How to Align Your ERP System with Digital Transformation Goals

Enterprise resource planning systems (ERPs) manage key business processes and data in organizations. However, as digital transformation activity accelerates in the industry, the ERP system needs to become more suitable for empowering instead of undermining the organization’s agility and innovation. Responding to the question of bending the organization’s unified resources to support the broader strategy for digital transformation remains a critical requirement for organizations to remain competitive.

This article advises on the practical steps to take in evaluating your current ERP landscape, which is overlaid with setting digital transformation objectives and taking strategic actions to bring ERP processes in alignment with emerging technologies. It provides a step-by-step approach for IT leaders and business executives to help legacy systems to digital capabilities improve performance.

Assessing Your ERP Environment

Before modifying or replacing an ERP system with the help of ERP solutions development services, organizations must clearly understand what they currently have in place. Key activities in this assessment phase include:

1. Catalog all existing ERP components, applications and capabilities across the enterprise. Look at financial management, HR, manufacturing, supply chain and other systems.
2. Identify integrations between ERP and other data sources, such as CRM, analytics, eCommerce, and custom applications, and map out data flows.
3. Define use cases and roles for current ERP processes. Link specific business functions and teams to parts of the ERP environment.
4. Quantify costs and resources required for ongoing ERP operations and maintenance. Include IT personnel and end-user training/support.
5. Document pain points, challenges and requests related to current ERP capabilities from business teams across the organization.

The analysis serves as the baseline for considering the highest priority objectives with respect to growth, efficiency, data access, and user experience for the alignment of an ERP.

Defining Digital Transformation Goals

Digital transformation means different things to different organizations. ERP planning must support the specific objectives established in the company’s digital strategy roadmap. Ask questions like:

• What does digital transformation success look like in the next 3-5 years for our business?
• Are we trying to achieve top-line growth via better or enhanced customer experience? Operational efficiency via automation? Or both?
• As digital disruption accelerates, what fresh business models, offers, or procedures will let us compete?
• How may new technologies be used to maximize current ERP investments and power our digital future efficiently?

The answers help shape priorities for ERP systems in relation to goals like improving:

• Access to data for analytics, reporting and business insights
• Flexibility and agility in operations, manufacturing and distribution
• Omnichannel customer experience across physical and digital touchpoints
• Employee productivity with intuitive self-service and automation

Keeping the focus on one to three key digital transformation and ERP objectives will provide direction for ERP strategies.

Strategic Alignment Approaches and Actions

With current state analysis and future digital priorities defined, companies can determine the best approach to align ERP plans with transformation roadmaps. Strategic options include:

Incremental ERP Enhancements

By making minor upgrades or add-ons, companies can add to the existing ERP functions over time to achieve digital goals without complete ERP platform replacement. Potential incremental improvements consist of:

• Integration with cloud data sources and business applications
• Mobile optimization for any device/location access
• Lightweight customer and employee self-service functionality
• Advanced visualization, reporting and analytics features
• Artificial intelligence/machine learning for intelligent process automation
• Expanded APIs and microservices for ERP extension

Incremental efforts can make the ERP environment progressively more open, connected and intelligent.

Two-Tier ERP Model

This strategy involves using a new cloud-based ERP for some business units or processes while keeping legacy ERP in other areas. It enables you to move quickly to promising digital capabilities where they make the biggest impact. For instance, cloud-based ERP for supply chain management helps distributed teams become more scalable, visible and predictive. Legacy ERP can continue meeting the needs of financial operations.

Full Cloud ERP Replacement

In this approach, organizations entirely move ERP to a modern cloud-based suite. Digital ERP gives them the full advantages of ubiquitous access, faster updates, scalable infrastructure, embedded analytics, and easy integration with future technologies. This allows your business to continue aligning with changing business needs in the future. In fact, Cloud ERP migration is best suited for firms that have depreciated much of their legacy systems or have significant technical debt associated with those systems.

The optimal alignment approach balances business priorities, budget, and appetite for change. Every company’s ERP journey is unique.

Realizing the Benefits

Whichever alignment method organizations select, the fundamental goal is making sure ERP systems advance rather than impede ERP digital transformation plans. With properly aligned ERP strategies, companies can realize major benefits like:

• Agile operations that rapidly respond to market changes
• Omnichannel customer experiences driving growth
• Higher employee productivity and satisfaction
• Improved data visibility for strategic decisions
• Stronger platform for innovation initiatives
• Reduced TCO through consolidation and cloud migration

The first step in achieving these results is to ensure a very tight linkage between ERP and digital transformation business objectives. Thus, ERP investments must directly serve top strategic goals.

Being able to track success metrics for those critical goals also helps organizations measure ERP impact and provide feedback for continuous enhancement to retain its competitive differentiation.

Conclusion

With every company becoming a digital business, ERP systems cannot retain their status quo. As the enterprise follows digital transformation initiatives, an ERP environment will need to change in lockstep to deliver growth and performance.

The need to make these ERP models more fit for purpose now lies in planned action and the necessary strategic plans. Methodically studying existing ERP implementations, spelling out digital goals, and leveraging cloud-enabled systems and processes as the critical data foundation of an agile digital future allow organizations to get ERP configured as the essential data underpin for a digital thriving tomorrow.