Manufacturing & Logistics IT spoke to a number of experts from the vendor and analyst communities about current trends and areas of development within the world of ERP – including those concerning integration, digital optimisation and the Cloud.
The Enterprise Resource Planning (ERP) solutions marketplace has continued to evolve apace over the past few years. To begin this detailed discussion in terms of some of the key areas of innovation and development within this technology area, Nandini Natarajan, analyst industrials, Frost & Sullivan, cites what she describes as the AI takeover of ERP as a key current trend. “ERP is emerging to be a pertinent ground for implementation of futuristic technologies like AI,” she said, adding: “Despite being nascent, AI is creating a significant impression in this market. Using AI concepts like machine learning and pattern recognition, ERP systems will be able to recognise data patterns and provide insights for informed decision making. For instance, an AI-powered ERP system can help a car manufacturing company identify purchasing patterns of different car models in different geographical regions. It can also help manufacturers forecast when to increase car production depending on demand.”
Natarajan also recognises what she refers to as the mega shift to the Cloud. “ERP has traditionally been not so warm to innovations,” she said. “This scenario is starting to change and is majorly driven by IoT and the Cloud. This availability of ERP in the Cloud has made ERP accessible to all including the small and mid-sized enterprises. With the benefits of Cloud, these enterprises are freed up from having to maintain expensive in-house infrastructure. It has also become a backbone for integration of ERP with different other enterprise systems such as CRM, SCM etc.”
Natarajan also references the power of predictive analytics as another key trend. “ERP is an integrated storehouse of data that houses almost everything from HR records to supplier details to customer orders to product specifications,” she explained. “Interestingly, all this data is heavily underutilised which results in loss of potential business opportunities. AI and analytics play a crucial role in aiding ERP systems to convert real-time data to actionable business insights.”
The emergence of Blockchain
Additionally, Natarajan observes that Blockchain is emerging to be one of the most secure platforms for any kind of transaction. “Enterprise functions such as supply chain management and customer development will become more effective with the introduction of blockchain in ERP,” she said.
According to Natarajan, enterprises are also starting to look for more personalised ERP solutions, ones that will focus more on end-customers. “One-size-fits-all will be a concept of the past as an increasing number of enterprises discover the need for personalised ERP solutions,” she remarked. “Enterprises will also begin to make user experience seamless across different channels and platforms.”
With regard to what has driven these changes, Natarajan considers that legacy ERP systems with low or zero intelligence are increasingly becoming irrelevant in today’s marketplace. “They offer businesses limited opportunities to scale and grow,” she said. “Although ERP is a storehouse of data, it is pointless if this data is left unanalysed. This is where technologies such as AI and Cloud have an important role to play.”
Further, Natarajan points out that ERP still does not entail crucial bits of information relevant to business development such as customer interactions, behaviour and relationship management. “The need to integrate all this information onto a singular platform will become a future necessity,” she said. “AI, Machine Learning (ML), blockchain and Cloud are emerging to be critical elements in bringing this radical shift in the ERP software landscape.”
Bryan Ball, VP & group director – global supply management practices, Aberdeen Group, reflects that Cloud is not new news, but recognises that having a real Cloud-based version of ERP where people are looking to move their entire ERP to the Cloud is getting more traction now. “Realistically, in terms of solutions built for the Cloud from the bottom up, it’s really been within the past five years that this has really come into being,” he said. “There have been ad hoc versions, third-party hosting or provider hosting, private Cloud and those kinds of things, but really getting a true Cloud-based solution is now coming into its own.”
However, Ball adds that not everybody’s there yet, particularly when including all the applications that come with it. “Some vendors’ applications are more of a user interface, with front ends that work in the Cloud and can integrate, but the real functionality is not truly Cloud-based,” he explained. “It’s changing rapidly, but not everybody’s quite there. Having said that, one of the reasons for moving to true Cloud-based SaaS-driven applications is the benefits to be had from using technology that falls under the Industry 4.0 umbrella, including embedded analytics that could support and come with any applications you can use in the Cloud. Artificial intelligence is a good example too; not a separate standalone AI but an embedded version that can be leveraged and used within any of the applications that come standardised in the Cloud.”
