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CIOs Must Take Action To Address Fast-Approaching Reality Of "Legacy ERP"

Wednesday, 14 January 2015, 04:59 Hrs

By 2016, heavily customized ERP implementations will be routinely referred to as "legacy ERP," according to Gartner, Inc. Gartner said that as alternatives to monolithic, on-premises ERP and enterprise applications continue to mature, CIOs and application leaders must take action to address the fast-approaching reality of "legacy ERP."

"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," said Andy Kyte, vice president and Gartner Fellow. "Early ERP adopters, particularly large enterprises in energy, manufacturing and distribution industries, are paying the penalty of a decade or more of excessive customization. Businesses looking to improve administration today can take advantage of lower costs, better functional fit and process flexibility offered by blending cloud applications with on-premises applications in what we now refer to as 'postmodern ERP."

The ERP suite is being deconstructed into postmodern ERP that will result in a more federated, loosely coupled ERP environment with much of the functionality sourced as cloud services or via business process outsourcers. 

"When ERP was in its heyday, CEOs and business executives wanted reliable and integrated solutions, so they seized upon ERP as the way to provide this," said Mr. Kyte. "Business stakeholders still want these same qualities, but now they assume that these qualities will be present in any software solution, and their requirements have switched to the twin concerns of lowering IT costs and seeking increased flexibility. A system that is not sufficiently flexible to meet changing business demands is an anchor, not a sail, holding the business back, not driving it forward."

Mr. Kyte said that so many business executives have expressed real concern about the lack of flexibility in their business applications portfolio that Gartner now defines legacy as: "any system that is not sufficiently flexible to meet changing business needs." Under this definition, heavily customized ERP implementations are very much at the forefront of the next wave of legacy systems. 

While current ERP implementations are not going to vanish overnight, they will need to adapt. The impact of specialist cloud-based point solutions, combined with very strong growth in business process outsourcing, will provide ample alternatives for business users frustrated by inflexible and expensive ERP modules. Over time the current heavily customized ERP implementations will be rearchitected to focus on "systems of record" functionalities — which should require little customization — while the differentiating processes and innovation activities will use alternative delivery models that are integrated with the ERP system of record capabilities. 

Source: Gartner