The days of the monolithic ERP system are numbered. Many businesses are tired of confining their business practices to those purely defined by SAP and Oracle. Instead, companies are seeking an outcomes-based approach, selecting an optimized mix of vendors and technologies to help them best achieve their goals. The era of the composable ERP is upon us, and organizations who adopt this strategy stand to differentiate themselves from their competitors.
In this post, I define what a composable ERP strategy is and explore some of the benefits that an organization can derive from adopting this framework. As I’ve traveled around the world presenting these principles to IT leaders, there’s been a lot of interest and curiosity about the topic. And if you’re not able to make it to one of our Street Smart events, here’s a high level look at what composable ERP is and how it differs from the current ERP systems your organization may be using.
What is composable ERP?
Adopting a composable philosophy allows you to create a workflow that focuses on outcomes, rather than shoehorning your unique processes into a rigid technology. After all, it’s becoming increasingly clear that there isn’t a single solution that’s a perfect fit for all companies. Today, it may well be a mixture of people, vendors, solutions, and technologies, assembled in a modular fashion, that can best meet the needs of your business. By building — or composing — an ERP in this fashion, your organization has the flexibility to utilize different technologies and platforms to best serve your business.
There are three key drivers for organizations shifting to a composable ERP strategy:
- Next-generation subscription-based ERP systems. Both SAP and Oracle are seemingly pushing their customers into a one-size-fits-all ERP solution that’s hosted on vendor infrastructure. This can cause your organization to lose flexibility as these vendors exert more control on these systems.
- An abundance of solutions. In the world of software-as-a-service (SaaS) platforms, there are more solutions available now than ever before. These programs are often tailored toward a specific industry, need, or niche, and they can frequently provide results that are superior to a one-size-fits-all system.
- Data integration. Previously, it was difficult to get disparate systems to talk to each other, share data, and ensure the correct role-based access. Today, there are data orchestration layers that address these issues of interoperability and integration, enabling systems to plug and play with each other while preserving data integrity.
Let’s look at an example of a composable ERP strategy for a company that uses SAP ECC for most of their core business functions. At the request of their sales team, the organization decides to implement Salesforce.com as their customer relationship management system to better support that group. Additionally, the Human Resources department decrees that Workday is their HR solution of choice, because it promises to shorten the time to hire and to boost employee retention. A composable ERP strategy would enable the organization to adopt each of these solutions to solve each of the team’s specific challenges.
It’s important to note that implementing a composable ERP means more than being able to implement a modular solution for each business unit. At its core, a composable ERP strategy represents a philosophical mind shift toward not letting the technology dictate your business and realizing that technical solutions take a backseat to business objectives. Five years from now, the HR department may find an alternative solution to Workday that is an even better fit for the department and returns a higher ROI. A composable ERP strategy empowers the organization to be nimble, swapping out one HR tool for another that might yield higher returns without disrupting operations.
This scenario contrasts directly with the way in which ERP systems at SAP and Oracle are evolving today. Currently, it appears these vendors are building an inflexible, monolithic system in which an organization must pay for custom development to fit their needs. Furthermore, as SAP and Oracle migrate to their next-generation ERP systems, they’re also taking more of the technology stack away — such as the hosting infrastructure and technical support —as they move to a subscription-based billing model. This causes organizations to lose not only the flexibility of their current system, but also their negotiating power with these vendors. They can no longer decouple that ERP software from the vendor selling the subscription.
Benefits of composable ERP
Choosing a composable ERP strategy will require your organization to untangle itself from a monolithic ERP system but doing so can yield substantial benefits. Primarily, your organization can achieve a degree of flexibility that is not available with a one-size-fits-all solution. This flexibility manifests itself in the following ways:
- Thrive in an optimized and unique environment. When your organization can interchange components of your ERP, you can customize the environment to your exact specifications. You can configure services in a modular fashion rather than having to work around this need by writing custom implementations for the out-of-the-box ERP system. Every business has unique rules, operating assumptions, and needs. Transitioning from customizations to configurations can enable you to achieve those outcomes faster while your competition is still trying to wedge their business outcomes into a given technology.
- Evolve at your speed, not the vendor’s. If your organization has a monolithic ERP system, it’s captive to the speed of innovation of a single — often large and slow-moving — vendor. You only gain access to the features and functionality as they are released, usually in a massively disruptive upgrade or patch. Instead, with a composable ERP strategy, your business can leverage a solution from a small, nimbler provider that’s laser-focused on a particular piece of the overall technology stack. When you’re following your organization’s own roadmap, you have a clear advantage over the competition.
- Extend the life of your current ERP. Rather than being pushed to upgrade your ERP to meet the requirements of the vendor’s subscription-based services, your organization instead keeps those core components and extends functionality with other vendors. You should stop thinking about SAP and Oracle in a singular context but instead view the ERP system as a set of discrete functions, such as order to cash, procure to pay, finance, operations, manufacturing, business intelligence, payroll, and more. While most of that functionality may be contained in the SAP or Oracle ERP systems, your organization may find some of their features suboptimal. Transitioning to a composable ERP strategy lets you take advantage of the best features of your current systems while implementing other technologies in a modular fashion to add the functionality that you lack.
One benefit that I have yet to highlight is ROI. Although not all composable ERP strategies will result in decreased costs, I believe that dwelling on that fact is myopic. Too many folks hang their hats on cost savings when they should instead be focused on ROI. And that means looking at how the outcomes produced by this additional technology will be superior to those of the core ERP system.
Each organization must put a dollar amount on the outcomes it’s able to get today versus what it could achieve tomorrow with better technology. That outcome could, of course, be cost savings, but it could also include more operational efficiency, less errors, elimination of rework, improved adherence to compliance and regulatory requirements, reduction of risk, and more. When an organization decides whether to adopt a composable ERP strategy, it must consider the ROI of all possible outcomes, not just the cost savings.
Rimini Street and your composable ERP journey
Businesses are at a crossroads. They must decide whether to adopt the subscription-based models of the next-generation SAP and Oracle solutions or completely transform the way they do business with a composable ERP strategy. When making this decision, it’s important to know that Rimini Street is here to help with composable ERP support.
Rimini Street’s Primary Support Engineers (PSEs) have an average of 20 years’ experience with these systems and can help you on your path to a composable ERP. Furthermore, we have the tools to evaluate software that best suits the needs of your organization and can conduct the ROI analysis of adopting a given solution.
It’s high time that tech takes a backseat to the business outcomes you need — and Rimini Street is ready to help guide you on this journey.
- Read: Say yes to an ERP innovation strategy
- Watch: What is composable ERP?
- Solution: Professional Services
