Does a standardized ERP system even exist?

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One of the largest Dutch SAP-partners, Ctac, questions if a standardized ERP system is the way to go for companies. The application for managing business processes increasingly embraces this so-called Fit-to-Standard principle. The rise of the cloud accelerates this major change for Enterprise Resource Planning.

Speaking to Techzine, Hans Gootjes and Jeroen Scholte of Ctac shared their opinion about the movement in the ERP market. A remarkable view, considering Ctac gets a lot of business out of ERP. One would think that Ctac also follows the industry’s general Fit-to-Standard idea. Especially because the service provider specializes in SAP applications, one of the largest ERP vendors that supports Fit-to-Standard.

The shift that Ctac noticed is that companies are encouraged to work as standardized as possible. A shift that should be possible because software vendors spent a lot of time getting to know industries, in order to create best practices. The software vendor provides the systems with a solid foundation that the industries (verticals) should be able to work with. Companies then look at which processes from the standard ERP system they can use.

However, in order to differentiate, companies want to modify the standard ERP applications, according to Ctac. After all, they would not always be able to work with the standards based on best-practices. Gootjes, therefore, questions whether an implementation even exists that is based on SAPs ERP standards.

The changing ERP landscape

These doubts are triggered by the shift that is taking place in the current market. In the past, many companies opted for an ERP system from SAP. As a result, they often run the on-premises implementation called ECC, which was highly customised. SAP partner’s helped companies with this customisation, which is called the Fit-Gap principle. Enterprises often used the same procedures for years, which Ctac analysed and then modified the ERP system accordingly. Many companies are now using ERP systems from SAP with self-built functionality and processes.

However, SAP introduced the successor of ECC years ago, the cloud-based S/4HANA. This solution, if it’s up to SAP, will eventually become the standard for ERP. There are several options when it comes to S/4HANA. There’s the multi-tenant edition and the single-tenant edition, which SAP both promotes. The multi-tenant edition is closest to the S/4HANA SaaS positioning in which the Fit-to-Standard idea is used the most, and several updates follow each year. The single-tenant edition may contain some customisation, updates are spread over several years. If a company chooses the single-tenant option it has to adjust the customised parts sometimes, maybe after two years.

If you differentiate yourself from competitors or towards customers with custom business processes, the advantage of customisation is made clear in a business case.

Finally, there is what Gootjes calls the old version of S/4HANA, in which you run the ERP on-premises or in a private cloud. This is a S/4HANA ERP system in which the standard processes are not all equally applicable. This implementation gives users almost the same capabilities to customise their application as ECC does. Because of the custom modifications, upgrading the software has become more complicated, as more testing is required for modified processes. There is a prevailing belief on the market that this is an old-fashioned approach, partly because new functionality does not get to the system as quickly as it should. Gootjes, however, doubts this: “If you differentiate yourself from competitors or towards customers with custom business processes, the advantage of customisation is made clear in a business case.” The right to exist is then validated. New features, as the other S/4HANA versions often provide, will not always be necessary. After all, companies often developed working methods that remain the same for years. However, important choices often have to be made in this area. Together with a partner such as Ctac, you will examine which process components should be quickly adaptable and which components should have accelerated access to additional features.

Keeping the core clean is a challenge

Within the market, there’s this idea to stay as close as possible to the standard of the ERP software, which the multi-tenant version suits best. This is also called “keep the core clean” and leaves the standard processes untouched. According to Ctac, this may work for large multinationals, but for companies that aren’t multinationals, it is almost impossible. At Ctac they like the idea and the reasoning behind it, but in reality, small and medium-sized enterprises increasingly see deviating from the ERP’s processes as a way to differentiate.

To support this in the best possible way, Ctac zooms in on how a company operates during consultation. For example, they look at how processes are executed, the possibilities of the product and the impact of the delivery process. These specific working methods are then compared with the standard processes from an SAP solution to see if they match. In reality, this assessment often shows that a lot of working methods don’t fit within Fit-to-Standard. In that case, you quickly go back to the old Fit-Gap idea: adapting the software to the company’s wishes. You end up with, what Gootjes calls the old version, in which a company bears the responsibility for an installation.

What do you want to achieve as an organisation? What is your strategy?

As far as Ctac is concerned, what SAP has defined as the standard is not the standard for every company. A number of things can indeed be adopted as the standard, but when implementing ERP software, it is necessary to take a good look at what makes your company unique. Questions such as “What do you want to achieve as an organisation?” and “What is your strategy?” are fundamental. Processes often play a supportive role in this, which, according to the two gentlemen, usually leads to customisation. That does not necessarily have to mean complexity and not future-proof. In the manufacturing industry, you often see that they adopt a pragmatic attitude: “I’ve been doing it like this for years, and it works.” As a company, you can simply run the same ERP version for years.

The SME manufacturing industry

During our conversation, Scholte also provided a specific example to clarify the situation. A manufacturer of industrial doors did not see their desired working method in several standard SAP processes. In SAP software, the standard procedure is to start with a plan order, followed by a production order and finally a delivery order. At this specific company, they pretty much skip the production order. In fact, it only becomes a production order when the product is ready to enter the warehouse. This flexibility is very important for the company, but SAP software doesn’t support it by default. At times like that, Ctac realises that customisation is often still required.

Build and maintain as a combination

According to Ctac it is almost impossible not to choose standardized ERP sotware. Some developing is necessary to achieve customisation. SAP already made hundreds of APIs available that developers can use to build very detailed applications and processes. Wherever possible, you build this customisation outside of the core, for example, on the SAP Cloud Platform, but this is not always the logical choice. For a small change in the standard process, you’re not going to rebuild the entire process. Furthermore, when you frequently need to consult SAP data for performance reasons, you should stay as close as possible to the data source, according to Scholte.

Remarkably, people are increasingly opting for lowcode, especially the Mendix platform. SAP works closely with this low-code vendor, and applications can be built easily and quickly. Mendix makes extensive libraries and standards available for this exact purpose. In addition, there are enough building blocks to optimise the processes.

Whether it involves traditional development, in which processes and applications are highly customised, or low code: ERP service providers such as Ctac can help. After all, setting up ERP software is often too complex to be left to an in-house development team. In addition to the (Mendix) knowledge, the consultants also have experience with the processes and integration of SAP. The development expertise at an ERP service provider often makes a difference, as they understand the logical aspects and build faster and more future-proof apps and processes.

There’s often a combination of self-built features and standard features. Of course, Ctac also sees that S/4HANA provides enough usable standards. An example that the two gentlemen mentioned during our conversation is sending invoices. In reality, enterprises often see this as a differantiator. You may decide to send an invoice after a week or at the end of the month, but that process can often be done effectively with the core of the SAP system.

Desired choice for companies

Ctac has been a good SAP partner for years, but right now, the company is seeing things a little different than the SaaS provider. Keep the core clean or Fit-to-Standard, as it is called, can ensure a quick implementation process. Ctac wants to help its customers in the best way possible, which, according to the service provider, is not always possible by forcing companies to use a standard ERP. In Ctac’s opinion, this means that many unique characteristics of a company are lost, and you as a company no longer distinguish yourself from others on the market. In the current economy in which everything is optimised, this isn’t the norm. If you, as an organisation, let IT fully determine which capabilities you receive to support your processes, you will go years back in time as a company, according to Scholte.

Ctac recognizes that S/4HANA is the way to go, but wonders if this should all be on the SAP standard. And in 2020, this is, by all means, a different view.

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