The enterprise resource planning (ERP) system has been a staple of corporate finance operations for years, acting as a central repository of data and a hub to initiate a range of processes, from accounting to procurement.
But the ERP of today doesn’t look like it used to. Enterprise cloud migrations have opened up the ability for smaller businesses to adopt ERP technology once reserved for the largest corporates. At the same time, a surge in third-party financial platforms has disrupted the flow of data into the ERP, disbursing information throughout the back office.
As a result, new technologies are needed to unlock data silos and support the ERP’s newfound role as a collaborative portal for corporates, said Wes Gillette, vice president of Product Management at insightsoftware.
“ERP still sits at the heart of modern finance, but we’ve also seen that the monolithic ERP doesn’t work,” he told PYMNTS. “There is a need for solutions that more effectively address specialized requirements.”
The ERP’s Role in a FinTech World
The boom in B2B FinTech has introduced a flurry of new solutions and platforms from which corporates and small businesses can choose. It’s a result, explained Gillette, of the legacy ERP no longer being suited to address the full range of businesses’ diverse financial and process management needs.
He pointed to financial reporting as one example of this shift.
“Native ERP reporting typically isn’t optimized to handle the structure of financial data, or many of the complex requirements like granular data, drill-downs, automated reconciliation and comparative reporting,” he said. “Overall, it’s just not designed to enable the kind of higher-level financial intelligence that CFOs and their peers require today.’
Similar challenges have emerged in the traditional ERP’s ability to meet modern financial planning, cash flow forecasting, and risk analytics needs, he added.
As a result, businesses are turning to best-of-breed platforms designed specifically for these singular capabilities, although this tactic has undoubtedly led to its own set of challenges. One of the largest is in corporates’ struggle to manage the growing number of back-office solutions in place, while managing the pain point of aggregating data across these platforms and consolidating it.
According to Gillette, while the ERP remains a central hub, reliance on individual platforms can lead to gaps in financial data, a lack of context, and a general disconnect of one piece of information to the next — introducing a new opportunity for the ERP.
Modernizing the ERP
With corporates needing value-added services to address modern financial management requirements, Gillette noted that there are opportunities for the ERP to integrate with the growing number of third-party platforms in place.
For example, he pointed to multinational corporates’ need for tax provisioning and transfer pricing solutions to promote efficiency and compliance across borders. Efforts to modernize procurement and accounts payable are also opportunities for data integration with the ERP.
“These applications tend to back right into the General Ledger, the central financial data repository at the heart or ERP core financials,” he said.
Data connectivity was one of the reasons insightsoftware recently acquired financial planning and tax software company Longview, a takeover the company said would enable its ability to “connect and make sense of tax, close and consolidation data” for corporate users.
With growing data volumes, there’s also opportunity for more sophisticated data analytics to step in and augment the traditional role of the ERP by enhancing data capture and quality capabilities.
Robotics process automation shows particular promise, said Gillette, especially in areas like invoice processing, payments approval initiation, compliance and more. The technology can automate tedious tasks, freeing up professionals to work on more strategic initiatives like vendor management, he said.
The ERP has already experienced significant technological disruption, both directly and as a result of businesses embracing third-party FinTech solutions. Corporates’ own digitization journeys has also challenged and changed the role of the ERP, particularly when it comes to the identity of the end-user. Small businesses today now have more opportunity than ever to benefit from an ERP once reserved for large corporates.
Interestingly, said Gillette, large corporates’ sophisticated and unique financial management needs has made the cloud migration of the ERP a sluggish and challenging process.
“Moving to a SaaS ERP is tricker” in situations where corporates have complex custom ERP needs, he said, noting that “many larger organizations are holding back” from ERP modernization.
Conversely, however, smaller businesses with more straightforward financial management needs can see a clearer ROI to adopt cloud ERP technology.
“That’s where we’ve seen the most movement towards SaaS so far,” added Gillette.
As the cloud migration continues, more data will be at businesses’ disposal, with even greater opportunity for robotic process automation (RPA) and other technologies to augment the role of the ERP and elevate its use as a central data depository.
Considering how slow the ERP’s cloud migration has been, however, further disruption will be gradual, especially when it comes to disruption from artificial intelligence (AI) and machine learning.
“These technologies show promise in a number of areas for finance teams,” said Gillette, pointing to automated invoice processing and payment automation as one example. “But true AI capabilities that analyze data and help to drive decision-making in the same way humans do are probably still up to a decade away.”
Even so, there remains significant opportunity for the ERP to take a new shape within the enterprise, large or small.