If you’re in the market for an enterprise resource planning (ERP) system, you’ve likely heard a new buzzword being thrown around: “postmodern ERP.”
The term, coined by Gartner, describes a new approach to getting the most out of these heavy-duty business software systems used by larger organizations. In short, it’s the piecemeal adoption of applications that fit your organization, which is different from your competitors and every other business out there, to form a single unified ERP system.
But because it’s a new idea without a single blueprint for success, it can be difficult for small and midsize businesses (SMBs) to understand what a postmodern ERP strategy might look like for them. How can SMBs benefit from a concept without fully grasping it?
We’ll explain in this article, but there’s no need to be intimidated.
If a business selectively implements postmodern elements into their ERP strategy, they will benefit from more effective systems that are tailored to their own unique needs.
Here’s what we’ll cover:
Postmodern ERP, Defined
Gartner originally coined the term “enterprise resource planning” back in 1990 to describe a new breed of integrated software suite. These suites included software applications for:
- Material requirements planning (MRP)
- Manufacturer resource planning (MRP II)
- Core financials
- Human resources
- Customer relationship management (CRM)
During the 1990s and 2000s, ERP software became essential to the corporate IT infrastructure. Unfortunately, by the mid-2000s, ERP software started to get a less-than-savory reputation. This bad rap was based on the price tag of ERP systems, the relative inflexibility of an integrated suite and the droves of ERP implementation failures that made news in the tech world.
It’s common nowadays for commentators to proclaim that ERP is “dead,” or that the end is at least near. And a growing number of companies are now implementing alternatives to the traditional one-stop shop offered by ERP systems.
These alternatives can include:
- Finding best-of-breed solutions to replace individual applications within larger ERP suites. For example, an organization might prefer to use a more robust industry-standard CRM system, such as Salesforce (which can integrate with most major ERP suites), instead of the CRM application bundled with their ERP system.
- Using multiple ERP suites from different vendors, usually across different business units or subsidiaries.
- Foregoing an ERP suite altogether and using only best-of-breed applications.
Recently, these criticisms of ERP software have prompted new viewpoints among many tech thought leaders. Enter the “postmodern” ERP system, defined by Gartner in 2014 as:
The goal of a postmodern ERP strategy is to use the best applications possible in each particular area, while ensuring they adequately integrate with each other when necessary.
These systems may be hosted either on-premise or in the cloud, based on the organization’s needs.
To put it another way, a traditional ERP system is like the new car you buy every 10 years. A postmodern ERP system is like owning the same car indefinitely, but with various components that can easily be changed out as needed.
Formulate Different Strategies for Different Applications
A key facet of a postmodern ERP strategy is that it is not one highly defined, universal approach; it’s not necessarily a unified “system” you can buy from a vendor. Two similar organizations’ strategies could both be “postmodern,” yet still be wildly different from each other.
That’s because each organization defines its own postmodern strategy according to its operations and its needs, avoiding one-size-fits-all solutions.
Broadly speaking, a postmodern approach actually includes two or more separate strategies—one for each category of applications the organization uses. According to Gartner, most ERP applications can be broken down into either the “administrative” or the “operational” category:
|Administrative ERP Applications||Operational ERP Applications|
• Human resources
• Indirect procurement
• Supply chain management
• Order management
Organizations should identify an appropriate and distinct strategy for each category of applications they use, rather than using the monolithic strategy of a traditional ERP implementation. Thus, a postmodern ERP system will likely be comprised of applications from two or more vendors, and may include multiple deployment models.
For example, if you work for a midsize industrial manufacturer, your postmodern ERP strategy might look like this:
- Your core financials and human resources are housed in one integrated suite, hosted on-premise.
- Your manufacturing and sales operations, meanwhile, are served by a suite of cloud-based MRP and CRM applications, provided by various other vendors that can better meet the specific requirements and needs on the operational side of your organization.
Such an approach brings several benefits. For one, it ensures your company is using the applications best suited to each particular job.
What’s more, if something major happens with your company—such as a merger, acquisition or rapid business growth—you might need to upgrade certain systems, such as your financial and CRM applications.
With the postmodern strategy, this is generally much easier to accomplish; you can easily replace or upgrade only the specific applications affected by the change. But with an integrated ERP system, you would have to replace the whole suite of applications, or customize or upgrade several components.
Of course, keep in mind that postmodern strategies rely on the integration capabilities of individual applications and suites provided by different vendors. Make sure the systems you purchase work well together; without sufficient communication between components, your ERP will resemble a collection of disparate applications instead of a fully integrated suite. In other words, it won’t be an ERP at all.
Explore AI to Inform Your Postmodern ERP Strategy
In the last decade, artificial intelligence has evolved from impractical fantasy to practical reality, boosting operational efficiency and forever altering the businesses landscape. It’s shaping the future of ERP software more than any recent innovation in the market.
In fact, Gartner predicts that more than 70 percent of businesses will use multiple forms of AI by 2021, and the technology will be a determining factor in how organizations deploy their ERP systems.
ERP vendors have already begun to implement AI into their products. This means businesses considering the postmodern approach will have immediate access to the technology and its transformational benefits, including deeper analytical insight, process automation and an enhanced user experience.
To get those most out of your postmodern ERP strategy and acclimate your business to AI, Gartner recommends doing the following:
- Familiarize your employees with the concept of automation by implementing some form of the technology within the next 18 months.
- Gain a deeper understanding of AI by kickstarting initiatives within the next two years, especially in areas with an opportunity to gather insights quickly. Draw on your early successes to build a foundation for progress, and use your failures to identify opportunities for growth.
- Get some hands-on experience with ERP’s AI-based features through workshops and incorporate any lessons learned into future postmodern ERP objectives.
- Determine in the next two to five years the practical benefits and opportunities AI presents for your organization.
When it comes to AI, no one ERP vendor is likely to meet the needs of your business. Most standalone applications lack the customizability and ease of integration SMBs need to stay competitive in a rapidly evolving business landscape. But a postmodern ERP allows you to build your ideal system from the ground up, with the functionality you need to keep your organization agile and efficient.
Is Postmodern ERP Right for My Organization?
Many praise the aforementioned benefits of postmodern strategies. For example, Gartner’s Denise Ganly writes that “using a traditional ERP system” in this day and age “is like building a house on sand.”
She maintains that the benefits of ERP “should be preserved where it makes sense to do so,” but that businesses shouldn’t deploy an on-premise suite from a “single mega-vendor” just because that’s the way it has always been done.
Instead, organizations should opt for a strategy that will provide them with long-term agility over short-term operational efficiency. Beyond that, it’s up to business owners to determine the best deployment model for their needs. A good way to determine if postmodern ERP is right for your business is to consider size and operational needs.
|Larger organizations (100 or more employees)||Smaller organizations (less than 100 employees)|
|These include growing midsize to large manufacturing firms with multiple locations or subsidiaries.||Companies with limited operational applications and fewer logistical needs.|
|Well-suited for a postmodern ERP approach due to complex operational requirements, broad geographical reach and a need for greater business agility in a highly competitive environment.||Better suited for traditional, all-in-one ERP suites due to the potential expense of multiple software systems, time required to integrate independent vendor products and the need to for room to grow within software solutions.|
Still unsure about what type of system is right for your organization? Give our advisors a call at (888) 234-5187 for a free 15-minute phone consultation. They can help you assess your business’ needs and determine which ERP systems and applications are a good fit.