Enterprise resource planning (ERP) has been the backbone of many organizations for decades. ERPs were popular because they offered a centralized back-end to manage and view vital business information in one place.
However, ERP systems are not without their disadvantages; legacy ERPs are especially difficult to maintain due to the monolithic architecture of these platforms. In addition, they are often cumbersome when it comes time for an organization’s digital transformation or adapting fast to changes in customer requirements (e.g., new regulations).
ERPs are now being reinvented from back-end systems to Digital Operations Platforms (DOPs) — integrating the ERP into customer-facing systems or mobile applications that process data and other front-ends. Spanning product, supply chain, finance, people/talent, and customer operations, these next-generation DOPs play a critical role in transitioning to a digital enterprise.
What is a Digital Enterprise?
It is difficult to say what a digital enterprise looks like, as it varies from one organization to the next. But, in general, a digital enterprise:
- Is more knowledgeable and agile than its competitors because of continuous data collection and analysis that enables proactive decision making; this may translate into lower operating costs or higher customer satisfaction rates.
- Uses data and analytics to reduce the amount of waste in its processes.
- Is more competitive because it can continuously refine products, services, or policies without investing time and money into developing a new ERP system. Continuous adaptation is characteristic of a digital enterprise.
The trailblazers in the DOP industry are SAP and Oracle. SAP S/4HANA is one of the best examples of how a Digital Operations Platform should look like — an opinion shared by leading research firm Forrester. Oracle has also made strides in this space with its Oracle-NetSuite.
Despite the proven advantages of becoming a digital enterprise, a 2019 survey by the Boston Consulting Group (BCG) saw most companies attain a low digital maturity index score. In addition, a more recent study by Accenture found that the average digital maturity of companies’ end-to-end operations overall is only 39%.
Below, we will discuss how companies can become more competitive by transitioning from monolithic ERPs to emerge as truly digital enterprises that adapt quickly and compete effectively.
Also read: What is ERP (Enterprise Resource Planning)?
Disadvantages of Legacy ERPs
Many ERPs have historically been difficult to maintain and update. This results from monolithic ERP systems — the many interconnected modules are often poorly documented, making it time-consuming and expensive for companies to execute changes or new features. For example, integrating them with customer-facing devices and mobile apps is often impossible or requires complicated and costly workarounds.
Legacy ERPs also struggle with scalability as the business grows; this can be problematic when business snowballs due to digital transformation (e.g., adding another distribution center). Legacy ERPS are also less agile in adapting fast because they require customizations, which can take weeks or months before deployment.
The fact that legacy ERPs require complicated workarounds and customizations also means they are expensive from a human resource perspective. Staff must spend long man-hours on ERP-related tasks.
Lastly, legacy ERP systems generally do not offer security that meets today’s stringent compliance regulations such as GDPR and PCI DSS standards.
Advantages of Digital Operations Platforms (DOPs), the New Age ERPs
In contrast, ERPs that have been reinvented — for example, ERPs with new architectures and digital capabilities such as a DOP — offer many advantages for organizations looking to transition from legacy ERPs. These next-generation ERPs are designed with digital capabilities and can be used in front-ends like customer devices, mobile apps, and back-end ERP systems.
Below are some of the advantages of DOPs:
- One of the major advantages is a true single version of data; this has benefits such as being able to integrate all modules across different endpoints (e.g., products, supply chain) without customizations that take weeks or months before deployment.
- Enhanced data integrity can eliminate errors in business operations while increasing customer satisfaction by eliminating processes that lead to errors, reducing operational costs.
- A flexible system provides scalability, so an organization does not need to spend money on costly upgrades when it needs to change over time or experiences rapid growth. The next-generation ERP is also more agile in adapting fast, as customer requirements are processed on the ERP (e.g., new regulations).
- Security is no longer a problem with next-generation ERPs because they incorporate compliance standards such as GDPR and PCI DSS that meet today’s stringent cybersecurity requirements.
- The new-age ERP is no longer a back-end system but an integral part of the organization’s business strategy.
- Managing data and business processes across several ERP systems reduces costs, minimizes workflow errors, and improves customer service.
- Ultimately, the organization becomes proactive — fast and collaborative — rather than reactive. This becomes a competitive advantage.
What to Consider When Deploying a Digital Operations Platform
Deployment of DOPs requires careful planning. The architecture and database must meet the scalability, security, and flexibility requirements to avoid delays during deployment or after implementation by constantly integrating with various customer devices.
Companies considering deploying a digital operations platform need to understand their future needs and ensure the ERP can adapt accordingly as they grow. In addition, companies transitioning from monolithic ERPs should consider building an inventory of skill sets needed to execute these changes effectively. Those skillsets may not yet exist within their organization today but could evolve over time.
Some more specific considerations include:
- Security controls: ERPs that are ERP-integrated and cloud-based offer enhanced security with the use of encryption, data masking, tokenization, and other techniques.
- Operational efficiency: It must eliminate an end to operational inefficiencies caused by many disconnected operations. Automation also reduces errors while improving customer service.
- Industry specialization: ERPs can be specialized for specific industries or business functions to only contain required modules. This dramatically improves performance without adding unnecessary features, leading to bloatware (e.g., a company’s ERP containing hundreds of unused modules).
- Scalability: ERPS should support scalability to accommodate growth at every level — IT infrastructure and software capabilities such as ERP integration and cloud computing.
- Simple Integration: Next-generation ERPs should integrate easily with customer devices such as mobile, desktop, and tablets to interact to provide a seamless experience for employees who may work in different locations easily.
- Big data processing or streaming analytics: ERPs should be able to process big data and offer streaming analytics to provide more timely insights into the organization’s operations.
- Language support: DOPs should have the ability to support multiple languages while ensuring that local laws are met (e.g., GDPR). Implementing these capabilities during deployment will help companies transition seamlessly from monolithic ERPs to next-generation DOPs without missing any critical requirements or deadlines.
If you’re looking to take your company into the future, it may be time for a change. You can start by transitioning away from legacy ERPs and instead adopting a Digital Operations Platform that will help you become more competitive in an increasingly digital world. The DOP is explicitly designed with the speed of response in mind to not fall behind competitors who are already leveraging this technology today. With access to real-time data on all aspects of business operations, your organization has the opportunity to adapt quickly and compete effectively across every industry vertical.