Leverage AI to Reduce Trauma in Your ERP Transformation

According to Opkey’s 2023 State of ERP Testing Report, the global ERP market is expected to reach $300 billion by 2030. Its growth is being fueled by the need for better flexibility, management and control of companies’ business operations.

Companies of all sizes are struggling to keep up with the dynamically changing business environment. So, this has kicked off a remarkable era of what CIOs are calling ERP transformation. That is the replacement of legacy ERPs with new systems along with the management, hosting and provisioning of the new ERP platform and its substantial onboarding process.

Classically, ERPs were an engine for managing operations. While they are excellent at managing mainstream business processes, the number and variety of processes that do not fit within the ERP functional mandate, better known as corner cases, continues to expand. Unfortunately, most ERP implementations are too rigid to quickly or effectively adapt to businesses’ dynamic operations in the necessary timeframe, thus creating this increasing number of corner cases. 

A corner case refers to an unusual or unexpected situation that deviates from the typical or expected behavior of a business process. These scenarios are not fully anticipated when the ERP platforms are designed, and they usually cause issues. As the business environment becomes more complex, addressing corner cases becomes time consuming, tedious and may not be accurately reflected by the ERP. Given their growth, dealing with corner cases requires a large expenditure of time.

From the CIO’s perspective, corner cases are not a problem. The system wasn’t designed for it so there should be no expectation that the system performs those functions. However, for managers an increasing amount of their time, and the time of their senior staff, is taken up maintaining these corner cases which often involve spreadsheets, orphaned databases or hand-written notes for non-standard workflows.  After a while, most workflows become ‘non-standard’.

Businesses want increased ERP flexibility, management capabilities and the ability to democratize their operations data — while capturing more granular data. While the new ERPs being offered today provide many of the benefits CIOs want, a rip-and-replace strategy is traumatic and expensive. When all is said and done, they’re still not as flexible as they need to be to address the underlying problems of the growing number of quickly appearing corner cases. 

The Trauma Induced from ERP Rip-and-Replace

Factors to consider when conducting a rip-and-replace ERP transformation are significant. They include:

• Software Licensing – The cost of the ERP software itself can range from $10,000 to $250,000 per year for smaller businesses, up to $10 million annually for large enterprises. 
• Implementation Costs – This is where the biggest variability lies. Implementation costs, including consulting fees, can add anywhere from $20,000 to $250,000+ to the price of the software. 
• Hidden Implementation Costs and Delays – Implementations can sometimes take years and can pull managers and IT personnel ‘off line’ on a full-or part-time basis, representing the business side when making adjustments on workflow, interfaces, etc.
• Customizations – Costs for customizations to dashboards, workflows or user interfaces can add up quickly, especially if significant development is required. Typically, customizations on ERPs take much longer and cost more than customizations for smaller scoped systems.
• Data Democratization – Being able to capture and process new kinds of data, at finer levels of granularity, is difficult to achieve and can add additional costs. Migrating data from the legacy system to the new one is a significant undertaking, with data complexity and migration methods driving the final price tag.   
• Training – Training users on the new ERP system is essential for successful adoption and will add to the overall cost. 
• Hardware – If implementing on-premise, there are costs associated with hardware infrastructure, including servers, networking and security. 
• Ongoing Costs – Ongoing costs for software maintenance and support will be necessary. Upgrades should be anticipated and businesses will need to factor in wait times for vendors to provide new functionality.  
• Downtime – Swapping from one platform to another  – even with the same brand – can produce significant downtime and will invariably lead to a loss of efficiency.
• Module Integration and Availability – There are many point solutions that are integrated into today’s ERP platforms that will not necessarily be available or easily integrated into newly acquired ERP platforms.

Perhaps the biggest factor to consider is that the ERP will still be impaired because of its ongoing inability to address corner cases – typically from day one. It’s just not cost effective for the customer because the total cost of solving a single use case by the vendor within the ERP, is far greater than the efficiency gained, for that one use case.

Leveraging AI Augmentation to Reduce Trauma in ERP Transformations

Think of it this way. If your car had broken mirrors, lights and turn signals, would you swap out the engine? Yet, this is exactly  what’s happening in the vast majority of today’s ERP transformations. 

The underlying engine in an ERP platform is a powerful tool. It works. The problem is its inability to rapidly customize workflows, democratize data and change user interfaces.

When done correctly, AI systems that augment a legacy ERP can allow you to reduce corner cases in your organization and provide a more flexible interface than a traditional ERP. This will allow for more flexibility as your company grows and changes.

This capability broadens the definition of data democratization while making data democratization goals more practical. A flexible AI interface can provide “the right person the right information at the right time,” and avoid a steep learning curve on new interfaces or overwhelming users with too much information and too many options. 

The power of effectively implementing AI rests in delivering a single, flexible interface that can handle many corner cases. The cost of adding that flexible interface to the ERP is much easier to justify compared to individual customizations for individual corner cases.

AI networks can be configured and updated to augment legacy ERP implementations that will make it easier for end users to operate, while assimilating new data sets into a central data store. Centralizing more information provides executives with the valuable, real-time information they need to make better business decisions – orders of magnitude faster than a legacy ERP system can be transformed.

AI-augmentation allows workflows to be more flexible than with legacy or recently purchased ERP platforms because all workflows must be carefully tested and planned ahead of time. The AI networks become the user interface and are flexible enough to be quickly reconfigured as needed. AI can allow workflows to proceed based on logical business rules which can be easily updated. 

When done correctly, AI augmentations also integrate point solutions that “bolt on” to an ERP platform. They are seamless because for the first time, they can interact directly as well as through the ERP platform. Again, AI networks become the user interface, allowing better data collection and management while rapidly adapting and adding new workflows which are rapidly tailored to address new corner cases.

The ERP Transformation through AI ERP augmentation strategy is a much less expensive and disruptive endeavor than the typical rip-and-replace ERP implementation because it can utilize flexible interfaces to handle the many and varied corner cases. Additionally, ERP vendors themselves will be slow to adopt any flexibility which can be derived from AI because of the central planning nature of the systems, as well as the extended time it takes to alter a large platform. Companies of all sizes should examine this approach before thinking about undertaking a rip-and-replace program.