When I was asked to join Daryl Plummer, managing vice president, chief of Research and chief Gartner Fellow, on a webcast about Digital Disruptions, I immediately started thinking about all of the seismic events that have occurred in the tech industry since I joined decades ago.
In my view, the most disruptive occurred in the early 1990s due to a trifecta of concurrent trends. The first was the publishing of the late Dr. Michael Hammer’s seminal piece, “Reengineering Work: Obliterate, Don’t Automate,” in Harvard Business Review in 1990. This helped fuel a global mania around the need for “Business Process Reengineering” that turbo-charged the management consulting business as C-level execs began to rethink their fundamental business processes.
The second catalyst was an industry-wide shift towards cheaper and more flexible alternatives to mainframes. Goodbye green screens, hello GUIs. Good riddance to proprietary hardware, operating systems, and databases, welcome open systems – RISC-based UNIX machines and relational databases. Sayonara dumb terminals, PCs for everyone.
The hardware shift also led to the third driver – the global demand for Enterprise Resource. At the time, many large companies had multiple back-office systems. They may have had financial apps from McCormack & Dodge, MRP II from ASK, logistics and/or supply chain systems from several more. Some of the largest manufacturers discovered that they had deployed more than 10,000 separate apps throughout their organization. They opted to use BPR and ERP to rationalize their software portfolios.
The ascent of ERP rapidly turned out to be the full-employment act for consultants. If managed right, these advisers could parlay an initial BPR assignment into an ERP system selection and then into the far more lucrative multi-year, ERP implementation engagement. The early ERP 1.0 or 2.0 versions proved not to be really usable until the 3.1J version, or higher. This led to the continuous need for relatively expensive upgrades required scarce/expensive third-party resources.
As it turns out, killing apps – and their corresponding hardware clusters – proved hard to do. For one thing, those rationalizing the portfolio didn’t think about how quickly new, must-have apps would come along. The ERP wave was followed by new software for supply chain planning, CRM, PLM, HCM, asset management, and ecommerce/procurement. This led to a new wave of app proliferation that left IT scrambling to keep up with disparate data structures and UIs, and integration and master data management challenges.
“We’re in year 10 of a three year upgrade.”
When the first ERP buyers purchased their systems in the early to mid-90s, it’s highly unlikely that they would have anticipated that they might be running a version of that software 20-25 years later, or that they would have sunk over $1B into that investment over the life of the investment in licensing, services, and staffing. Many are now suffering from the ERP migraines of trying to consolidate all of the instances into a single, global, on-premise system. As more than one CIO has whispered to me, “We’re in year 10 of a three-year upgrade.”
Fast forward to 2017
Looking for parallels with the early 1990s, one could argue that there is nothing comparable today to Dr. Hammer’s original HBR article or his subsequent book, "Reengineering the Corporation: A Manifesto for Business Revolution,” co-written with James Champy. There is no shortage, though, of great research on digitizing business processes that reduce or eliminate any remaining friction in connecting with customers and other constituents in the extended enterprise.
Client-server is quickly disappearing. GUIs gave way to browsers. Servers have gone to the cloud. While most desktop PCs may soon join the endangered species list, laptops and smartphones are the most popular access devices. Adios 10 Mbps Ethernet access and slow dial-up connectivity, hello high-speed Wi-Fi.
While on-prem ERP is still the dominant back-office system, there is a growing demand to move more and more functionality out of the data center and on to the public cloud. While the public cloud has been the platform of choice for first time ERP users, we are seeing growing interest by Fortune 500 companies to “cut out the tax” they have been paying in annual maintenance for innovation that they are not able to use. They want to move away from having to double or triple their COE staffing needed for the next upgrade and required testing.
Today, conversations with most CTOs and CFOs quickly turn to the need for bi-modal systems. Their strategy is to leave their legacy ERP alone as the system of record and leverage agile development and the cloud for rapid iterations for a “system of innovation.” This requires new platforms that come with a ready-made ecosystem of third parties apps and productivity/analytical tools that can be easily plugged into the platform. More and more they want ERP, PLM, and supply chain apps to be migrated from on-prem to a cloud platform.
The most forward-thinking execs are also looking to leverage AI/machine learning to know more about their customers. They have been populating data lakes with huge volumes, but have not been able to fully realize the value. This is changing.
At the same time, many are creating innovation labs where they are inverting business processes to look at them from a customer’s perspective. Imagine being able to take that ERP budget for that on-prem COE support system and use it and the staffing for digitization and innovation!
The real disruption going forward is that it’s true that every company now has the opportunity to be a technology company. The tools are more user-friendly and affordable. Workers are more digital-savvy than they were in the 1990s. They expect change.
That said, we’re not done. There’s still a lot more work to do. Don’t miss this powerful webcast: Gartner2017 Forecast for Digital Disruption, presented by Salesforce.