What does it take to get companies to update their systems? Sometimes, only the threat of total mayhem.
Fortunately, the IT crisis never fully materialized, but the upheaval in the run-up to coming with a silver lining: It accelerated the adoption of the enterprise resource planning ERP systems that help run most large companies today.
At its most basic level, an ERP system links all of a company’s business processes, from finance to procurement to HR to sales, all sharing a common set of underlying data. The rationale was simple: The better the understanding of how each step in a process affects the next, the more efficient a business can be.
The term ERP was coined in 1990 by Gartner, the IT consultancy, but its roots date back to the first materials requirement planning and manufacturing resource planning systems.
Before it was over, American companies in the U.S. had spent $100 billion on fixes according to a U.S. Senate report. But the fixes also presented an opportunity; if companies had to spend piles of money and worker hours on IT overhauls, it only made sense to address bigger IT problems that would end up helping the business in the process.
Today ERP systems are part of the mainstream operation of nearly every large company. The market is huge. worth $25.4 billion in total revenue, according to IDC’s Worldwide ERP Software Tracker, 2017, and projected to grow to $33.6 billion by 2021.
Now another sea change within the ERP market is underway. Large companies are waking up to the advantages of cloud ERP program vice president of Enterprise Applications and Digital Commerce at IDC.
Some of these Fortune 500 companies have spent billions of dollars over the last 20 years building, maintaining, upgrading, and customizing ERP products to make them more usable, and what they figured out is that you don’t need to be spending all this money.
To understand why to consider the differences between on-premise and cloud ERP. Essentially, an on-premise ERP system lives on a company’s own servers and is customized according to its needs. It’s a system built for a single client and is typically maintained by the ERP vendor or partners with updates delivered maybe once or twice a year.
In contrast, public cloud ERP systems are standardized to meet the needs of a multitude of clients; and, though all the data are separated and secure, the application and intelligence layers are shared, and there’s a common UI. This offers some huge benefits.
Second, updates are pushed out to everyone at once, which delivers a competitive advantage. You’re not left waiting around for a vendor to update your custom ERP system. Third, if companies identify any issues or unmet needs with cloud ERP, they can push the vendor to deliver changes the will of the crowd often prevails.
Shifting to the cloud also often requires changes to a company’s internal workings changes that often turn out to be enormously beneficial. The beauty of a cloud ERP system is it forces many companies to clean up their data. Because a cloud ERP system is more standardized, it in turn forces standardization of the underlying data.
That is simply good for business because it gets everyone within a company working from a single, unified source of information. And it’s also crucial if a company wants to take advantage of another big benefit of cloud ERP systems: AI and machine learning.
We call it intelligent ERP it’s built in the cloud because the vendors only want to do this once. You can do it in on-perm, but it’s going to cost you a fortune because you have to keep updating it.
So, what are the robots up to? Put simply, the machine learning or artificial intelligence that accompanies cloud ERP systems automate common, repetitive tasks. The benefits quickly become clear in finance departments in particular.
And intelligent cloud ERP, coupled with in-memory processing, can handle far more complex situations. You can detect an error in real time and as the algorithms mature, there’s a lot less human intervention needed, and a lot more exception handling.
Indeed, access to real-time data is an outsize advantage of cloud ERP and intelligent cloud ERP in particular. Instead of waiting weeks or months to get end-of-quarter results, an executive can run the numbers at any time, and adjust budget or strategy accordingly. Instead of hearing a day too late about a disruption on a production line, a manager can learn about a problem right away, and rest assured that the algorithm has initiated the appropriate solution.