On the pulse of production, supply and demand - ERP Report March 2015

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Manufacturing & Logistics IT spoke to a number of experts from the vendor and analyst communities about recent developments in the world of ERP – including those concerning, rich analytics and Big Data, mobility and the Cloud/SaaS. The contributors also reflect on some of the key drivers for these developments, and consider what ERP users can likely look forward to in the not too distant future.    

Developments in the world of Enterprise Resource Planning (ERP) solutions and related technology over the past year or two have been plentiful, covering areas such as mobility, richer analytics, better demand forecasting and many more. We asked a select group of key spokespeople with a keen focus in this technology space to provide their take on what some of the predominant and most important areas of change have been in the recent past.

In the view of Christian Hestermann, research director ERP at Gartner, the main areas that have an influence on future of ERP include 'Nexus of Forces': the combination of Cloud, social, mobile and analytics (not each of them in isolation, but effects from combining some or all of them with each other).

He also cites developments related to the Internet of Things concept and the digitisation of business models. Hestermann explains that most of this will require in-memory computing capabilities, not only for handling Big Data but also 'real' real-time and new planning, simulation etc. capabilities throughout the system – not just in isolated places such as Sales & Operations Planning (S&OP) or Material Requirements Planning (MRP).

Hestermann added: "Postmodern ERP is the response to the faster speed of change which needs more business agility, and which cannot be supported with large monolithic ERP suites but rather needs more loosely coupled and more specialised applications – but without the chaos of the unstructured days of 'best of breed' (see note 'postmodern ERP is different from BoB' 264620). Together, these trends and requirements require a rethinking of ERP strategy and a fundamental restructuring of the existing ERP/business applications landscape."

Multi-tiered ERP strategy

Nick Castellina, research director, business planning & execution, Aberdeen Group, explains that Aberdeen's 2014 business management and ERP benchmark survey found the majority of organisations are utilising ERP to support their operations. "Traditionally ERP was seen as a one size fits all solution company had multiple business units," he said. "More recently, there has been much discussion about managing multiple ERP implementations as a strategy in and of itself. Best-in-class companies are 90 per cent more likely than others to have a multi-tiered ERP strategy. In a multi-tiered ERP strategy, there is from one standard ERP implementation for the corporate offices. This is often referred to as the 'administrative ERP'."

Castellina added that additional ERP solutions that may offer different functionality or configurations are implemented at separate locations. "Best in class companies are recognising that one size does not fit all," he remarked. "For example, an ERP that does a great global financial rollup may not be well suited to scale down to manage the needs of a specific assembly line.

There may also be localisation and compliance issues when using a 'one size fits all' ERP strategy. These reasons make a multi-tiered ERP strategy attractive for organisations with geographically distributed subsidiaries. This is especially evident in organisations that are in the acquisition mode and need to integrate new units with existing operations.

Castellina continues: "Of course, organisations using multiple ERPs need to be able to transfer data from one system to the other seamlessly. The best in class are 49 per cent more likely to have integrated their business systems to be one complete system of record. Consequently, this information is shared between these applications seamlessly and transparently."

As an example Castellina explains that a corporate office could take an order for a product and then a remotely located subsidiary could ship the order. "During this process, both ERP systems would communicate with each other automatically. The key benefit of a multi-tiered ERP strategy is the ability to implement solutions in different business units based on the needed functionality of those business units. While this saves the company money, it is only useful if these systems are able to communicate with the corporate standard."

By creating a technology environment that fully supports the needs of individual business units and locations, Castellina points out that organisations with a multi-tiered ERP strategy perform more effectively in a variety of metrics. These range from improved delivery, execution, accuracy, and, ultimately, profit margins. "This is evidence that the multi-tiered ERP strategy can lead to a more effective organisation as a whole," he said.

Carter Lloyds, chief marketing officer at QAD, believes that, today and in the future, it is all about the user experience, and in his view ERP is becoming much more proactive. He commented: "In the past, you could find the information you needed if you knew what inquiries to make, but today modern ERP systems automatically greet the user with exceptions, waiting tasks and other important information.

Much more than the simple dashboards of the past, the newest role based ERP launch pads use sophisticated UI elements such as colours or motion to draw the user directly to the most important information rather than presenting everything with the same degree of importance."

In addition, because so much of the information is based on operational metrics, KPIs and business intelligence, Lloyds makes the point that ERP systems are incorporating BI as an integral part of the ERP system so users receive the insight they need in near real time without the need to run queries or reports from a data warehouse. "Business intelligence is more pervasive and less of a bolt-on because users need insight into current status to do their jobs every minute of every day," he remarked.

Lloyds also observes that the move to the Cloud has driven ERP companies to adopt a simpler user interface, so that the total experience is more conducive to completing a task. "Rather than present every field in a table, for instance, modern UIs have role-based transaction screens that each user can personalise to their needs," he explained. "This results in faster implementation times and less required training, so upgrading to a modern ERP system is easier to cost justify than ever before."

