote IT access and support should be updated and tested. In some cases, organizations will also need to modify remote-access workflows and retest communications networks to accommodate unexpected fluctuations in remote work, and plan for more robust cybersecurity tools, testing, and training.
Inside and outside of ERP systems, organizations will need to automate manual business processes and workflows to make the remote-work environment operationally efficient. They should, for example, consider automation of workflows like processing and approval of invoices and accounts payable.
Elevating ERP to the cloud
While many small and mid-size businesses still have legacy systems that are on-premise, there is clear momentum driving those companies to cloud solutions. In addition to the many business benefits of moving to the cloud, the fact is that most software companies are sunsetting their on-premise products in favor of more modern cloud solutions, essentially forcing the migration trend. Cloud ERP solutions offer an advantage because remote management is built in; they also offer immediate scalability and flexibility for fluctuations in business needs. For employees, particularly remote workers, cloud ERP can improve remote access to tools and assets, enabling authorized workers to access their entire scope of work from anywhere.
There’s also a cost benefit: Cloud-based ERP systems are typically less expensive to maintain compared with on-premise systems. Applications and data are maintained by cloud providers, which lessens the need for in-house management by IT staff. Similarly, cloud ERP providers offer sophisticated, built-in cybersecurity protections that are regularly updated to address evolving cyberthreats, thus alleviating the burden on cybersecurity and privacy staff.
Some businesses are implementing cloud-ready on-premise ERP systems that can be moved to the cloud later on. This enables organizations to transition to the cloud at their own pace, based on individual business strategy, resources, and evolving customer needs.
Mobile ERP goes mainstream
Cloud-based ERP can boost the capabilities and use cases for increased mobility. Enhancing the productivity of a remote workforce will require seamless access to ERP information and tools across mobile devices like smartphones and tablets. Increasingly, ERP vendors are offering mobile apps that put ERP data and functionality in the hands of employees, regardless of location.
These tools allow users to access real-time data stored in the ERP solution to check the status of critical workflows, as well as conveniently complete tasks like purchase order approvals, expense reports, and time tracking. Mobile apps also enable employees to gather and transmit information from the field.
For IT admins, mobile apps enable more accessible and timely remote management and troubleshooting of ERP systems. If moving to a hybrid work-from-home (WFH) model, businesses will need to update and test remote IT support technologies and processes to confirm that they deliver the right information to mobile devices and workers. Those that do will be better positioned to gain enhanced productivity and agility.
Easier configuration with low-code software
It’s inevitable that new processes will be introduced as businesses fully reopen. While these changes are not yet fully known, it’s likely that they will require updates to ERP solutions. Configuring ERP, however, is typically resource-intensive, exceedingly complex, and costly. It’s no surprise, then, that most organizations lack the expertise and resources to fully implement and configure their ERP systems.
To simplify the process, many ERP vendors have developed “low-code” add-ons that empower non-technical businesses to configure certain capabilities. Low-code software (also known as no-code software) uses graphical interfaces and prebuilt modules that allow business users to make changes, build apps, and create tools like custom dashboards. What’s more, some ERP vendors offer low-code modules that provide an easy way to add machine learning (ML), artificial intelligence (AI), and analytics to the ERP solution.
This ease of customization allows business users who are closest to the problem to fine-tune ERP to enhance operational efficiencies and nimbleness. In other words, low-code software puts more power in the hands of the business user without involving IT and software developers.
Embedded AI for personalization
AI and its subset, ML, can be integrated with ERP to help achieve personalization and business process improvements. Yet many companies simply don’t know how to get started with AI. To that end, ERP software vendors are beginning to embed AI and ML into their ERP solutions.
AI can enable businesses to enhance the customer experience with automated voice assistants and chatbots that can be integrated with ERP systems to provide a more personalized encounter. AI-based chatbots, for instance, can respond to customer questions using information stored in the ERP. More than that, AI and ML can be combined with ERP data to enhance operational processes like inventory planning, logistics, supply chain performance, and production.
AI also encompasses robotic process automation (RPA), which automates routine business processes like data entry, report generation, sales order processing, invoicing, and employee onboarding. And as organizations accumulate more operational and customer data, AI can scan that information to deliver business insights and help identify emerging market trends.
Why two tiers of ERP are better than one
In the past, businesses relied on a single ERP solution for all needs and locations. That’s changing as more organizations embrace a two-tier model that creates a secondary ERP system for regional business units and international subsidiaries.
Under this model, the corporation would use a robust, highly configured Tier-1 ERP for its headquarters; the Tier-1 ERP could be cloud-based or on premise. Smaller business units or those that are in different countries would adopt a cloud-based Tier-2 ERP that could easily be customized for international requirements. The Tier-2 ERP, for instance, could be configured to use local language and currency, as well as help ensure compliance with international tax and regulatory laws. The two ERP systems could be configured to enable seamless data exchange from the Tier-2 system to the Tier-1 ERP to create a single source of truth for effective data management.
Additionally, a two-tier approach can help businesses successfully navigate mergers and acquisitions by consolidating the systems of a newly acquired company. Rather than moving the acquired company to the corporate Tier-1 ERP solution, it may be more efficient to adopt a cloud-based two-tier system. This approach can be less costly and less disruptive and enable organizations to preserve investments in the existing Tier-1 ERP. A two-tier ERP can also facilitate the financial consolidation between Tier-1 and Tier-2 systems. Proper implementation of a cloud-based ERP solution would enable an immediate redesign of the chart of accounts to support the overall consolidation of financials, and, in the case of multiple ERPs, a robust data governance process between the two systems should also be implemented.