The new era of cloud-based enterprise resource planning (ERP) challenges businesses to rethink strategy and overcome the belief ERPs are merely transaction systems that work with data and create reports, said Mike Guay, senior director analyst at Gartner, speaking Tuesday at the Gartner CFO and Finance Executive Conference in Washington D.C.
Legacy systems were difficult to work with so businesses would customize solutions to make them easier to use, according to Guay. As a result, businesses created nested applications from a single vendor and upgrading ERPs became unwieldy, so businesses would run systems 6 to 8 years old.
In the cloud era, businesses will have to adopt vendor customization because they can no longer change core source code, Guay said. Vendors will consistently offer updates, which creates a usability advantage.
Understanding the importance of ERPs requires acknowledgement of the systems' scope.
While it varies across companies, ERPs are heavily woven into operations and financial management, according to Guay. One implementation could control everything from inventory and supply chain to accounts payable and general billing.
Some implementations include human capital and enterprise asset management.
Current ERPs are business-driven, and allow multiple architectures, making it easier to change and meet business needs, according to Guay. The market is leaning toward openness, allowing applications from multiple vendors to work together, something that was nearly impossible 20 years ago.
Still in the early stages of cloud technology, half of enterprises have migrated one or more ERP applications to the cloud, Gartner research found.
Emerging ERPs will take on a more strategic approach in the enterprise, supported by business and IT groups, a shift from the days of monolithic applications controlled by IT alone, according to Guay. Moving away from customization will also free up internal resources for solving business problems.
Because of the market immaturity, only one solution — Oracle ERP Cloud — is a "leader" on Gartner's Cloud ERP Magic Quadrant from August 2018. Microsoft Dynamics 365 is considered one of the leading "visionaries," just outside the leader category.