Enterprise resource planning (ERP) solutions have matured and expanded their reach to supportmost business functions, from back-end processes like accounting, HR, procurement andmanufacturing to front-office functions such as sales force automation (SFA), marketingautomation and ecommerce. Businesses rely on ERP to not only cut costs by eliminating redundant processesand automating mundane tasks but also to provide employees access to critical information tomake better decisions, faster.
As companies increasingly rely on ERP to run their businesses, these systems continue toevolve to incorporate new technologies and support a broader range of functions. In thisarticle, we’ll cover eight major trends to keep an eye on in 2023 and beyond.
Key Takeaways
- Businesses continue moving to cloud ERP. The global cloudERP market is expected to grow 13.6% annually and reach $40.5 billion by 2025, per Statista.
- Artificial intelligence (AI), and specifically machine learning, help optimize morebusiness processes, provide new insights and create personalized customer interactions.
- ERP is further integrating with other technologies, such as internet of things (IoT)devices and social media, to automate even more and provide greater visibility and abetter customer experience.
- A solution that can support remote work has become critical as organizationsincreasingly rely on distributed workforces in the wake of the coronavirus.
8 ERP Trends for 2023
1. Cloud ERP
Historically, many organizations used on-premises ERPapplications and were reluctant to entrust core business applications to thecloud, but that’s changing rapidly. Businesses are adopting cloud ERP to takeadvantage of a simpler deployment, lower costs, elasticity (i.e., the ability toonly use the necessary resources at any given time), new functionality, less needfor internal IT resources, and the ability to easily add users and functions toaccommodate business growth.
The pandemic has further illuminated the value of cloud ERP and accelerated the shiftfrom on-premises software, partly because cloud-based applications allow employeesto get their work done from anywhere with an internet connection—theydon’t need tobe in an office. Some CFOs looking to cut costs amid the economic uncertainty areactually increasing investment in cloud ERP to drive savings and better supporttheir remote workforce. A 2020survey of finance executives indicated that 20% expect to spend more on cloud ERPtechnologies.
2. Two-Tier ERP
Historically, many companies tried to deploy a single ERP system for both theheadquarters and all regional offices and subsidiaries. But in practice, thatapproach was often costly and extremely challenging to implement; subsidiaries oftenhad specialized requirements, didn’t need the full functionality of thecorporatesystem and struggled with the one-size-fits-all approach.
That’s why two-tier ERP is one of the top ERP trends in 2023. Two-tier ERP is a strategy that enablesorganizations to leverage their investment in existing ERP systems at the corporatelevel (tier 1), while subsidiaries and divisions operate using a different ERPsolution (tier 2), which is often cloud-based. Larger companies may continue to usetheir core ERP system for financials and other core processes, while smallerbusiness units turn to solutions that address their specialized needs. Theeffectiveness of this approach depends in part on the ability to exchange databetween the tiers—some tier 2 cloud solutions include built-in capabilitiesforintegration with corporate ERP systems.
There are a number of benefits to this approach. It’s often less costly thanretrofitting the corporate ERP system to work for the entire business. A tier 2solution may be simpler to implement and provide subsidiaries with more flexibilityto respond to changing business conditions. In addition, the two-tiered approach maybe better suited for organizations in high-growth mode. As Gartner puts it, large organizations should“assess whether a two-tier ERP strategy would offer more business benefit thanasingle-tier one, especially by modernizing small, potentially fast-growing businessunits.”
3. Digital Transformation
Digital transformation refers to integrating digital technology into all businessfunctions to improve daily operations. This approach can often boost revenue andcompetitiveness while increasing employee productivity and improving customerservice and communication.
Since an ERP suite typically touches most areas of a company, it’s a logicalplace tostart to facilitate this transformation. Indeed, Accenture’s 2020 ERP Trends report foundthatthree-quarters of U.K. businesses are using cloud ERP as a gateway to modernization.Several of the trends highlighted below—including the integration of ERP withIoTdevices and the adoption of AI and advanced analytics—can be considered partof thisdigital transformation.
4. Other Technology Integrated With ERP
While modern ERP is a main element in a company’s digital transformation, it isonlypart of a bigger investment in technology. Companies are integrating their businessapplications with other new technologies, including IoT, to improve core processes.For example, retailers use warehouse management systems that collect data frommobile scanners and smart conveyers to track the movement of goods within thewarehouse. Some companies integrate ERP with ecommerce to improve online orderworkflows, automatically triggering orderfulfillment, updating inventory levels and recording payment.