Resident native AI
Ball then provides a real-case type example: “Let’s say I have a planning application with resident AI built into the app that comes in the Cloud – as opposed to having a planning application that’s connected to a standalone AI engine in order to help me carry out certain tasks. It’s more of an integration versus an embedded tool scenario. This type of resident native AI is getting some traction and the use cases are quite compelling – things like procurement to supplier; the flow of information back and forth.
“Think in terms of creating a PO, I send it to the supplier, the supplier acknowledges it and I receive an advance shipping notice, I get the EDI version of the timing of the transaction, the shipment, promise date and the updates to those kinds of things, including information related to any anomalies that need resolving. So, EDI is kind of back in the frame and playing an important role together with AI in this type of context. If you can pick up one or two days with this type of technology in terms of intelligence and knowledge this can be very valuable when you’re talking about next-day delivery, same-day delivery, knowing where my inventory is and being able to promise that inventory and actually having visibility in pretty much real time. These are very viable capabilities.”
Chris Devault, head of software selection, Panorama Consulting Solutions, points out that many Panorama clients that are talking about ERP projects or business process improvement projects and are looking to digital optimisation to achieve this. He adds that they want to use technology to grow but not necessarily to enter new revenue streams. “That means we are seeing some manufacturers that are adding more distribution on the back end of their manufacturing operations – less outsourcing of distribution. So, some are buying fleets. Some are introducing services such as warranty management on hardware, but the core of this is digital optimisation.”
Devault also sees more companies wanting to provide customers with an omnichannel experience. “We’re seeing a clear difference between how companies do business, whether it’s business-to-business or business-to-consumer or both, and those related toolsets are quite different,” he said. “Some of requirements concern supply chain management, so we’ve seen an increase in companies wanting a specific supply chain management application to take care of advanced forecasting and demand and order management. Those things can be easier to implement than ERP within the mid-market space, so companies can receive benefits quicker and get the key rich functionality they require without buying full ERP, which can take more time to implement and cost considerably more.”
Nigel Montgomery, research director, Gartner, considers that the key drivers for change in the world of ERP revolve around power and politics in the supply chain. “If you’re in a position of power you want more power, if I’m a serving company manufacturing for a larger organisation then I want to keep in favour, if I’m part of a larger organisation I want to expose the margins through the supply chain in order to have better financial control,” he said. “So, the challenge with ERP is that it has historically been thought of as a product rather than a strategy. Companies would say I’m going to buy SAP, Oracle, Infor, Microsoft and so on, and they would then have what they considered to be an ERP system without really thinking hard about what it actually does and what difference it can make within a power and politics context. I think that has been the biggest change in the market.
“More companies are now recognising that ERP is not so much a product but more of a strategy, which means they can think about it differently in terms of how it’s constructed. Up to now, people have looked at ERP as being a central system that controls nearly everything. Now, organisations are starting to realise that if they think about ERP at a strategy level they don’t have to think about these systems as individual products. They need to break it down into the componentry such as financials, HCM, manufacturing operations and asset management. Some companies will link in supply chain as part of that story. To them, you don’t separate manufacturing and supply chain as they could be seen as two disciplines that roll into one. So, depending on your organisation your view of what ERP is and what it should constitute can vary.”
Montgomery adds that one of the main changes in ERP solutions themselves is the fact that because more companies no longer think of ERP as a ‘solid mass’ they are now realising that they could move to the Cloud and remove a lot of infrastructure capability – and also pick up some of the newer services to start gaining differentiation in terms of lowering costs while getting the job done quicker and better and even increasing the visibility of operations. “The fact is that power and politics is all supported by visibility of information; the idea that information is power has probably never been as true as it is today,” he said.
What are some of the drivers behind companies re-evaluating what their ERP/supply chain strategy should be? “Things like Brexit might be getting more companies to think more deeply about what their supply chain looks like, how it operates and what frailties is has, but I think this was largely there already; it’s just that Brexit adds another layer of supply chain-related questions,” said Montgomery. “Arguably, it provides some extra urgency or level of deadline to get things done. However, Brexit isn’t changing ERP strategies – I don’t have anyone coming to me saying we’re going to change our ERP because of Brexit. What I have seen, however, is people saying that Brexit is one of the things that gives us power to go to the management team to say we could benefit from changing or updating our system. So, I think Brexit is driving some upgrades and driving some changes in strategy, but it’s only one of the factors behind this.
