Our CEO Shares his vision on the future of ERP Modernization, and how systems of engagement are replacing systems of record for Core Operations programs.
Last month, over 20,000 members of the ServiceNow ecosystem – both new and old – descended on Las Vegas for NOW’s annual customer conference, Knowledge 2024.
There, lucky attendees experienced three days of amazing keynotes, customer and partner sessions, new technology demos – hello AI! – plus all of the best of Vegas’s networking parties and a closing performance by Mr. Worldwide himself, Pitbull.
It was a truly special month for the CoreX team, as well.
While, collectively, our executive team has attended 35+ Knowledge conferences among us (and counting!), this was the first year for the CoreX logo to be among the attendees, our first “official” Launch and Networking parties with our NewSpring investment team, and our first ERP panel session, led by ServiceNow and joined by leaders from Dropbox, Stanford Medical Group, and our very own CEO, Rick Wright.
In the coming months, we will be sharing a host of new content, articles, roundtables, and research on ServiceNow’s new Source to Pay, Finance, and Core Operations product suite. There, we will cover why we see this as the exact right time to capitalize on the power of workflows in Core business, and why we bet our company on the success of this new product suite.
To kick off our new ecosystem content, we thought it was appropriate, to begin with this very critical moment – and a summary of our very first Knowledge session.
In this article, we tackle one of the largest questions kicking around the ERP modernization space right now: Does ERP need to evolve to embrace today’s market conditions, and what does that future look like?
ERP Systems: Stone Dead in a Minute… (or not so fast?)
Is ERP dead? Our K24 ServiceNow moderators began their exploration into the future of core business strategies by asking if Enterprise Resource Planning systems do have a future.
While that’s a catchy thought, if anything, the strategic importance of enterprise resource planning has become more important in 2024. As business demands and the pace of change in the enterprise continue to accelerate, of course, the underlying application architecture must evolve as well.
Unfortunately for many organizations, despite decades of “digital transformation,” Finance and Supply Chain processes remain manual.
What’s the hold up? According to ServiceNow’s 2023 Analyst Day Insights report, both digital transformation initiatives and many ERP modernization technology programs are stalled due to ERP migration initiatives, driving up tech debt and leaving many procurement and financial operations teams – even in world-class organizations – still working in swivel chair technologies first implemented in the 1900’s (as the kids say).
The ERP systems entrenched within today’s corporate enterprises have been customized for decades to align with new business models and operational processes and are hard-coded with years of tech debt.
That legacy then leaves rigid data stores lacking any ability to provide a modern user experience and leverage new technologies like AI to drive collaboration and operational efficiencies. But as business evolves, inevitably the ERP space, and the workflows and technology supporting that space, also need to evolve.
During the Knowledge discussion, several themes emerged from the panel conversation, including:
We’re going to dive into all three in this three-part Article series, beginning with the Panelist’s 411 vision on the need to unify the myriad layers of ERP technology.
ERP Proliferation
The session kicked off by looking at the current operational headache facing Procurement and Supply Chain leaders today – underpinned by multiple ERP systems.
As a solution, leaders shared they’re increasingly looking into the need to create a unified system of engagement (vs. system of record) between these separate technology options to enable and empower a more end-to-end ERP management process.
That sounds like a lot to bite off. Where do we start? For Wright, the first stage is understanding how we got here.
“I'm not sure there's any sizable company out there that has one ERP today,” shares Wright, “Most organizations have multiple ERPs and other point solutions, whether that is SAP or Coupa for procurement, it might be something else for supply chain logistics.” What we see in today’s enterprise is not one single ERP too, but a collection of separate, disconnected ERPs, that run the core operations of all businesses.
That can all lead to a whole lot of tech debt and process complications. According to our Stanford Health panelists, the volume of people and services needed to cross between multiple entities can be mind-boggling – with over 1,500 applications and systems to track in sourcing and procurement alone.
“ERP systems are not going away.” CoreX CEO, Rick Wright, explains, “They are the systems of record of kind of core and key business processes across all businesses. However, there have been efforts over many years to update and modernize ERP systems.
