Back in 1998 when I first joined Damgaard, what later became a part of Microsoft, I met with Erik Damgaard (the inventor of what is now evolved to Dynamics 365 for Operations, and we discussed how he envisioned ERP systems to become distributed workloads.
He had a drawing on his whiteboard showing the core capabilities for a company running on-premise. (Clouds at that time were something that prevented Danes from getting a tan.) He included workloads, such as banking, HR, collections, WMS, etc... that would run at a service provider's location and transactions would flow back and forth between them.
Still, with this early vision, ERP systems have long been the central business management system in most companies. But in a few years, the ERP system we know today could be a thing of the past. The solution is transforming from the all-inclusive platform we currently know today, to many individual services all running as a service in the cloud.
Erik’s vision has also been made by Professor Bo Hjort Christensen from the Oslo Business School in Norway in an article posted on transformationtools.dk. The article touches on several interesting aspects of the future of ERP and how the various software companies are addressing the opportunity.
Bo Hjort Christensen elaborates on how he views the role of the ERP system in a world where Cloud, Internet of Things and Business Analytics are becomming a significant part of the company's IT architecture.
Services will be collected under various brands, such as Microsoft Dynamics 365, where they have replaced ERP with services such as Sales, Field Service, Operations, Customer Service, Project Services, etc... Therefore, in the future when companies are looking for an invoicing solution, the service will be called Billing and not ERP.
The ERP Package is Designed for On-premise
The ERP and CRM concepts are terms that have been created in an on-premise regime, where you buy a collection of products - such as the Office suite, with both Word, Excel and PowerPoint under one solution. But, as the market is moving towards more and more specialized cloud services, it's unnecessary to stick to the old terms because the services can be purchased separately.
Just a few years ago, several players pointed out that it would become "cloud first " over several years. Today, they are talking about “cloud only”, which shows that cloud services are the future. However, it will take a long time before it "everything is in the cloud" becomes a reality.
By 2020, we will begin to see product catalogs from IT vendors where modern cloud-based services can integrate into different, older on-premise systems across suppliers, which will slowly be replaced over several years.
ERP Industry Transitions by 2020
- Multi-Tenant Public Cloud will be the trend
- There will be fewer and more dominant brands
- The architecture of the services allows for more customer adjustments, proprietary components and integration with third-party products
- Version upgrades will be small and frequent
- Minimal trainig will be required because the solutions interface will be so simple
In the future, we will also see that companies will purchase services from different vendors to put together the best possible package that matches the needs of their organization. However, it may still be sensible to buy multiple services from a single provider, such as Microsoft, SAP or Oracle, because of assurance of traceability and databse consistency.
Efficiency is a Keyword in the Future IT System
What is going to characterize a quality business process over time will be speed, scalability and a healthy balance between manual and automated division of labor. It will also be important to analyze processes to provide a good basis for further process improvements.
To become a winner in the future market, companies need to think about streamlining into the IT set-up. Thus, companies should also consider where to get the highest degree of quality for the price. Something Bo Hjort Christensen predicts many will find in a Multi-Tenant / public cloud model.
Clearly, this model is the most effective way of delivering and managing a service. With public cloud services, businesses are shared on costs for a wide range of resources, the CPU itself in the service, and system upgrades.
About the Author - Jasper Haarloev
Jasper is a seasoned executive who has served in leadership positions at both Microsoft and Avanade. He spent a decade in public accounting before joining Damgaard (Navision) in 1998. When Microsoft acquired Navision in 2002, Jasper played an instrumental role in building up the Dynamics AX capability for Microsoft Consulting Services and served as Engagement Manager for the largest and most complex projects for Microsoft’s Enterprise customers. Most recently, Jasper served as Practice Director for Avanade’s ERP Service Line on the West Coast. Originally from Denmark, Jasper has been living in the US since 2000. Today, Jasper is VP of Delivery at ENAVATE.