“In terms of Gartner’s Nexus of Forces concept – the forces that can come together and impact business and the supply chain – Brexit could be seen as one of those examples. It’s a bit like mobility, because mobile is something companies require because they need that visibility and need to be able to take a decision now rather than wait, but also need its people to be more flexible when they’re moving around. So, all these things are things within the Nexus of Forces that are driving change.”
Terri Hiskey, vice president of product marketing for manufacturing, Epicor, believes the biggest innovation to ERP in recent years is the migration to the Cloud. “Having a Cloud infrastructure in place affords businesses access to innovations as needed, whenever they’re needed, at a lower cost and faster implementation,” she said. “Companies want, and need, to see value from their technology investments, and they don’t want to wait for implementations that take a year or more to see that value manifested.”
Aside from bringing about improvements in responsiveness, agility and costs, Hiskey adds that the Cloud is helping organisations digitally transform and get fit for growth. “Businesses of all sizes can take advantage of the latest technology innovations – connected machines, AI, AR, and other Industry 4.0 enabling technologies – to improve their business and optimise processes,” she explained. “What’s more, Cloud ERP enables organisations to access real-time business intelligence, data-driven insights and predictability to sustain competitive advantage well into the digital age.”
The changing workforce
Hiskey considers that these changes have been driven by a couple of key trends – one being the changing workforce. “There are now more millennials in the workforce than baby boomers, and younger workers are demanding modern, streamlined, connected technology that is available on any device, any time,” she pointed out. “Our research found that 41% of young people want to work with the latest innovations, with a third (33%) of millennials keen to be at the cutting edge of new developments. Businesses that invest in, and promote their use of, new technology innovations will be well-positioned to attract the next generation of employees and boost their workforce ranks.”
A second trend observed by Hiskey is the increasing importance and influence that customers have on their manufacturers and suppliers. “The online retailer Amazon, for example, has driven this behaviour with the visibility that it gives its customers from the moment an order is placed until the product is delivered – convenient, personalised and frictionless,” she said. “It’s exactly the type of experience customers want and expect, whether they’re buying products for themselves or making business-to-business purchases.”
Hiskey added that manufacturers are now expected to provide such visibility to their end users, as well as a more holistic and simplified buying experience. “To this end, manufacturers must think about how they can add and extend value beyond simply delivering a product,” she said. “This means being able to accommodate engineer-to-order, configure-to-order, made-to-order and assemble-to-order manufacturing models to meet specified requirements. To keep up with new demands, these firms must embrace digital transformation – supported by ERP – to liberate and lubricate the flow of information and work product across the enterprise, with the ultimate goal of satisfying customer expectations.”
Brent Dawkins, director of product marketing, QAD Inc, observes that the rate of change in the industry is increasing, driven by a number of factors. According to Dawkins, these include the increasingly widespread adoption of AI, data analytics, mobiles, IOT and RPA, meaning that the tools and capability is available to deliver. He also explains that there is an expectation from customers for a more personalised experience, driven by their interactions in their personal digital lives. Dawkins adds that customers in the industry are also more demanding of product innovation, seamless delivery and excellent experience. He also maintains that manufacturers are influenced by increasing drives for efficiency and increased competitiveness in the market and the need to compete effectively.
Recent development sweet spots
Are there any other recently introduced benefits offered within the world of ERP that are of particular note? Natarajan considers that Cloud-based ERP systems are certainly more sustainable and environment friendly than on-premise ERP systems. “The Cloud facilitates the implementation of functionalities such as document management, which is far more sustainable than traditional pen and paper due to faster processing speeds, increased accuracy levels and their reduction in the amount of paper generated,” she said. “Further, centralised Cloud data centres will drive improved sustainability and reduce carbon footprint. It also allows a more efficient use of infrastructure with the ability to scale up or down based on seasonal demands of the business.”
Hiskey points out that the use of IoT sensors on things such as shop floor equipment has made enterprise asset management (EAM) an area with renewed focus. “Companies can benefit from proactively addressing production or equipment issues before those issues end up halting production,” she said. “By having a better understanding of capacity and throughput of those machines, jobs can be scheduled for efficiently and throughput can be optimised.”
Additionally, Hiskey explains that many factories are adopting smart home technologies such as integrated control of ambient temperatures. “This enables the facility to use ‘energy saver’ strategies during downtime periods like weekends – delivering both energy and financial savings,” she said.