Jonathan Orme, sales operations & marketing manager for Exel Computer Systems, believes the key development drivers in ERP systems remain the same as ever – meeting the current and anticipated needs of manufacturers in an increasingly global market. "The reality is that the underlying technology of many ERP systems is now largely the same and manufacturers take for granted areas of functionality and connectivity which not so long ago would have proved to be cutting edge," said Orme.

"In many ways the main underlying differentiator is how latest technologies are incorporated within ERP. Some ERP solutions, let's call them the 'me toos', are essentially a loose knit collection of bolt-ons, which may well be integrated to a certain degree. Others however are designed from the outset to not just incorporate the latest functionality required by manufacturers but to seamlessly integrate this into the overall efficiency and effectiveness of the solution."

According to Orme, all this places more emphasis on how intelligently ERP is put to use, which puts more emphasis on the underlying knowledge and expertise of the ERP vendor to deliver the best possible results. For example, Orme makes the point that every manufacturer expects to have comprehensive mobile connectivity, "but the real benefits come when you can demonstrate to them new and innovative ways of working as a result of this technology," he said.

Steve Winder, regional vice president, UK & Eire, Epicor Software UK, considers that 'anytime, anywhere' computing is becoming mainstream, especially with the proliferation of mobile technology. "Once strictly chained to the office desktop, ERP software is now increasingly becoming a device-centric mobile technology, especially if its users have their way," he remarked. "There's greater emphasis on what software can be used for, how that software can be accessed and used and who it can benefit than ever before. ERP has to shift its focus from being purely about deep functionality to being about broad usability and the ability to make decisions based on ERP data. This is perhaps where ERP currently faces its greatest challenge."

Winder added that access to data across devices has become an attractive prospect for large and small businesses alike – from mobile phones, to tablets, and laptop computers. "Executives and employees want real-time access to information regardless of where they are, evident by the increased adoption of mobile solutions that we are seeing," he said. "There are significant investments being made into extending enterprise applications on mobile devices. Businesses are using mobile ERP not just for reports and dashboards, but for conducting key business processes. Real-time information needs are demanding more agile business applications."

Winder explains that Epicor has also noticed that social technologies that increase collaboration have become an integrated part of existing enterprise applications. "It's all about accessing data to reveal key insights for better faster decision making at every level in the organisation – from product development, to services, marketing and customer engagement," he said.

Internet of Things

Another key opportunity for ERP to become far more responsive and useful to its customers is alongside the development of Internet of Things (IoT), believes Winder. "In the near future every aspect of a manufacturing and engineering company's business will be revolutionised," he remarked. "Machines used in production are becoming increasingly connected, as are transportation and logistics networks as well as sales channels."

Steve Wilson, vice president at Capgemini Consulting, recognises a trend for integration in terms of business planning from a financial perspective through to a product and unit forecasting perspective. He commented: "For some organisations these things remain quite separate. However, in the best organisations we see those as being not just joined but integrated at a data level and integrated using ERP capabilities.

We have seen that as a significant move over the past two or three years where large organisations have invested in joining up their view of the data so that they're able to analyse not just the flow of product into their company but the raw materials then the finished products out. Also, they are able to look at what that means regarding sales projections in terms of the cash that they are spending – what they're giving to suppliers – and aligning the financial forecast performance with the supply chain forecast of sales and operations."

Following on from Wilson's remarks, John Lewins, managing consultant at Capgemini, reflected that the challenge is to align orders, sales, planning, forecasting etc. and come up with numbers that are consistent, so that when there is a movement in one direction companies understand what the budget and stock implications are, etc.

Increased use of analytics

Wilson is also seeing an increase in the use of analytics to extend demand management – looking at data analytics much more carefully and then feeding that into the way in which demand forecasts are made and how that can feed the S&OP process. "Frequently, data analytics is done outside of ERP and then fed into it, but nonetheless we are increasingly seeing clients using things such as social media listening," he explained. "They are also using a variety of other types of ways of gathering data so that they can then feed this information into their forecasts.

If you think of a consumer products company they don't sell to the general public per se, but sell to retailers who then sell to the general public. However, if they harvest social media then they get insights that they can then use to drive their forecasts.

They can also get forecasts from their retail partners and then use all the information to hand to drive the process of determining whether they should follow either the retail forecast of the social media forecast or a bit of both. The art is to use that extra set of data which can be closely defined in terms of regions and specific types of products. This can give a clearer overall picture."

Additionally, Wilson is seeing a continued focus on companies understanding what it is that makes them different, while also understanding what they do that is undifferentiated and that could be either outsourced or offshored. "In the case of outsourced or offshored activity, companies need to think about how to support that from a process IT perspective so that they can still retain the level of control," he said. "With the right IT infrastructure this can give them the ability to adapt their supply chain to the changing circumstances that they face."

According to Wilson, Capgemini is also seeing consumer products companies and manufacturers starting to think about the direct-to-consumer model. "Previously, they tended just to have a supply chain that delivered to their retail partners, but now more and more of them are realising they need to have the ability to sell direct to consumers as well," he said. "ERP is facilitating this, making sure that the manufacturer has the flexibility to service customers directly via Internet sales while also continuing to be able to deliver goods to the stores.

