Why do some companies embrace cloud-based enterprise resource planning (ERP) systems, while others remain hesitant? The reasons typically have to do with the speed, scale, and agility needed to thrive and remain competitive in the digital economy, according to research from IDC.
The IDC report, “Future Proofing the Organization with ERP Modernization[1],”makes the case that digital acceleration is fundamental to creating a future-ready foundation, and that legacy ERP systems can’t support this shift.
“IDC finds that by early 2025, organizations still on legacy systems will need to modernize their applications immediately to survive and adapt to the digital world already surpassing them,” wrote Mickey North Rizza, who leads IDCs Enterprise Applications and Strategies research service.
What’s different this time?
The predominant issues are that legacy, on premises ERP systems are too inflexible to adapt to today’s needs, too expensive to modify, and outdated. An older ERP model falls short in today’s era where the enterprise is a more fluid structure that increasingly embraces mobile and remote work and customers are rapidly embracing digital experiences.
Many businesses are struggling with issues such as compliance management, talent shortages, supply chain challenges, creating resiliency to weather unanticipated events, and the need to accelerate innovation. Legacy ERPs have long been viewed as the nervous systems that bind together applications and processes to ensure smooth operations of every part of a business. Those systems are too brittle and reliant on architectures purpose-built for needs that no longer dominate business strategies.
IDC says organizations desire the reduction of ERP operating costs and avoidance of new datacenter investment. They also “want to move into the digital age with better planning and forecasting; increased speed, scale, and agility; more productive user experience; and more innovative products.” In addition, they need to adapt to the rapid adoption of artificial intelligence tools and capabilities.
Leaping ahead
Many decision makers in both IT and business roles fear any change to their ERPs. Nobody wants to disrupt operations or absorb the financial and organizational pain that may have accompanied past ERP upgrades and migrations.
The shift to cloud-based ERPs promises a smoother pathway than may have been experienced in the past. It provides a future-ready foundation that can be continuously upgraded and adapted more quickly to changing needs. Immediate payoffs are the streamlining of back-end business processes and accessibility to critical, timely information by those most able to utilize it.
“Next-generation ERP applications are delivered as cloud services with fixed upgrade cycles so that all customers are on the latest release,” Rizza wrote. “They have a consolidated data foundation and architecture, which is built for change and for frequent reconfiguration as new business requirements appear. They have built-in analytics facilities, are extensible via APIs, and utilize machine learning/artificial intelligence for improved insights, automation, and personalized experience.”
Each organization must plot its own ERP journey. But it is increasingly clear that taking only incremental steps to meet immediate needs creates the risk of falling further behind peers and competitors as they focus on digital business transformation.
Learn more about the benefits of a future-ready, cloud-based ERP system. Click here.
[1] IDC Spotlight, sponsored by Workday, “Future Proofing the Organization with ERP Modernization,” #US51905824, March 2024