Have ways of best integrating ERP with other systems developed to any notable degree over the past year or two? To put things in context, Natarajan reminds us that front office systems like CRM record customer-related information such as customer interactions, sales tracking, pipeline management etc., On the other hand, back office systems such as ERP and SCM deal with information around back-end processes such as billing, shipping, financial and supply chain related data. “Traditionally, these systems have been kept separately,” she explained.
Natarajan continued: “Superficially, this might look extremely manageable and easy to use. However, integrating the front-end and back-end systems can help manufacturers gain a better understanding of their customer base at every stage of the manufacturing processes keeping in mind the end goals and delivering results accordingly. This has to a huge extent helped in streamlining business processes and improving productivity. Risk of database errors have also dropped due to this integration. Enterprises are slowly beginning to understand the potential from this integration and have started to act in this direction. Integrating these back-end and front-end systems through a single platform solution will be a priority in the coming years.”
Devault observes that vendors such as Infor are looking to put all their applications on a common platform in order to provide companies big or small with a common toolset to realise these integrations. He also comments that from a Microsoft standpoint every year more and more people are using those applications meaning there are more resources out there for development. “A lot of people buy Microsoft strictly on the fact that they can customise very easily and can integrate fairly easily,” he said.
Devault adds that although ‘Big Data’ continues to be promoted, he thinks that many people still have difficulty understanding what it is, how they can effectively get valuable business intelligence from the data, and how they can ensure the data is accurate, clean and consistent across functional areas and entities. “So, people are trying to adopt AI, but what is often promoted as AI is actually workflow automation and business intelligence and maybe 20% of AI wrapped in it,” he said. “But, mostly it’s automation of current toolsets and people are increasingly realising that a lot of this workflow automation is very powerful within these systems and it’s been under utilised historically.”
Hiskey stresses that in order to get the most value from your ERP system, and to really understand manufacturing costs and the impact to your margin, it is critical to be connected from the front office (order management, CRM) through procurement/purchasing, production, inventory, shipping and servicing. Hiskey adds that IoT technologies have made it easier to get a better view of inventory, as well as parts, as they are coming from their suppliers. “In short, new technologies have driven greater visibility from when a customer starts browsing on a website through to the delivery of an order,” she said.
Ball makes the point that in the past ERP has often been thought of as a something that contains just about everything. However, because of the increased move to the Cloud, he believes it’s going to become more a case of platforms connecting with other platforms in a very horizontal fashion as opposed to ERP having all or most of the pieces contained within it. He also believes that with the growth of this integrated platform-to-platform model, the partner network will become increasingly important. “So, we’re moving to this horizonal platform-to-platform model versus the older approach of having all or most of the architecture under one roof,” he said.
Ball continued: “As an analogy, I happen to be a runner and have a Garmin watch. The watch has a lot of functionality built into it including GPS capability, distance tracking, time monitoring and a heart rate monitor. Based on my heart rate these pieces of functionality connect and say Bryan you’ve burnt so many calories today, this is how much you ate so you’re over or under the ideal etc. It also connects to Strava, which connects me to the running community and lets me know how other people are performing and how I could perform against them. So, these platforms are connecting very horizontally and offer back and forth collaboration. And they designed from the ground up to be collaborative in the Cloud. ERP is moving in the same direction; having a base and many partners. So, now it’s a case of not thinking of an application but thinking more of an application on a platform and how this platform can connect with other platforms and partners. That makes ERP solutions much more effective if they move in that direction, and this is why Cloud adoption is going to continue to increase.”
Has the increased trend for the integration of mobile/field service devices with back-office ERP systems provided improved business and operational benefits for the end user? Natarajan maintains that with the ease of access through mobile devices, service quality has improved as customers have direct access to the relevant information. She adds that mobility has also helped employees to use time productively without any delay. “With information made available at their fingertips, employees have been able to deepen business relationships and response times,” she said, adding that real-time availability of analytical reports has helped to aid decision making. Moreover, Natarajan explains that, internally, it has become easier for employees to fill in their official documents such as leave and travel, and to check their attendance on their devices.
Hiskey makes the point that the integration of mobile/field service devices with back-office ERP systems allows users to be more reactive and to reduce the time lags that used to occur when someone had to call in an issue out in the field, and get a resource assigned and sent to service the faulty equipment. “With mobile/field service devices, issues can be identified and resources can be assigned directly from the device,” she explained. “This helps reduce the amount of time that a piece of equipment is down and helps companies be more reactive when dealing with faulty or failing equipment.”
