The Evolution of ERP and The Future of Applications

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The Origins of ERP

Enterprise Requirements Planning (ERP) systems were created to solve a series of problems organizations had 25 – 30 years ago, mainly data and process inconsistency. In the early days of enterprise applications, many organizations had systems which were centered around functional areas – Finance had theirs, as did Procurement, HR/Payroll and other teams. This application era was commonly referred to as “best-of-breed”. The applications worked for the respective functional areas but were often not integrated well with other areas and often developed by different providers – meaning different platforms and support organizations. This created a huge data and process integration problem. Most IT resources at the time were dedicated to making sense of these different sources of data to provide performance reporting to executives. IT was even called “Data Processing” and “Data Management Systems (DMS)” back in this era.

ERP systems emerged to solve these data problems by providing a system that was fully integrated across functional areas. In the 1990’s and 2000’s, it was common to hear “we want a fully integrated ERP system (or suite)” during the acquisition process. ERP suites are built around standard rules – usually GAAP standards to make the reporting or performance easier. These systems worked well to solve those data and process problems and produce performance reporting, but were huge, complex, restrictive, difficult to use and expensive to maintain by their nature. These early ERP systems were called “monolithic ERP” – deployed in an organizations’ data center and were the predominant type of ERP from the 1990’s to the early 2010’s.

It is necessary to remember this history to avoid repeating it. There is a real risk of that given events over the last 5-10 years.

The Emergence of Cloud and Postmodern ERP

The early 2010’s saw the emergence of the internet as a secure foundation for enterprise applications and large volumes of transactions. By the mid 2010’s, many commercial and public sector organizations had adopted strategies to leverage cloud computing power for enterprise requirements.

This led to the deployment of enterprise applications in the cloud. First were Customer Relationship Management (CRM), then HCM/Payroll, then Finance followed by Supply Chain and Manufacturing. This created a huge disruption in the ERP space. Not many organizations were ready – or willing – to rip out multi-million dollar legacy ERP and data center investments to adopt a new capability delivered in the cloud.

However, the budget, governance and control of application acquisition was shifting back from central IT to the heads of functional areas such as the VP of HCM and the CFO’s office. This meant that functional areas in the organization that had lived with what they considered sub optimal functionality for years could now acquire enterprise capabilities tailored to their areas for an annual fee per user. Many did just that – and began using cloud applications not delivered by their ERP vendor.

IT organizations were then faced with having to manage and integrate hybrid on-premises ERP with functional areas (CRM, HCM, etc.) deployed in the cloud – often from vendors other than their core ERP vendor. Sound familiar?

At Gartner, we developed a strategy called “Postmodern ERP” to represent what we saw as the likely evolution of ERP to a hybrid model of on-premises and cloud applications. It recommended that organizations needed develop a holistic strategy and to think differently about who would control the acquisition, deployment, integration and support between these systems. And to avoid a return to the bad old days of best-of-breed. This was the predominant ERP strategy between 2013 and 2016.

We assumed at the time that the hybrid world of on-premises and cloud applications would last between 5-15 years given the inertia in the ERP market – estimated at $1Trillion worldwide.

Our assumptions about the adoption of cloud and development of ERP in the cloud were too conservative.

Multi-Tenant Software as a Service (MT SaaS) ERP

ERP Vendors took multiple approaches to migrating their RPI-08-17-22-Circle-of-Life-Banner-No-BGexisting customers to cloud. Some took an evolutionary approach allowing customer to move from on-premises to Single Tenant (ST) and others a complete transformation to MT SaaS “cloud only” for new sales. Each approach has its advantages and disadvantages and is too broad a topic for an in-depth analysis here. Suffice to say that all vendors recognize the advantages of deploying MT SaaS ERP and are moving towards it. Some vendors are just faster than others.

Why? MT SaaS can be easier to support – all users are running the same version of the software with the same underlying database architecture. The licensing model can also be more profitable for vendors over the long term.

But MT SaaS is by its very nature offers some very enticing benefits for customers. The newer technology used to develop these MT SaaS applications allows for much faster development and deployment of new features and functionality. These applications are usually developed on enterprise application platforms (EAPs) which makes integration with the vendor’s (or other vendors’) applications easier. The underlying platform technology also allows vendors to embed technology such as Artificial Intelligence (AI) and Machine Learning (ML) and voice interfaces within the application architecture.

