Will That Wretched ERP Finally Die? Possibly, But Only the Acronym!

Will That Wretched ERP Finally Die? Possibly, But Only the Acronym!
P.J. Jakovljevic - May 1st, 2000

Event Summary

"The traditional ERP model is dead and collaborative commerce (c-commerce) is emerging to take its place." This was yet another ERP demise prediction, this time given by a speaker at a symposium in Europe at the beginning of April, which was hosted by a leading research house. He went on to predict that Customer Relationship Management (CRM) and Supply Chain Management (SCM) would become as important as ERP in the electronic economy by 2004. A prediction was given that ERP systems will only host 40 percent of business applications by 2004 due in part to the rise of collaborative commerce, or c-commerce.

With traditional ERP systems, attention is placed on internal productivity. What will happen to alter that model is the emergence of a more diverse enterprise framework. From now until 2004, a more dynamic online marketplace will emerge, where companies can collaborate with employees, customers, stockholders, sales channels and suppliers through a multi-enterprise framework. It was also predicted that due to a more dynamic marketplace, ERP vendors would have to focus on either 1) creating functionally stronger ERP components or 2) creating functional c-commerce frameworks.

Market Impact

There is nothing new in these statements that the market has not already been aware of. The currently infamous 'ERP' acronym may face extinction, but not its basic concept. All of the major ERP vendors realized the need to shift from an internal to an external focus a long time ago. Over the last few years, the main players have been actively partnering or finding other ways to provide solutions that allow businesses to collaborate more effectively. Also, the vast majority of vendors have recently stopped using the term ERP in their marketing campaigns, or have at least been downplaying it. Part of the reason for doing this lies in their attempts not to be branded as outdated by market requirements.

However, the real reason lies in the fact that the boundaries between ERP, CRM, e-commerce and SCM are blurred so much that this attempt to functionally separate them becomes pointless. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the more remarkable and supposedly more relevant CRM and e-commerce activity.

The cycle begins with the attraction of the customer through sales and marketing. This hopefully results in an order management and fulfillment process and ends with a customer service, which can involve anything from field installations through to enquiry and complaint management. All of these steps have to be executed well without exception. Otherwise, the customer will end up on a competitor's list of customers.

Therefore, the relative importance of CRM vs. ERP, ERP vs. SCM or of any other match-up is irrelevant. All of these functional areas are critical, except for some esoteric or autistic businesses. The 64,000-dollar question is how all business processes work together. In the electronic world, the degree of flexibility and efficiency of processes relating to the customer lifecycle, product development, and so on, to name but a few, will be a big determinant of losers and winners. Therefore, while the traditional introspective mind-set of ERP becomes history, its functionality remains critical. The 'new economy' will not cause the obsolescence of general ledger and accounts payable & receivable for example. Quite the contrary, it may only emphasize their importance.

User Recommendations

The ERP system remains the backbone of the supply chain. It sets the structure a company needs to do business and to communicate with other businesses. Combined with a functional supply chain, an ERP system can successfully extend into global business markets. However, some obstacles exist if a company reaches out to a market that lacks the technology to communicate with its own back-end system.

The answer to doing business with incompatible systems lies in combining an ERP system and a supply chain with Internet technology. In response to this, many ERP vendors are starting to build interfaces to marketplaces. The combination of ERP, supply chains, and the Internet, or collaborative commerce, is an integration designed to offer faster and easier access to business transactions as well as customer data. This combination does not mean ERP systems become useless over night; it is just another step in the evolution of back-end applications.

Users should to bear in mind a few facts about the customer lifecycle. Any step can involve any channel of communication - the Web, the call center, field staff, you name it. Furthermore, customers are entitled to inconsistency in the channels they use. They might, for example, order through the Web site and then expedite the order through the call center. The call center operators then need everything at their fingertips, including order details, fulfillment status, and billing information. Integration and interconnectivity are therefore the name of the game, regardless of whether customer prefers the "one stop shop" pitch from Oracle or SAP, or the EAI story from the middleware vendors.

Users should be aware of the fact that they need a reliable back-office system in place in order to conduct their e-commerce business or client relationship management. Therefore, we encourage them to aggressively inform themselves about vendors' latest product offerings and vigorously negotiate contract terms. E-commerce is not merely electronic retailing via a Web site. The ability to coordinate the entire supply chain, fulfill orders, and service customers quickly and efficiently is what matters.

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