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Are Gartner’s ERP recommendations and predictions for 2022 accurate?

iStock 1346000818 - Global Banking | Finance

545 - Global Banking | FinanceBy Andy Campbell, global solution evangelist at FinancialForce

When the COVID-19 pandemic began two years ago, it quickly became apparent that a number of businesses found the back-office systems upon which they relied were no longer fit for purpose. Organisations struggled to respond to the difficulties they were facing, with their main focus being on simply staying afloat.

However, now that it appears that we’ve come through the worst of the pandemic, investment in digital transformation has increased significantly. In fact, this spending looks set to continue for years to come, with IDC forecasting that global digital transformation spending will exceed $10 trillion over the next five years for the first time ever. Companies are getting their houses in order so they never have to go through the organisational pain caused by the COVID-19 pandemic ever again.

In response enterprises are increasingly embracing the cloud, as they’ve become acutely aware of the value it offers during difficult and unstable periods. Further to this, businesses are reviewing whether it’s possible to revive the enterprise resource planning (ERP) systems they currently use by investing in modernising and upgrading them, or whether they should consider new alternatives.

Gartner, the leading information technology research and advisory company, recently produced a report on what the future holds for ERP technology. This included a number of recommendations and predictions that it is worth exploring in some detail.

Gartner recommendations

The first recommendation from the report is that companies are increasingly looking for alternative options to their incumbent ERP vendors. While this is definitely the case, enterprises aren’t seeking to make changes just for the sake of it, they’re not looking to replace their current ERP systems with alternatives that are fundamentally the same, except in the cloud. Organisations are considering things from a different perspective and evaluating how these modern technological capabilities can add value to the overall business and provide a platform which is flexible and future-proofed, allowing for potential growth.

In the second recommendation Gartner describes a new, composable ERP model. The report  states that it’s imperative to support business composability outside monolithic ERP applications by including a multi-vendor capability. This is an extremely attractive proposition, and one which brings an alternative dimension to solution evaluation. When it comes to choosing a vendor strategy, enterprises need to find the perfect balance between three important components. Firstly, whether the system is capable of extending and adapting to shifting customer dynamics and business needs. Secondly, what the total cost of ownership of the technology estate is. Generally speaking, the more complex the solution architecture is and the more moving parts there are to it, the more costly it will be to support. Thirdly and finally, whether the system has the ability to deliver the functional capabilities required to support the organisation’s key business processes. Organisations that choose to adopt a multi-cloud or hybrid cloud model tend to do so because individual clouds don’t provide the full range of capabilities that businesses need.

However, when it comes to taking a platform centric approach, for example like Salesforce’s model, the obvious benefit is that users are not restricted to one solution. Instead, they are able to choose from a vast ecosystem, which includes thousands of individual complementary vendors, which are all underpinned by the same technology platform. Overall, this helps businesses to mitigate these three issues.

The third Gartner recommendation is that organisations need to gain support for a complex and costly upgrade by first determining whether to switch ERP vendors. In the last few years, a number of businesses have discovered that their existing legacy ERP systems are exposed and not up to the required standard. This has meant companies have been unable to pivot as desired, and this lack of flexibility has rendered them incapable of addressing the challenges caused by the pandemic. As a consequence, employers and employees have assessed their existing on-premise applications and decided to embrace cloud-based applications that are far easier to access and maintain than their on-premise predecessors. This is especially true in the current climate, with enterprises continuing to operate both in the office and remotely. Therefore, it is unsurprising that businesses are looking at all of the options and technological advancement opportunities available to them, rather than simply adopting the latest software version from their current vendor.

Gartner predictions

In its report, Gartner also made a series of predictions for the coming years. One such prediction is that by 2023, 65% of large enterprise developments will be executed by predominantly remote implementation teams. This is almost certain to come to fruition and it is pleasing to see how customers and vendors have willingly embraced this transition. It should be noted that in a cloud world, the ongoing relationship between customers and vendors becomes increasingly important. It doesn’t come to an end immediately following a project going live. Vendors will engage with customers on a continual basis, providing them with updates and additional functionality. The ability to collaborate with users must be a key feature of the capabilities of ERP solutions. A new system cannot just be for Christmas – it must be more persistent.

In addition, Gartner also predicted that by 2024, more than 60% of organisations will deploy cloud ERP as an ecosystem of application and technology platforms from multiple vendors. While the hybrid cloud model is set to dominate for the foreseeable future, it does bring its own challenges, as managing and preserving different clouds comes with a cost. One of the biggest risks is that no two clouds are the same – each will have its own cadence of regular updates, with these cycles unlikely to be in sync with one another. As a result of this, users risk having to spend their time undertaking regression testing across all of the integration points between these different systems whenever one of the vendors chooses to upgrade its system. This will add a significant amount of time, effort, and cost to the process, while it will also slow down possible innovations.

Finally, by 2024, at least 50% of existing mega vendor clients will evaluate multiple vendors rather than automatically adopting the latest versions of incumbent ERP suites according to Gartner. Many organisations have been reluctant to replace their existing ERP systems because it has often been seen as a cumbersome and unpleasant task with the barriers to changing to a new system perceived as being prohibitive. To overcome these problems, enterprises have started to use a phased approach, replacing their existing ERP solutions with a cloud model, but doing this in a staged format. The advantage of a phased approach like this is that it allows ERP providers to improve business operations in a way that limits the cost, risk, and potential disruptions.

Overall, these observations and recommendations made by Gartner concerning ERP technology provide a well thought out vision of what the future holds for ERP systems and technology and some interesting considerations for those companies about to undertake that journey.

Global Banking & Finance Review


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