The Cloud up close
Picking up on the Cloud theme in more detail, has the Cloud or Software as a Service (SaaS) model had any notable level of impact on the ERP market? For clarification purposes, Montgomery explains that the main connection between the terms Cloud and Software as a Service (SaaS) is that they both refer to solutions that are available to use off-premises. Cloud could refer to a licensing model where the user is responsible for the updates, whereas with SaaS all the software updates are normally dealt with by the vendor and users pay a subscription to use it.
He adds that what can happen in the background is that if the vendor can do it economically enough and there is enough common ground between companies, then a multi-tenant model makes sense. “So, I now have one piece of software that I’ve got to maintain and everyone’s using the same software. However, the difference between SaaS and Cloud at a structural level is that people are putting their existing ERPs in the Cloud which means they get the cost savings by having it off-premise; they have a subscription model, but don’t necessarily move to a SaaS model because SaaS means the partner is going to take it over totally. So, companies need to distinguish between licensing models and deployment options because they can be two different things. Essentially, Cloud means I’m no longer holding it, while SaaS means I don’t need to worry about the software and the updates, I’m just going to use it as a service.”
Montgomery adds that one of the outcomes of the change in thinking around ERP is because ERP is now not thought of so much as a ‘solid thing’ and thought of more as a strategy the functionality pieces can be more easily separated out. “So, because things such as HCM, financials or CRM lend themselves to the Cloud and to a SaaS environment they tend to move in that direction,” he explained. “In terms of manufacturing operations, planning and execution can be separated out. So, execution stays on premises and stays alongside the assets and the planning starts to go out to the Cloud. So, we are seeing that the Cloud is becoming the destination for a lot of these things, although to some extent this is brought about by the vendors rather than the customers.”
From a geographical perspective, Montgomery points out that although it might be thought that a Cloud-based solution could provide distinct advantages in terms of making information accessible over multiple plants throughout the world this isn’t necessarily true. “This is because depending where I am in the world and what my model is there are certain countries that have a very bad infrastructure and don’t suit the Cloud at all,” he said. “This is one of the big challenges, and when you look at SAP what you find is that most of their manufacturing customers on S/4 HANA have actually chosen an on-premises model. The reason is because when you’re looking across multiple geographies you don’t necessarily have the ability to take everything to the Cloud. In the services sector if you’re off line for 20 minutes work goes on. In a manufacturing environment if you’re off line for this amount of time it can stop a production line. So, vendors are realising that only offering customers a Cloud model might actually be detrimental in terms of attracting new business because not everybody can head in that direction.”
That said, in terms of separation of duties things like manufacturing planning can be in the Cloud because if it goes down for 20 minutes it doesn’t impact my shop floor so much because planning is done ahead of production. However, execution could be an issue if it’s in the Cloud. So, what we’re seeing is a separation of planning and execution at the manufacturing level and you have people such as Siemens and Rockwell and a few others building out of that infrastructure layer to be effectively an execution platform upon which the manufacturing capabilities sit plugged into a Cloud-delivered planning and supply chain.”
Natarajan believes SaaS is slowly pushing the traditional software licensing model into the background. “Organisations are moving large-scale software expenses CAPEX to OPEX, and this has resulted in looking at SaaS as a major business model,” she said. “SaaS offers lower total cost of ownership and faster returns on investment. This trend is visible especially in small and medium enterprises segment where there are budget limitations. Today, businesses are increasingly embracing the on-demand model of software deployment, and it’s only going to accelerate in the future as businesses start opting for the Cloud-delivered model of selling software. The advantages of Cloud, on-demand, user-based pricing model helps to expand the market. Further, SaaS is designed to serve multiple customers in contrast to the traditional on-premise software, which requires the user to install and operate software in his or her local IT environment.”
According to Natarajan, some of the promising features that compel businesses to make a move from on-premise to Cloud solutions include the ability to customise solutions at any time, allowing users to manage and create their own systems for fast deployment, scalability and agility to adjust resources based on how much system is being used.
