Forrester finds ERP slow to modernize compared to SaaS

Over the last 20 years, ERP is the category of enterprise software deemed slowest to modernize because of priority given to sexier front office applications and senior decision-makers’ aversion to risk.

Welcome to the woolly world of analyst reports, but in Forrester’s case, it has a point.

The research firm’s 2023 survey found just 13 percent of orgs were focusing investment on finance systems, seven percent on operations, and six percent on HR. This compares with 22 percent on customer experience.

In a new report looking at the problems in modernizing ERP, the tech analyst said: “Firms have been slow to recognize the impact ERP has on customer outcomes. Far more software decision-makers say that their firm is focusing its software strategy and investments on customer experience than on departments responsible for tackling operational systems and processes. This is a mistake because operational systems impact – and can hold back – customer outcomes.”

It cites one utility company that was racing to adopt a new customer platform, only to find “the tech gurus informed them that their vision would not be possible on their legacy core.” The report also argues ERP buyers tend to be more risk-averse than other execs because their users work in finance and operations, for example, with no direct links to customers.

“They rightfully fear that the wrong kind of disruption in their systems could cripple the enterprise,” Forrester said. “An executive at an industrial manufacturer told us that he worried about changing technology and business processes at the same time as it felt like too much change at once for his thousands of users.”

Meanwhile, ERP vendors have been slower to change, Forrester argues, while companies in CRM or HR such as Salesforce or Workday came in and quickly made the market “SaaS-centric.”

“In core enterprise systems such as finance or supply chain, the shift to cloud has been much slower. Several major ERP and supply chain vendors are only now making a real push to SaaS,” it said.

The researcher found 22 percent of global software decision-makers adopting business management software primarily use multi-tenant SaaS, while 32 percent say they remain primarily on-premises.

Why the push to the cloud? After all, even AWS has admitted customers are moving from the cloud to on-prem infrastructure partly for reasons of cost.

According to Forrester, modern ERPs harness the cloud, “with its ability to enable business agility with decoupled microservices-based architectures, innovation that makes technology ‘evergreen’ (with less difficult upgrades), low and no-code platforms that support business-led development and marketplaces.”

Whether the quest for “agility” outranks the requirement for stable, reliable financial reporting and planning without the cost of difficult or disruptive upgrades is another matter. ®