IT Agility and ERP: A Partnership of Intelligent Proportions

The term “IT agility” is more than just another technology buzzword tossed around the boardroom. It is the organizational principle that values the ability to adapt effectively and quickly to every changing customer, market, and employee demand.

But at the core, a mix of business data, processes, and applications is required to work within one ecosystem.

As quickly as customer and market demands change, business priorities shift to react. Every day we see this happen as intelligent technologies such as predictive analytics, the Internet of Things (IoT), artificial intelligence (AI), machine learning, and blockchain. These technologies rise to the top of executives’ wish lists.

However, without the right ERP suite, and the right approach to extend it, executives may never fully realize the full potential of their digital investments.

Is Your ERP System Ready for an Update?

For decades, enterprise resource planning (ERP) systems have been viewed as enablers of business-critical functions. This traditional view has turned a once-novel technology into a tightly coupled, monolithic, and business-critical system that is posing some significant challenges for today’s digital strategies.

In some ways, the classic setup of an ERP solution can support highly automated processes and enable users to interact with one interface. However, its tightly coupled structure can impede the isolation and reuse of specific functionalities needed to test new business models, scenarios, and customer experiences. Since different components share the same data or code, companies must scale the entire ERP system. Therefore, instead of selectively scaling services that are experiencing a shift in demand, companies are risking the stability of their digital cores.

The monolithic nature of traditional ERP systems is characterized by self-contained, intertwined applications that provide end-to-end functionality for a particular task. As a result, such systems become critical for running a company’s operational business, as they dictate whether a company can, for example, manufacture goods properly, run an undisrupted e-commerce store, or manage finance and accounting activities without error.

Consequently, modifying such a monolithic, tightly coupled, and business-critical system often mandates extensive, highly governed change management processes. IT teams are tasked with considering every possible connection and interaction with other components by conducting extensive testing, documentation, and multiple quality gates. Changes can easily take many months and still bear the risk of disrupting daily business. Highly modified systems can also become increasingly complex to maintain over time and cause a series of changes implemented through the regular deployment of patches and upgrades.

Intelligent Innovation with Minimal Risk

Reacting to changing customer demands and market dynamics in real time calls for a rapid and iterative trial-and-error approach that allows for fast experimentation with new functionalities — without adding risk to daily operations.

Developed on a platform outside the core ERP system, side-by-side solution extensions are made available through standard application programming interfaces (APIs) and called from backend systems. These extensions can take various forms including: simple modifications, completely new processes, standalone applications with separate data persistence, and leading-edge capabilities like machine learning or IoT that are embedded into business processes.

By extending the core ERP on an external platform, businesses can eliminate tight coupling. Doing so provides the freedom to experiment with new functionalities, test rapidly, and avoid lengthy approval processes – all while keeping daily operations stable.

This tactic is especially useful when bringing new machine-learning scenarios to life. By removing workload from a core ERP system and outsourcing it to an extension platform, businesses can enable computationally intensive innovations such as recognition and classification of voices and images, which often compromise system performance.

For example, SAP provides predefined side-by-side extensions and offering tools that support the development of innovations such as:

  • Machine learning foundation: Core API services ease the training and consumption of machine learning models and functional capabilities such as image processing, face recognition, natural language processing, and text classification.
  • IoT microservices: The development of IoT applications is simplified to enable functionalities that connect devices and store, analyze, and integrate data with other applications.
  • Cloud platform blockchain service: Foundational services create blockchain nodes and streamline business logic development along with enabling services like timestamping and proof-of-stake or history.

Clear Path to a Future of Next-Generation ERP and IT Agility

SAP embraces the concept of supporting IT agility through the next-generation, intelligent design of SAP S/4HANA. As core ERP, the suite enables seamless, end-to-end integration across functions, process standardization across geographies, and the sharing of trustworthy insights across business units. And, with the addition of SAP Cloud Platform, these promising capabilities can be further extended with easily integrated solution extensions made ready-to-use or developed in-house.

Discover more extension ideas and use-case scenarios:

Next week in the “Enterprise Architecture and Landscape Strategy” series, explore how analytics and machine learning amplify the value of data-driven transformation.

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Thomas Küther is a business transformation and process consultant at SAP.