How AI is Transforming ERP – The Future of AI and ERP

The AI Origin Story – Rise of the Machines

Back in 1984, when I was still in college, the first Terminator film came out. I’ll never forget how I felt in the theater with the special effects and the dystopian future imagined by director James Cameron. At the time, it seemed that no one – in Hollywood or in business – could imagine a future of artificial intelligence (AI) that didn’t rebel against its maker.

It scared the bejesus out of me! Not so much in a horror film way - more in anticipation of the darkness I felt that "real AI" could plunge us into. Maybe not killing off humans, but certainly replacing them in certain capacities.

When I went to work in the ERP industry in the ‘90s at a company called Baan, some would say the “Dutch SAP ”, the ERP system that I used – called Baan IV – was rather labor intensive. Even entering some data like a sales order involved manual lookups (say, a customer address) and typing/re-typing information that was sometimes wrong anyway.

There was no AI technology in ERP systems at this time, although there were already some efficiency gains and automation from just humans using the ERP software as opposed to doing things manually using paper and spreadsheets. While robots weren’t replacing lots of white-collar workers using computers, they were already replacing shop floor workers in manufacturing companies with machines.

Companies were also justifying ERP systems, and ERP vendors helped with this, by promising “headcount reductions” and enablement of “Shared Services”. This was code for getting rid of humans. Not slaughtering workers in the streets like the Terminator, of course; just making them redundant!

By this time the second Terminator film in the saga, Terminator 2 Judgement Day, featured a much more advanced – and more frightening – shape-shifting Terminator model. The older Terminator model, reprised by Arnold Schwarzenegger, became the protector of the humans Sarah Conner and her son John.

This film reminded me that, in Hollywood and in business, AI could work alongside humans in a symbiotic way and make them both better. AI could be a powerful augmenter of humans, even if the AI was sentient, provided there were guardrails against the “dark side”.

The AI Revolution and the Future of AI

Fast forward to today. The reality of AI hasn’t yet caught up to the Terminator - thank God - but the pace at which reality is catching up with Hollywood is stunning. For example, on the venerable 60 MINUTES – which was around when the first Terminator came out in 1984 – here is an episode entitled: ‘The AI Revolution: Google’s developers on the future of artificial intelligence’.

Researchers at 谷歌 and Google DeepMind have been creating, for example, robots that teach themselves how to play football (soccer for us Americans ??). It’s crazy! Another development is a game-playing robot that created a chess strategy that no humans have ever used.

The Google folks in the video are talking about getting people “adjusted” to the Bard AI technology because it’s more than just a culture shock – it’s a REAL shock. Imagine being a chess champion beaten by an AI bot that learned to beat you by playing thousands of times in just one afternoon!

Another video about the impact of AI is this CBS interview with Geoffrey Hinton, aka the “Godfather of Artificial Intelligence”.

Here Hinton talks about the impact of modern AI and?ChatGPT from?OpenAI . Geoffrey Hinton is considered a pioneer of AI, having championed machine learning decades before it became mainstream.

As chatbots like?ChatGPT ?bring his work to widespread attention, CBS spoke to Hinton about the past, present, and future of AI in Toronto on March 1, 2023.

What is AI in ERP?

What makes AI so interesting in combination with ERP, especially compared to most other technologies out there, is how ubiquitous it is in its application.?It impacts nearly every industry, nearly every department, and even every job function - from the shop floor all the way up to the CEO.

Those that are thriving with the adoption of AI are using it to augment human intelligence in companies and in software, not replace it. Still, there is something sinister about AI that suggests that maybe – just maybe – it will start replacing human intelligence or at least turn against it.

The ERP software industry is undergoing a significant transformation due to the influence of AI. But what specific impacts does AI have on ERP software and what do we need to know about it?

Here is a video from top analyst Eric Kimberling of Third Stage Consulting Group entitled “How AI is Fundamentally Changing ERP Systems (and Vice Versa)”.

AI has gained significant recognition recently, and you may already be familiar with the concept or have experimented with AI solutions like?ChatGPT. However, questions still surround the relationship between AI and ERP software.

Is it something we really need to worry about, like T2, or is it a benevolent companion and protector, like T1 in Terminator 2 Judgement Day? Either way, AI is having a transformative impact on ERP.

Fortunately, although AI and ERP are distinct technologies, they can coexist and complement each other. For example, as we saw in the 60 Minutes video, major tech providers like?Microsoft?and?Google have already heavily invested in AI and offer standalone AI platforms like OpenAI 's ChatGPT and?Google’s Bard that are already beginning to bleed into ERP and other software technologies.

