By Kumar Singh, Research Director, SAPinsider  

Changing the Paradigms of Enterprise Resource Planning

Business environments, in most industries, have always been dynamic and susceptible to changes. These changes may be gradual or sudden, but the fact is, the world of business has continuously evolved through these changes. However, what we are increasingly experiencing now are massive and disruptive changes that businesses need to grapple with. Although the goal of businesses is to build capabilities that allow them to flex with these changes, whether sudden or gradual and become future proof, there are many tactical issues that need to be addressed. For instance, they need to combine speed with strategic direction, understand the current state and future state of technology, become more responsive as an organization, and continuously identify areas for quick wins and measurable transformation.  Technology plays a two-sided role in these evolving dynamics. On the one hand, it is leading to the acceleration of the evolution of business environments and ecosystems due to its exponential growth. On the other hand, it aids organizations in addressing the imperatives arising from this growth by acting as an enabler.  To understand the drivers that this rapid evolution of business environment and ecosystems is creating and how technology can help address these drivers, we invited Chris Chan from SAP product analytics for a discussion on this topic.

The Rapid Evolution of Business Environments

While there is no doubt that there are a plethora of factors that are contributing to this rapid evolution, there are some that are more prominent than others. And evolving customer expectation tops the list.  As customer demand evolves, their expectations evolve, there is increasing pressure on the companies to evolve their business and operating models. Manufacturers, for example, are constantly challenged to reduce costs within the business and remain flexible in the face of disruption. Or perhaps your industry has seen a sudden increase in demand. The challenge then is to find more ways to do things with less, especially when you are constrained by supply chain limits or other factors. There is also the possibility of being somewhere in the middle, where demand is only modestly impacted, but you still need to reduce waste, energy, and resource consumption. And in that scenario, sustainability, climate friendliness, and environmental stewardship must be improved upon.  The expectation of "instant gratification" that the e-commerce era has introduced only adds to the woes. Chris corroborated our hypothesis during the discussion: "We see new business models of operating. Everything from service and sales to managing entire supply chains is now done at digital speed. Being able to provide new business models and making buying options simple is imperative to meet the changing customer needs. We also see a significant focus on sustainability. Businesses like SAP have already been looking at sustainability and the environmental impact of business, but now in 2021, I see that not only for SAP, but this has become a differentiator for businesses in the marketplace. More often, I am reading about large investors are only investing in companies that are socially responsible – and customers are now demanding to see the data in how businesses are meeting sustainability goals." Then there is the additional driver of uncertainty and volatility. One that businesses are currently facing head-on, but it has always existed in some form. Most businesses exist today to supply products or services (or both) to fulfill a demand. And it is common knowledge that it is important for both supply and demand sides to be able to adapt to volatility. In today's age of volatility, you can toss out the legacy rule of demand forecasting and supply chain planning and many other traditional approaches since we simply do not know from one day to the next what the demand will look like or what the supply chain logistics will look like. Organizations need to make quick decisions about how to adapt operations to cope with that uncertainty and volatility. Agility and responsiveness have become must-have capabilities. Chris highlighted the volatility aspect as well in his quote: "We have witnessed how volatile the market can be. We see businesses who adapt fast are thriving in the new economy, whereas businesses who are slow to transform are barely surviving. In a recent study by McKinsey, 31% of businesses have adopted more effective business models since 2020."

Technology can be an Antidote to Pain Points from the Rapid Evolution

As mentioned earlier, technology plays a dual role in these evolving dynamics, playing both sides. On the one hand, it is leading to the acceleration of the evolution of business environments and ecosystems due to its exponential growth. On the other hand, it aids organizations in addressing the imperatives arising from this growth by acting as an enabler. From the perspective of being an enabler, it plays a key role in the trio of people, processes, and technology. And when it comes to technology, a plethora of tools and systems are helping organizations address the drivers they are facing. These tools range from foundational enterprise systems like ERP to new and emerging tools and technologies, like Artificial Intelligence (AI), Machine Learning (ML). ERP systems play a key role in digital transformation. But they can be a drag as well if you do not have an ERP system that aligns with the business realities of today. The right ERP system can bring revolutionary changes to various processes of modern business.? As Chris emphasized: - "Legacy ERP systems are no longer sufficient to help us drive the business into the future. Today's modern ERP needs to be able to harness ERP data, operational data, and external data but also provide integrated analytics to give you a 360-degree view of the business, turning your data into value. If you don't aren't able to turn your data into value today, it's not too late to start planning for the future."

