Executive Briefings

What Comes After ERP?

"Is there something on the horizon that will replace ERP in the next couple years?"

This is one of those questions I get asked several times a week. Whether clients are buying a new ERP system or upgrading, enhancing and consolidating their existing one, no one wants to make a big investment in a technology that's about to be obsolete. In some cases, they're simply being cautious, but lots of them are amazed that, in the last 20 years, no one has developed a new application category that will replace ERP.

It's not as though ERP systems are wildly popular. For all of their ubiquity and commercial success, users, managers and IT professionals still complain about the cost, complexity, rigidity and sheer awkwardness of ERP applications. I almost never encounter an ERP project team that could realistically be described as excited and enthusiastic.

This isn't necessarily the normal state for enterprise applications. There certainly are software categories like CRM, supply chain management or talent management that people are excited about implementing. Even ERP and its predecessor manufacturing resource planning (MRP II) were once considered "cool" and "edgy" applications, but, eventually, they became the ponderous symbols of the status quo we see today.

How Did We Get Here?

A big part of the problem with ERP systems is that they're old. The fundamental concept dates back to the 1970s, most of the business process designs are outdated, the massively monolithic structure is unappealing and, in far too many products, the user experience is prehistoric. In many cases, the people who designed and built these ERP systems, and the people who buy them, are also old.

I'm convinced that if you took a group of smart, young people, who grew up immersed in modern technology, they would take an entirely different approach to solving this business problem. It certainly seems unlikely that they would decide to create a giant, central database surrounded by hundreds of tightly integrated applications that support digital versions of traditional, paper-based transactions. Or that their preferred-deployment approach would be for each company to host and manage its own copy of such a beast. Those were breakthrough concepts when I helped create and promote them 30 years ago, but they seem archaic in our current business and technology environment.

To some extent, the fundamental business model for ERP vendors has contributed to the lack of innovation in the product design. ERP has been successful largely because thousands of companies have been convinced that they can and should do most things the same way. The twin holy grails of "process standardization" and "industry best practices" have allowed the ERP vendors to write one set of applications, and sell them over and over again, which is how you make money in the software business. Anyone who has done a recent ERP product comparison discovers that 95 percent of the product functionality is identical. The consulting firms became complicit in this scheme when they realized it was a lot more profitable to apply this same "packaged solution" approach to implementations.

It's Time to Rethink ERP!

We are long overdue for another paradigm shift in the enterprise business system industry. We saw it happen in 1980s, with the introduction of minicomputer-based MRP II systems that offered distributed, real-time suites at a fraction of the price of mainframe systems. We saw it again in the early 1990s, with ERP systems that featured client/server architectures, relational databases, graphical user interfaces and multi-entity functionality. Unfortunately, everything since then has been refinement rather than revolution. The functionality has expanded, and the technology has gotten more sophisticated, but ERP systems are still largely the same as when Gartner defined the category in 1992.

I would argue that NetSuite may be the first of this next generation of business systems, but I expect to see a number of others emerge soon. Here are some of the characteristics I anticipate being included:

• Designed for cloud deployment

• More flexible, loosely coupled architecture

• Easy and intuitive to use

• Fast to implement

• User configurable and extendable

• Rapid innovation cycles

The really important difference has to be a new approach to business processes. We need applications that redefine commerce, accounting, production and service activities. They need to stop automating the "forms and filing" activities of the past, and ignore the departmental organization structures that define traditional ERP systems. This may require hiring designers and developers who have never worked in those environments - people who can take a fresh and objective look at today's business problems and how technology can be used to address them.

Whether you believe in this brave new world or not, I would love to hear from you. As always, I can be reached at jim.shepherd@gartner.com.

Source: Gartner

"Is there something on the horizon that will replace ERP in the next couple years?"

This is one of those questions I get asked several times a week. Whether clients are buying a new ERP system or upgrading, enhancing and consolidating their existing one, no one wants to make a big investment in a technology that's about to be obsolete. In some cases, they're simply being cautious, but lots of them are amazed that, in the last 20 years, no one has developed a new application category that will replace ERP.

It's not as though ERP systems are wildly popular. For all of their ubiquity and commercial success, users, managers and IT professionals still complain about the cost, complexity, rigidity and sheer awkwardness of ERP applications. I almost never encounter an ERP project team that could realistically be described as excited and enthusiastic.

This isn't necessarily the normal state for enterprise applications. There certainly are software categories like CRM, supply chain management or talent management that people are excited about implementing. Even ERP and its predecessor manufacturing resource planning (MRP II) were once considered "cool" and "edgy" applications, but, eventually, they became the ponderous symbols of the status quo we see today.

How Did We Get Here?

A big part of the problem with ERP systems is that they're old. The fundamental concept dates back to the 1970s, most of the business process designs are outdated, the massively monolithic structure is unappealing and, in far too many products, the user experience is prehistoric. In many cases, the people who designed and built these ERP systems, and the people who buy them, are also old.

I'm convinced that if you took a group of smart, young people, who grew up immersed in modern technology, they would take an entirely different approach to solving this business problem. It certainly seems unlikely that they would decide to create a giant, central database surrounded by hundreds of tightly integrated applications that support digital versions of traditional, paper-based transactions. Or that their preferred-deployment approach would be for each company to host and manage its own copy of such a beast. Those were breakthrough concepts when I helped create and promote them 30 years ago, but they seem archaic in our current business and technology environment.

To some extent, the fundamental business model for ERP vendors has contributed to the lack of innovation in the product design. ERP has been successful largely because thousands of companies have been convinced that they can and should do most things the same way. The twin holy grails of "process standardization" and "industry best practices" have allowed the ERP vendors to write one set of applications, and sell them over and over again, which is how you make money in the software business. Anyone who has done a recent ERP product comparison discovers that 95 percent of the product functionality is identical. The consulting firms became complicit in this scheme when they realized it was a lot more profitable to apply this same "packaged solution" approach to implementations.

It's Time to Rethink ERP!

We are long overdue for another paradigm shift in the enterprise business system industry. We saw it happen in 1980s, with the introduction of minicomputer-based MRP II systems that offered distributed, real-time suites at a fraction of the price of mainframe systems. We saw it again in the early 1990s, with ERP systems that featured client/server architectures, relational databases, graphical user interfaces and multi-entity functionality. Unfortunately, everything since then has been refinement rather than revolution. The functionality has expanded, and the technology has gotten more sophisticated, but ERP systems are still largely the same as when Gartner defined the category in 1992.

I would argue that NetSuite may be the first of this next generation of business systems, but I expect to see a number of others emerge soon. Here are some of the characteristics I anticipate being included:

• Designed for cloud deployment

• More flexible, loosely coupled architecture

• Easy and intuitive to use

• Fast to implement

• User configurable and extendable

• Rapid innovation cycles

The really important difference has to be a new approach to business processes. We need applications that redefine commerce, accounting, production and service activities. They need to stop automating the "forms and filing" activities of the past, and ignore the departmental organization structures that define traditional ERP systems. This may require hiring designers and developers who have never worked in those environments - people who can take a fresh and objective look at today's business problems and how technology can be used to address them.

Whether you believe in this brave new world or not, I would love to hear from you. As always, I can be reached at jim.shepherd@gartner.com.

Source: Gartner