ERP evolution: From information technology to business outcomes

"ERP is commonly misperceived as a computer system. Not so. It's a people system made possible by a computer system." – Thomas Wallace and Michael Kremzar, authors of ERP: Making It Happen.

Gartner coined the term enterprise resource planning (ERP) back in the 1990s. At the time, ERP systems focused on increasing employee productivity and operational efficiency. As ERP systems evolved, the way businesses perceived them evolved too: critical systems of record that help businesses run; complex IT projects that take many years; systems that no longer deliver value.

In this blog, I'll challenge these perceptions so you can approach your ERP strategy with the right mindset going forward.

Although many people think the ERP market has matured and is therefore shrinking, Gartner forecasts that the ERP market will be worth $44 billion by 2022. But all is not well for ERP customers. Gartner estimates that businesses perceive 60% of ERP investments as failures. Here are some of the reasons why:

• Projects not achieving the business case objectives
• Projects being delivered late or over budget
• Having limited or incorrect project scope
• Delivering a complex user experience
• Being rigid and lacking required agility

In addition, ERP systems were initially attractive because they offered a standardized way to manage business processes. However, in today's more dynamic and uncertain competitive environment, this trait has become a weakness.

To modernize ERP solutions, enterprises must respond to a range of ERP trends and best practices to better meet customer needs.

Enterprises that are enjoying ERP success recognize that ERP is more than an IT system. ERP leaders avoid thinking of technology and departmental requirements first. Instead, they consider end-to-end approaches that connect and integrate the organization. In fact, Gartner states:

"Through 2021, CIOs who take a business-strategy-first approach to ERP will deliver 60% increased business value over those who take a vendor-first approach."

ERP leaders focus on the needs of their end customer and what capabilities the business must build to satisfy those needs. Decision-making results from a need to transform customer experience, and not from ERP technology vendors. Leaders prioritize developing innovative and differentiated capabilities instead of business as usual functionality. This mindset shift, willingness to experiment, and focus on business benefits is what sets ERP leaders apart.

ERP leaders also look beyond the functional needs of each department. Instead, they focus on user-centric design principles to create exceptional employee experiences. They use business integration skills to cut across functions and break down silos in the design process to build an end-to-end, cross-functional system. They know how this system will support employees and, in turn, the end customer.

Business leaders who are willing to evolve their ERP mindset and current practices to an experience-led approach will become ERP leaders. If you're eager to get started, identify the business capabilities your employees need to effectively support customers. Through this process, you'll evolve your ERP from a legacy IT system to a powerful solution that drives tangible business benefits.

As you transform your ERP system, you'll need to develop the following competencies across your organization:

• Build an outside-in, customer-first focus, as opposed to an inside-out, technology-first view
• Create a strong change management capability that extends across organizational boundaries
• Develop integration skills and overcome talent shortages by partnering with organizations that have deep ERP expertise in your industry
• Investigate cloud ERP to help your organization become more adaptive and innovative

Delving deeper into cloud ERP, we see many enterprises making a shift to cloud for core finance, HR, and procurement processes because these functions are often the most mature and consistent. However, cloud ERP is a means to an end, not the end itself. Remember – improved experiences and greater business benefits are the end goal.

When you begin to see ERP systems as a people system enabled by IT and focused on business outcomes, your efforts are more likely to be fruitful.