I write this on the day that UK based software company Sage has announced the departure of their CEO Stephen Kelly. This neatly evidences the point of this article. Sage has struggled with inconsistent product strategy to move the business into the cloud. It’s historic on premise and hosted model hasn’t matched the fast moving needs of current businesses. As a term, ERP has become too broad brush, describing two distinctly different types of product.
We are now firmly in the age of the “business platform” and software vendors, like their customers, will struggle if not fully invested in “business platforms”.
As a term, ERP “Enterprise Resource Planning” was conceived in 1990s by Gartner. It came about from the joining of financial and operational processes within a single system, largely spearheaded by manufacturing requirements. Indeed ‘ERP’ evolved from the need to enhance ‘MRP’ “Material Requirements Planning, the time phasing of stock and production to meet demand. ERP encapsulated the wider process around CRM (Customer Relationship Management), core accounting and other processes that we now consider stalwarts of the “ERP” fold. However, it still very much remained a single application, behest to specific versions, reimplementation to upgrade the software, and the internal maintenance of the infrastructure upon which it resides.
The purpose of this article is to question ERP’s continuing relevance as a term and argue that given the current available technology and market trends, we are now in the age of the ‘business platform’. Not all applications that were considered ‘ERP systems’ can be described as a ‘business platform’ This has distinct repercussions for both businesses using the technology and software vendors themselves. I wish to argue, that businesses not currently operating on, or considering the selection of a ‘business platform’ will disproportionately encounter competitive headwinds due to the inefficiencies in back office processes and business reporting that result.
A Crowded Market
The current ‘ERP’ market is over-crowded. Multiple suppliers offering multiple different products, some domestically focussed, others catering for international businesses. Yet across the market, there is a clear delineation between two types of ERP product with regards to their architecture. Some products on the market today were initially conceived in an era when it was the norm to load disks onto servers located on client sites. The attempts of software suppliers in rearchitecting these ERP products into what would today define a ‘Business Platform’ have largely been unsuccessful. This has left customers, despite their application being hosted over the internet, behest to version lock, manual upgrades requiring the need for professional services, costly customisation and poor user adoption. Return on investment is reduced and the need for further system evaluation increases.
On the other hand, there are ERP applications, or ‘Business Platforms’ available on the market which have been designed, from the outset, for the modern cloud architecture. An architecture that delivers transactional business processes, alongside other capabilities required to run a business. Business intelligence and reporting are inbuilt, customisation is delivered through point and click methods, not leaving the customer locked to a particular version. Dashboards and flexible, pivot-able reports are common place, allowing businesses to analyse data and make decisions much faster than compared with aging ‘ERP’ systems.
As a result, whist current marketing and business terminology considers the market as “ERP”. The products within this subset can clearly be divided into ERP’s and “Business Platforms”. Over the next decade it will be the business platforms that have the most relevance and success for successful businesses. This is due to the underlying fact, that business platforms will allow for businesses to focus on revenue generating activities, lowering IT expenditure and increasing their efficiencies.
What Key Features Define a Business Platform?
- All Customers on the same software version and upgraded automatically.
- ‘Point and Click’ customisation possible without version lock.
- Partner applications available to extend functionality using the platform, or prebuilt integration.
A fundamental hallmark of the business platform is a multi-tenanted environment where new releases of software are delivered automatically to the client base. These upgrades are delivered without the need for manual intervention by the client, or further professional services from the vendor. Therefore, all customers are on the latest version of the software and remain so. This confines the term ‘version lock’ to the yesteryear of ‘ERP’. To remain agile, it is no longer acceptable to select a software product in the knowledge that further updates will need reinstall/reimplementation and assistance from the software vendor. This is paramount, as older ‘ERP’ products might now be installed and hosted over the internet, seemingly to the average user being delivered ‘in the cloud’. However, users will be behest to the same, or greater, limitations of the product when it is deployed in this way.
Second to the above is the fact that modern ‘business platforms’ almost encourage customisation. Notwithstanding the colloquial mantra, “if you do what you always done, you’ll always get what you’ve always got, despite adopting software leading practices, every business has the need to create extra fields and workflows to complement their internal or external processes. Contrary to previous ERP applications, customisations for modern business platforms are not completed by coding the application. This is instead done in a layer separate from the application source code and as such has fewer dependencies on the application. As a result, customisations carry forward from one version to another, allowing a business to grow, scale and carry out the last mile amendments needed to retain competitive edge.
Business Platforms are characterised by an easier mechanism to deliver and develop functionality to accounts. Componentry can be bundled and delivered already configured. In a similar vein to the consumer experience of iOS or Android app stores, modern business platforms offer the ability for further development of functionality by third parties. Often partner developed solutions maintain the same look and feel as the core application itself, given the use of the available tools in the business platform. Functionality is delivered ready for configuration and consumption, quickly extending the functional reach of the core business platform itself.
Opportunity Cost of Not Investing in a Business Platform
I started this article explaining that those businesses that do not invest in a business platform risk lower growth and increase business risk. In a previous post, I’ve argued that given the shortening of product lifecycles and increased international competitiveness, it is being able to easily handle the unforeseen requirements of the future that will yield a competitive edge for companies. This is only possible by investing in a “business platform” and as such, the term “ERP” lacks relevancy in today’s market. The term masks the fact that two very distinct product types are available for purchase. Both types having potentially wildly different impacts to the organisations where implemented. For organisations not investing in business platforms today, they will find that back office inefficiencies could continue to risk and jeopardise future performance.