ERP: It feels like the 1990s again (my mother says the 1960s)

t seems about every 30 years there is a sea change in Enterprise computing where multiple trend waves merge to create a colossal wave of transformation.?

The 1960’s?

In the early 1960s, my mother was a programmer on the early mainframe computers at IBM in New York.? She is in her mid 80s today and being in the same Enterprise IT profession today, it is fun talking to her about how things have or have not changed.??

Something that hasn’t changed: The Beatles are still part of our lives!? In 1964, she experienced firsthand the craziness surrounding the arrival of the Beatles in New York.?? ? In 2023, (in fact last week), we were all able to experience the release of the Beatles’ newest single.????

Back then, there were no standards for business computing software.? In fact, she said she didn’t know the word ‘software’ until much later.? Systems analysts looked at each customer’s processes and painstakingly custom programmed everything from scratch.??

Demand exploded for Mainframes, surprising even IBM.? My Mum and her colleagues were amused that IBMs President, Thomas J Watson in the 1940’s once famously said, “I think there is a world market for about five computers.”??

?Several trend waves combined into a monster wave:???

1. Large computing power through mainframes became affordable for (large) companies,??

1. Dedicated telecommunication lines to connect mainframes to remote terminals on people’s desks became more stable and affordable.???

1. Globalization was driving the need for ever larger processing capacities and the need to get away from paper-based systems that were limiting growth.???

??

But there was a problem:? The world successfully moved from paper-based systems to computers, however the architectures of those paper-based systems were often just reprogrammed directly into the system making the software architecture unwieldy – albeit much faster.?? My Mum’s work was to analyze each client’s processes and wishes and just program them to work on the computer.??? The code structures often looked like a plate of spaghetti.??

By the late 1960’s, five of her colleagues over in IBM Germany began expressing frustration that whenever they went to a new customer, they always started programming from scratch and reinventing the wheel and that software architectures were messy.? The common assumption at the time was that every company was different, and you needed to program from scratch.??? Those 5 engineers claimed that quite a bit of what they saw in companies’ processes was actually very similar.???

?They suggested notions of??

1. standards,??

1. packaged software,??

1. real time processing,??

1. central master data, and??

1. integration between functions.???

??

It was all a bit much for IBM to swallow at the time and so they left in the early 1970’s to form a startup called SAP to give birth to ERP (Enterprise Resource Planning).? (A pity my Mum didn’t join them.? But then again, if she had, I would not have been born.)??

?Fast forward to 1990???

As I mentioned in my last blog, (How a Frustrating Experience Shaped the Rest of My Career) by 1990 we were looking up at a forming global tidal wave of demand for SAP’s ERP.? Even IBM signed up to use it!? The software was still programmed on the mainframe (with the SAP R/1 and R/2 products) but there was a computer architecture rapidly emerging called Client-Server.? Next to the famous ‘Dumb Terminals’ on people’s desks, PCs started to appear, which were connected to distributed servers.? SAP was one of the few software companies ready for that wave with their flagship R/3 product.????

?Again, a few waves started merging:???

1. The client server wave merged with ..?

1. the standard packaged software wave??

1. …and the ERP wave along with??

1. the relational database wave (led by Oracle)...?

… to combine into a Tsunami that caused a mass exodus toward this new paradigm in Enterprise IT.? The next decades culminated in almost three quarters of the world’s commercial transactions being moved onto SAP’s ERP client-server platform.?

Fast forward to the 2020s?

It seems that today there are several waves once again forming on the ERP horizon that are consolidating to form what might become another tsunami.??

?Most ERP systems running in companies today still run on on-premise or hosted client-server systems, with relational databases and lots of customizations that have gone into tailoring them for special needs over the decades.??? This has made it difficult for them to upgrade and left a temptation to postpone upgrading and kick the can down the road. But at some point, those systems approach their maintenance ends and need to be upgraded.?? That is slowly becoming the case with the previous version of SAP ERP (ECC) approaching a maintenance end in 2027.? Most of the customers (meaning more than half of the world’s transactions) are still running on SAP ECC and are planning a move to SAP S/4HANA, over the next few years.????

?The waves on the horizon are gathering momentum and converging:??

1. This need to upgrade is a huge gathering wave of transformations that is already being felt and will strengthen over the next few years.? Service companies are already struggling with the demand for SAP S/4 expertise.? But, it might not be a bad thing that companies waited until now, because there are other waves converging that might make the next ERP transformations much more interesting and valuable.??

