Microsoft warned us. In a 2018 online post Angel Shimelish, senior product marketing manager for its Dynamics 365 platform, writes that, ‘companies still operating on-premises enterprise resource-planning [ERP] systems suffer a multitude of issues. Employees may rely on manual record-keeping and duplicative processes because data and documents tend to be stored in multiple databases, in multiple formats, across multiple departments. That’s a recipe for missed deadlines and potentially costly mistakes’.

Shimelish notes that more than 60% of companies surveyed were still using ERP solutions that were out-of-date (at least five years old). This, she says, ‘can act as an anchor, impacting profitability by dragging down business growth and innovation’.

That was in 2018 – and while four years is a lifetime in tech terms under normal circumstances, these past four years have been far from normal. Yet even in 2018, businesses were already starting to shift their thinking from whether they needed EPR technology to where that technology should live.

In 2022, the pandemic-propelled move to remote working has made that question all the more urgent. ‘Today business is rediscovering that ERP systems are capable of transforming businesses at the core, and that they can enable the kind of transparency and openness that enterprises need to transform and modernise operations and supply chains in step with increasingly sophisticated consumers who are demanding change, fast,’ says Stephen Howe, joint CEO of Platinum Sage business partner Times 3 Technologies.

Howe cites a study by MIT Sloan Management Review and the Boston Consulting Group, which found that most business IT systems do not sufficiently support companies that want to integrate sustainability into their core strategies, activities and extended value chain. ‘This is where ERP is coming to the rescue,’ he says. ‘The research clearly shows that ERP provides an integrated view of business processes across companies and, as such, can become the nerve centre and system of record for many businesses.’

Howe cites another study – this one a 2020 Accenture survey of 122 CIOs – showing that just 1% of organisations that used ERP were doing so without the cloud, and only 33% were still in the process of shifting to cloud-connected ERP. The rest had all established their cloud presence and were looking at ways to expand it… Just like Microsoft said would (or should) happen, four years ago.

‘What we’re seeing is that cloud ERP is no longer just a back-office system,’ says Howe. ‘With a multi-cloud approach, back-office analytics can inform your client-facing data and vice versa, improving accuracy and decreasing data entry across the various business functions. The big push for ERP is happening because of the flexibility and maturation of these systems, which today are proving incredibly useful to fuel transformation.’

SAP’s looming support deadline is another significant reason for that push. In early 2019 the German ERP software giant announced that it was planning to end maintenance of its flagship ERP Central Component (ECC) system and other legacy products by 2025. It then pushed that deadline out to 2027, partly due to pushback from clients and partly because it understood that clients would take longer than planned to migrate onto its new S/4 HANA platform.

However, the move to cloud is continuing regardless. A February 2022 SAP corporate online post describes cloud computing as ‘one of the most profound technological innovations of our time. In the past, companies managed their hardware and software in a physical data centre, but the virtual nature of the cloud offers a much more efficient alternative’. SAP points to its 230 million cloud customers (‘and counting’) and outlines how it helped entertainment brand Cirque du Soleil migrate to the cloud. ‘Cirque has a cloud mindset,’ says Elodie Bonniard, SAP platform team lead. ‘The way we built the system 20 years ago does not reflect the company now. We needed to move to a system with less limitation.’

The acrobatic metaphors flew (as you’d expect with Cirque) – but SAP’s point stood… By moving ERP to the cloud, Cirque du Soleil could, as Bonniard says, more efficiently manage finance, procurement, merchandising and costume production thanks to operations being automated, analytics-driven and integrated. ‘To put this into context, in 2019, before the pandemic hit, the costume workshop produced more than 15 000 costumes, each with an average lifespan of three months. That’s a lot of costume changes to manage. With the cloud, each item can be tracked in real-time, enabling far more efficient inventory management.’

Marilyn Moodley, country leader for South Africa and West, East, Central Africa at SoftwareONE, expects to see a significant shift to the cloud as SAP customers move their existing ECC to the cloud and start converting to S/4 HANA. She’s excited about the prospects. ‘There are so many advantages to running an organisation’s ERP system in the cloud,’ she says. ‘Businesses can no longer adopt a wait-and-see approach, as the time to start your ERP migration to cloud is now.’

That’s happening. Nutanix’s 2021 Enterprise Cloud Index shows how the pandemic accelerated cloud adoption, with 82% of its South African survey respondents saying that COVID had caused IT to be viewed more strategically in their organisations. As a result, the report notes, 60% reported an increase in hybrid cloud investment compared to 46% globally.

‘The pandemic has in many cases forced IT shops to turn to the cloud for readily available infrastructure that can accommodate larger numbers of work-from-home employees,’ according to Nutanix. ‘IT shops in South Africa appear to have been ahead of global averages on the remote-work front, with only 16% of respondents reporting that they had no employees working from home on a regular basis compared to 27%, globally. Since the pandemic, that figure has dropped to 5%.’

While many large businesses are shifting their ERP solutions to the cloud, many small businesses are being left behind. A recent white paper published by research firm IDC found that some South African SMEs are failing to achieve return on investment (ROI) from their enterprise applications because of a mismatch between business priorities and the outcomes of their current solutions. In the survey of SME employees in Johannesburg and Cape Town, many business managers expressed frustration with ERP solutions that are taking too long to adapt to their needs. The report shows 28% of surveyed managers found the solutions to be too slow to meet productivity timelines, and 25% said they failed to deliver ROI. A further 21% said implementation took too long, and 15% said ERP applications were unreliable and error prone.

Yet as Heinrich de Leeuw, MD of tech company Seidor South Africa, points out, ‘in our current context, can you afford not to have a digitally intelligent business?’.

He doesn’t buy the ROI argument. ‘The costs of an ERP system depend on many elements, including the rental and/or licence fees, business analysis, data analysis, customisation, infrastructure, testing, training and change management,’ he says. ‘Keep in mind that ERP reduces costs by streamlining processes and limiting repetition and manual work. By enabling just-in-time inventory management, raw material orders can be aligned with production schedules, freeing up capital for other needs, and optimising warehouse operations.’

Whether it’s a large corporate or a medium-sized enterprise, De Leeuw believes the benefits of implementing an ERP system pay for themselves.

‘ERP doesn’t automatically equal expense,’ he says. ‘The size of the company and the number of users ultimately define the cost of the project. But if you select a proven system and have a detailed roadmap, it’s likely to be the only one your business will ever need.’

The one question that remains, then, is whether that system is deployed on-site or in the cloud. And even that question is rapidly being answered.

By Mark van Dijk
Image: Gallo/Getty Images