Devault observes that all the main ERP vendors now offer Cloud solutions. “However, most of our clients are still purchasing on premise software – I would say it’s about 60% – and most of those companies are manufacturers,” he said. “I think this is for a number of reasons, one being concerns about security. We have many discussions about this issue with clients, but I don’t believe concern about security is a valid a reason not to go Cloud. In terms of total cost of ownership for SaaS and Cloud versus on premise we see that for about seven years they have actually been quite close to each other. In the past the SaaS model has been a bit more expensive on the back end, but when you really look at what it means to properly staff from an IT standpoint, and if you’re hosting you can host on-premise software elsewhere, then those annual costs are still fairly significant and don’t offset the SaaS model.
“Originally when SaaS came in it was around 40 or 50% cheaper than the on-premise versions, but during year one that gap can be significantly closed. Now we see it’s only about 20 or 30% difference between year one pricing. So, the SaaS model has increased in price but nevertheless it’s certainly increased in market share adoption.”
Devault makes the point that the main adoption of SaaS is within the SMB space, although he does see some enterprise companies also looking to go into the Cloud. In terms of the vendors, he reflects that they can differ considerably as to how they got to the Cloud. “For example, Microsoft completely re-wrote the AX platform from the ground up and, interestingly, they’ve since announced on-premise versions of the new Cloud software,” he said.
Devault continued: “Infor have Cloud-enabled their application, and where it’s not built from the ground up as Cloud they have put it on the Cloud technology they have now. Oracle has had the Fusion product for many years and they have strictly re-written their Cloud apps. But the maturity is an issue and some of the larger enterprises want to go Cloud but they are finding not all the functionality they need is necessarily there at this moment in time.”
Hiskey believes the SaaS model and Cloud has helped make some technologies available and accessible to small and mid-size companies that felt such sophisticated and innovative technologies were out of their price range, and over and above what they needed for functionality. “Moving to a SaaS model, or to the Cloud, allows small and mid-size organisations to leave the often-cumbersome IT management responsibilities to their solution partner,” she said. “SaaS makes these technologies more affordable by offering a subscription method to get access, so it helps spread the financial burden. I think we’ll start to see smaller companies gain advantages over larger companies by leveraging these new technologies.”
Is SaaS and the Cloud a threat to the on-premise ERP model? Natarajan reflects that industrial devices often generate huge volumes of data that require processing at high levels of speed and precision at an optimal cost. “Public Cloud/SaaS will be best suited to address this need,” she said, adding however that a major drawback of public Cloud would concern security and related apprehensions. “On-premise data offers a certain degree of assurance to the manufacturers, for whom data security is important. It would make sense for them to invest in protecting sensitive data. For less sensitive data, they could avoid paying for excessive security. Until public Cloud is able to convincingly strengthen security, a right combination of Cloud and on-premise systems or a hybrid SaaS would be the ideal way forward.”
The main difference Hiskey observes between SaaS/Cloud and on-premises ERP implementations has to do with customisations. “With SaaS/Cloud implementations, users use most of the functionality out of the box but have some capabilities to personalise things like the home page or forms, or the ability to create specific workflows,” she explained. “The reason for this is that SaaS implementations have a much more frequent upgrade schedule. For Epicor ERP, it is twice a year, but some SaaS applications update on a monthly basis or even more frequently.
“Frequent upgrades make vast customisations very difficult to manage. That being said, we are seeing many hybrid implementations, with customers trying out certain pieces of functionality in the Cloud (like e-commerce or analytics) as they get used to managing cloud versus an on-premise implementation. Many customers have invested heavily in their current on-premises system, and just aren’t ready to give up that investment yet, so they may add on new functionality in the Cloud with plans to move everything to the Cloud eventually – but that may still be several years away.”
Upgrade or replace?
Is there still a case for updating/upgrading legacy ERP, or is it better to ‘rip and replace’? Natarajan reflects that it depends on the kind of systems an enterprise already has in place and also upon its budget allocations. “If an enterprise uses a legacy ERP system that uses a fairly recent version of software, it would make sense to upgrade,” she said. “On the other hand, if the enterprise uses legacy systems using very old software for several years, it makes sense to go with complete replacement. These legacy ‘end-of-life’ ERP systems were not designed for today’s constantly changing manufacturing world, so they are forcing companies to conform to the available software, which impedes growth. Further it also depends on how much the enterprise is ready to shell out. An average single site tier-2 ERP implementation for a medium scale business can cost anywhere between US$600K to $2000K and might take close to a year to complete ERP implementation. This number can go up in case of larger and multi-site ERP implementations.”
