AI-Driven Platforms Will Move Business Applications Beyond The ERP Era
Forrester’s vision for the future of business applications is that modern specialist SaaS platforms will replace on-premises “omnisuites.” Forrester clients can read more about this vision in our new report: “Create A Modern Software Strategy With AI-Driven Platforms And Their Ecosystems.”
The enterprise resource planning (ERP) era is over. The ERP model of a single integrated suite to handle every process for every division within the enterprise did not work, for many reasons. Instead, application development and delivery (AD&D) leaders need a new, eclectic strategy based on a handful of modern, open, smart, flexible SaaS platforms. The most successful SaaS platforms will specialize so that they can embed best practices in their solution, apply AI to automate processes, and continually innovate ahead of market trends. That specialization could be horizontal, such as finance or hybrid cloud management, or vertical, such as digital operations for manufacturing or professional services.
The eclectic strategy doesn’t mean choosing 57 different products and trying to stitch them together yourself. You’ll still have preferred sources from whom you’ll buy multiple products, but you’ll apply a discriminating selection process that avoids the weaker parts of the portfolio. Key to our vision is that leading platforms will be far more open than their omnisuite predecessors, with microservice architectures and productized integrations with other peer platforms. They’ll also attract broad ecosystems of add-on tools and extensions, such as recommendation algorithms and industry-specific applications. The ecosystem will be crucial for delivering a wider range of innovation and domain expertise beyond what the platform vendor could do by itself.
Unfortunately, the ERP acronym lives on, with two distinct meanings: firstly as a euphemism for consolidated financials and secondly as the oxymoronic term “midmarket ERP.” Both have a place in the new SaaS platform landscape; it’s the original, literal interpretation of ERP that is now obsolete.
Of course, it won’t be easy to migrate to this new multiplatform landscape from a fragmented portfolio of dozens of on-premises instances, hundreds of point solutions, and thousands of manual workarounds. AD&D leaders should nonetheless start to reduce the technical debt, even if you can’t pay it off completely. Enterprisewide rip-and-replace digital transformation is one approach, but it is disruptive and risky. You may prefer a gradual approach via a series of minor improvements — digital evolution rather than digital transformation. This relies on creating the right environment for experimentation, mutation, and natural selection, and it also means balancing local autonomy, where possible, with central governance, where necessary. You can keep the legacy core applications that are working well while improving their effectiveness, thereby extending their life by using digital process automation tools such as low-code development and robotic process automation. Meanwhile, you can start moving the less effective parts to SaaS platforms, function by function and business unit by business unit.
Truly digital operations require a modern business application portfolio, built on flexible, AI-driven SaaS platforms. AD&D leaders should create an eclectic strategy that combines a few leading specialists and their ecosystems — then you have to decide whether to migrate rapidly to that new vision or create the environment for gradual digital evolution.