This is actually one of the challenges that ERP systems are facing; not the ERP vendors' solutions per se, but ERP systems used by consumer products companies need to have the ability to handle what might effectively be very small orders direct from consumers, while also handling the often very large orders from the retailers."

Motivation behind development

What has driven these changes? Orme again stresses that it is mostly due to the growing demands made by manufacturers. "They don't just want the latest system, they know they need the know-how and expertise of the vendor to get the best from it as this is where they'll generate their own competitive advantage," he said.

Winder makes the point that Epicor customers are facing a barrage of information about how new disruptive technologies will change the face of manufacturing – mobile, social, analytics, cloud, the Internet of Things, nanotechnology, 3D printing and more. "But the use cases for these technologies are still only just emerging," he remarked. "Our goal is to share insight on what technologies are going to make a difference to customers as these use cases evolve and the business cases for them become stronger.

This is where our opportunities lie, helping customers find sources of business value and competitive advantage." Winder added that since its beginnings over 25 years' ago ERP has changed boundless numbers of businesses in fundamental ways; integrating, automating and improving their operations. "The Internet, alongside miniaturisation of technology and mobile and wireless, has introduced computing into every aspect of our lives and our expectations of what can be achieved have changed dramatically as a result," he said.

According to Lloyds, the rise of the Internet has driven many of the changes. "For example, everybody knows how to place an order on Amazon; there's no training required," he said. "Why can't an ERP system's order entry have the same ease and fluidity? So you will see a lot more of a 'consumer-like' interface. It's still powerful functionality, but cloaked in a simple, friendly and personalised user experience."

Lloyds added that moving ERP to the Cloud has also driven a lot of change. "When the IT team is freed from the mundane day-to-day tasks, they can focus on strategic initiatives like streamlining business processes," he said. "And they're saying 'Wait a minute! Why can't this be as easy as Amazon?' Companies are looking for more flexibility in defining and personalising processes. Workflow is just too simplistic to make real process changes, so they are turning to more powerful tools such as business process management to squeeze every drop of efficiency out of their existing ERP systems."

Wilson considers that there is continued pressure on cost and returns, which is one of the key drivers for development. He commented: "We are very close to a deflationary environment and yet wage inflation and product or material price inflation is cutting in. So for a product manufacturer it's very important to manage the cost base and therefore there's a lot of focus on how to drive out cost through improved efficiencies; and ERP can help in relation to this. We see consumer expectations continue to accelerate in terms of product availability and how quickly they can get what they want. All of these kinds of things still remain as significant pressures."


Have ways of best integrating ERP with other systems developed to any notable degree over the past year or two? Wilson believes integration is less of a problem than it was a few years ago. "Within the companies we're working with we're finding increasingly that there's a common architecture for integration – basically a service bus-type process whereby all the integration feeds into and then feeds from this to the ERP and back again," he explained. "This makes it less expensive and therefore quicker to integrate new elements, whether they're supply chain, CRM or mobile elements etc. Some of the software tools that deliver service bus capability and ERP vendors each have their own kind of tool for doing that. So we're seeing this as a trend rather than the historic way, which was more around using middleware or point-to-point mapping."

Hestermann considers that integration has become much more important, mainly under the influence of Cloud and postmodern ERP. "ERP systems now offer more APIs and more options to integrate," he said. "In addition, Cloud-based integration platforms and Cloud service brokerage providers are evolving (see the Gartner paper: 'The Role of CSB in the Cloud Services Value Chain'). However, this also means that end user organisations will be even more responsible for building and maintaining application integrations than before."

As companies are deploying more and more applications in the Cloud, Lloyds maintains that integration methods have had to change to keep pace. "The old style point-to-point integration might have worked when all the applications were on premise, but it doesn't work when one or more of the apps are in the Cloud," he said. "What if one is on premise and one in the Cloud, or if you're running two apps in two different public Clouds? Forward-thinking ERP companies have addressed this need by re-architecting their systems, so all tables are addressable through APIs. This enables a tool such as Dell Boomi to integrate apps easily regardless of where they're running."

Eric Kimberling, president of Panorama Consulting Solutions, considers that ERP software will no longer be limited to ERP. "Salesforce used to simply be a CRM vendor – albeit a very strong competitor in that space," he pointed out. "With its increasing ecosystem of apps and bolt-ons designed to address the things the software can't do on its own, it is becoming clear that Salesforce and other non-ERP vendors are disrupting ERP software as we once knew it. Now, rather than simply considering the traditional ERP vendors, organisations can look to standalone CRM, financial and inventory management systems and still have options to extend those solutions into more traditional ERP territory."

