What is Postmodern ERP?
What is Postmodern ERP?
Digital business and its technologies (cloud, AI, big data, multi-sensory UX, IoT, blockchain) upended the predictable world of ERP. Once dominated by a handful of giants, the ERP landscape has fragmented. Now more players, more platforms, and more products compete for more customers than ever before.
Gartner attempted to mark these changes in 2014:
Postmodern ERP is a technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.i
As you can see, this definition appears to allow some interpretation. Since 2014, many ERP vendors have claimed that they—and, ironically, only they—can support a truly postmodern approach. These brands associate postmodern ERP with specific models: some with best-of-breed, others with hybrid.
Yet Gartner’s definition does allow for greater clarity. We just have to go a bit deeper into its nuances.
Let’s start with a quick glance at the history of ERP.
For decades before 1990, many enterprises used multiple software products to manage their manufacturing processes. Gartner identified these composite setups as MRP systems, and traced their development from ‘MRP’ to ‘MRP II.’
In 1990, Gartner coined the term ‘ERP,’ expanding the definition of MRP (now MRP II) to include back-office functionalities such as finance, human resources, and order management. Vendors had begun offering comprehensive ERP suites, ‘monolithic’ systems with end-to-end business management tools. Despite heavy licensing and implementation costs, these on-premises products gained significant market share.
The early 2000s saw the emergence of the cloud, and with it new ERP models. A new generation of vendors offered ERP suites built entirely for the cloud. Without hardware or licensing restrictions, these cloud suites offered credible alternatives to the on-premises model. Key to these products was Software-as-a-Service pricing, which allowed clients access on a monthly subscription basis.
Each of these eras correlates to a set of strategies. A best-of-breed approach prevailed in the 80s and early 90s, with architectures composed of different solutions for most, if not all, functionalities. The mid- to late-1990s ushered in the era of monolithic ERP—everything in one installed suite or application. From 2000 on, an increasing number of clients migrated their ERP to the cloud. Cloud migration took one of three forms: the cloud suite, the best-of-breed model, and a hybridized mixture of cloud and on-premises.
Now that we have some background, let’s return to Gartner’s definition. We can draw several conclusions from a closer reading.
1. Postmodern ERP is a strategy, not a model
Contrary to online pundits, Gartner’s original definition does not dictate any particular ERP model or platform. Postmodern ERP involves a linking together of business capabilities using appropriate integration levels. Yet clients determine “appropriate levels” through a weighing process. An established business might prefer the security of “vendor-delivered integration,” while a startup might want greater “flexibility and agility.” Each business will have a unique point of balance. Therefore, it makes no sense to say that any one model or platform is Postmodern ERP.
2. The ideal model depends on each company’s goals
Each ERP model suits a different set of interests. According to three consecutive Alert Logic reports, private and integrated hybrid cloud environments draw more cyber attacks than the public cloud. So, organizations with high security needs would select a single cloud suite, while organizations that can afford greater risk would choose a more highly integrated option. The cloud has also continued to destabilize these categories. In some cases, integrations make for unwieldy systems, while unified cloud suites allow greater flexibility.
Simply put, Postmodern ERP flips the entire ERP mindset on its head.
Once, vendors held all the power in their relationships with clients. Strategy had to fit the available applications. So MRP demanded a best-of-breed approach, while on-premises vendors forced clients to adopt their prescribed strategies.
In the digital era, ERP is no longer about applications. The ERP market’s power dynamics have reversed. Clients now select ERP models and systems according to their needs. Now, ERP is a mindset—a strategy.ii
Remember the Burger King slogan from 40 years ago? Have it your way. Well, that is exactly what postmodern ERP challenges your business to do—build and maintain a flexible footprint that supports your changing needs.
This involves massive opportunity, but it also requires a paradigm shift of enormous magnitude. It involves risk. The new game can’t be played under the old rules.
If you have any questions, please get in touch. I would love to talk more about what postmodern ERP means for your business.
iPhelan, Pat. “Postmodern ERP Strategies Primer for 2018.” Gartner. Feb 1, 2018; ID: G00343946
ii Although we can’t say exactly how a postmodern ERP strategy looks, we can gain some insight by looking at the needs common to various industries.
Each market space entails a certain set of ERP needs:
- In public sector, ERP typically includes finance, fund accounting, procurement, HR, and reporting. Organizations value security, usability, and durability.
- In higher education, ERP typically includes fund accounting, finance, procurement, HR, student management, grant management, and asset management. Organizations value specific functionality, security, usability, and durability.
- In professional services, ERP typically includes PSA (professional services automation), project management, project accounting, HR, CRM, finance, expense management, and analytics. Organizations value efficiency, insight, scalability, usability, and security.
- In charities, social service, and faith-based organizations, ERP typically includes fund accounting, donor management, finance, HR, and event management. Organizations value usability, specific functionality, insight, durability, and security.
- In manufacturing, ERP typically includes material planning, production, purchasing, inventory, finance, asset management, and supplier/vendor management. Organizations value specific functionality, efficiency, usability, scalability, insight, and security.
- In software and technology services, ERP typically includes CRM, purchasing, inventory, taxation, project accounting, finance, and reporting. Organizations value efficiency, insight, scalability, usability, and security.
- In healthcare, ERP typically includes HR, finance, purchasing, inventory, compliance, asset management, vendor/supplier management, and reporting. Organizations value security, specific functionality, usability, scalability, and insight.
- In retail, ERP typically includes point of sale, purchasing, inventory, taxation, CRM, and analytics. Organizations value usability, efficiency, scalability, insight, and security.
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