Is This the End of Enterprise IT Systems?

By Mark Willford

Large enterprise IT systems have long been the backbone of global companies and government agencies responsible for running critical operations such as manufacturing, finance, materials planning, warehousing, human resources, sales, procurement, analytics and customer service. But, with the advent of cloud, software as a service (SaaS) and related solutions that offer increasingly attractive options from a cost and flexibility perspective, are we quickly approaching a time when it will be a case of ERP, R.I.P.?

Not anytime soon.

Enterprise IT systems will continue to play a critical role both by making business processes more consistent and tailored to a company’s unique needs, and by ensuring more effective data security and integrity. This is not to say, however, that ERP systems have not and will not continue to evolve over time.

A hybrid model—with ERP at the core and cloud-based innovation and on-demand services at the edge—promises organizations the best of both worlds. Many companies will continue to pursue some form of ERP system implementation, while upgrading that system and adapting it to their needs, for three reasons:

1. A universal operating model

To serve customers effectively, run back-office functions efficiently and manage the business consistently, a company needs to have all parts of its disparate global organization on a “universal operating model.” This means operating on the same cost structure, for example, or recording profit and loss in the same way.

With a consistent operating model, companies can support business growth faster and more predictably. Ultimately, having enterprise systems with the same data fields, metrics and reporting mechanisms in place will help remove the uncertainty that often occurs during acquisitions. 

2. Simplification

As organizations look to standardize their operating model, they simultaneously seek to simplify their IT environment, especially their suite of enterprise applications. This enables the delivery of significant cost reductions because the business operates more efficiently with a “single version of the truth,” giving the company consistent, timely information from all its applications.

A major simplification and standardization program focused on a company’s global operations can improve operating efficiency and customer service by accessing a common base of information, reporting and analytics to support better planning, management and decision making.

3. Security, integration and data management

Managing data—the lifeblood of any organization—is becoming an increasingly difficult challenge. Cloud and SaaS solutions, if not properly integrated, offer the potential of a more chaotic, less reliable and less secure data environment. 

While companies may be comfortable with a limited set of customer data in the cloud, will they have concerns about also including financial or credit information? How will they deal with issues regarding compliance? For these reasons, on-premises ERP systems remain a viable, continuing part of the IT equation.