Orme observes that ERP systems have moved away from older middleware connectivity, and points out that the majority of serious ERP systems now offer what on the surface appear to be similar levels of integrated functionality that were traditionally the preserve of third-party bolt-ons or specialist systems. "While this has removed some of the legacy problems customers used to face, where they were left with three vendors each pointing the finger of blame at each other, often the increased functionality in some ERP systems is the result of loosely incorporating these other third party systems," he said. "So, while there may be only one system vendor to deal with, in reality your system may comprise a number of sub-systems. As Exel supplies a fully integrated system, designed in-house in the UK, if there's ever a problem anywhere throughout the solution, our customers know who to come to in order to get it resolved."

Andrew Briggs, technical director at BEC, considers that the better ERPs try to address all of the business needs in terms of putting together various operational or application strands such as CRM, Sales & Marketing Management, Enterprise Asset Management, WMS, Supply Chain and Service & Maintenance; i.e. putting together different systems, which may have been separate systems with integration links, into one common environment so that all of the information is shared across the business through one solution rather than many. "The better ERPs are achieving this by having a common architecture upon which all of these modules are built," he said. "This is called 'Service-Oriented Architecture.' This is the platform that brings all of these parts together as it has been written purely to achieve this."

In the case of BEC customer Raleigh, for example, BEC has enabled warehouse functionality in Raleigh's ERP system so the company hasn't had to go out and purchase a WMS. "As a result of bringing this into the ERP system, Raleigh now has the real-time business intelligence that it would not have had if it was part of a separate system," said Briggs.

Winder points out modern ERP platforms are now supported by open and flexible architectures that encourage and embrace the integration of other applications, enable greater collaboration with business partners, and use new technologies without requiring the wholesale replacement of infrastructure or applications. "We believe ERP solutions will continue to become more agile, more adaptive and more flexible – all of which lowers the total cost of ownership and encourages business to think more strategically about how they can use technology to drive competitive advantage," he said.

Mobility and ERP

Has the increased trend for the integration of mobile/field service devices with back-office ERP systems provided improved business and operational benefits for the end user? Hestermann answers in the affirmative. "This is one example of one of the forces of the Nexus (in this case, mobility), by better managing remote assets, e.g. in the utilities and services industries," he said.

Briggs highlights two key aspects – recording processes and transactions in real-time, thereby facilitating increased accuracy of data and greater levels of productivity for people that are doing the work. Briggs points out that one major benefit is that managers, shift supervisors etc. are able to access business information, reports, dashboards and so on from mobile devices such as mobile phones and iPads. "The information is to hand – they don't need to dial in or call somebody up in order to see this up-to-date information," he said.  

Orme comments that Exel has been at the forefront of field service mobility and consequently is at the cutting edge of working with manufacturers to develop this in areas that meet their ever changing requirements. According to Orme, one example of this is the increased use of CRM within a field service environment and the development of Exel's Service CRM capabilities. "After all, CRM is all about interactions and not just sales," he stresses. "Using this, manufacturers can track, automate and have complete visibility not just of customer and prospect information, but all relational/interactional information. And because in our case, field service functionality can be included as part of your ERP solution, this includes all relevant manufacturing and production data where required."

Winder considers that good ERP has answered the call for increased responsiveness, becoming much more focused on supporting critical relationships, decisions, change and innovation, rather than just efficiently managing the status quo. "Increasing responsiveness can help a business improve operational performance and accelerate its productivity, through information being available at people's fingertips and allowing more informed and rapid decision making," he said. "Historically, information in businesses was limited in volume and 'passive'; i.e. there when (you knew) you needed it, if you were lucky. This stifled responsiveness because you usually had to put time and effort into getting the right information. As businesses increased their use of systems, information became more prolific and 'active' – structured data analysed to drive answers to key questions. This helped organisations to know what they needed to do, but problems of data overload often limited the organisation's ability to act. It was difficult to see the wood from the trees in the time available."

Winder points out that, now, information is becoming intuitive. "It's hidden from us in plain sight and doesn't weigh us down, but is increasingly fed to us in the right format and context at the time we need it, in the form of succinct answers to questions," he said. "This evolution of data in organisations is one of the key reasons we're able to become more responsive, but it also is the reason we continue to demand more responsiveness at the same time."

Lloyds reflects that the increased part that mobility now plays has been a major benefit to customers as well as users. "The company benefits because they can see who in their field has the right skills and the right inventory to correct a customer problem, so they can dispatch the closest available tech who meets the requirements," he said. "This has enabled them to improve technician utilisation and cut repair and maintenance costs because they close more calls in a single visit rather than have to send someone back for a second or third attempt.

It also makes it easy for the tech to record time and materials, so invoicing happens quickly and accurately, speeding up cash flow and reducing disputes. Since so much equipment is custom configured today, integration with ERP allows techs to see the 'as built' configuration rather than the standard model, further helping to reduce costs. Customers are happier too because they get their equipment up and running faster so it helps to reduce downtime."

Kimberling believes there will be continued adoption both of mobile and business intelligence solutions. "As some companies strive to leverage low-hanging fruit in their ERP initiatives, more will invest in mobile solutions and business intelligence software to get more out of their existing ERP systems," he commented. "Organisations will recognise that newer ERP systems will not necessarily help them make better use or sense of business information without the tools to better support decision-making among employees and key decision-makers. In addition, executive teams will be under growing pressure to increase revenue, which will put more pressure on their employees to provide decision-making tools and dashboards designed to support executives' need for information."

