Pragmatism, GenAI and local ERP plans

Published on the 08/08/2023 | Written by Heather Wright

Pragmatism, GenAI and local ERP plans

Few established use cases for GenAI ERP, yet…

Pragmatism appears to be the name of the game for Kiwi organisations when it comes to their ERP strategies.  

After three years of large-scale transformation, many Australian and Kiwi companies are taking more of a wait and see approach – and that extends to the much-hyped generative AI. 

Neha Ralhan, Gartner senior principal analyst for application strategy, says there’s some ‘transformation fatigue’ in the air for Australian and New Zealand organisations.

“At the moment the use cases for generative AI in ERP are just not established.” 

“A more pragmatic approach has been the order of the day in the last three to six months. Whether that is because of appetite within the organisation and external factors that lead to that – economic headwinds or organisations hedging their bets in terms of the investment they would have to put into large-scale transformation projects – we’re seeing more slow, thoughtful moves around what people are doing with their ERPs. 

That extends to how organisations are approaching vendors too.  

“The A/NZ market is quite mature in that they question vendors a lot, they are not so easily taken in by the latest and greatest – like with generative AI.” 

Ralhan is far more restrained about the impact of generative AI on ERP than some, particularly vendors, who are bullishly proclaiming that generative will ‘revolutionise’ ERP as we know it. 

Boston Consulting Group managing director Mike Troisi says the technology is ‘ushering in an entirely new era’, enabling automation of routine tasks, providing real-time insights to provide a critical competitive advantage and enabling advanced demand planning, inventory optimisation and supplier capabilities. 

Ralhan is more circumspect.  

“At the moment the use cases for generative AI in ERP are just not established.” 

“In finance, generative AI could have the ability to produce periodic reporting or help with narratives explaining variances within finance. Or for manufacturing it could help predict shop floor equipment failure which would then prompt a repair work order. Or GenAI could help produce documentation and help regarding troubleshooting and repair of equipment. 

“In HCM it could help provide position descriptions and text for performance reviews. Those are the use cases, but we’re not seeing that being filtered down through to the applications just yet.” she says. 

Choosing her words carefully, Ralhan says: “ERP vendors are starting to pilot use cases that drive GenAI and other AI and machine learning capabilities more in use.” 

While Ralhan won’t say it, it’s clear that as with many new technologies, early days see mass hype. How the technology gets filtered down and implemented within ERP – an area where many would argue there’s already plenty of smoke and mirrors – is likely to be far more complex and less clear cut than the breathy headline proclamations. 

So how much impact could GenAI have on ERP further down the track? 

Ralhan says that depends on several factors including how widely vendors integrate the technology into their offerings – with early indications suggesting plenty of enthusiasm to do that – and the willingness of organisations to invest. 

“It will require a lot of investment from the end-user. First of all, it will require you to be on the latest version of every ERP. Having a legacy-based system that is possibly on-prem will not give you full functionality,” she says. 

Medium term, Ralhan says generative AI may prove a catalyst for getting organisations to move from legacy applications.  

The ability to overcome roadblocks, such as concerns around disinformation and quality of data used, will also be key. 

“There are still some roadblocks before we can say without a doubt that yes, it is going to save ERP,” she says. 

Locally, Ralhan says organisations are interested in GenAI ‘but it’s not at that step of them asking how they can implement it’. 

“Australian and New Zealand clients are quite pragmatic at the moment, so it is still about whether they are upgrading their ERP or changing the boundaries of their ERP, as opposed to whether they can implement GenAI or what GenAI means for their ERP.” 

Local organisations are instead continuing on their approach of rightsizing their ERP systems – refreshing specific functionalities such as finance, HCM or supply chain, depending on what is mission critical for the business. 

Those siloed refreshes highlight a move by local companies away from complete systems from a single vendor, to best of breed models, with some functions provided by vendors outside the core provider. 

“Organisations that are testing the market and possibly looking to break up from having one vendor to more than one vendor, are more digitally mature, and are aware that they’re able to get the functionality they require from beyond just the big name vendors.” 

It does, she cautions, require having a strong strategic vision for the ERP and also marrying that to the organisation’s vision of the ERP.  

“It doesn’t just become an ERP/IT project, it becomes more of a rethink of how the organisation uses digital.” 

But if A/NZ organisations are keeping a watching brief for now, Ralhan says there’s likely to be a flurry of activity closer to year-end and the start of Q1/Q2 next year. 

“What end users are doing is wise in that they are strengthening their rationale and their ERP strategies. ERP is not a one and done activity, so organisations should still be aware of market changes and monitor the markets to ensure that it’s not a case of complacency.” 

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