This is leading very quickly to a new generation of enterprise applications with enhanced capabilities and experiences.

The Future of Applications

Composable ERP

The future of ERP is now being defined as “Composable ERP”. In the context of this note, we will only provide a very high-level description of composable ERP. I will be delivering several other notes to help organizations understand and leverage this unprecedented opportunity for digital transformation. MT SaaS ERP development cycles offer the potential for much faster innovation adoption, which enables delivery of greater business value.

ERP is shifting to modern MT SaaS systems built on enterprise applications platforms new capabilities for low-code/no-code development and integration. These systems enable and support the development and deployment of new capabilities and experiences built on a solid foundation of established business processes.

Characteristics of future applications


Gartner coined the terms “citizen developer” and “citizen integrator” to reflect the fact that the new capabilities and power of MT SaaS ERP coupled with Enterprise Application Platforms (low-code / no-code development and integration) enable power users in functional areas to build and interface applications without having complex programming skills. This democratization of development and integration is happening whether organizations like it or not. So it is prudent to be prepared.

The role of IT in organizations will need to evolve from “controllers” to “curators and advisors” for applications. A good analogy is the emergence of laptops about 20 years ago. Initially, users would run out and buy any brand of laptop they wanted – creating a support nightmare for IT organizations faced with tech support for multiple hardware platforms. Eventually organizations realized they had to provide guidance and limits. If you want an Intel based machine, buy one of these two; those preferring Apple machines – one of these two.

IT will have to adopt similar policy guidelines for applications – define boundaries and allow users choice. Provide flexibility without anarchy. This will be an evolving learning experience. The time to finding the correct balance will depend on where an organization is starting from in terms of technology and governance maturity.

Intelligent Apps

One thing that will be significantly different from the past is the very nature of applications. Historically, ERP updates included new features, functions and usability enhancements. Those will still be forthcoming but at an accelerated pace due to MT SaaS. Beyond that, the underlying technology and capabilities of the applications themselves is advancing. Some examples:

  • Intelligence embedded in the applications. Systems will begin to analyze business processes and recommend improvements to improve efficiency. This is already commencing.
  • Context awareness. Understand what processes the end user is engaged in and the context of the activity. Suggest automating processes often repeated by users.
  • Role awareness. Unique to roles internal and external to the organizations. Applications will be tailored to create an enhanced user experience based on their role. This is also already happening.
  • Continuous improvement. This is where the MT SaaS becomes important. Apps surrounding the ERP core must have a modern architecture to enable continuous updating, patching and improvements. Users will expect applications to improve constantly.
  • Multi experience. Multiple means of interacting with the back-end applications. Voice interactions with virtual “intelligent assistants”. This is already commonplace in the commercial world – Alexa, Siri, Google, etc. and will soon be commonplace in enterprise applications.

Vendors in the ERP space are already investing heavily in these capabilities.

Experience Focused

Experience focused means delivering not just “easier-to-use” interfaces, but a superior user experience. Just a couple of examples many of us can relate to:

  • Uber: This application has completely disrupted the taxi industry. On-demand transportation and consumer ecosystem the app has developed, has not just added a new convenience, it has changed the way many of us eat, entertain ourselves, and even shop.
  • Hotel applications: Several years ago, many hotel chains began to deploy applications for travelers to use to book and maintain their reservations. In and of itself convenient, but now apps allow you check in from the app, select a specific room and provide a digital key. No more waiting at the front desk. A huge improvement for anyone traveling frequently.
  • Banking: It is now commonplace to have a banking application that will allow you to manage your accounts, pay bills, transfer money and even deposit checks from anywhere you have a cell phone signal.

All experiences delivered by an application. No one knows the underlying business systems behind these applications and no one cares. Nor should they. But without a solid foundation of business processes these apps would not work.

Entities in any of these industries (personal transport, hospitality and banking) that do not provide these capabilities and experiences run the risk of losing customers. Public sector agencies are discovering that citizens are increasingly expecting these same types of capabilities and experiences.  

That is part of the future of applications. Enhanced experiences and capabilities. Composable ERP provides a necessary foundation for these.

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