The year ahead will also see a greater connection between social media and ERP. Byseeing the social media activity of customers and prospects in one place, companiescan develop a more complete understanding of their audience that allows them toenhance their digital marketing strategies and the customer experience. Byintegrating data from social media interactions with sales order history andcommunication with customers, companies can gain more insights about the entiresales process and experiment with new ways to target and sell.
5. Personalization
Historically, ERP platforms with complex scripting languages were difficult tocustomize to the specialized needs of each business. But organizations can now takeadvantage of cloud ERP platforms designed for easier configuration, or what analystscall “low-code” platforms. There’s also a growing range of ERPsolutions tailored tothe needs of specific industries.
As companies focus on delivering more personalized, relevant experiences tocustomers, they need ERP systems that can accommodate those needs with features likehighly customizable dashboards. One emerging trend is the growing popularity ofAI-based assistive and conversational user interfaces such as chatbots, which caninterpret user voice or text input and respond to questions using customer and orderinformation stored within the ERP.
6. AI-Powered Insights and Improvements
Artificial intelligence and machine learning capabilities embedded into ERP systemswork behind the scenes to help meet increased demand for personalization and improvea broad range of business processes. While companies could add AI functionality tosome ERP systems in the past, more vendors now offer ERP software with thesecapabilities built in.
AI can deliver significant benefits for businesses, including:
More insights. As organizations gather more operational and customerdata than ever before, they look to AI to deliver valuable business insights basedon that information. AI technologies scan vast amounts of unstructured information,quickly identify patterns and predict various trends that wouldn’t be possibletospot with manual number crunching alone.
Improved processes. AI helps to automate and improve a whole rangeof processes. For example, consider a manufacturer that adopts a just-in-timeinventory strategy, which aims to deliver components at the last possiblemoment to minimize inventory carrying costs. AI, in the form of machine learning,can optimize the supply delivery and labor schedules to increase productivity andlower costs. IFS’s 2019 study found that 40% ofmanufacturers planned to implement AI for inventory planning and logistics, and 36%intended to use it for production scheduling and customer relationship management.
7. Predictive Analytics
The hunger for AI-infused ERP highlights organizations’ increasing desire tominetheir operational and customer data for new and relevant insights that will increasethe top and bottom lines.
While it’s always been possible to analyze ERP data to reveal what happened inabusiness’s past, a focus in 2023 and beyond is using predictive analytics touncoverand address what is likely to happen in the future. For example, software withmachine learning capabilities can comb through a maintenance company’s dataaboutmachine repairs to predict when breakdowns are likely to occur. The organization canoptimize maintenance schedules so it services or replaces parts right before theycause problems.
8. Mobile ERP
ERP providers have offered mobile support for some time, and mobile apps are becomingthe norm. ERP solutions are evolving to provide on-the-go access to criticalbusiness data, allowing employees to conduct both back-end and front-end tasks nomatter where they are, from the warehouse floor to a retail checkout terminal to anairport. Mobile ERP can also encourage collaboration for dispersed workforces indifferent time zones.
Mobile ERP apps designed with a user-friendly interface can help users get work donewhen they’re not in front of a computer. Employees can complete tasks likeexpensereporting, call logging and time tracking, and they can view the status of criticalworkflows or approvals from their phones. Mobile ERP offers real-time data andinsights and provides overall benefits including always-on remote access, improvedproductivity, faster and more accurate data capture and increased agility.
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What’s Next? The Future of ERP
The transition to cloud ERP will likely only accelerate as companies realize it’s mucheasierto gain the speed and agility they need to compete in today’s marketplace if theyshift ERPand its associated modules to the cloud. Thoseorganizations that have already invested in cloud ERP will look for ways to further utilizethe power of the cloud.
In the near term, organizations will also continue to focus on ensuring their ERP software isoptimized for remote work. That includes providing more mobile ERP functionality, ensuringsecure remote access, supporting remote training and increasing automation of workflows.
Another trend to watch: further expansion of ERP supply chain management capabilities to helpprotect the organization against supply chain disruptions or other rapid changes in globaleconomic conditions.
As ABI Research Principal Analyst Michael Larner put it, “Supplychainorchestration requires software to be more than a system of record and provide risk analysisand run simulations, enabling manufacturers to understand and prepare for supply chainshocks.”
