Reports of ERPs death have been greatly exaggerated: why procurement should care

Check out the following excerpt from a 2014 article titled “Does Gartner’s “Postmodern” ERP moniker put a positive spin on what is, in reality, the equivalent of technology landfill”

“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.” – Gartner Says By 2016, the Impact of Cloud and Emergence of Postmodern ERP Will Relegate Highly Customized ERP Systems to “Legacy” Status (January 29th, 2014)

Based on the above, and with the emergence of the digital age in which RPA and AI SaaS platforms offer ‘by-the-drink’ pricing, it would be reasonable to assume that ERP platforms have been “relegated” to back-office oblivion.

However, and based on the announcement earlier this week that SAP will continue to offer ECC support for its legacy business software until 2030, are reports of the death of ERP (still) greatly exaggerated?

The power of legacy

SAP’s reasoning for extending support is that they hope to “get businesses to migrate to S/4 Hana.”

The decision raises many questions, as industry experts openly wonder if businesses should “run legacy business software for 15 more years?”

So much for Gartner’s postmodern ERP era.

The question you may be asking is, why should procurement care? After all, isn’t this an IT and finance issue? Procurement professionals were never really consulted about the decision to implement ERP platforms, nor was our approval or buy-in sought. We were fringe players at best, and, at worst, spectators with little if any choice but to fall in line with the strategy.

The above may all be true, but here is the reality; various polls report that at least 63% of a company’s purchasing is handled through an ERP platform. In short, and as a primary purchasing tool, ERPs remain a reality despite proclamations of a postmodern ERP era and the advent of the digital revolution.

Changing roles

Besides having to deal with legacy ERP systems’ continuing presence, procurement and the larger business world have to face another important challenge: changing roles.

The functional lines and corresponding responsibilities that traditionally defines the role of a CIO, CFO, or CPO are changing. For example, did you know that over the next couple of years CMOs (Chief Marketing Officers) will spend more on IT than CIOs? That’s an overlap with the IT realm as well as the procurement realm.

In such a scenario, CMO’s will take the lead and have ownership for identifying the technologies to assist them as they serve the company’s customers. While offering a modicum of input rather than taking the lead with said acquisitions, both IT and procurement departments will likely assume a transactional role from the standpoint of sign-off and fulfilment.

What this means is that similar to the CMO assuming ownership for the decisions regarding solution requirements, procurement must now step up to the plate to do the same. However, we need a solid working knowledge of what we want and how the technology we choose will either integrate or interface with legacy ERP systems.

Is your procurement organization ready to assume such a responsibility?