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.”
No, your college literature professor hasn’t taken on a career in IT—this term simply describes a new approach to getting the most out of these heavy-duty business software systems used by larger organizations.
In this article, we’ll explain how we got to the era of postmodern ERP and what it means for your business.
Streamlined Systems Replace Legacy ERP Suites
Let’s start with some history. 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.
Today, some commentators have proclaimed 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:
“A technology strategy that automates and links administrative and operational business capabilities (such as finance, HR, purchasing, manufacturing and distribution) with appropriate levels of integration that balance the benefits of vendor-delivered integration against business flexibility and agility.”
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.
Thomas Spol, senior director at PRO Unlimited, describes the postmodern approach perfectly in an article for CIO Review:
“In the postmodern ERP world, the legacy ERP suite is deconstructed into a more [loose] set of integrated business functions. The pieces make up the whole, rather than the whole (or suite) comprising the pieces.”
Use Different Strategies for Different Types of 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, eschewing 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:
• 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.
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. However, your other applications can probably remain intact.
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; more siloed applications may not suffice for this type of strategy.
Is a Postmodern ERP Strategy 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.
|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 Software 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.