Industry Analyst firm Gartner has issued a new advisory, namely that CIO’s and their IT teams must take action to address the fast-approaching reality of ‘legacy ERP’.  According to Gartner’s latest prediction, by 2016: “heavily customized ERP (Enterprise Resource Planning) implementations will be routinely referred to as ‘legacy ERP. CIO’s and application leaders must take action to address the fast-approaching reality of ‘legacy ERP.’”

Pause for a moment and reflect on the above statements.  The analyst firm that first introduced the applications IT market to the concepts and benefits of Enterprise Resource Planning systems along with the rating of capabilities among ERP vendors so many short years ago is now raising warning flags for technology end-users. A Gartner Vice President observes: ”The need for agility and responsiveness has led highly customized ERP implementations to an impasse, creating a subset of legacy ERP installations that must be dealt with constructively.” Similarly, analyst firm IDC has been strongly urging IT vendors to concentrate all future applications development on the so-termed “Third Platform” namely cloud, mobile and business intelligence enabled applications.

From our experience within the industry analyst world, that is the clearest acknowledgement by the traditional analyst firms that traditional ERP platforms and applications are struggling to  keep pace with supporting required business change utilizing legacy behind-the-firewall applications. Keep in mind that these same analyst firms garner significant revenues from ERP vendor clients but must advise multitudes of end-users.

Most in the supply chain and B2B fulfillment community who have had any experience with information systems or transformation initiatives have long discovered the obstacles and pain levels associated to highly customized ERP systems. Customization becomes a significant obstacle to timely business process innovation not to mention the heartburn for streamlining information flows and decision-making.  Legacy ERP was constructed with the design principle of inside-out control, but today’s businesses are faced with the challenge of outside-in information, planning and decision-making needs.

IT leaders who follow Gartner’s research may recall that a couple years ago, the analyst firm articulated three layers of systems innovation:

Systems of Record (presumed to be legacy ERP systems)

Systems of Innovation (presumed to be best-of-breed or cloud-based point solutionbs_

Systems of Engagement (presumed to be extensions social based systems in the concepts of Facebook, Linked-In, Twitter and others)

A new reality is occurring however, at a far more rapid pace.  Business and supply chain functional teams are stepping-up to accept more time-phased accountability for delivering required business outcomes or dynamically responding to ever changing business process requirements. Accountability includes more responsibility in IT applications funding and selection.  The CIO and his/her IT teams have similar strategic needs to accelerate the pace of business innovation but also reduce the legacy IT infrastructure costs.

As noted in Prediction Ten of our 2014 Predictions for Global Supply Chains, the fate of technology investments now rest in the hands of business and supply chain teams, with the counsel and assistance of IT.  The days of multi-year, highly disruptive IT transformation has been subsumed by highly targeted business process initiatives directed at phasing-in continuous improvement capabilities toward a desired business end-goal.

Gartner, IDC and indeed ourselves in our advisories are acknowledging the reality of today’s IT landscape, namely that continuous innovation and faster time to business value dominate the C-level agenda.  Leveraging the technologies of cloud and mobile computing, deeper business analytics and faster decision-making processes are increasingly looked upon as systems of innovation and engagement enablers.

Need more evidence.

SAP, a major player in ERP, announced to its investors that it has elected to forgo previous profitability goals for the next two years in order to accelerate development efforts to transform its business suite of applications to better leverage cloud platforms. Co-CEO Bill McDermott told investors: “we have bold ambitions in the cloud.” Bloomberg reports: “SAP is searching for a balance between expanding cloud-software offerings and safeguarding its mainstay license business.”

Similarly, Oracle has been aggressively investing in cloud offering through both acquisition and internal development as are many other ERP providers.

In today’s new normal of business, industry competitiveness is predicated on seizing market, product and services opportunities quicker and faster than competitors. The new realities of business imply a globally based supplier and trading partner ecosystem bringing increased dimensions of complexity, scope of control and risk.  The IT applications landscape supporting end-to-end supply chain business process innovation will benefit from the rapidly changing applications development trends being enabled by today’s cloud, mobile and analytics technologies.

Heed the growing evidence that highly customized ERP systems are headed toward legacy status and systems of innovation, engagement and deeper supply-chain-wide intelligence and insights should be your organization’s priority.

Bob Ferrari

© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.