Achieving Strategic Outcomes by Modernizing ERP with Composable Architecture

Legacy ERP systems built up through mergers and acquisitions can create a complex web of disjointed applications and data silos. Many CIOs feel pressure to consolidate these heterogeneous environments to reduce costs and complexity.

However, ripping and replacing ERP with a single centralized system risks undermining the competitive differentiation embedded in current systems. It can also introduce significant disruption and change management challenges.

CIOs can take a more strategic approach to ERP modernization by adopting a composable architecture mindset. Here are key recommendations:

Preserve Differentiation While Simplifying

Avoid forcing all business units onto a single ERP instance if it removes strategic capabilities that set operations in certain geographies or divisions apart. Conduct business capability modeling to identify differentiating processes and systems worth protecting.

Standardize only on capabilities, like back-office functions, where businesses operate similarly. Composable architecture allows for standardizing foundational processes while connecting specialized capabilities.

Enable Common Functional Synergies

Link ERP consolidation to evolving operating models that consolidate certain activities across business units. For example, centralized sourcing or finance functions. Identify opportunities to standardize common capabilities through ERP, while preserving localization.

Use newer SaaS applications for common functions to benefit from best practice configuration. Legacy on-prem or cloud ERP can provide differentiation. Interoperate centralized and decentralized systems using integration tools.

Architect Flexible Solutions

Avoid a future where business units must integrate multiple ERP instances. Build solutions using APIs and microservices that loosely couple applications and data. Embrace capabilities provided through cloud marketplaces to extend standardized ERP.

Integration enables assembling solutions using optimal applications for each capability. It also allows replacing components without major surgery. Think beyond consolidating instances to how integrations support the end-state ecosystem.

Pursue Balanced Business Benefits

Look beyond IT cost reductions to intangible benefits like improved analytics, customer experience and time to market. Weigh potential process and role changes required to maximize benefits. Include business stakeholders in planning to ensure consensus on expected outcomes.

A phased roadmap delivers quick wins while building support for larger initiatives that may take longer to manifest benefits. Consolidating ERP should advance business goals, not just simplify IT.

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