The history of ERP is littered with organisations that have implemented an ERP solution, but been disappointed with the results, which include poor business outcomes, failure to realise benefits and unknown or uncaptured value.

Gartner’s research indicates that around 60 percent of organisations don’t measure application benefits realisation. Project satisfaction levels are similarly dire, with 26 percent not meeting expectations or “disappointing” and another 48 percent damned with the faint praise of being “somewhat successful.”

The problem is that most organisations fail to properly identify, then track the business outcomes and harvest the benefits from their ERP investments. Disciplined value measurement is often absent, started too late, not sustained or treated as something that IT or “the project” should take care of.

The focus of postmodern ERP is on improved business agility and flexibility. Those organisations that have successfully renovated their core ERP will achieve a 75 percent improvement in IT response agility and cost-to-value outcomes by the end of 2018, according to Gartner. Yet, benefits delivered by postmodern ERP strategies will only be improved with a far more disciplined approach to benefits realisation. This needs to be an integral part of the ERP program and project approach.

Achieving value from ERP investments
If you’re seeking to transform your ERP, consider the following:

1. Build benefits realisation by taking a holistic view
Adopting a postmodern ERP strategy increases complexity, which in turn complicates benefits realisation and potentially dilutes the focus on it, especially since a postmodern ERP strategy involves a more federated set of solutions.

For example, a company might implement a SaaS human capital management system, a core ERP system for financials and procurement and a specialist cloud solution for workforce planning. Each solution is treated as a separate project with its own business case. However, the business cases vary significantly in detail, rigor and scrutiny of ROI.

Take a consistent approach across the individual projects that form part of a postmodern ERP strategy, while recognising that there may be differences between them, for example, in the scope, duration, timing and nature of benefits.

Don’t assume that adopting cloud applications will magically provide value. It is still necessary to link business objectives to your postmodern ERP strategy to ensure that value is realised, whether you adopt on-premises or cloud applications.

Benefits realisation from ERP investments has more in common with a marathon than a sprint. Sustain focus on benefits realisation from the moment the starting gun sounds (that is, when work on the postmodern ERP strategy is initiated) through every mile of the subsequent program and project(s), and into the post-race recovery period.

2. Build and execute to a benefits framework
When a business case has been developed and approved, its development team may fall into the trap of thinking that this is “done” and can be filed away for revisiting long after the project has been completed or never. The approved business case must immediately feed into the benefits framework. This framework will provide fundamental support in the delivery of the business case — at least the value side of it.

Start by identifying business outcomes and strategic, tangible and intangible benefits through a robust business case process. Then you can institute a rigorous value measurement by building and executing to a framework, thereby achieving real business value.

3. Employ a strategic top-down, bottom-up and middle-out approach
While it is understandable that ERP initiatives are often launched because of an executive mandate, this leads to big problems with benefits realisation. When the time comes to build a business case, there is no insight into how to drill down from the top-down mandate to achieve benefits realisation within the business case.

To overcome this, employ a strategic top-down, detailed bottom-up and middle-out approach to benefits realisation for your postmodern ERP projects by building your business case, benefits framework, benefits model and measurement/tracking bottom up.

4. Translate intangible benefits into tangible value
All too often, intangible or soft benefits are dismissed as unimportant or “nice to have,” because they don’t translate into ROI — at least not directly. Little business focus is paid to them as a result, and this often leaves “money on the table.” Intangible benefits can translate into tangible benefits, however — it just takes more scrutiny to identify and capture them.

It’s important to convert intangible benefits into tangible benefits to improve net business value by following the “chain of consequences” of delivering the intangible benefit. In other words, derive the tangible benefits from intangible benefits. If you perceive none, consider if the intangible benefit really is a benefit or merely something aspirational or perceived. Accept that sometimes you can’t build a chain of consequences, and that intangible benefits are important because they help build executive and management buy-in.

ABOUT DENISE GANLY//

Denise Ganly is a research director at Gartner, covering ERP strategy, business cases, benefits realisation, selection and change management challenges facing organisations with enterprise-class applications. She is speaking about postmodern ERP at the upcoming Gartner Application Architecture, Development & Integration Summit in Sydney (24-25 July 2017).

ERP remains one of the biggest enterprise software spending categories. Australian organisations are forecast to spend almost A$780 million on ERP software in 2015, while in New Zealand, spending is forecast to reach more than NZ$100 million. Both markets showed healthy growth rates over last year.

Many Gartner clients are concerned about the future of their ERP suites. Large organisations find the problem formidable, with many moving parts and interdependencies that create a leave-it-alone mentality.

Consequently, most organisations are overwhelmed with tactical issues, such as reducing licensing costs, pursuing instance consolidation, managing upgrades and interfacing with cloud services. This leaves little time for strategic planning on how ERP can enhance value and support the pace of business change.

Introducing postmodern ERP
ERP technology has evolved during the past 30 years from a collection of stand-alone, best-of-breed applications to an increasingly comprehensive endto- end integrated suite. However, this technology vision has been killed by external market forces and the fact that, for most, a one-size-fits-all approach does not work. There are a number of reasons for this, the most important being the availability of cloud services.

