Ulrich Kreitz
Head of Managed Services Germany, NTT DATA Business Solutions
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From integrated information and streamlined processes to cross-department collaboration and accurate forecasting, Enterprise Resource Planning (ERP) offers many competitive advantages.
Much has been written on the subject of the future of cloud and ERP environments from a high-level perspective (with reports of the global ERP market reaching more than $66bn by 2026), but my focus, in this article and throughout my career, is on the real-world implementation. Strong relationships built with clients have always come through improving processes and delivering tangible results.
Product offerings across the sector are evolving. The way we work with our clients ought to be developing in parallel. The sense of partnership and need for trust is growing, as roles, responsibilities and boundaries shift.
It is from this perspective that I have viewed recent changes in the delivery of ERP products. Naturally, this has given me a useful starting point to look to the future too. As more cloud-based technology comes online and opens more exciting opportunities for optimization, product offerings across the sector are evolving. The most important thing for me is that the way we work with our clients ought to be developing in parallel. The sense of partnership and need for trust is growing, as roles, responsibilities and boundaries shift.
How should organizations move forward, to ensure that the personal connections within client engagement are nurtured, in conjunction with embracing new tools and ways of working? And what are the implications of today’s changing landscape? Here, the cloud, new business models, new customer requirements and shifting roles and responsibilities all come into play.
The impact of the cloud
At NTT DATA we have spent the last few years demonstrating how the cloud, and all its benefits, is revolutionizing client ERP landscapes. We are clearly not alone in understanding its potential: the cloud-based ERP software market is expected to grow by 13.6% annually. Furthermore, 50% of existing ERP customers said they would explore new suppliers to renovate or replace their systems.
Of course, each customer has unique goals. We recently helped a discrete manufacturing client replace a heterogeneous landscape with one central system of standard delivery processes, across their global business. But change might mean starting small with a pilot piece of work. Our manufacturing client started with one location, for example, delivered in an initial six-month period, before moving on to implementation across 24 countries. Supplying vital air and water filtration equipment globally, it was important supply chains remained uninterrupted as they were modernized. Testing becomes important when, as is sometimes the case, a business commits to a cloud-based ERP product without fully understanding the impact of implementation in detail.
Delivering any solution also often means negotiating with software partners who, of course, have their own vision and strategy. Data handling is another consideration. The customer’s own, suppliers’ or third-party hyper-scale data storage centers are all options to review.
New business models
Given the variables and complexities at work, implementing, integrating and managing today’s ERP solutions have led to new ways of packaging and selling solutions. The direction of travel is away from selling software licenses, hosting, maintenance and managed service packages and towards a more consultative model. This means subscription pricing replacing more traditional models based on user numbers and software updates and renewals.
We have seen that contract lengths are increasing from one, to three, to five years. One immediate impact of this shift is the loss of cash flow associated with an initial upfront software investment. For customers to become profitable for us in the future, we will need to work harder to grow value over whole contract periods. Forming strong relationships and providing quality support will only grow in importance.
Being able to offer easily-integrated additional products alongside core cloud industry solutions will add value – solving more of their problems. What better way is there to position yourself as a go-to trusted partner?
Further development of independent Intellectual Property (IP) is also likely to become an increasing part of making money from customer relationships. Being able to offer easily-integrated additional products alongside core cloud industry solutions will add value. Extending what is offered to customers means solving more of their problems. What better way is there to position yourself as a go-to trusted partner?
New customer requirements
Customers are changing too. As time goes on, more will turn away from wholly bespoke systems. Efficiently adopting cloud-based ERP might mean accepting more off-the-shelf processes and adopting existing best integration practices. Examples include delivery through preconfigured mobile apps and integration via standard whitelisted APIs.
Others will, perhaps, struggle with the idea that getting the best results from the cloud might mean finding new ways to work. For many, there are operational and market obstacles to overcome too. Covid-19 and other socio-political uncertainties of the last two years linger. Given these circumstances, it is likely many companies won’t have much spare energy to invest in their ERP rollout.
Shifting risks, roles and responsibilities
Therefore, suppliers like us are being asked to accept more of the client risk, and own processes in the future. Being a trusted supplier means taking accountability when things don’t run smoothly too, because clients’ resource availability is increasingly stretched. There is still a lot of work to do for suppliers here. As recently as 2019, 45% of ERP projects suffered cost overruns and 58% were not delivered on time, according to a report from Panorama Consulting.
Today ERP implementers, such as NTT DATA, feel in a state of flux. Can we keep customers’ trust through this period of evolution as we adopt, and adapt to, new cloud-based solutions?
Today’s landscape sees a clear opportunity to seize the initiative, understand the product benefits, build services that create genuine value and, most importantly, continue to deliver real, lasting positive operational results.
I am confident the answer is yes. If you are in the business of using or implementing cloud-based ERP systems, today’s landscape sees a clear opportunity to seize the initiative, understand the product benefits, build services that create genuine value and, most importantly, continue to deliver real, lasting positive operational results. However, both suppliers and customers will have to be flexible as change gathers pace. Achieving this won’t happen overnight. It will need care, thought and confident leadership.
We are all going to have to look at our supplier offering. Longer, more consultative contracts are likely. We will have to share more risk, too, as we deliver more responsive and innovative products. So, trust me when I say it is an exciting time to be in our industry.
