Technology breakthroughs are delivering new ways to create value, from analytic applications that derive customer insights from social and collaborative networks, to location-based services that instantly deliver discounts to customers over their cell phones.
As new ways of creating value arise, companies are upgrading from proprietary, static Enterprise Resource Planning (ERP) systems to open, more dynamic enterprise applications that allow them to create value better and faster than the competition—whether that’s offering a customer a better deal, or a constituent a more efficient government service.
Companies strive to create value, while also facing challenges such as application integration, innovation and business transformation. Addressing these challenges requires a paradigm shift, shifting the centre of the universe from ERP to Enterprise Architecture, as the ERP era as a primary use of IT funds shows signs of coming to an end.
Addressing competitive differentiation: challenges
When talking to IT executives throughout the industry, Oracle realised that despite making significant investments in ERP, many companies are still facing considerable challenges to drive competitive differentiation. Here are some of the challenges they talked about:
Companies spend approximately 80% of their IT budgets just keeping the lights on.
CIOs aren’t left with enough flexibility to make strategic investments targeted at achieving business differentiation.
Companies need to reduce IT funds dedicated to operations and redirect investments towards strategic projects, supporting differentiated processes and capabilities.
Companies are hindered by complex IT environments, characterised by disconnected processes, redundant applications and islands of data.
Companies need to reduce IT complexity because that directly impacts business performance.
The gap between the needs of the business users and the ability of IT to support them is growing.
CIOs need to find a better way to support business innovation. The business requires more agility and flexibility.
IT must enable business transformation that creates sustainable differentiation
Transforming the business means moving:
- From rigid and proprietary systems to flexible, adaptable and interoperable systems;
- From pre-defined business processes to configurable business processes leveraging existing investments;
- From backward-looking reporting to forward-looking insight to action;
- From massive amounts of data locked in disconnected databases to usable information delivered to users in role-based cockpits;
- From an inside-out focus on a single enterprise built around the general ledger, to an outside-in focus on collaboration built around the consumer.
Overcoming the challenges: from ERP to Enterprise Architecture
We believe that addressing these challenges requires shifting the centre of the universe from ERP to Enterprise Architecture. Enterprise Architecture consists of a set of open, standard-based technologies that enable a company to build flexible and configurable business processes, transform data into insights, deliver more value to the business users, reduce time-to-value and create competitive differentiation, while leveraging existing investments. The focus needs to move from standardisation (enabled by ERP) to differentiation (enabled by Enterprise Architecture).
The promise of ERP 20 years ago was to enable companies to standardise their business processes based on aggregating multiple disconnected enterprise applications into one system. ERP has served its purpose. Companies now realise that ERP only took them so far, and that they need to shift their investments to differentiation and user productivity. The ERP era as a primary use of IT funds has come to an end.
So what is "Beyond ERP”?
- Enterprise Architecture, such as business process management, business intelligence, user experience and infrastructure.
- Money-making processes, such as innovation, sales and marketing, demand to delivery and service.
The two concepts are intertwined:
companies need to invest in the business processes that make them money and help them create a sustainable competitive advantage, and they need to leverage an SOA-based architecture in order to deploy them with more flexibility and velocity, and at a lower cost.
Mobile functionality, predictive analytics, and collaborative tools are just some of the new functional advancements being incorporated into enterprise applications today to support new ways of working and managing organisations.
CIOs wanting to uptake these new applications quickly and cost-effectively are turning to flexible, service-enabled IT environments that allow application components to be deployed as needed by the business, and switched off and on through new delivery channels like Software-as-a-Service and cloud computing.
Rather than focus precious resources on stitching together application components themselves, smart organisations are looking to standardise on an application foundation that brings together business applications, middleware and information management systems into a single, integrated technology stack.
Benefits of moving "Beyond ERP”
A "Beyond ERP” strategy will enable companies to:
- Enhance the value of their ERP investments;
- Incrementally adopt new capabilities to support strategic business needs;
- Drive value to the business in a modular and flexible way;
- Create sustainable differentiation;
- Transform data into usable insights;
- Empower better decisions with reduced cost and risk.
We live in an era of increased variability and velocity. Companies cannot engage anymore in costly long term projects and big bang approaches. This new era requires agility, velocity and responsiveness, achieved incrementally through value-based projects targeted at increasing differentiation. This is why we believe that the "Beyond ERP” era is here to stay.
Questions to ask before moving "Beyond ERP”
The "Beyond ERP” journey will be made possible by redirecting investments in applications, middleware and infrastructure that help your company reduce IT complexity and enable business transformation at a lower total cost of ownership. The strategic roadmap will depend on each company’s specific priorities. What are your most critical needs? Are they:
- Reducing IT complexity?
- Deploying flexible and adaptable business processes?
- Improving user productivity?
- Improving business differentiation?
- Delivering actionable business insights?
- Increasing computing power at a lower cost?
- Reducing data centre expenses?
Each one of these strategies will need to be enabled by "Beyond ERP” investments.
The bottom line is this: in the "Beyond ERP” era, companies need to allocate their IT funds to projects that will enable them to reduce cost and complexity while enabling agility, velocity and responsiveness. How the principles of "Beyond ERP” applies to your company depends on your current situation and strategic goals. The key is to engage in strategic conversations with your internal stakeholders and your external partners in order to define a roadmap that will make the best use of scarce IT funds and produce the sustainable advantage that your company seeks to achieve. Welcome to the "Beyond ERP” era!