According to Gartner Inc., by 2016, heavily customised enterprise resource planning (ERP) implementations will be routinely referred to as “legacy ERP.
The firm has said that as alternatives to monolithic, on-premises ERP and enterprise applications continue to mature, chief information officers (CIOs) and application leaders must take action to address the fast-approaching reality of “legacy ERP.”
The ERP suite is being deconstructed into postmodern ERP that will result in a more federated, loosely coupled ERP environment with much of the functionality sourced as cloud services or via business process outsourcers.
While current ERP implementations are not going to vanish overnight, they will need to adapt. The impact of specialist cloud-based point solutions, combined with very strong growth in business process outsourcing, will provide ample alternatives for business users frustrated by inflexible and expensive ERP modules. Over time the current heavily customised ERP implementations will be re-architected to focus on “systems of record” functionalities ? which should require little customisation ? while the differentiating processes and innovation activities will use alternative delivery models that are integrated with the ERP system of record capabilities.
Gartner also made the following ERP predictions:
By 2018, at least 30 percent of service-centric companies will move the majority of their ERP applications to the cloud.
The concept of a single ERP suite that meets all of an enterprise’s needs is dead, and has been replaced by a hybrid ERP approach that combines cloud point solutions with a smaller “core” of on-premises ERP function, such as financials and manufacturings. Gartner predicts that hybrid ERP environments will be the norm within five years
While it will be at least 10 years or more before the majority of organisations decide to flip ERP to the cloud, Gartner predicts there are industry segments where this will happen much sooner. Service-centric industries, such as professional services, business services and digital media, have not been well-served by integrated ERP suites, which have tended to focus on product and asset-centric industries. Many have already moved key elements of application functionality to the cloud and there will be a greater likelihood that service-centric companies will flip the majority of their ERP functionality to the cloud within the next five years, earlier than the product-centric companies.
By 2017, 70 percent of organisations adopting hybrid ERP will fail to improve cost-benefit outcomes unless their cloud applications provide differentiating functionality.
While Gartner expects that most organisations will shift from monolithic ERP to a hybrid approach within five years, the adoption of cloud services for some components of functionality does not guarantee a reduction in the total cost of ownership (TCO). On the contrary, there is the potential of actually increasing the TCO.
