What is ERP?

The journey began with Material Requirements Planning (MRP) systems. These early systems were designed to help manufacturers manage their inventory and production schedules by tracking the raw materials and components they needed. While groundbreaking for the 1960s, they were limited to the core functions of production and inventory management. 

Understanding ERP capabilities 

Today’s ERP systems expanded on this to become an integrated software used to consolidate all core business functions (including human resources, finance, and supply chain management) into a uniform and enterprise-wide environment. 

This was made possible by using a centralised database, which eliminated data silos and provided a unified source of truth across every department of the organisation, leading to increased efficiency and better decision-making. 

Common challenges associated with monolithic ERP systems 

Many mid-sized businesses today are looking to grow and thrive in the digital age but simply don’t have the sufficient infrastructure to support this. Implementing a modern solution can introduce efficiency savings, reduce overheads, and support growth (both financially and operationally). But concerns about the required monetary investment and potential scale of disruption can often serve as a stumbling block.  

The modern concept of an ERP emerged in the 90s, so it’s not too much of a stretch to imagine that some companies may still be using archaic versions of this technology. Monolithic ERP systems are extremely rigid, meaning integration with other applications is incredibly challenging and staying agile in a fast-evolving market becomes almost impossible.  

Some of the other drawbacks of a monolithic tech stack include: 

• Inflexibility and difficulty with updates: Because all modules are tightly coupled and share a single codebase, making even a small change or customisation to one part of the system can be complex and risky. It often requires re-testing and redeploying the entire application, which can be time-consuming and expensive. This makes it difficult to quickly adapt to new business needs. 

• Limited scalability: Monolithic systems can be hard to scale. If a company needs to increase capacity for a single function, such as an e-commerce platform during a sales surge, the entire ERP system must be scaled up. This leads to inefficiencies and unnecessary spend because resources are being added to components that don't need them. 

• Vendor lock-in and technology barriers: They are typically built on a single unflexible foundation. This can prevent organisations from adopting new cutting-edge technologies or tools from other vendors. Over time, this can lead to an outdated system that is difficult to modernise without a costly replacement. 

• Single point of failure: Their integrated nature means that a failure or bug in one module can potentially cause a ripple effect and bring down the entire system. This lack of resilience can lead to significant downtime. 

Benefits of using a composable ERP platform 

Composable ERP is a modular and API-driven approach to the technology, built from a collection of interchangeable components rather than a single fixed stack. For businesses looking to improve profitability, investing in a new platform may seem counterintuitive. However, reimagining processes through composability brings significant benefits: 

• Streamlined implementation: New modules can be implemented in a phased approach, reducing the disruption and training burden associated with the complete overhaul deployments of monolithic systems. 

• Lower upfront investment: Companies only need to purchase and implement the modules they need, avoiding the high initial costs and complexities of an "all-in-one" suite that might include unnecessary features. 

• Best-of-breed tools: Employees can continue using specialised, user-friendly applications that are optimised for their specific tasks, leading to higher productivity and satisfaction. 

• Futureproofing and innovation: The API-driven nature of composable ERP makes it easy to integrate new and emerging technologies, such as AI and machine learning, ensuring the system can evolve with technological advancements. 

• Rapid adaptability: It allows for quick responses to market changes, new business models, or evolving customer demands by easily adding, updating, or replacing individual modules without a complete system replacement, ensuring a faster go-live for specific elements too. 

What to look for in a composable ERP provider 

Selecting any new system can be daunting. With many options to choose from, businesses are often overwhelmed. Here are the key traits to prioritise: 

• A true partner: The provider/customer dynamic can often feel unbalanced or one-way. It’s crucial to find a tech provider who’s going to be a true partner for the long-haul, one with a customer-for-life policy. One that has industry expertise and actively includes customers in product roadmap discussions to ensure long-term suitability and success. 

• Enterprise capabilities: It may seem like a pipe dream but seek a composable ERP provider that actively fights the corner of mid-sized organisations. One looking to level the playing field by offering enterprise capabilities without the typical enterprise price tag. 

• Embedded AI: There is no getting away from AI today. It’s essential that all core business functions are infused with AI capabilities. And that can only stem from the tech stack that’s in place. A UK provider with AI prowess is the dream scenario, as this ensures UK data sovereignty while also making it possible to keep all employee AI usage within company perimeters.    

• Covering all the bases: Finding a provider who understands the day-to-day obligations of businesses in the relevant sector is of the utmost importance. Even better if applications are clustered together in a way that fulfils the "jobs to be done" of specific departments, such as an FSG (Finance, Spend & Governance) portfolio or a WFM (People/Workforce Management) portfolio. Over time, if the partnership is working, more applications/portfolios can be leveraged and stitched together to drive even stronger data-related outputs.    

Frequently Asked Questions around ERP systems 

What does ERP stand for? 

Enterprise Resource Planning, which is a type of software system used by organisations to streamline processes and facilitate the flow of data across multiple departments. 

What are the key components of an ERP system?  

While the exact modules can vary depending on the industry and vendor, historically the most common components included in an ERP system have been Financial Management, Human Resources (HR), Supply Chain Management (SCM), Manufacturing, Inventory Management, and Customer Relationship Management (CRM). 

What are the different types of ERP systems? 

ERP systems have typically been classified by deployment model (On-premise, Cloud-based, Hybrid), business size (Enterprise, Mid-market, Small), or industry. But more recently we’ve seen the emergence of the more flexible modular/composable ERP platforms too.  

What is a composable ERP? 

A composable ERP is a modern approach to the technology, which shifts away from the fixed monolithic system and towards a collection of interchangeable applications that are able to work independently.  

Aren’t ERP systems expensive? 

An ERP purchase/replacement is often viewed as a pricey affair, as it entails a complete overhaul of all business management processes. However, the composable ERP approach has made this far more palatable for smaller organisations as it enables them to only purchase the singular applications they absolutely need.   

Is there a long implementation process with ERP systems? 

Similar to the pricing aspect, implementation would have typically been seen as a long and complex process when it came to traditional ERPs. But with composable ERPs it becomes possible to complete implementation in a staggered process, minimising disruption and making it quicker for companies to get up and running with the systems that are most important to them right now.