Can you Reconcile ERP and Agility?
Can you Reconcile ERP and Agility?
Few ERP users will tell you that they are happy to use it. Even fewer will tell you that they enjoy how agile their ERP system makes them in their day-to-day work.
This article looks at the compatibility and incompatibility between agility principles and the underlying logic and construct of an ERP.
What is an ERP best at?
System of Record
An ERP, like any other central enterprise system, is a System of Record. Its purpose is to be complete, accurate, and the reference of truth for critical functions inside a company: inventory, sales, accounting, human capital, assets, purchase, and related financial impacts.
In information system theory, a System in Record is not a differentiating factor. It is an industry standard, it comes with best practices, workflows, controls, reporting.
Transactionality, Segregation, and Security
ERP and most enterprise software are transactional by construct, implement segregation of duty, and ensure data access security. These building principles prevent innovative ways to interact with data. It forces most ERP to go with generic designs, uniform screen layouts.
These design principles make it possible to use the same generic ERP in many different industries, extend its business model, add workflows, provide standardized API, data exchange, and analytics. It makes the business of deploying an ERP easier but does not provide the best user experience.
It is no surprise that most ERPs provide poor User eXperience, as they are designed with processes and data management in mind, not users. In this article a UX expert lists all the reasons why ERP UX is poor and finally offers little hope of improving.
From Process Alignment to Process Uniformity
A large ERP deployment typically aims a covering 100% of a company’s operations. It implies that large sales, delivery, production batches will dictate how complex a particular process can be. At the other end of the spectrum, a simple quotation, a quick delivery, a small batch will have to adhere to the most generic process and follow some of the same steps and controls.
This one-size-fits-all strategy is challenging to avoid. Companies may be tempted to implement shortcuts for simple transactions inside the ERP, but this will add complexity to the design, lengthen the configuration and development, and extend the testing phase. All these contribute to the risk, budget, and time of the implementation.
It is Complex Enough
ERP deployment, especially at a global scale, is complex and risky enough, without adding more layers of complexity, trying to achieve higher levels of innovation and agility. An ERP deployment must concentrate on its critical components:
- user adoption,
- data management,
Rigidity: 4 / Agility: 0
Is there Hope for the Future of ERP?
The Cloud is a Must
In this Harvard Business Review white paper, Microsoft describes how moving an ERP to the cloud gives companies agility. The article points out all the benefits of the cloud, but none to the ERP itself.
There is no question about how the cloud brings agility to a company. But a rigid ERP in the cloud is still a rigid ERP.
Artificial Intelligence is a more promising route to explore. As one of the critical objectives of an ERP is to capture, produce, and generate high-quality data, it is a great candidate for machine learning.
In this article SAP promises the future of ERP to be Intelligent ERP. But as for the previous article from Microsoft, the first mention of agility comes from leveraging S4/Hana, the proprietary SAP technology. SAP only mentions the usage of machine learning and predictive analytics as a second opportunity.
Agility on top of ERP
A promising avenue is to build agility on top of an ERP. In information system theory, this will be called a system of differentiation. When an ERP provides standards at the lowest possible cost of operation, a differentiation system must provide a unique value tailored to a company’s operations and DNA.
Combining a system of differentiation with an ERP has several advantages:
- Leverage the ERP as System of Record, centralized authentication, data security, master data repository,
- Provide an innovative user experience in a unique system of differentiation,
- Hide the complexity of the data model from the user,
- Provide fast prototyping and iterative development without creating risk at the ERP level,
It is the approach of an innovative software company. Their promise of agility relies on the above described best-of-both-worlds strategy, combined with low-code tactics.
Rigidity: 4 / Agility: 3
Identify the candidates for Agility
It is never too late to consider adding agility on top of an existing ERP. Using process mining is a great way to detect the candidates for acceleration and innovation. This data-driven approach can lead to agile development to increase operational efficiency.
Then cloud deployment, artificial intelligence, and rapid development can significantly increase operational efficiency while improving the user experience.
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