The next year will continue to present businesses with the supreme challenge of operating in an environment, both globally and domestically, that’s fast-paced, highly competitive and unpredictable. These business conditions aren’t new and they have, in fact, driven many businesses to reassess traditional business models, embracing innovative and, in some cases, unorthodox business solutions.
The same business environment has also contributed to many of the changes and developments that ERP systems have undergone in order to remain relevant and competitive in this marketplace. Perhaps the most significant of these changes has been the acknowledgement that their highly customized, monolithic on-premise solutions lacked the agility and flexibility to address the very business concerns of many of today’s businesses, especially mid-sized businesses.
The pressure for change came from customers and shareholders alike, who demanded that companies provide greater functionality and efficiency, and that they project business strategies reflective of their environments. These challenges and pressure points will continue to provide the incentive for businesses to maintain their focus on providing greater functionality and increasing efficiency, while keeping costs as accessible as possible.
So what will happen to ERP software going forward? The following ERP predictions are an assessment of the ongoing market forces that are significant enough to instigate and/or reinforce a change in the behavior of major ERP vendors:
The Use of Cloud ERP Will Continue to Increase and Surge
Cloud computing has experienced a steady rise in popularity over the last 10 years (with an emphasis over the last five), with research studies indicating the growth of the cloud market reaching $53.3 Billion in 2021. Cloud ERP will continue to be significantly impacted by the expansion of cloud computing in the marketplace. Flexibility, agility and the increased number of business-driven opportunities available to organizations are the features most often cited by cloud adopters.
In fact, in a recent survey we conducted, we found that 95% of the 225 companies we interviewed were leaning strongly towards a cloud deployment model, and of this group, 65% were involved in the manufacturing sector. Moving away from the rigidity, expense and commitment of traditional on-premise ERP solutions is viewed as a move towards greater efficiency and a more innovative, cost-effective business strategy. ERP vendors, in concert with this trend, are also aggressively promoting cloud offerings and increasing their investment in cloud solutions.
The Move Towards ERP System Simplification Will Intensify
The trend among ERP vendors of adding features to their solutions, either by acquisition or by developing new functionality, has been significantly reduced due, in large measure, to the penetration of cloud solutions. This trend will strengthen in the next year, bringing this practice to a virtual halt. Rather than enhancing their core ERP systems, many companies are opting to add in cloud-based point solutions for functions like human capital management (HCM), customer relationship management (CRM) and expense management.
Many ERP vendors have come to terms with the reality that it’s difficult to compete with vendors that specialize in specific market solutions like CRM or HCM, and are therefore less likely to introduce new functionality or provide long-term support for their dated products. This will reinforce the migration, for many organizations, to more modern technological solutions.
The Growing Importance of the Integration of Big Data Analytics With ERP
Cloud computing has triggered a chain response of developments within the ERP environment. Cloud ERP has continued to gain legitimacy and has succeeded in bringing about a redefinition of what constitutes an effective and beneficial ERP system. In terms of Big Data, the cloud is providing increasing information sources to ERP companies, as well as the opportunities provided to make use of this data. The goal of Big Data analytics is devising data science techniques to help solve specific classes of business problems.
The predictive capabilities of ERP systems provide the basis to analyze current data and historical facts, helping identify potential risks and opportunities for an organization. Manufacturing companies are especially well-positioned to benefit from the intelligence gathered from this data, as they can use it to revolutionize operations, improve profits and fuel new growth.
The ability to employ sophisticated analytical tools was, up until very recently, strictly within the purview of big organizations. But analytics capabilities enabled by running cloud software has begun to spread this opportunity to small and mid-sized businesses that, in turn, are increasing their investments in data analysis.
Artificial Intelligence (AI)-Enabled ERP
The growing acceptance of analytically-based business decision-making, as supported by Big Data analytics, has cleared the way for the entry of AI-enabled ERP into the marketplace.
AI-enabled ERP solutions provide an interactive interface for customers and employees that can learn to speak and read, as well as predict and respond to future outcomes. By constantly optimizing operational models, they introduce efficiency, reduce cost and control human errors. As with data analytics, AI-enabled ERP wasn’t often considered by small and mid-sized businesses. But its wider accessibility (as helped by cloud infrastructure) has brought it within reach of many businesses, allowing them to reap the benefits of this offering. Some of the greater benefits include improving the decision-making process, automating data input and automating the analysis of the data to identify more efficient workflow processes and set performance benchmarks.
The predictions outlined in this post are all quite intentionally interrelated. Individually, they reveal changes/developments to the ERP system that respond to market changes, business demands and consumerization. Together, however, these predictions are revelations of a larger, interrelated trend that’s motivated by similar forces, but demonstrate an incremental movement that was set in motion by the highly disruptive influence that was brought to bear on the business IT infrastructure by cloud computing.
As cloud computing gained a strong foothold in the market, ERP systems recognized that they would have to adapt their model from a monolithic, unyielding solution to a more agile and flexible system. This change paved the way for ERP to move towards a more open and simplified system that was open to collaborating with cloud solutions for the benefit of vendors and customers alike.
Big Data and artificial intelligence were complimentary features that were appropriately linked to ERP when cloud computing made data collection and data analytics more feasible and attainable. The coming year will determine whether these predictions will have the weight and relevance to impact the marketplace as we suggested they will. What features and advances do you think are coming to ERP?