ERP systems have consistently helped mid-market companies achieve important improvements to processes such as ordering, purchasing, invoicing and financial reporting. But we are now starting to see discussions of the fourth era of ERP. There has even been a striking prediction from technology analysts Gartner that by 2023, two thirds of organisations will use ERP applications that encompass one or more of the fourth-era characteristics.
So what is fourth era ERP and how does it help organisations become more agile, demand-focused and cost effective in today’s uncertain trading conditions?
Originally conceived as materials resource planning in the 1990s, in its second phase, it was quickly dubbed 'Enterprise Resource Planning' as software vendors started to extend planning capabilities to enable organisations to gain better control of a variety of internal processes as well as simplifying the original materials planning task.
As the internet enabled better connectivity and ERP platforms’ functionality expanded, businesses saw the value of connecting their processes and transactions more closely with other organisations. The internet age also made supply chains and workforces more interchangeable, but inevitably more complex. The IT industry thought leaders began to envision ERP systems being able to reach entire supply chains and deliver a whole new set of strategic planning, cost control and even forecasting capabilities.
In the third era of ERP, businesses were thinking beyond additional technology investments that improved internal processes and more towards becoming increasingly customer-centric and agile in their strategic planning capabilities and business processes. The parallel explosion in mobile devices and people’s ability to work on the move, created a mass of new data points and insights that could reveal the individual user’s experience and the performance of organisations’ main business applications.
Today, the Internet of Things (IoT) draws on devices, sensors embedded across networks and supply chains, and artificial intelligence (AI) tools can now be integrated into ERP products. Industry commentators such as Gartner have heralded the defined fourth-era ERP.
These tools have five defining characteristics that offer the potential to transform mid-market firms’ planning capabilities:
Businesses need to better understand and analyse mass data generated as core processes and those of their supply chains digitised and data moved into the cloud. This rise of data as the lifeblood of mid-market companies’ control and responsiveness to their customers has been propelled by cloud applications, embedded sensors, software-driven processes and the IoT.
As a result, the ERP system focus is inevitably shifting from internal processes to encompass entire supply chains and to understand the data generated. This profound shift means that ERP systems are increasingly using information to identify risk, enhance strategic planning, support service innovations and improve an organisation’s desired business outcomes.
Understanding the customer
In the cloud age, every function in the front or back office can potentially leverage ERP modules to drive customer value and improve processes, ensuring more effective product delivery and achieving better customer satisfaction. This greater external (customer) focus is a marked shift away from the ERP of the past that tended to focus on delivering internal value. Fully-implemented fourth-era ERP will help organisations understand and meet the needs of their customers.
AI can support organisations with complex decision-making through predictive analytics. This shift towards data fuelling AI capabilities is arguably the essential hallmark of fourth-era ERP. AI will organise and fundamentally alter the ways that organisations interact with clients, suppliers and processes.
Fourth-era ERP platforms are now harnessing AI for data processing and judgment-based capabilities at huge scale that is beyond the human capability. As a result, fourth era ERP products will enable organisations to automate and perform key processes more quickly, reliably and free up employees to concentrate on higher value services or more creative tasks.
ERP systems have gradually become more flexible, easier to implement and more customisable. The fourth era ERP is becoming a set of technologies that enables organisations to plan for and attain desired business outcomes, rather than standardising and automating internal and supply chain processes.
To learn how the fourth era ERP can deliver competitive edge for your organisation, contact us now.