What Wilson has seen among many Capgemini clients over the past year is that instead of looking at a daily cycle where they run a series of batch jobs and provide the updates between the lower-level systems, the ERP is increasingly looking at running multiple waves within a day. "These companies might have four batch runs and start thinking in a different way because of that," he said. "Moreover, some clients are going beyond that and considering how they could use the Hana-type capability of SAP to do more in-memory processing.

So, they can start to move away from the idea of batching and begin thinking in terms of real-time or quasi real-time processing. Traditionally, ERP systems have tended to work in a batch-type environment, so moving towards having four runs a day improves the ability to run high quality forecasts and to better react to changes in demand." Wilson added that this does, however, require the business processes underneath to be set up to be able to deliver against that. "We are seeing companies moving towards this kind of model and actually implementing it because it makes things more nimble than doing things on a daily basis," he remarked.

The Cloud and SaaS option

Has the Software as a Service (SaaS) model, and the Cloud concept in general, had any notable level of impact on the ERP market so far? Hestermann considers that the answer depends on two key questions: what is meant by ERP, and what is meant by Cloud? "Cloud is not equal SaaS; SaaS is a special flavour of Cloud, with three main characteristics: It is externally hosted and managed by the provider. It is delivered in a one-to-many model. It is subscribed to on a pay-per-use basis. It is important to note that it does not have to be multi-tenant per se."

Hestermann adds that certain ERP domains such as purchasing, HR and e-commerce have absolutely been transformed by SaaS. "In broader ERP deployments, Cloud is mainly relevant as Cloud-hosted or for private Cloud," he continued. "For complete suites, SaaS had only a major impact on the ERP market for SMBs. For a company in the upper midmarket or a large enterprise, the one-to-many nature of SaaS is not a good fit to the level of differentiation and individualisation these companies need. In order to obtain business value from SaaS ERP, companies need to adapt to highly standardised applications used 'as-is' (see the Gartner paper: 'Standardise Business Processes and Implement Governance to Maximise Business Value of SaaS ERP')."

Kimberling sees blurred lines between SaaS and on-premise ERP software. "For years, organisations (ourselves included) have been obsessed with the SaaS versus on-premise debate," he said. "As the dust of the debate begins to settle, it appears that we may have been arguing a moot point. ERP vendors are increasingly more likely to offer both SaaS and on-premise solutions to their customers, and, in many cases, organisations are adopting both. The real grey area is with hybrid solutions that host on-premise solutions in the Cloud, which is a solution more of our clients are starting to adapt as a way to get the best of both worlds."

Orme observes that every year the benefits of the SaaS model are pushed by those vendors with a vested interest in doing so. "Whilst our software can be operated in a hosted environment, and some customers are currently doing this, every year we still see the majority of our customers preferring to operate using the on-premises model," he said.

Winder explains that, in Epicor's experience, the uptake of Cloud for fully integrated ERP solutions from manufacturers in EMEA has been slow so far. "The concept of running an entire ERP solution in the Cloud is still relatively new and we are in an education phase where manufacturers are exploring the benefits," he said. However, Winder adds that while the adoption of Cloud seems relatively low, it is on the rise and he believes this could help manufacturers to meet their product improvement and cost competition goals through, for example, easier collaboration in the supply chain and lower cost of IT ownership. "We believe the IT industry has been slow to demonstrate the value and return on investment for Cloud solutions for manufacturers, preferring instead to focus on the technology itself," said Winder. "With the economic pressures of the last few years, adoption of Cloud-based solutions has therefore been difficult to justify against competitive demands for capital and resources. However, we believe we will see growth as more forward thinking manufacturing organisations look to extend business processes into their value chain, their customers and their suppliers to improve service and drive cost out of the supply chain."

Winder observes that the rapid evolution of global business has changed the ways in which companies approach the deployment of ERP solutions. "Today's need for agility and responsiveness has increased the demand for choices, and customers need to be able to use the same product whether they want it deployed on-premise or in the Cloud, on a desktop PC, or on a tablet or smartphone," he said. "They also need the freedom to change how it is deployed without having to configure and implement a different solution, allowing them to upgrade faster and stay current with technological advances."

In an increasingly competitive environment, Winder believes deployment choice is a significant advantage for companies seeking an agile response to constantly changing market conditions. "With modern ERP, companies are not forced to compromise because of the way they want to deploy their solutions," he remarked. "Before, if a business wanted to move from on-premise to the Cloud, it could potentially mean sacrificing functionality and forcing end users to move from one user experience to another.

However, with modern enterprise solutions these potential restraints are eliminated. Some businesses may not yet be comfortable with Cloud deployment, either for their entire system or as a hybrid. Having the choice means customers can make a decision today to choose on-premise deployment, knowing that at some point in the future they can choose to move to the Cloud without having to change their product. There is no need to learn a new application or go through another implementation."

