How to understand and overcome ERP challenges

Most ERP systems have been around for decades and, consequently, have accumulated a large number of features and functions to support growing business complexities. Highly complex systems such as ERP do not facilitate ongoing vendor innovation and incorporation of new technologies.  That said, even newer ERP systems, designed on new technologies, cannot avoid the inherent complexity that is built within ERP to support complex business needs.

As a result, ERP faces some ongoing challenges; the following are some of the more significant ones:

  •      Cumbersome design
  •      Perennial complexity
  •      User experience

The origin of these challenges lies with both vendors and end users. Over the years, vendors tried to develop comprehensive solutions either organically or through mergers and acquisitions that did not always offer the best user experience. Further, ERP customers focused on their urgent needs and expected vendors to deliver quick solutions to complex problems.

Cumbersome design

Decades ago, ERP solutions like PeopleSoft, JD Edwards, Baan, and Great Plains were the dominant players in the enterprise software market. Although these systems included robust capabilities, they did not always respond to the complex needs of large enterprises – hence vendors offered customization services to customers who could afford to pay for custom made features.

But, with customization technical issues ensued, largely because custom coding was impacted by system upgrades. ERP upgrades became the most dreaded occurrence for many companies because a new code would ‘break’ or modify the custom code. As a result, customized features were incorporated by vendors as an ‘out of the box’ option as an enhancement to their ERP solutions – a strategy that helped avoid the ‘broken’ code issue.

In fact, ERP was built upon a material requirements planning (MRP) platform, to which vendors added functionality for finance, sales and purchasing in response to customer demand. As the importance of employee and customer management became more vital to companies, vendors introduced basic human resources (HR) and customer relationships management (CRM)  capabilities.

However, ERP vendors were not alone in the market introducing features that catered to more and more refined customer needs. The so called best of breed software vendors were creating solutions focused on very specific business needs or market niches – like CRM, HR, payroll, etc. ERP vendors quickly realized that it would be more efficient to acquire existing best of breed software products to complement their specific offerings.

However, the mergers and acquisitions of this type of software reintroduced the previously referenced ‘broken code’ challenge to ERP vendors, namely, how to integrate solutions, designed on different technologies with very distinct business priorities onto their system. While it may have appeared that customers were saving money when buying packages of integrated solutions from the same vendor, in reality, the added cost of integration and the cumbersomeness of dealing with data duplication provided a very piecemeal answer to the original challenge and made the overall customer experience less than satisfactory.

Perennial complexity

A genuinely new development in the evolution of ERP emerged with the advent of cloud technology. The software as a service (SaaS) delivery model was revolutionary in enterprise software, as systems relied on configurability rather than customization when it came to extending the solution beyond what was offered out of the box. Furthermore, SaaS offered the ability to roll out upgrades to all users of a system simultaneously, streamlining the process for both vendors and users.   The cloud led to a new wave of ERP solutions such as NetSuite, Workday, Acumatica, and Plex.

The obvious benefits of the cloud (reduced IT costs, enhanced security, less painful upgrades) and the excitement created by the potential of an “ERP revival” made many companies overlook the long term challenges of this new delivery system. Only a few years after using cloud ERP, some companies found that the total cost wasn’t significantly lower than the ‘on premises’ delivery model, even though the software’s initial cost was very attractive.

Some of the new vendors went out of their way to distance themselves from the original legacy ERP, mostly due to its questionable reputation. . One example is Workday, which markets their product as  “an alternative to ERP” when in fact the structure of the solution is very similar to an ERP. Other vendors created ERP-like solutions even though their initial focus hasn’t been ERP. Another example is salesforce.com who built FinancialForce. The solution has been built on the Force.com platform as a service (PaaS) platform in partnership with UNIT4.

Despite the fact that these systems leverage cloud technologies, vendors are fundamentally following the same old development model – that is, adding multiple modules and capabilities to their core ERP product. As a result, ERP remains a monolithic product – complex and essentially difficult to maneuver.

User experience

As an ERP implementer, the most common comment from end users was:  “Please tell me how to navigate the system; I don’t need to understand how the system works”. While no one expects users to fully understand technical details, they do need to understand how each person’s use of an ERP solution can impact others in the company. As previously noted, ERP   is not a simple system! In the future, vendors may find a way to simplify user interaction, perhaps by harnessing the use of artificial intelligence and allow users to perform tasks by voice commands and via their smart watches. The promotion of user adoption relies on striking a fine balance between business complexity and the adoption of technologies that simplify user interaction.

That said, there are factors beyond the scope of a software system, such as, company culture and employee engagement, that do affect user adoption. De-motivated employees are less likely to learn and adopt new technology, especially when they are excluded from the early stages of the selection and implementation process. The best software is only as good as the implementation team that works with the product. In this instance, the onus  is on the company to provide a positive, challenging and rewarding work environment for its employees.

Final word

To conclude, I believe it would be beneficial to ask ourselves some fundamental questions about an enterprise software ecosystem. When choosing an ERP system for your own work environment or of when deploying an ERP system in house, some context with regard to how ERP has developed and evolved over time might provide some benefit to end users. There is no getting around the fundamental complexity and large-scale scope of ERP, but understanding a bit of why and how it evolved in this way may shed some light on how to approach challenges like integration, configuration, and upgrades.

 

Contributed by Gabriel Gheorghiu – Experienced consultant and analyst focusing on business software and customer interactions

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