Cloud vendors are selling the vision of easyto- use and manageable applications with new, modern user interfaces in areas such as sales force automation, talent management, and travel and expense management. Many users who found their ERP applications hard to use now use these cloud applications.

Vendors now offer core elements of ERP and even full suites in the cloud. Cloud services offer not only new user functionality and a different buying model, but also the reality of faster feature updates and enhanced technical scalability due to the underlying cloud infrastructure. As organisations look at extending their ERP to support mobile access, multi-enterprise working and better decision making, they’re forced to re-imagine the role of ERP, its provision, and which vendors will dominate.

Gartner uses the term ‘postmodern ERP’ to describe the deconstruction of suite-centric ERP into loosely coupled applications that are indifferent to the source of process provision and will enable innovation instead of stifling it. The concepts and benefits of an ERP should be preserved where it makes sense to do so, but today there is no automatic quest for on-premise solutions, or a single instance/megavendor, or for operational efficiency over business agility.

Many traditional ERP deployments stifle innovation, because they are rigid and slow, and they value integration and standardised processes over agility. Gartner predicts that heavily-customised ERP implementations will soon be referred to routinely as ‘legacy ERP’. Within five years, hybrid ERP environments will be the norm, with a mixture of on-premises, cloud and outsourced components.

Postmodern ERP has emerged at the same time as many CIOs have focused on ERP investments. Gartner’s 2015 CIO Survey showed that in Australia and New Zealand, ERP ranked as the fifth priority overall for new spending. It is vital that CIOs making investments in ERP understand the impact of postmodern ERP and don’t throw more good money after the bad, old way of doing things.

Defining an ERP strategy
Many organisations have inherited their ERP through a combination of tactical decisions made at the business unit level and merger and acquisition activities. Senior executives often see standardising on a single, monolithic ERP suite as a way to rationalise, delivering operating and process efficiencies and forming a foundation for future growth. Although this approach can deliver significant benefits, it is a high-cost, high-risk initiative that could compromise the business if it is ineffective.

The biggest mistake many ERP projects make before the implementation starts is failing to define and agree on a business-led ERP strategy. Instead, executives get excited about the potential benefits of ERP and encourage IT to rush straight to vendor selection, hoping that a vendor’s ERP suite will solve all their business process and change management issues.

Although this can work (more by luck than anything else), in most cases, it causes end users to resist using the ERP system.

Consequently, CIOs and application leaders must work with business users and senior executives to define and agree on an ERP strategy before considering any technological choices. This is one of the foundations for ERP success: 83 percent of the organisations that exceeded the business payback identified in their original business case had an ERP strategy that was approved by the business.

Four tenets of postmodern ERP
Although the fundamentals of ERP and defining an ERP strategy are still valid, the emergence of postmodern ERP adds another layer of complexity. CIOs and application leaders need to understand:

1. The megasuite is dead, killed by cloud specialist vendors that just develop a subset of the megasuite really well.
2. No vendor in the world can build a suite fast enough to keep up with the specialists, particularly cloud specialists. ERP vendors have stopped developing some areas that traditionally fell within the scope of ERP (such as talent management) and are acquiring cloud specialist vendors to deliver the required functionality.
3. New, loosely coupled ERP solutions are emerging in the cloud, based on developed and acquired products plus integration services.
4. Integration becomes more complex; however, vendors are hiding complexity in the cloud.

Overall, this means that the ERP market is in transition. Choosing a single vendor and hoping that vendor could do it all, without defining a business-led ERP strategy, was a high-risk approach in the past. In the postmodern ERP world, it’s pretty much a guarantee of failure.

IMC in the postmodern ERP era
The real future of ERP lies in in-memory computing (IMC). It breaks down the wall between ERP and business intelligence. By 2018, at least 50 percent of global companies will use in-memory computing to deliver significant additional benefits from investments in ERP.

Gartner defines IMC as an architecture style where applications assume all the data required for processing is located in the main memory of their computing environments. Broadly speaking, IMC technologies in ERP and CPM applications will deliver three types of benefits: performance improvements, advanced analytics and process innovation. These potential benefits (and the hype around them) may make IMC seem like a musthave technology investment, but the benefits will vary by organisation size, functional domain and industry. The potential benefits of IMC will not be restricted to large organisations, because midsize organisations will benefit from advanced analytics and may be able to innovate processes faster than larger, less nimble organisations.

Postmodern ERP using IMC will be a key technology enabler in digital business because organisations will be able to react to business moments in near real time by identifying their potential impact on strategic business objectives. Using a traditional ERP system in digital business is like building a house on sand. As a first step, understand your business’ appetite for digital transformation and what processes will change, and start to renovate your ERP systems for the digital age.

Download the PDF Digital business calls for postmodern ERP

ABOUT DENISE GANLY//
Denise Ganly is the research agenda manager for Gartner’s ERP and Enterprise Applications Strategies research group, based in Melbourne. In her 15 years at Gartner, she has advised many clients on life cycle challenges for enterprise applications including ERP strategy, business cases, benefits realisation, selection, implementation and change management.

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