What's Next for ERP? Tear Down the Walls

Few systems are more efficient at managing internal data than enterprise resource planning (ERP), but business today happens between companies, and when it comes to managing external information and relationships, ERP falls short. To fill this gap, many organizations are turning to open, hosted platforms that can be more easily accessed and shared.

This vendor-written tech primer has been edited by Network World to eliminate product promotion, but readers should note it will likely favor the submitter's approach.

Few systems are more efficient at managing internal data than enterprise resource planning (ERP), but business today happens between companies, and when it comes to managing external information and relationships, ERP falls short. To fill this gap, many organizations are turning to open, hosted platforms that can be more easily accessed and shared.

If you have ERP in place, you've heard about the cloud connection. There's cloud-based ERP, cloud add-ons, widgets and processes where you can take your existing structure, migrate it to the cloud and live happily ever after. And the reason to migrate is becoming increasingly compelling. Constellation Research concludes that moving to a third-party provider could free up cash to install SaaS products that add new juice to the legacy system.

STUDY: Sharp rise in ERP users mulling support alternatives

But where do you start? A recent CIO study identified a few areas where the cloud can help an ERP platform break out of its shell. These areas leverage a network-centric model to connect multiple business partners and automate shared businesses processes, especially purchasing and financial transactions across multiple systems. And enterprises of all sizes are using them across functions to streamline processes and accessibility for a variety of initiatives, including ERP. Here's how:

* Spend management. ERP systems allow a company to issue purchase requests, route approvals and generate orders. But they stop at the end of the enterprise with the generation of an approved order that must be routed through various channels that are disconnected, and often only semi-automated -- from fax and email to proprietary and costly EDI networks and point-to-point portals.

In cloud computing, services and technologies are delivered over the Internet in real time. The supporting infrastructure is separate from the customer's IT environment. The customer sends the data it needs to share with partners to the cloud, where partners can access and respond to this data. When cloud-based supply chain management applications are integrated with ERP systems, buyers and sellers benefit from a robust network that enables more efficient trading relationships and collaboration across a shared community, regardless of which back-end systems a party uses.

* Financials applications. ERP systems excel at managing financial transactions within the organization. But processing an invoice involves collaboration between buyers and sellers. Cloud-based financial solutions can support this multi-enterprise connectivity and collaboration, and allow companies to better manage the electronic settlement process, such as enabling suppliers to convert paper-based purchase orders and invoices into electronic ones, delivering detailed remittance with electronic payment, and enabling dynamic or sliding-scale early payment discounts.

Cloud applications can also drive the kind of collaboration between buyers, suppliers and financial institutions required to better manage payables, days payable outstanding and cash, while providing trade and receivables financing options that ensure their mutual financial health -- a must in today's still-recovering global economy.

* Demand management. ERP systems can connect a buyer to a seller to transmit a purchase order. But they don't connect buyers and sellers. This is being done in the cloud with solutions that allow buyers and sellers to find one another. Much like services such as Match.com, these solutions connect sellers with buyers in active purchasing cycles with specific needs that they can fill. And they deliver results. Buyers and sellers spend less time finding each other and negotiating and making transactions. This lowers overhead for buyers, and increases profits for sellers by an average of 20% to 30% year-over-year.

* Order management. In certain areas, ERP does order management and does it well. In other areas, companies are supplementing their efforts with cloud-based applications. Services procurement like temp labor, for example, involves interactions between the buyer and seller. Such interactions are more suited to cloud-based applications that are shared by electronically connected trading partners and can facilitate the collaboration of a request for candidates, resume submission and proposal, counter-proposal and acceptance.

In addition, with the right cloud-based application in place, buying organizations can drive a more efficient settlement process by delivering purchase orders electronically and automating two- and three-way matches before posting for payment.

Businesses have spent the past 20 years deploying ERP and other enterprise applications to streamline processes and improve information flows within their own four walls. To reach the next level of productivity, they must extend these investments to improve process efficiencies and collaboration among external trading partners.

Cloud applications combine a community of digitally connected buyers and sellers in a many-to-many format with multi-enterprise process automation to make this possible.

Ariba is a provider of cloud-based collaborative commerce solutions.

Read more about infrastructure management in Network World's Infrastructure Management section.

This story, "What's Next for ERP? Tear Down the Walls" was originally published by NetworkWorld.

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