Digital Disruption in ERP – Time to think beyond graphic user interface

Ever since the likes of Uber became largest taxi operator without even owning a single taxi or AirBnB became largest hotel room space seller without owning a single hotel, the power of digitalization has become too evident to all.  These organizations (and there are much more like them such as Alibaba, Ola etc.) have utilized technology to their advantage and have disrupted the business models completely. The examples of digital disruptions in all business categories are only increasing and core IT applications like ERP or Supply Chain Management are going to get impacted very soon. Infact, one of the long pending demands from ERP users (all of them whether it is SAP, Oracle, Microsoft or others) is that the user interface is too complex and non-friendly and users need to remember lot of things, navigation etc. for their daily operations. This makes them take longer time to complete their work, is not fun to work in ERP and with new users coming in – there is a learning curve for them. There has been decent number of attempts by large ERP players to make the user interface more friendly but have met with little success. SAP has even tried to sell different UIs to user organizations but success has still eluded them.

Salesforce, Netsuite, Workday, Ramco etc. led the first wave of digital disruption in ERP space by introducing niche products but now is the time to think beyond that. With the advent of Google Play, Cortana and Siri, a new door is now open for the ERP players to try and integrate their products with either these or develop their own voice controlled user interface and do away with graphic user interface slowly. The users should be able to command an ERP on the transactions just by speaking to them either standing/sitting in front of their desktops/laptops or their mobile devices while traveling. The production users will get the ability to talk to ERP and take the production of items to next stage while making the transactions talking to their watch which will be integrated with ERP. Similarly, the sales team can book the orders while talking to customers onsite and ordering their mobile device or the watch to prepare an order in ERP and provide the available to promise” date to the customer right away. This way, the complaint of users that they have to run business operations as well as run ERP as two separate tasks and takes time, will fade away as they will be able to conduct normal business as well as run ERP, almost with single activity and there will be huge reduction in post business regularization of transactions in the applications. The application data will start matching with actual data (like inventory at all stages) as ERPs will help the users more in their business in real time. With all ERP products now available in Cloud models, integration with mobile devices like phones, watches have already become easier due to availability of internet connectivity almost everywhere, this idea may carry the ERP products through the next wave of innovation where they disrupt their business models themselves before somebody else comes with this digital disruption and these giants have to fight for their survival.

 

Challenges for migration of ERP to Public Cloud

Ever since cloud computing has burst into the technology scene, there is a mad rush by almost all forward organizations to move their applications to cloud partially due to potential benefits showcased  by the service providers and cloud solution providers. Public cloud has been there at the forefront of cloud movement generally whether as Infrastructure as a Service, Platform as a Service or Software as a Service as it reduces the cost of operations and is extremely scalable at a fast pace. The applications ranging from websites to portals to best of breed business solutions to mail-messaging apps – all started moving to public cloud amid security and some other concerns – but somehow the movement is happening and at a fast pace.

While public cloud providers have almost all the case studies by now showcasing examples of payloads moved by different industries to cloud, but ERP Production Systems are still rare on public cloud, especially in emerging markets like China and India. We will particularly talk about India in this article, about challenges that are faced by organizations in all industry verticals in hosting their ERP Production (and even DR) application on public cloud (Infra as a Service).

 

In India, though every major public Cloud service provider has started selling their services long back, they have still not ironed out few gaps and these are:

 

• None of the major players like Microsoft Azure, Amazon Web Services, Google, IBM etc. have their own data centres in India till now (Though there were couple of announcements made last month but these are still not visible yet). Due to this, the bandwidth expenses to connect to these international data centres are huge by any standards since ERP will need secure international MPLS line and IPSEC internet line will not be enough to take high load/ low latency requirement. This drives up the cost of moving ERP to public cloud to an extent that bandwidth cost is almost equal to the every other cost of hosting the ERP load there
• Since major ERP players (like Oracle, SAP, Microsoft etc.) are also coming with their own Software as a Service models (and IaaS models also), they have a conflict with IaaS providers in terms of support. These ERP players do not say this openly but their executives will tell you in the discussions (with a disclaimer of not to quote them) that they will not support their ERP hosted on any other vendor’s platform or infrastructure
• Software incompatibility is another issue which comes when trying to move to IaaS as most public cloud providers would like to open standard operating systems as well as virtualization software whereas ERP players will push for their own versions of these software or will not support in case of any product bug etc.
• License calculation has come out as another area of conflict between the open standard public cloud providers and the ERP Product companies especially if the licenses you have, are processor based (maximum user base is like this) and not user based. The method of calculating cores/processors based on what virtualization software you are using and which hardware technology you are using, is different and is quite complex to understand
• Another pain in ERP movement to cloud is that you will need to keep your test and development loads also with the same provider (or at least at the same location), otherwise you will need to shell out more money while you copy production data to the test instance. Normally, the ERP data does not move incrementally to test instance and it needs to be copied completely every-time and large organizations have their database size ranging from 2 TB to 10 TB which will not only take more time while moving through cloud but will also consume lot of bandwidth – so more cost

There are a few smaller problems (and security ofcourse – which is well known) that organizations in India face while moving their ERPs to public cloud but I will talk about those as they are more of irritants. I generally am a proponent of moving to cloud have actually migrated quite a few applications to cloud already but talking about ERP movement everytime gives me jitters. Yes, if the datacentres of these large public cloud providers are established in India fast (as they are promising for quite a long time now), then lot of problems will be taken care of. The other major one will be resolved when the tug of (cold) war between public cloud providers and ERP Product organizations is over – let’s see what direction these giants take in near future. 

Digital disruption challenging supply chain dynamics

Digital age has changed a lot of things like DVDs, Cameras, cassette players, phones etc. and this space will keep on disrupting itself in near future also. A recent study published about Fortune 500 organizations, said that since 2000, 52% of the companies in the Fortune 500 have either gone bankrupt, have been acquired, ceased to exist, or dropped out of the Fortune 500. End to end supply chain visibility, which is also impacted by Digital Disruption, has changed a lot. Some of the organizations (very few) have adapted and are using digital technology to their advantage whereas the others are facing new challenges. According to Gartner, by 2016, less than 20% of the organizations will be able to provide end to end supply chain visibility. Also, as per them, 70% of large companies cannot achieve the Supply Chain Maturity required to be winners in 2020. Logistics, which is intrinsic part of any efficient supply chain, is becoming most important than ever and while its costs vary from a low 2.4% for a pharmaceutical industry to a high of 10.8% for CPG industry, the challenges are very similar across industries.

Modern Supply Chain needs to be more mobile with ubiquitous visibility and access, have more insights with real time information for best decisions, more collaborative for faster responsiveness from all stakeholders/participants and more engaging. Let us take an example of optimization of logistics. Digital tools available these days not only help in route and capacity optimization but also landed cost simulators will provide costing in different scenarios so that a decision can be taken after considering all parameters in terms of mode of transport, inco terms, exchange rates etc. These tools combine the knowledge of Wiki, social bookmarks, forums, blogging, in house multi team collaboration and even photo sharing & video campaigns to provide strong input to the supply chain planners.  New ideas that keep floating at different digital platforms will form the core of supply chain planning and innovation around it. Going forward, digital platforms will capture, develop and prioritize ideas, generate proposals, optimize investment and will help in commercializing ideas.  

The major benefits expected are faster speed to market, higher product revenue, improved product margins, better fill rates, improved product launch performance and improved sales effectiveness. 

 

The above article has been written by our guest Sam Page – Supply Chain Leader in a Fortune 500 organization.