90 Percent of Organizations Will Lack a Postmodern Application Integration Strategy
The increasing complexity of the enterprise resource planning (ERP) application portfolio is driving the need for a defined postmodern application integration strategy, according to Gartner, Inc. Without addressing the integration concerns in a strategic manner, cost and complexity will begin to spiral out of control and any benefit will be quickly eroded. Gartner predicts that through 2018, 90 percent of organizations will lack a postmodern application integration strategy and execution ability, resulting in integration disorder, greater complexity and cost.
“Postmodern ERP represents a fundamental shift away from a single vendor megasuite toward a more loosely coupled and federated ERP environment,” said Carol Hardcastle, research vice president at Gartner. “This new environment promises more business agility, but only if the increased complexity is recognized and addressed.”
The shift to the postmodern world continues unabated. The majority of organizations now operate in a hybrid reality, leading to greater complexities in the application portfolio with new integration, analytics and governance challenges that can increase the risk of failure. There is a dawning recognition among end-user organizations that postmodern ERP is no quick nirvana. Many organizations moving from an on-premises monolithic state acknowledge they have little or no skills to support postmodern application integration. They have no postmodern application integration strategy, naively assuming the vendors will take care of it. Vendors are not doing this, which has left many organizations scrambling to integrate applications when they finally realize this grim reality.
Other ERP predictions from Gartner include:
By 2017, 75 percent of IT organizations will have a bimodal capability; only half of these will manage to avoid putting their ERP solutions at risk.
Almost 40 percent of CIOs are on the bimodal IT journey, with the majority of the remainder planning to follow in the next three years. Bimodal will soon be a fact of life, but a large number of organizations will make a mess of this change, not by moving too fast, but by failing to understand where to apply the two modes. The risks of making a mess with bimodal IT are substantial, particularly if it creates organizational, architectural, technical or process damage or dysfunction within the ERP backbone. This could disrupt business operations, seriously damage business performance and come with a high price for remediation and mitigation.
Until 2018, 80 percent of enterprises will lack the capability to successfully deliver on their postmodern ERP strategy.
“Twenty five or more years after ERP solutions entered the applications market, many ERP projects are still compromised in time, cost and more insidiously in business outcomes,” said Ms. Hardcastle. “Organizations need to resist the temptation to succumb to pressure from business leaders to get started before the enterprise is really ready (and without a business-agreed ERP strategy). Business leaders must understand what it will take to ensure success. The blame for this, however, does not lie solely with end-user organizations that lack the experience and expertise to avoid many of the pitfalls. System integrator (SI) and ERP vendors have to be accountable to their customers in this respect.”
By 2018, enterprises will insist on postmodern ERP project deployments that deliver proven value in less than two years
End-user organizations are increasingly questioning the value of investment in ERP solutions and are looking for new solutions and new deployment models that can deliver value quickly.
“The poor practices of the past and the associated excuses for suboptimal business outcomes won’t hold water any longer. The focus of postmodern ERP is on improved business agility and flexibility for example, through deployment of solutions and services that are better targeted at the business capabilities and address other needs such as user experience,” said Ms. Hardcastle. “It really is time that the significant investments enterprises make in ERP solutions reap real benefits. ERP vendors and SIs must raise their game on implementation approaches, renovating and revisiting their own implementation methodologies for speed and with greater emphasis on the benefits realization activities.”
About Postmodern ERP
Postmodern ERP is a technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility. This definition highlights that there are two categories of ERP strategy: administrative and operational.
Administrative ERP Strategy. This focuses on the administrative aspects of ERP, primarily financials, human capital management and indirect procurement. Some industries don’t need operational capabilities, such as manufacturing or distribution, so they focus their ERP strategy on administrative functions, perhaps augmented by some industry-specific functionality (such as grant management in the higher education and public sectors, or project resourcing, billing and costing in professional services). These industries are generally characterized as service-centric industries.
Operational ERP Strategy. Organizations in manufacturing, distribution, retail, etc. (sometimes referred to as product-centric industries) are likely to extend their ERP strategy beyond administrative functions into operational areas, such as order management, manufacturing and supply chain, to maximize operational efficiencies. Also, asset-intensive organizations, such as utilities and mining, may include operations and maintenance of assets in their ERP strategy. These organizations can realize benefits from the integration between administrative and operational capabilities, for example, where operational transactions that have a financial impact are reflected directly in the financial modules.