What is Postmodern ERP?
If you are not familiar with the term postmodern ERP, you can rest assured it has nothing to do with post-WWII literature. On the contrary, it is a new IT strategy that links and automates administrative and operational business solutions in organizations. Read this post to gain a brief overview of what postmodern ERP is, how it got here, and if it’s a good fit for your organization.
A brief history of ERP
The term enterprise resource planning was first coined in 1990 to describe the integrated software suites that were new at that time. These platforms included applications for various aspects of business planning, including manufacturing, finance, HR and customer relationship management. As years went by, ERP suites became essential for corporate IT structure, but by the mid-2000s, it became a source of vexation throughout the corporate world.
This was due mainly to the high price of the software and a host of implementation failures. Also, there was a desire in the market to substitute some of the software applications or functional modules, but the current ERP suites could not support this. The desire for more flexible, agile, and functionally feature rich solutions has continued into the present, to the point where some people have proclaimed that ERP is near its end or even dead.
Historically, companies addressed the issue of the suite problem by substituting the one-size-fits-all ERP with a combination of multiple ERP systems. Companies have typically surrounded the core ERP modules with on-premises point solutions that were not generally available from the suite vendor, such as tax calculation or security & compliance software. Having an environment comprised of many vendors solutions with multiple platforms made integration and automation a difficult if not impossible challenge for the IT organization; not to mention terribly expensive and difficult to maintain. Hence the loss of agility and flexibilty.
With the introduction of cloud-based solutions along with open APIs, companies have begun replacing the point solutions as well as core ERP modules with such cloud-based applications. Some companies have completely replaced ERP suites by utilizing a combination of specialized applications that can provide greater functionality along with the desired flexibility and agility that suite ERP solutions cannot. For example, implementing Salesforce.com CRM integrated with Intacct Financial Management allows for companies to successfully implement this strategy. This new strategy has led to the new era of corporate IT structure called postmodern ERP.
Postmodern ERP defined
A postmodern ERP system, according to Gartner, a world leader in IT research, is defined as:
“A technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing, and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.”
In other words, postmodern ERP aims to use the best applications in each area while making sure they are adequately integrated. These applications can be hosted on-premises or via cloud services. The advantages of this strategy are:
- Each application can be replaced whenever necessary
- The option of cloud hosting reduces the need for in-house IT resources and reduces costs.
- Best-in-breed applications can replace ineffective ERP suite components or replace the legacy ERP platform completely.
Postmodern ERP strategies
The postmodern approach forgoes the one-size-fits-all systems that are available from vendors. Each organization should define its strategy to suit its unique needs, and include separate strategies for each category of applications.
According to Gartner, ERP applications are generally divided into administrative or operational categories. Administrative applications would include areas such as finance and human resources while operational applications would handle areas such as manufacturing and order management. Organizations should develop a separate strategy for administrative ERP and operational ERP.
In many cases a postmodern ERP will include applications from two or more vendors and be deployed in different ways. For example, your organization may want to host a financial ERP suite on-premises, while manufacturing and sales applications are hosted in the cloud. Also, your ability to combine software from different vendors allows you to choose the application that best fits your company’s needs.
Another benefit of this approach is, when major changes happen to your company, such as growth or mergers, you will be able to upgrade or swap out applications as needed. The only caveat with this strategy is that you must make sure these various applications from different vendors will have sufficient integration capabilities.
Is postmodern ERP right for your organization?
Although some industry leaders proclaim traditional ERP a “dead” technology, a smaller organization that is not expecting to grow rapidly may find that it is sufficient for its needs.
However, if your organization is growing or is already mid-sized or large with multiple locations with varying needs, it will benefit from the postmodern ERP approach. Such organizations have complex operational requirements and rely on greater operational agility in competitive industries. The flexibility of postmodern ERP is without a doubt the correct approach for the vast majority of organizations today.
In any case, you should take careful consideration of your organization’s current and future needs before making a decision. It is always best to have expert advice when developing IT strategies, so we invite you to contact us for more information.