Wilson observes that some companies are going down the hybrid model, i.e a mix of ERP and SaaS solutions integrated together, and use ERP as the holder of the master data. Lewins adds that Capgemini is also seeing many clients using open source software with some integration functionality, reporting and analytics. "It's a low cost of entry but there remain questions, especially within a manufacturing environment, in terms of validating things such as resilience, the upgrade path and the support that's behind this," he said. "Also, with things such as Salesforce.com in the marketplace it gives companies access to extend functionality quicker than they may typically find with ERP. So it's opening up new opportunities, but some questions remain."

Far from greeting the Cloud with fear and trepidation as they once did, Lloyds observes that progressive CIOs now consider the Cloud to be a strategic preference. "In fact, as they become aware of the simplicity, flexibility and security of the Cloud, we see more and more companies considering the Cloud as a strategic choice rather than a simple deployment option," he remarked. "IT finds that when they are freed up from day to day mundane tasks such as backups and setting up users, they can focus on more strategic initiatives such as streamlining the company's differentiating business processes."

Lloyds sees more and more companies turning to ERP in the Cloud as a strategic choice. "Some Cloud ERP vendors make it hard for their customers to move to the Cloud because they don't have or support an on premise model," he said. "Large global multi-nationals can't just convert all their sites in a day or even a few months, so ERP vendors have to offer a way for systems to co-exist regardless of the deployment method. The coexistence strategy can't be about doing tasks offline or manually entering adjustments. The system has to be designed to function seamlessly in both environments and to look and feel to users as if it's a single deployment."

Lloyds maintains that some ERP vendors are so wedded to the 'pure Cloud' definition promoted by industry pundits that they forget that their customers are real businesses with real needs. "Companies in regulated industries such as life sciences can't have their business processes changing on a daily basis or whenever the Cloud provider pushes changes to them," he said. "If that happens, they have to get recertified by all the regulatory bodies in the countries where they do business, which is a painful and expensive proposition.

The same holds true for many companies that are ISO certified, or who have been certified by any industry or regulatory body. So Cloud vendors need to understand the realities of their customers' businesses and industries, and allow customers to have some degree of control over the timing of upgrades and code changes just as they would on premise."

Lloyds adds that Cloud ERP is growing globally at more than twice the rate of the overall ERP market, so he believes companies obviously recognise its benefits. "The advantages that the Cloud offers makes its adoption an increasingly easier decision to make," he said.

Upgrade or 'rip and replace'?

Is there still a case for upgrading legacy ERP, or is it now better to 'rip and replace'? Briggs believes it would depend on the levels of modifications already in place, and whether they are needed. "If they are heavily entrenched in some bespoke functionality, this will push them down the path of keeping what they've got," he remarked.

Lloyds considers there are pros and cons on both sides. "Truthfully, most ERP systems are very similar in terms of the functionality they offer," he said. "One might have a little more of this while another has a little more of that, but overall they are functionally at parity. So the issue becomes one of industry focus and your comfort level with the vendor. If your current ERP vendor understands your industry and they've given you good support over the years, why not upgrade rather than rip and replace? If you've customised your system so extensively that you can't do a simple upgrade, it's still going to be easier to go with your existing ERP vendor than a different company, because you will minimise training and conversion costs.

On the other hand, if your vendor hasn't been seen since the day you went live or you're tired of dealing with cumbersome functionality designed to support industries you aren't in, maybe it's time to switch. In any case, it should be as much about the relationship you have with the ERP vendor as it is about functionality. And don't worry about technology if you're considering the cloud. Let the ERP vendor manage all that while you focus on running your business."

Hestermann considers that both the upgrade and replace options can make sense, depending on the individual situation of the company (see the Gartner paper: 'Postmodern ERP: When Staying With On-Premises ERP Is the Right Choice). In some special cases, he believes there is even a case for migrating legacy applications to the Cloud.

Wilson points out that some of Capgemini's clients are still operating AS/400. He commented: "This system is still very good at acting as an interface layer, so all the integration is already there. And some users are swapping in pieces of functionality and using, in some cases, ERP-type capability and plugging that in, and in other cases using SaaS-type capability and plugging that in. AS/400 being used as a kind of interface map makes sense because switching it off and then replacing it can be a major undertaking in terms of integration. Maintaining AS/400 as the interface layer means it doesn't actually have any functional requirement anymore; it simply passes messages backwards and forwards and therefore becomes cheaper to run while giving users more time to start to streamline and, eventually, maybe replace it with a services bus."

Winder maintains that there is definitely a case for upgrading. However he adds that businesses need to make sure to invest in a system that has the capability and flexibility to be able to evolve to meet future needs. "A perfect example of this is that some businesses may not yet be comfortable with Cloud deployment, either for their entire system or as a hybrid," he said. "Having the choice means customers can make a decision today to choose on-premise deployment, knowing that at some point in the future they can choose to move to the Cloud without having to change their product."

