The approach of traditional ERP vendors is being significantly challenged by the current generation of platform-based ERP providers. In this article, we’ll explain the differences between the traditional and platform-based ERP approaches, the advantages of a platform-based approach, and the actions that CFOs, CIOs, and COOs should consider.
The Traditional ERP approach:
Historically, an ERP selection process centered around finding vendors which met the core business requirements. As additional functionality was required, businesses had to choose between their ERP vendor’s ISV community or deal with a complicated project to integrate or “bolt-on” a best of breed solution. Envision a metaphorical island community that had to construct separate bridges out to each of its necessary functional partners – not very efficient and necessitating much upkeep. This is a picture of the traditional ERP approach.
When businesses are making an ERP investment, it’s a decision that may have a significant 10-15-year impact. Given the velocity of technological change and ever-increasing demands made by customers, it is nearly impossible to anticipate the future product horizon (features/functionality) of a traditional ERP solution. The risks of investing in an incorrect or inflexible ERP solution could be significant and potentially quite costly. These risks apply whether the traditional ERP is on premise or hosted.
Platform-Based ERPs: what are they?
Compared to the traditional ERP metaphorical “island” with bridges connecting to solutions such as eCommerce, warehousing tools or EDI, a platform-based ERP acts as a technology (or foundation) upon which compatible technologies – that are foundationally identical – can operate seamlessly. And, as newer and better compatible technologies come along, integration into the foundational platform is simpler and more efficient. There is no longer the need to build and maintain “bridges” to achieve desired and changing business process outcomes.
Platform-based ERPs not only offer the core functionality for what businesses need today, but they also offer marketplaces where organizations can “shop” for added or different functionalities to meet tomorrow’s needs. Both the platform and marketplace providers are maintaining their solutions on an on-going basis, so the risks (and costs) of on premise maintenance and upgrades can be greatly minimized.
An additional benefit to the platform-based approach is that companies don’t need to have skilled programmers on staff. Configurations and mappings are simplified, often without the need for coding or heavy tech overhead. Business analysts can focus their time and energy on system outputs (business intelligence), not the time, expense and hassles of maintaining the system.
Many businesses believe that their traditional ERP serves them adequately – it does everything the business requires and what can reasonably be anticipated over the next ten to fifteen years. Plus, it’s a familiar and “comfortable” solution. However, unanticipated changes do occur.
In the manufacturing and distribution industry, for example, the internet has significantly and permanently impacted eCommerce and customer/supplier communications. Manufacturers have to manage their products across new and different selling channels. Traditional ERP vendors may not have the ability to integrate easily with any kind of eCommerce or website portal. Some businesses are forced to choose a completely separate tool and often maintain and update it manually including pricing, inventory levels, product descriptions, etc. As market demands required the industry to develop portals and websites, many old-school ERP users simply could not respond in a timely and competitive manner.
How should a Platform-based ERP be assessed?
As businesses begin to assess platforms, these key issues need to be evaluated:
- How many applications are currently available on the platform?
- How big is the platform forecasted to be?
- What is the model for adding applications and associated cost structure (per user, per company, etc.)?
- How can (or will) added applications be tested without disruption to the production application?
- What does a business need to do if it requires something totally custom built?
It’s all about getting to know the platform ”community” and the people who comprise that community. Is it big enough that people have required skill sets? Are members of the community available to “interview” before investing any money? And, finally, what have users experienced in customizing applications (ease, difficulty, access to skill set, training, etc.)?
Post Selection Process
Once a platform-based ERP has been selected, businesses can begin to ask: “What apps or collection of apps can fill the requirements that I have gathered?” And then there is a selection process – not dissimilar to the traditional ERP world – where apps are demonstrated and a proper due-diligence process occurs. A more agile approach is now possible as businesses need not fully anticipate all future needs but rather go to the marketplace as needed.
The technology environment is changing. In this new day and age, we now have platform-based ERPs as opposed to just traditional ERP vendors (and a handful of integrated applications) to choose from when we’re making our ERP selection. Today, businesses should start by first assessing a platform-based vs. a traditional vendor because the platform can dictate so many future outcomes. But businesses should first do their homework to understand the depth and breadth of a platform and its marketplace.
About BT Partners:
While BT Partners is a business technology consultancy, the heart of what we do is simple…We make businesses work better. For 30 years, our technology-centered business consulting services have been provided with expertise, focus and a commitment to long-term success. We are committed to establishing a deep familiarity of your business and the way it operates. And, we grow relationships over time based on evidence of reliability, honesty, integrity and competence.
About Allison Park:
Allison Park offers a rare blend of technical expertise and leadership ability. She has directed technical and cross-functional teams at private and publicly-held companies as both a senior leader and as a consultant. She is a driver of technology implementations and continuous improvement projects. Allison leads the Rootstock practice at BT Partners and assists Manufacturing and Distribution customers in migrating their ERP application to Rootstock ERP on the Salesforce platform. She has worked on the Salesforce platform since 2010 and became a Salesforce Certified Administrator in 2014. She is an active member of many Salesforce User Groups. You can reach Allison @ APark@btpartners.com.