The End of ERP: Is ERP Dead?

Significant changes in business operations make it seem like the end is near for ERP software. Yet ERP is not dead. In fact, it’s adapting to meet the changing needs of modern businesses. Learn more about why these systems still play a significant role in the business world and how they’re still evolving.

The End of ERP (As We Know It)

At a glance, it’s easy to understand why we seem to be approaching the end of ERP. As an all-in-one software all businesses could use to streamline operations, it used to be critical for companies embracing digital transformation. Today, an increase in specialized, third-party software with easy integration makes ERP optional for businesses.

For example, look at developer Zoho. The company has dozens of business software products which can all interconnect to create a completely customized experience for users. While there isn’t a true Zoho ERP, all the different applications can combine to cover all the necessary functionality. And consider Odoo, a free and open source ERP. Users can change the code themselves to make the ERP fit their exact business needs.

Between open source code and third-party integrations, companies which once used ERP as a complete business solution are now able to mix and match tools to build the systems they like. After all, why pay for an expensive, all-encompassing ERP when you can put together a far more cost-effective and customized program piecemeal?

Does this mean ERP is really on the way out? Not quite. In reality, ERP is changing to keep up with evolving demands. Here’s what caused this misconception:

• First, the impact of cloud computing on ERP cannot be overstated. When ERP systems were solely implemented on-premise on local servers, businesses had a lot more control over the software. Now, cloud-based platforms put the developers at the forefront. They can remotely make changes to an ERP which the users can’t do anything about.

• Next is the shifting market dynamics around all types of business software. While some perpetual license plans are still around, more and more vendors are switching to annual or monthly SaaS payment models. Combined with cloud-based implementation, this again increases the reliance on the developer or vendor.

• Finally, there are changing customer expectations. For example, the rise in remote work has led to more businesses seeking easily accessible ERP software, usually through cloud-based platforms or mobile apps. And more companies want straightforward software which only covers the functionality they need. For some, full ERP systems have too many unnecessary features to be worth the cost.

Death of ERP

While ERP isn’t ending, there are some companies which have chosen to move away from this type of software. Most importantly is that there are more types of software developers than ever before, and many are making highly specialized solutions. Some focus on only one industry, like manufacturing or construction. Others cater to businesses based on organization size. Instead of getting an ERP, companies can get an industry-specific software which fits their unique business needs.

A few other reasons ERP systems have lost popularity include:

• ERP failure: ERP implementation failure is unfortunately common. A Gartner study found up to 75% will fail due to circumstances like budget issues, unrealistic timelines, and poor vendor fit.
• Complexity and cost: The more complex the ERP system is, the more expensive it will be. Even once the software is successfully implemented, there are annual costs associated with maintaining the ERP which significantly add up over time.
• Integration issues: Any business which relies on a legacy system needs the ERP to be compatible to share data. If there are issues communicating between different systems, this can lead to ERP abandonment.
• User experience and interface: Even the best ERP in the world is worthless if employees have a poor user experience. The UI needs to match their needs.

Death at the End of the ERP Life Cycle

Beyond ERP declining as a type of software, there are also individual ERP “deaths” happening at businesses every day. The life expectancy of an ERP system is between 5 and 10 years. As such, businesses need to replace or upgrade the ERP at least every decade.

There are plenty of businesses letting ERP “die” in order to get out of the increasingly expensive upgrade and integration cycle. Instead of renewing expensive contracts, they simply let them expire. Sometimes it’s the software developer who lets the ERP “die” or sunset. They may decide a specific program is no longer financially viable and simply stop offering support to users. In these cases, the developer may suggest users upgrade to a new version. Yet there are cases where the developer is getting out of the business entirely and there are no easy replacements.

Reimagining ERP for the Future

Do ERP systems still have a place in modern business strategy? Yes, as long as those developers and vendors align their ERP with evolving business objectives:

First, that means embracing adaptations and innovations seen in other software. One of these is limiting core functions in exchange for optional, add-on capabilities. For example, businesses don’t want to pay extra for features they’ll never use. More ERP vendors are now offering modular implementations so users can pick and choose exactly what they need. And an increase in ERP with open APIs and data exchange allows for seamless collaboration with external systems.

There is also an increase in ERP with user-centric design. These systems emphasize mobile-friendly and intuitive interfaces so users can access the ERP from anywhere with minimal training. There are also more options for user-permissions, so employees in different departments only deal with the features they actually need.

While some businesses are abandoning ERP for niche software, others still prefer having one software with every application they can need. One platform for all functions eliminates the need for any difficult integrations or separate user training programs. And bigger software means more opportunities to test new tech. Advancing technology like predictive analytics, machine learning, AI, and automation are also helping ERP to climb back to the top of the business software chain.