Orme comments that Exel is in the enviable position of having customers still using EFACS 10, 15 and 20 years after initial implementation. "As such we have customers who have steadily upgraded their EFACS system as and when required in order to keep meeting their needs," he remarked. "We also have customers that had ripped out legacy systems from other vendors and replaced them with EFACS because their former systems didn't meet their needs.

That, at the end of the day, is the core factor for most manufacturers – does their ERP meet their requirements? Yes, there is always the additional potential disruption caused by implementing a new system and for some manufacturers, a failed ERP implementation can mean a failed business. However, what we are increasingly finding, as ERP systems become more similar, is the role and value of the relationship with the supplier. Customers want security and peace of mind not just in the early days of a system, but also in the years of ownership that follow, where the system may need further development and customising to adapt to future business and market conditions."

Orme adds that, again, this brings Exel back to keeping an eye to the future and being ready for future client requirements. "If the client has outgrown their current system and needs to implement an up-to-date solution, the first port of call will always be their current vendor," he said. "If that vendor hasn't been investing in development and cannot offer the functionality, speed, and stability required by their client, the chances of retaining that client are slim."

The role of Big Data

How can technology trends such as Big Data help to gain the best out of ERP systems? Winder reflects that, in the case of Big Data, the focus is the insight that data gives companies. "The availability of precise real-time data means that manufacturers no longer need to make crucial decisions based on gut feel or past experience; they get a dynamic view of the intricacies of their business from end-to end," he said. "This is driving a revolution in the way that leading manufacturers use complex data to gain competitive advantage and streamlines processes. Improved visibility into the manufacturing process makes it possible to track trends, identify problem areas such as wastage, facilitates precise quoting, accurate procurement and better planning; all of which have a direct impact your customers ensuring that you meet their needs promptly and more efficiently."

Briggs comments that much of the business intelligence in BEC's solutions to date has focused on users; for example, the performance/productivity of operatives. "We expect that we are going to see much more use of the masses of data that can be gathered through our production line systems – sensors, measuring, testing equipment, robots etc. – giving the ability to monitor all business process, transparently across many sites," he said. "The large volumes of quantitative data will enable very accurate measurement and forecasting of resources – labour, energy, materials etc. – providing immediate real-time quality and reliability measures, with triggers for anomalies, and exceptions which can then be handled immediately."

Lloyds comments that Big Data and ERP can exist side by side, with ERP using insight provided by the Big Data engine to adjust plans and simulations. "Big Data is about very rapid changes in high volumes of data coming from multiple sources and in multiple formats, and most ERP systems can benefit from it in a few areas such as forecasting and supply chain simulations or predictive analysis for equipment maintenance," he said.

In addition, Lloyds believes Big Data can be very helpful in streamlining the supply chain, where one might consider how to manage sourcing in countries based on local weather conditions or political events. "You might also consider those same factors when forecasting demand in various regions," he added. "POS data can be extremely helpful in letting you fine tune production and distribution schedules or in predicting the effect of temperature or humidity on production throughput in processes that are sensitive to environmental changes."


What are some of the main functionality differentiators among the ERP vendor community? Hestermann reflects that it depends on what market the vendors target. "Industry-depth and solving the major trends are key," he reiterated. Orme again references the growing role and value that the manufacturer places in the relationship with the vendor. "To many manufacturers, the size and fit of the vendor and manufacturer matters a great deal, as does where the vendor is based (UK v US), and whether the vendor is a reseller or author," he said.

According to Winder, company managers and CIOs today are looking for ERP solutions that combine quality and reliability, with visionary technology that can help them meet ever changing business requirements. "A solid ERP platform can help an organisation not only reduce costs and streamline processes, but also increase the flexibility and agility that's needed to succeed in a competitive marketplace," he remarked. "What is important is that the ERP system needs to have the flexibility to be able to upgrade and to stay modern to be able to cope with future trends, including cloud, mobile and social. This way, customers will stay loyal and not stray to more future-proofed competitors."

Briggs makes the point that ERP solutions tend to be aligned to specific verticals; for example, certain providers are good at food & beverage, some are very good in manufacturing. "What makes some stand out from others is the flexibility of what certain users can customise without modifying the system and be flexible – i.e. flexible desktops and workflows," he said. "This enables them to do what they need to do within the existing system without trying to create something of their own; i.e. desktops, dashboards and workflows."

Lloyds reflects that some ERP vendors focus on the breadth of their offering. He commented: "They provide every conceivable functionality for the 25 to 30 industries and additional multiple sub-industries they support. This makes their systems harder to implement and use for their customers, and it contributes to long and expensive implementations. Other vendors, QAD among them, focus on providing real functional depth for a small number of focus verticals. This means every business process is tailored to the focus industry – in our case, manufacturing."

