OCT 3, 2017 BY NATHAN MCCANN
Technological change is faster and more chaotic than ever. As a result, business leaders are resetting their expectations of business management systems. ERP providers have expected for decades that businesses will adapt to their software, no matter how painful the process. Modern businesses look for the opposite: ERP software that configures to their needs.
When it debuted in the late 1980s, ERP software was a landmark achievement. It enabled enterprises to plan for the best use of their collective resources (money, personnel, knowledge, etc.), and businesses quickly came to view it as a vital organizational tool. Designed to capture accounting and other operational events, transport those transactions between systems, and assist disjointed organizations or departments in coordinating activities, ERP systems promoted efficiency within large companies.
Yet traditional ERP was always destined for obsolescence. We should probably be surprised that these 30+ year old products have endured so long. Who still uses VCRs, disposable cameras, dial-up modems, fax machines, CRT monitors, or floppy disks?
But what exactly makes traditional ERP systems obsolete? Why do they fail to give modern organizations the gains in productivity, efficiency, or effectiveness that vendors promise?
For the modern organization, flaws of traditional ERP systems include:
- Cost
- Customization (required, time consuming, and cost-prohibitive modifications; inability to upgrade due to customization)
- Change (lack of flexibility and/or prohibitive costs for customization)
- Consent (lack of user acceptance)
- Consumption (lack of usage and/or lack of proper usage)
- Complexity
Modern companies must contend with the ever-changing requirements of today’s business world. Many find that their current ERP system cannot take them where they need to go. It is difficult to properly value a business’s ability to adapt and evolve—to meet new market imperatives and gain an edge on competitors. But few would deny the vital importance of versatility and dynamism in today’s economy.
Again, ERP began with a simple purpose: to increase productivity, efficiency, and effectiveness across enterprises. However, instead of an asset that delivers such value, traditional ERP systems have become a liability requiring too much ongoing cost and complexity to operate.
Why? Because they were never designed for the digital age. Instead, traditional ERP systems centered on plants, equipment, inventory, and cost accounting. Modern businesses tend to prioritize data over plants, factories, equipment, and inventory. Data and intangible assets have overcome the Industrial Age’s preoccupation with the tangible.
According to Andrew Sherman, author of Harvesting Intangible Assets, these non-tangible assets account for over 80% of the average business’s value. Take Airbnb, which is worth more than Marriott without owning a single hotel. Or look at Uber, which is valued at over $50 billion without having a single cab (or car, for that matter) in its inventory. Facebook exceeds the worth of a company like Walmart, which has thousands of stories, distribution centers, truck fleets, hundreds of thousands of employees, and billions in inventory.
The tide has shifted—data now rules the economy.
However, traditional ERP’s deficiencies do not end there. What was irritating a decade ago is crippling today.
Everything about older ERP systems was designed to capture and process the most important internal business events, not the myriad of external data points critical to success in today’s economy. Vendors optimized traditional ERP solutions for on premise activities, not globally distributed teams.
Want to see the bill for that expense? No problem, just go to file drawer 2 of cabinet G, in aisle 7 of the basement. Want access to month-old data while on a business trip in Asia? No problem, just email your Executive Assistant with said request and wait until the next day for a PDF to arrive in your inbox. Old guard ERP may do well at feeding one data element into a funnel-shaped process, identifying one actionable item, and sending that to a user.
However, who does business that way anymore?
With the advent of “big data”, businesses now expect to identify thousands – even millions – of action items from a single data set, items ranging from the repetitive to the unique. The future requires that business systems process millions of events at a time, not simply millions of transactions at a time.
Granted, as illustrated above, traditional ERP systems do deliver some value, but only enough to create a false sense of hope. Almost always, any added value is entirely offset by the significant overhead required to maintain and update the system. While excellent in the abstract, traditional ERP fails to execute its founding premise: helping organizations ensure the “best use of collective resources.”
In its IT Glossary, Gartner puts it quite succinctly: “ERP deployments tend to come at a significant price, and the business benefits are difficult to justify and understand.”
At best, we get meager value in return for massive investment. At worst, we are simply feeding the beast. This madness cannot occur any longer. The ongoing reset of expectations, this modern paradigm shift, will result in companies rethinking, refining, and replacing their ERP strategies and systems over the decade to come.
One of the things I have observed in years of business, both as a chief executive and as a business consultant, is that ERP has a reputation as a “necessary evil.” You have only two choices: loathe it or ignore it. But you cannot like it. You cannot embrace it.
It is time this changed.
Twenty-first century businesses deserve better.
The years of traditional ERP are over. Never more should clients be forced to constrain their growth for fear of incurring penalties. Never more should they scrounge for data in the corners of a poorly designed infrastructure. Never more should they settle for just another system.
Clients are now daring to choose an ERP system according to their ambitions.
***
So what are your business’s ambitions?
Do you want to automate vital business processes?
Leverage big data throughout your organization?
Take advantage of improved paradigms?
If so, you should consider value-oriented ERP from a partner with a proven track record of delivering innovation ahead of its time. You should consider Xledger.
How does Xledger differ from traditional ERP? Traditional ERP focused on ensuring the proper use of resources. Xledger focuses on unified enterprise management. While traditional ERP tried to coordinate disparate functions, Xledger aligns those functions into a unified, logical process where everything interrelates.
We might define unified enterprise management as the act of accomplishing desired goals and objectives by guiding all of an organization’s assets and resources with the utmost efficiency and effectiveness. It comprises planning, organization, staffing, leadership, and control.
By this definition, Xledger is optimally suited to the modern, data-driven organization. The Xledger system heightens clients’ productivity by automating key accounting functions, promotes strategic decisions with real-time insight, and empowers organizations of any size to grow without fear of obsolescence.
You no longer have to settle for liking the idea behind your ERP system. Choose Xledger, and you can love the system itself.