Dawkins also believes it truly depends on the client’s specific situation. “If a legacy ERP system can no longer effectively meet the business requirements, is costly to maintain or lacks stringent cybersecurity capabilities, then it is time to strongly consider an ERP replacement,” he said. “Rip and replace can be a high-risk, high-cost effort with lengthy implementation timelines. Working with ERP providers such as QAD that focus on agility to deliver benefits quickly and easily integrate with existing legacy systems means reduced project risks and improved business performance with advanced technologies.”
Hiskey believes that companies considering upgrades should be looking at Cloud implementations, as being in the Cloud makes incremental upgrades much easier to implement. “The ‘rip and replace’ method is always painful, but sometimes necessary depending on how old the initial implementation is,” she said. “You need a modern ERP system to be able to harness the power of new and innovative technology – IoT, analytics, mobility, AI and much more – being introduced at a record pace. If your initial ERP implementation is not updated enough to be able to leverage these technologies, you may want to consider making the leap by ripping and replacing to a more modern ERP system. We asked a number of our executive customers in a recent gathering if they preferred that their solution providers provide changes a little at a time or all at once and were surprised to see everyone respond favourably to making big changes all at once.”
Can ‘Big Data’ help to gain the best out of ERP systems? For clarity, Hiskey first defines Big Data as the vast amount of data being collected from machines and other processes. “The insights that this data yields are invaluable to companies – revealing things like how long a production run actually takes, the exact product yield of certain machines, order fulfilment timings, etc.,” she explained. “ERP systems can help users gain better visibility and use real-time data insights to make quick and informed decisions about adjusting production runs to meet delivery dates, whether or not all product costs are being captured, so you know your pricing ensures the highest margins. All of this greater visibility gives users the most facts with which to make better decisions and changes if needed.”
Similarly, Natarajan makes the point that industrial enterprises need to be equipped to handle huge volume of data that is being generated by ERP systems in both structured as well as unstructured formats. “Big Data ensures that all this data is processed faster, better and in real-time ultimately leading to overall forecast accuracy,” she said. “An integrated ERP system powered by Big Data can be used to observe consumer behaviour in social sites, business networks and mobile devices. This is turn will help manufacturers to understand their customer preferences better and accordingly position their marketing or product strategies. As data continues to explode and becomes the new oil, being able to access information real-time for decision making will separate the laggards from the winners. It is therefore imperative for businesses to take note of their ERP systems and ensure that it is in perfect alignment with this trend of Big Data.”
What are some of the main functionality differentiators among the ERP vendor community? Hiskey believes that one of the key differentiators is whether or not competitors have a complete suite of products available both on-premise and in the Cloud. “Many service providers only offer one or the other, or if they offer both the Cloud version is often a lighter version than the on-premises offering,” she said. “We offer the same product and same code for both Cloud and on-premise deployments.” Other differentiators according to Hiskey have to do with industry-specific functionality. “Most ERP solutions are very horizontal, offering a wide range of financial management, but cannot go very deep in terms of functionality for specific industries like manufacturing or distribution,” she said.
Natarajan considers that ERP vendors can be assessed on the basis of architecture, user experience, price, ability to support complex workflows, agile and flexible workflow design, advanced reporting tools, platform stability, integration track record, experience, modularity, reputation and support offerings.
What do our vendor commentators consider to be their own company’s USPs in today’s ERP space? Dawkins points out that QAD delivers solutions that focus on the specific needs of manufacturing companies. “Our industry focus and expertise allows QAD to deliver solutions tailored to the unique needs of automotive, consumer products, food & beverage, high tech, industrial and life sciences manufacturers,” he said. “In each of our vertical segments, QAD takes an active role with industry groups and standards bodies to ensure that we embrace new manufacturing practices, address regulatory compliance issues, assess emerging technologies and deliver innovative solutions to give our customers a competitive advantage. We engage with customers in an annual business review process to determine their current and future challenges. The result of QAD’s attention to specific manufacturing industry requirements is a suite of solutions, which more rapidly responds to industry requirements, and more precisely addresses customer requirements than broader, less-focused applications. QAD has an enviable reputation for being easy to work with and high customer satisfaction and retention levels.”