1. The second wave is about moving to the cloud.? The recent explosion in demand (from seemingly nowhere 5 years ago) for the Hyperscalers: Microsoft’s Azure, Amazon’s AWS and Google’s GCP are a testimony to this trend.? Cloud migrations might be in a private Hyperscaler-based cloud or in a Public Cloud Software as a Service model.? But what seems clear is, everyone wants to move to the cloud.??

1. The third wave which has been well under way for several years is the drive to put everything into live main memory which allows for amazing processing speeds.? With the collapse in the price of memory and the increase in performance over the last decades, you no longer need to be so careful as my mother was with what you program into main memory (RAM-Random Access Memory) compared to what is in storage (ROM-Read Only Memory).? You can now run entire applications in main memory.? Most are moving away from relational databases to in-memory Databases that run in main memory which is already baked into SAP S/4 HANA. (HANA is SAP’s In-Memory database).?? This dramatically speeds up processing and analytics and allows much easier approaches to things like predictive analytics or real-time calculations on huge datasets.???

1. The fourth wave is about standards.? Companies want to get away from all the customizing and modification of old legacy systems.?? The Spaghetti code crept in again over the last few decades as all sorts of extensions or customizations were programmed into ERP systems.? This makes maintenance and upgrading challenging.?? Companies want to go back to standards and best practices and to a Clean Core which is central to SAP’s ERP strategy.? But what about all that custom code?? The tooling platforms surrounding ERP have grown to compensate for some of that, and through so-called Low-Code, No-Code development platforms along with other technologies, it is easier (even for non-developers) to extend the core today without fiddling with the standard code. ???As part of SAP’s Business Technology Platform, a whole suite of new tools have emerged to allow easy extensions without harming the core. ?

1. The fifth wave is the big one everyone is talking about:? Artificial Intelligence.??? When I talk to my mother about AI, she seems amazed by the capability today but doesn’t seem too impressed by the fears and concerns surrounding AI.?? I am surprised that she is not impressed.? She says a lot of it sounds quite familiar to what she heard in the early days of computing.? People and politicians were saying that those big computers would run out of control, and that robots might take over the world and destroy humanity.? Half a century later, that still sounds familiar.?? There is no doubt however that we are moving from a world of decision-support systems to decision-making systems that come a lot closer to human decision making and being able to process masses of unstructured data and synthesize it much faster than humans can.? It is becoming impossible to ignore AI but how does one harness it????

1. That is a good segue into the last wave:? Automation. ? Robots have been around for decades.? If you walk into a modern car factory it is almost like science fiction.? On the software side, Robots, often called Bots, have also been around for a while under the guise of RPA – Robotic Process Automation.? Thousands of bots zooming around enterprises today automate mundane and repetitive tasks.??? But this is rapidly evolving into something much bigger which is more about orchestrating the activity and governance of armies of thousands of bots and on the other hand about making these bots smarter with Artificial Intelligence.??? In fact, Automation is becoming one of the most effective ways to harness AI and turn it into useful and scalable reality for companies.? Companies like UiPath have emerged in recent years to set new standards for full Business Automation Platforms that orchestrate an entirely new category and layer within the Enterprise IT landscape: Intelligent Automation.???

??

I am probably forgetting or neglecting other waves such as the Internet of Things, or Quantum computing.? (I would be lying if I said I understood that last one.)??

?In any case, I believe with all these waves converging, the perfect storm is brewing to create maybe the biggest tidal wave Enterprise Computing has ever seen.? I believe the 2020s will usher in a new era of Intelligent computing that will turn operational systems into thinking systems.? Where ERP today is sometimes called the heart of the enterprise, it might in future be more accurate an analogy to call it the brain of the enterprise.? It is the one place where all enterprise processes converge and if it is able to think, it will become more than just a back-office book of record.???

?But before waxing the surfboard, it is important to note that because of all these new paradigms converging, it might be worthwhile to take a step back and consider whether it makes sense to implement ERP in the same way as over the past decades.??? Maybe, instead of viewing ERP in isolation, there is a new way to implement ERP that considers and optimizes the benefit of all these waves.?

?But more on that in a future blog.?

?#SAP

#ERP

#History of ERP

#UiPath