 The Evolution of ERP Systems is Integral to Address Business Drivers of Today

There is no doubt that the evolution of ERP systems is critical, but what are the evolutionary traits we need to look for when thinking about this evolution? Some of the evolutionary aspects shared below are indicative of the areas in which there are opportunities for ERP systems to evolve:

• Leveraging the Cloud
• The future of systems and solutions of a modern enterprise lies in the cloud, and ERP systems, therefore, need to follow suit. An evolved ERP system should offer the capability to further digital transformation through cloud integration. Whether it's a better utilization of resources or remote access, cloud-based software is becoming the new reality. A cloud-based version of an ERP system can also act as an extension of an existing ERP system, accelerating the pace of transformation. With this evolution, the ERP system can harness all the benefits that the cloud provides to accelerate innovation. The agility and responsiveness imperative highlighted previously can be addressed by leveraging a cloud-based ERP system that allows you to capture data from all nodes in your complex operating footprint seamlessly. This also helps address the imperative to create new business models since the cloud provides you the ability and power to experiment with innovative business models.
• Seamless integration capabilities
•  An evolved ERP solution should be able to integrate seamlessly with other applications, whether they are transactional point systems or analytics solutions. Integration of ERP systems with analytics tools, social platforms, and cloud technologies can not only streamline complex business tasks but also expand the functionality of your existing system and unlock the potential of ERP to transform your business digitally. An evolved ERP system should facilitate a variety of extensions that, in turn, will allow organizations to build a truly connected enterprise. The imperatives of volatility and uncertainty mean that you need insights fast and need to develop the ability to respond to these insights fast as well. This critical integration allows organizations to address these imperatives.
•  Enhanced scalability
• Last but not least. An evolved ERP software should offer scalability as one of its key features. No matter what size your organization is, an ERP system should be scalable and should be able to handle many different business processes. Advances in technology and computing power allow ERP systems to become more scalable and robust, but it is the integration of the cloud indicated earlier that will provide the real power of scalability to these systems.

 What does this mean for SAP insiders?

•  There is no doubt that technology plays a key role in the rapid evolution of business ecosystems today. But it also allows you to leverage it as an enabler to address the imperatives that arise from this rapid evolution. While the article has provided readers insights into how an evolved ERP system plays a key role as an enabler to address some of the imperatives, there are certain key aspects SAPinsider need to be aware of:
• Evaluate your ERP strategy. Since ERP systems act as central systems for many companies, it is imperative that you need to evaluate your ERP system and associated strategy to make sure it aligns with the realities of the digital age. The criterion of evaluation needs to be aligned with the needs of evolution as well as the requirements and strategy of businesses today. As an example, the aspects of the evolution of ERP mentioned earlier in the article can be one evaluation data point.
• Strategize the critical role of integration of ERP systems with analytics. During the journey of digital transformation, data and visualization accessibility play a crucial role. The need for innovation, customization and transparent real-time analysis has increased dramatically, and there are numerous applications within enterprises. And an important lever to achieve this is to ensure seamless integration between your analytics solutions and ERP systems.
• The benefits realized from these integrations can be immense. Chris emphasized this aspect by highlighting the benefits of integration of SAP S/4HANA and SAP Analytics Cloud: "SAP S/4HANA Cloud and SAP Analytics Cloud is changing the game. For example, I have a customer in the consumer products industry that was using a legacy ERP and planning systems. They heavily relied on IT, which slowed their forecasting time. Then they decided to go with SAP S/4HANA and SAP Analytics Cloud as in one financial management suite and were able to improve their financial planning cycles by 30%. This was achieved by integrating plans across the business, analyze their data in real-time with analytics at their fingertips, and eliminate departmental silos."
•  Explore digital transformation as a service. The most direct way to meet the challenges of changing markets is to adopt the most innovative business models and adopt more intelligent business processes through holistic digital transformation. It goes without saying that business process transformation can be challenging and require far more time and resources than anticipated. This is where services that help you transact the entire end-to-end journey can be immensely useful, and the good news for SAPinsiders is that SAP has launched one earlier this year. RISE with SAP is a unique SAP solution that aims to ease the transition from a vision to become a digitally transformed organization to an actual digitally transformed one. It is a new and highly innovative software and services solution offering "business transformation services."
• RISE with SAP provides organizations with new methods for redesigning processes for improved business outcomes, regardless of their phase of digital transformation. As Chris Highlighted: "We have an exciting offering you should have heard by now: RISE with SAP is business transformation as a service to put you in the lead of your industry. Whether you are on SAP systems or new to SAP, RISE brings together what you need to transform your business in the way that works best for you. It helps customers transform their business into an intelligent enterprise. RISE with SAP a guided journey to transform your business into an intelligent enterprise."