5 Top ERP Trends for 2022—And Their Implications for IT Leaders

It would not be an exaggeration to call ERP (enterprise resource planning) the brain of an organization’s IT infrastructure. After all, an ERP system streamlines, standardizes and integrates a wide range of vital business processes across different business functions.

Implementing an ERP solution ranks among the most intensive projects any IT leader will undertake. In addition to significant investment, the decision has the potential to impact all of the company’s strategic business units. Hence, it is imperative for a CIO to follow the best practices for implementing an ERP solution and then keep a close eye on the trends that shape it in the future.

Here’s a look at how the ERP category is evolving as an enterprise-wide solution and how these trends will impact IT leaders.

Customization gives way to standardization

The traditional practice of enterprise technology leaders customizing an ERP solution to meet their specific enterprise or business needs is giving way to implementing an off-the-shelf solution. A key driver of this is the high cost of resources to keep custom deployments abreast of the latest features—a cost many CIOs forgo in favor of stagnation at the risk of falling behind.

“There are regular ERP updates which can be in the form of features and functions that are brought into the live environment. If there is a high level of customization, the CIO will need to adjust the update in the context of the customization. This is cumbersome and incurs additional costs. By moving toward a standardized ERP solution, IT leaders can avoid these issues, and most are following suit,” says Abhishek Mundra, director of enterprise platform services at research firm Everest Group.

Implications for CIOs: In addition to avoiding cost and complexity, implementing an off-the-shelf ERP solution also helps speed time to market and makes businesses agile. “Earlier, due to customization, the implementation life cycle took between four and five years. With an off-the-shelf solution, implementation now takes only six months to a year,” Mudra says, adding that IT leaders using off-the-shelf solutions can better spend their time modernizing processes instead.

The best solutions are ahead of the enterprise-wide approach

Earlier CIOs used the implementation of an ERP solution and gradually expanded it to the various strategic business units in the enterprise. However, rapid digitization and the SaaS revolution are pushing IT decision-makers to adopt a different approach.

“Leaders in enterprise technology are aggressively pursuing digital initiatives such as marketing automation, customer experience, social media marketing and HR transformation,” says Mundra. “In these areas, however, cloud ERP solutions still lag behind in terms of functionality compared to their on-premise versions. So for a core function, such as finance, CIOs choose a cloud ERP solution from a leading vendor that meets their requirements, but for other areas, they adopt best-in-class point solutions.”

Implications for CIOs: To get the most out of the best SaaS solutions, IT leaders must shift their emphasis from implementation to integration. To get the best of both worlds—ERP for their core functions and a myriad of targeted solutions for vital business needs, such as Workday for HR or Salesforce for CRM—CIOs must undertake process modernization and take on more of an orchestrator role.

Integration takes center stage

With the emergence of next-generation technologies such as IoT, analytics and AI, enterprises are looking to gain business advantages from them. Taking a cue, leading ERP vendors are aligning with this trend by integrating their solutions with such emerging technologies, and IT leaders are following suit.

“With the availability of web services and JSON, it has become easy to integrate an ERP solution with other satellite applications,” says Achin Sharma, vice president of IT at logistics company Movin India.

Abhay Bapna, IT director at FMCG company Adani Wilmar, agrees: “We have thousands of sensors in our plants and each sensor sends data every 15 seconds. By moving ERP to the cloud and integrating with technologies like real-time analytics, massive amounts of data can now be processed on the fly.”

Implications for CIOs: Integrating ERP with other technologies has eased the pain points of CIOs to a great extent. For example, the financial module is a key component of an ERP solution. In the absence of real-time data, it took several days at the end of each month to crunch the numbers and ultimately produce a management report. Now with near-real-time replication, CIOs can complete this month-end activity the very next day, making the entire process seamless and time-efficient. Similarly, in healthcare, electronic medical records are integrated with the ERP solution, providing better insight to healthcare practitioners.

The rise of industry-specific solutions

Given the diverse needs of each vertical, a one-size-fits-all approach does not meet the expectations of business and technology leaders. This gives rise to ERP platforms that offer functionalities catering to specific business verticals.

“Industrial ERP solutions are increasingly finding preference among CIOs. There are emerging vendors that have found their vertical niches. For example, Infor has an ERP solution for the manufacturing vertical; Salesforce offers its ERP for healthcare, banking and financial services verticals; and ServiceNow is strong in the telecommunications and public sectors,” says Everest Group’s Mundra.

Implications for CIOs: Industrial cloud ERP solutions allow CIOs to gain insight into the best practices followed by their peers. Additionally, having a broad customer base offers a better likelihood that the solution provider will invest in product development and innovation.

The move to cloud

Enterprise technology leaders are replacing their legacy, on-premises ERP solutions by moving to the cloud. While the benefits of using the cloud were already recognized, the pandemic further highlighted its value as it enabled employees to work from anywhere.

“Currently, about 60% to 65% of the ERP market in India is still on-premises. This will change in the next three to four years, when the cloud will overtake on-premises with about 55% to 50% deployments on it. This trend is quickly catching up,” says Shitanshu Upadhyay, head of research at global market research firm Strategic Market Research.

Gartner defines the cloud ERP market as an application technology market. According to the technology research and consulting firm, across addressable market segments, enterprise IT spending on public cloud will overtake traditional IT spending in 2025. It predicts that nearly two-thirds (65.9%) of application software spending will go to cloud technologies in 2025 versus 57.7% in 2022.

Implications for CIOs: By moving their ERP solutions to the cloud, CIOs can benefit from lower costs, new functionality, mobility, easier deployment, elasticity, less need for internal IT resources, and the ability to easily add users and features to to accommodate business growth.