Until recently, enterprise resource planning solutions (ERP) were the definition of slow-moving technology. But then came the cloud.
The cloud model accentuated the need for a system or record that could house all of a company’s data and connect it with other systems, the foundational job of ERP. At the same time, cloud ERP reduced rollout costs and the complexity of ERP. Now businesses were needing ERP more than ever, and companies of all shapes and sizes were able to use it. Rapid innovation has followed, more so with the rise of AI and the increasing value of data management. ERP technology is slow-moving no more.
Executive VP of Sales and Marketing at Navigator Business Solutions
To understand how ERP has evolved over the past few years, and where it will be going next, we caught up with industry veteran Ralph Hess, executive VP of sales and marketing for one of the leading ERP implementation providers, Navigator Business Solutions.
How have ERP systems evolved over the last few years?
What has changed in the last three or four years is that ERP is applying machine learning and robotic process automation to get things done more efficiently. It is taking all the things that you would normally do with ERP and running them against learning models so the ERP can set up automations and workflows that are more intelligent and efficient. Hence the phrase that ERP market leader SAP has coined, “the intelligent enterprise.”
The ERP plumbing is all there at this point, so there’s been a pivot toward making it work smarter and faster.
An example is credit ratings. Before, someone would look at a list and rate if a customer was paying early or late, and if they were using their discounts. Now machine learning in ERP will do that for a business. It will automatically credit rate and predict the payment patterns of a customer.
Has there been any evolution in terms of connectivity and how easily systems talk with each other?
Yeah, there has been really significant progress with connectivity in the past five years. The promise of cloud ERP really was twofold: One was that you could consume ERP faster and with a quicker ROI. The other promise was that you could interconnect systems more easily since those systems were built with web services and open APIs that made it easier to integrate.
So as platforms have moved to the cloud, integration and connectivity have gotten a lot easier. Now some of the ERP integration platforms have even moved to the cloud and become services as well.
One of the top examples of this is SAP’s Business Technology Platform. The BTP is a PaaS that allows SAP ERP customers to quickly develop templates for integrating their ERP with external services such as Avitex for calculating sales tax or Shopify and Amazon for ecommerce. What formerly would take a team of integration experts days in a back room now can be done in a matter of minutes.
These are not just a few pre-rolled integrations you get from the BTP, either. The BTP also makes it easy to develop the custom integrations with smaller systems and suppliers.
You mentioned that the cloud has made ERP easier to consume and roll out. How has ERP implementation changed?
There’s been a shift in mindset since SAP released the BTP PaaS and SAP Grow, which is a public cloud version of its flagship S/4HANA Cloud ERP solution.
SAP actually pioneered public cloud ERP and a faster rollout 20 years ago when they released Business ByDesign. It was the first foray into what we call best practices ERP; bundling up the best way to do certain business processes in the box and making it available to be deployed very quickly and very easily through the public cloud.
SAP took its time refining the idea and continuously making it better. But now with the release of SAP Grow, which uses the same model, there’s been a real shift toward this fit-to-standard public cloud model.
ERP has evolved from best practices to fit-to-standard. There are standard business processes and ways to deploy things, and companies such as SAP no longer want you to customize. There’s 50 years of experience that the standard processes are based on.
If you want to customize, obviously the tools are there. But most companies now are taking a fit-to-standard approach for streamlining operations instead of customizing. This helps businesses uncover better ways of doing things, and it enables them to take advantage of innovations faster as new versions of the software are released several times a year.
When someone looks at a modern ERP solution, what surprises them the most?
One of the biggest surprises when we’re demonstrating a modern ERP solution to a prospective customer is the intuitive user interface and user experience that’s able to be personalized to an individual employee’s preferences.
This is not the first ERP that many companies have experienced; many have been using an ERP from the early 2000s, and they’ve got a lot of scar tissue and user experiences that haven’t been entirely positive. So as we demonstrate the software, often the first thing we hear is, “Wow, this is a lot easier than I thought it would be.”
Second, we hear “This integrates well. I’m doing a lot of work in Microsoft Office with Teams, Excel, and all that. This integrates seamlessly with that.”
Third, prospective customers often are impressed by how fast modern ERP runs.
Finally, customers often can’t believe the insights they are able to get from a modern ERP solution. They can click on a tab and see their inventory, what their oldest products are, what’s aging out, and things like what products are turning over less.
That’s for the inventory people, of course. Accounts receivable have similar insights. So the easy availability of insights just blows people away. What they used to have to do in spreadsheets or by running and patching together four reports now comes standard out of the box.
What are your personal predictions for how ERP will evolve over the next few years?
Foundationally, there’s many different business functions within a company. And nobody is inventing new business functions. But the speed at which people and businesses are changing, the way they go to market, and the way that business is being reimagined is changing. Handling this better is what’s driving ERP innovation.
Commerce anywhere is a good example of this change. We have customers who were previously wholesale distributors. Now, all of a sudden, they’ve set up a Shopify or Magento site and are going to Amazon and selling directly to consumers. A couple of them are even opening up retail outlets.
Where ERP is evolving is giving customers the tools for reimaging business and deploying new things really quickly. This is a game-changer, and I see that ERP vendors are going to continue empowering businesses to make rapid changes with new and better tools.
What role will artificial intelligence and machine learning play in this future?
One of those tools is AI. Businesses can deploy faster and more nimbly today by using out-of-the-box configurations, and the next step is using AI for making business run smarter and faster than the competition.
There’s already AI in many ERP solutions. If you look at GROW with SAP, there’s already a lot of machine learning and predictive analytics. But the near future is more generative AI.
SAP is introducing Joule, for instance, an interactive generative AI tool that allows a user to interact with the system and get insight into their data in a very remarkable way. Joule also can be used by consultants and executives. They can ask the system about a business scenario and get solutions. “The customer is looking for this type of output or this type of optimization on our product. What would you recommend in terms of a system configuration in the next few years?” Joule will be able to make those types of recommendations, and that’s going to make it easier to deploy and reconfigure an ERP system as needs change.
This is the same thing for ERP configuration and customization, too. A business wants to add a user extension field to capture special information. This field needs to contain a list of validation variables, and it needs to be accessible in five forms. The ERP solution like Navigator Business Solutions will be able to generate the code, compile it, and add it to the system automatically.
The tools that allow a business to adapt and customize the ERP solution are getting much better, and they’re going to continue getting better as AI evolves.
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