Hiskey explains that Epicor has over 40 years’ experience in the manufacturing industry, with both world-class Cloud and on-premise solutions. “We have been positioned as a Visionary in Gartner’s Magic Quadrant for Cloud ERP for product-centric mid-size enterprises, and we are specialists within manufacturing as opposed to generic ERP providers who sell to manufacturing companies,” she said. “In addition to being a robust ERP solution for manufacturing, our ability to integrate with other systems is unique, and delivers tangible benefits to our customers.”
What do our vendor commentators consider to be one or two of their most noteworthy customer references? Hiskey comments that one interesting Epicor customer adopting smart technologies is Sistema, a global plastics goods manufacturer based in New Zealand. The comapny has put together its own factory of the future, with robotics, machine learning and analytics. Another deployment of note, according to Hiskey, is Rainier Industries, a US-based company that has been using Epicor to modernise its 100+ year old business. “With Epicor ERP, integrated with Epicor Commerce Connect, the business has been able to lower costs by automating customer orders, improve the customer experience by accelerating time-to-delivery and increase sales by enabling online shopping,” said Hiskey. “This makes for a highly successful B2B digital commerce strategy that drives growth and is an inspiring adoption of our solutions.”
With regard to QAD, Dawkins cites i2O, a UK-based company that provides smart water network solutions to utility companies in over 35 countries around the world. “Recently, i2O identified a goal to use its advanced and patented solutions to make more smart water networks and make a bigger impact on the world. i2O looked to QAD to better take advantage of the most current enterprise technology,” Dawkins explained. As a result of a recent QAD implementation, i2O was able to:
- Improve manufacturing operations with a better tracking system
- Increase requisition traceability
- Reduce requisition approval processing time even when people are on the move
- More quickly onboard and train users
- Increase information security
- Enhance inventory controls
The next move
What might the next key innovations and developments be within the world of ERP over the next year or two? Hiskey believes AI and machine learning are a couple of things to look out for as key development areas. Hiskey comments that machine learning equipment will be able to correct itself instead of having to wait for human intervention. This, she maintains, will save time and help avoid human error. Hiskey also believes we will see many different applications of voice-activated technology and things such as smart forms where fields can be filled out automatically.
Natarajan foresees developments concerning the integration of front-end and back-end systems into a unified platform and a continuing focus on AI, mobile, blockchain, machine learning and Cloud. She also anticipates that specialist system integrators who can customise or personalise solutions to suit the specific needs of a business will emerge to be a breed-in-demand. Natarajan adds that future ERP software will look more flexible than today. “Although SaaS solutions are gaining relevancy and importance, most enterprise will look for an amalgamation of Cloud and on-premise solutions,” she said, adding that they will increasingly look out for the freedom of choice between the two in the future.
Ball believes we will continue to see greater adoption of Cloud ERP and anticipates that machine learning will continue to develop. He thinks there will also be more use cases of AI and an increased use of bots within these types of applications to speed up the automation and decision making and quicken the timeliness of information coming back to providers. He also maintains that there will be increased use of analytics so companies can make comparisons in order to make better management decisions going forward. “So suddenly you’ve taken that stuff that was very back office after the fact and moved it upfront to provide almost real-time intelligence in terms of what we might benefit from doing today in order to achieve better performance for this month or year-end and so forth,” he said.
Moreover, Ball believes there could be something of a shakeout within the vendor community as more companies move from on-premise to Cloud. “The last thing companies really want to do is go through a major technology disruption, but they are often forced to because, for example, their provider might be sunsetting the application they use or there has been a decision to move the infrastructure into the Cloud,” he said. “And where there’s disruption there could be some major shakeups in terms of which vendors gain or lose market share.”
Montgomery believes a hybrid ERP model with an edge capability is one of the directions we are going to see manufacturing moving in over the next three to five years. “Companies are going to build a hybrid Cloud and edge model such that they can put the executional bits that need a 50-millisecond response on premises and put anything that isn’t so time-critical in the Cloud,” he said.
Devault believes ERP vendors will continue to look to streamline the functionality of their solutions and to make the navigation in the systems more intuitive and more refined. “Historically, we used to see so many data fields; that can provide a lot of functionality but most of it was never used – so I think it’s now about optimising how end users use the system and about securing better end user adoption,” he said. Devault adds that a lot of this is about change management too. “Your people have to understand how to use the new technology and not be intimidated by it. Too many people think it’s going to take over their job, but it’s not really the case.”