Systems of Record vs. Systems of Engagement
Unfortunately, as Wright and the other panelists shared, “None [of today’s tech point solutions] were designed for centrally orchestrating and automating end-to-end processes because they are too invested in narrow, transaction-level operations at a very specific level, and not so much the broader business processes that rely on those transactions.
Further, major ERP transformation comes with rethinking how companies are executing their traditional business processes. One panelist shared they were in the middle of a major ERP rationalization process, moving from several distinct entities to a shared ERP strategy. And with a new common ERP, they then needed to come up with a new way to provide services to users across the entities.
According to our K24 panelists, today’s leaders, and the industry as a whole, has come to the realization over the past several years that there is a distinct difference between a back-end ERP technology solution and a system of engagement.
Systems of record are built to control core metrics and core data and to provide a single source of truth for financial transactions across the enterprise. Universally, the panelists agreed those will continue to be, to live, and be maintained.
The challenge: Systems of record – while good at specific controls, are historically terrible at fully connecting business processes end-to-end. Without a system of engagement, the only way to do work that spans multiple ERPs is to work in Excel, Email, or some other manual effort to swivel chair between systems.
Enter the Workflow power of ServiceNow, which was specifically designed to bring those disparate systems together in an engagement layer that ties the systems together and brings the relevant stakeholders into the process.
Transactional systems of record still have their place and support how an enterprise runs, with ERP vendors continuing to play an important role, and upgrading their system experiences in their specific solos. The Workflow process takes over the gaps, filling in the white space, and becomes the connectivity tissue between these systems.
For leaders like our Healthcare panelist, “One of the … [important initiatives] we face as an organization is making it easy for people to work, and to help them find the tools and services they need, depending on where they are working… we are leveraging ServiceNow [workflows] to help users find what they need more efficiently.”
To Wright, the current approach to ERP modernization is, “About creating value beyond just how you create a better system of record or how you get better reporting; It’s about business transformation.”
Digital Transformation, Take 2024
According to Wright, this focus on Workflow’s ability to drive value creation is the next evolution of the term Digital Transformation for the rest of this decade.
“I think the industry has moved beyond the ‘ERP simplification’ fad we saw 5 or 10 years ago, where organizations are trying to consolidate five ERPs into one. People are realizing that these systems are there to stay.
“The focus today is looking at the processes that ride across multiple ERP systems. Because the majority of procurement hours get spent in these end-to-end processes. Therefore, improving user experiences, making it easier to interact with specialists – and even find and match invoices or exceptions – significantly improves team efficiency and reduces rogue spend.
“We've been talking about ‘digital transformation’ for 25 years now, but I see this transformation is more of a continual process, broken into distinct stages,” argues Wright.
“I think what you've seen is people digitally transforming specific silos or systems. It could have been procurement, the procurement system itself, and how you manage spend under management and some of those kinds of key metrics. (And there’s been some great work by leading SaaS providers such as Coupa or Ariba on those innovation fronts to improve or specifically orchestrate the role of a procurement specialist.)
“But if you think about that in the context of broader Digital Transformation,” Wright explained, “That's only a level one, improvement, right?
“To get to level two, or level three, or level four of transformation, you need to now start looking across the enterprise. Almost all enterprise processes span multiple parts of the organization, multiple ERP systems. By uniting those processes into a single pane of glass and workflow, the whole source-to-pay process is now digitally transformed, as opposed to just the role of a procurement specialist.
“At least the people we speak to, they've realized that that's where the big value is. It's not optimizing their little components, it's taking a step back and saying, ‘What is that end-to-end process across four departments? And more importantly, how do you get, how do you build an experience that people want to use?’”
To Wright, we’re in the next era of transformation: Connecting all those pieces.
ERP modernization is not a project to modernize your ERP. Instead, he believes the next stage of ERP advancement is a much wider scope of modernizing the landscape of ERP systems that you have across the enterprise.
“It’s a mindset that the entire company must adopt. Asking how can ‘we’ continue to leverage technology advances (user experience, mobile, AI, ML data insights, etc.) to unlock trapped value across the landscape of all enterprise processes.”
Reduce cost, complexity, and employee frustration. Learn how pre-packaged and low-code solutions from ServiceNow can deliver innovation faster and at lower cost and risk than traditional ERP-centric upgrade cycles.