By now, most ERP systems are close functionally, added Lloyds, so in his view it becomes more about how much the vendor understands a particular industry and how good they are at working with their customers. As an example of going the extra mile to build strong customer relationships, Lloyds referenced QAD's customer engagement programme. "We meet with every one of our customers at least once a year to understand their strategic objectives and to offer advice and guidance on how they can get more out of their QAD ERP investment," he said. "We do this at no charge, because we believe that unless our customers are happy and using the system well, we haven't done our jobs. Our strategy is to help our customers become what we refer to as the Effective Enterprise. In an Effective Enterprise, every business process is working at peak efficiency and in perfect alignment to the company's strategic goals. That's our goal for every one of our customers."

An eye on the future

What might be the next key ERP innovations and developments to look out for over the next year or two? Orme's view is that there is no avoiding the continuing evolution and innovation in the type of devices that people will use to access data in their ERP system. "Whether it's more sophisticated tablets and smartphones, to more intuitive touchscreens on the production floor, getting accurate data into and out of the system, will become simpler," he said. "As mentioned before, this will then place the onus on how the latest technologies can then be used by the ERP system and the business as a whole to generate competitive advantage."

Lloyds believes we will see every ERP system introducing a new, more streamlined user interface over the next year or two. He adds that we will also see more companies getting serious about mobile. "QAD has had mobile applications for years, including business intelligence, mobile approvals and user customisable 'collections' of our functionality, but we will be adding more and more mobile transactions," he pointed out. "As mentioned previously, I think you will see BI becoming more of an integral part of ERP and less of an add-on application.

And of course, companies will be trying to move to the Cloud. Manufacturing ERP in the Cloud has been a tough problem for ERP vendors who don't understand it the way we do, but I don't think you'll see that changing in the short term. I also think you will see more companies moving toward shop floor reporting using automatic sensors and devices rather than manual reporting, and ERP systems will evolve to take advantage of the integration of the Internet of Things."

Winder believes the key thing over the next few years is to keep up with ever-evolving technologies to future-proof the businesses; for example, with social ERP. "People increasingly want simpler, more intuitive tools to help them make business decisions that fit in with their working patterns rather than defining working patterns for them," he said.

Another area to look out for, according to Winder, is business intelligence (BI). "One of the main benefits from investing in BI solution is the ability to provide faster and easier access to the needed data. BI enables companies to gain more complete and more structured knowledge about what has a positive effect on business performance, as well as what actions can cause harm. Easy access to such information enables quick reaction – companies may take advantage from opportunities and eliminate adverse effects. BI also allows companies to create reports, and to significantly reduce the time needed to complete them. Information gained from the reports also supports sales and marketing departments in creating campaigns and offers better tailored to clients' needs."

Kimberling believes best-of-breed systems will make a comeback. "Non-ERP software vendors are providing compelling reasons to adopt their solutions and integrate to others to provide comprehensive enterprise solutions," he said. "Now that there are more options on the table, organisations will no longer be hamstrung by a relatively limited subset of complete, standalone ERP systems. This is good news when it comes to having more options, but bad news in that it will make the ERP software selection process even more overwhelming."

Kimberling also maintains that integration and solution architecture will become increasingly important. "The increase of best-of-breed ERP systems will put more pressure on CIOs and ERP consultants to provide better integration between systems and address potential silos of processes and data that often come with the territory," commented. "As a result, solution architecture and integration will become increasingly important competencies required to support effective ERP implementations."

Additionally, Kimberling points to convergence of ERP and consumer user interfaces. "For the last decade or so, we've seen the proliferation of mainstream consumer social media platforms, such as Facebook, Twitter and Instagram," he said. "However, ERP systems have always maintained a different, more complex and less consumer-friendly look and feel – until now. It was bound to happen eventually as more millennials entered the workforce and demanded more consistency in their work versus social technologies, and it appears that it is finally happening. A new look at the user interfaces from ERP vendors such as JD Edwards, Epicor and Infor all reveal that this may be the year that enterprise software starts to close the usability gap with the social media giants. This is good news for those of us concerned with organisational change management and user adoption of new ERP systems."

Hestermann comments that the biggest innovation will come from adding machine learning and more 'intelligence' to ERP systems. "Imagine a system that proactively recognises and alerts the users of any event that might negatively impact customer satisfaction: why would anyone have to search for that information?," he said.

Nick Castellina considers that best-in-class organisations are realising that one size fits all is not necessarily accurate when it comes to ERP implementations. "Top performing organisations are looking to multi-tiered ERP strategy is to optimise costs and functionality among multiple business units," he said. "This may be because the organisation is in a phase where it is rapidly attempting to open new business units or purchase those units in other countries. Organisations that are embarking on a growth strategy should carefully consider a multi-tiered strategy. They can therefore improve their efficiency and visibility across business units, while keeping costs low."

Lewins looks forward to improved cost control through demand sensing and better inventory management up and down the supply chain; better control of outsourced operations – whether that is contract manufacturing, logistics or testing; and realising the tangible benefits of aligning S&OP and Integrated Business Planning (IBP) with the financial forecasts and the demand and supply forecasts. Lewins added that Capgemini is also receiving many enquiries now concerning the impact of Industry 4.0, the Internet of Things and what that means in terms of greater capabilities – how companies can become much more agile and do more with less.

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