Not to be outdone, some ERP software providers are investing directly in AI capabilities, incorporating machine learning and other AI technologies into their organic ERP systems. Additionally, prominent ERP software providers sometimes acquire AI providers to integrate AI technology into their flagship ERP systems.

Here’s a link to Kimberling's full blog:

https://www.dhirubhai.net/pulse/how-artificial-intelligence-fundamentally-erp-systems-eric-kimberling

How AI is Transforming ERP

I found another excellent article by an analyst named Ted Rohm at TEC which talks about how AI is – you guessed it – transforming ERP. Although it doesn’t call out individual ERP vendors, it does a great job of covering general concepts about the interaction of AI with ERP.

Says Rohm:

“The use of AI in ERP will radically change the way business data and processes are managed. ERP systems will no longer require people’s efforts and intelligence to properly code and enter every minute detail of a business transaction to complete an operation.

People will no longer have to wait patiently by a computer screen to approve employee expense reports or monitor factory equipment and inventory status. Nor will people need to run tens of reports, then slice and dice them together in spreadsheets to gain critical business insights on whether they need to order another 100 widgets for this month’s orders.

Artificial Intelligence holds the promise of further freeing people from many tasks that require human intelligence to make them happen.”

Here is the full post:

https://www3.technologyevaluation.com/research/article/how-ai-is-transforming-erp.html

AI is already being infused into many ERP modules and processes which, as a ‘90s ERP guy, I find very interesting. Here are some examples from Rohm’s post which he explains in more detail in the article (I’ve summarized to give you a flavor).

• Conversational AI Bots – Think of Siri for ERP.
• Autonomous Mobile Robots (AMRs) – Think of driverless mode in a Tesla.
• Overall Equipment Effectiveness – Think of ERP connected to shop floor machines via Internet of Things (IoT) devices for insights into uptime, performance, and quality of products.
• Sales – Think of using AI tools to improve important sales processes, including lead and opportunity recommendations, product pricing, and automating upsell and cross-sell suggestions. (see below the Microsoft Copilot example)
• Marketing – Think of tailoring unique messages and experiences for each customer based on social media history and other preference information.
• Warehousing Planning – Think of predicting proper staging and movement of materials and products in a warehouse, as well as determining the optimal warehouse utilization and configurations to meet demand.
• Production Planning – Think of macro-level planning of how much product needs to be produced over a given period based on purchasing behavior, including consumer sentiment or weather impacts. At the micro-level, AI can plan individual manufacturing operations and react to dynamic ordering changes.

These AI capabilities are becoming even more important given today’s economies and supply chain shocks caused by world events like COVID and the Ukraine War.?

An AI in ERP Example for Sales – Microsoft Copilot

Microsoft has built its own AI capability called Copilot which brings the power of AI to many ERP modules, like the ones listed above. Here is a general video about Copilot which explains how it works across numerous familiar Microsoft applications like Teams and Outlook to enhance the sales process to close more deals.

In my next follow-on article, I’ll be exploring Microsoft Copilot in more depth. So, stay tuned!

How AI is Transforming ERP Finance

Outside of possibly Sales, the department in a company that’s probably most in need of AI in their ERP system is Finance. Here’s the summary of a video from ERP Advisors Group that I enjoyed called “How Financial Automation in ERP Can Transform Your Business”.

Here's a quote from ERP Advisors Group:

“Most busy, productive finance and accounting professionals wish they and their staff had more time in the day to do the value-add tasks that require time and space to analyze their financial data and make recommendations to better the business. However, many find themselves mired down in manual processes including spreadsheet manipulation, repetitively clicking through multiple systems, and performing time-consuming data entry to complete basic tasks.

Automating tedious, manual financial processes can play an essential role in creating business value by accelerating task completion, filling gaps in times of talent shortages, increasing profitability, improving overall productivity, and more.”

Here is the video itself.

In addition to generating financial reports like income statements, AI can combine packages of reports and create new AI-generated content like notes into complete Powerpoint presentations ready to give to - for example - an executive board. Theoretically, AI can combine information from ERP systems, text, spreadsheets, and so on to create “original” content. (of course, your kids already know how to do this).

An even more exciting capability is that generative AI like ChatGPT can write computer code with immense flexibility and frighteningly good accuracy. The panel discusses a use case of ChatGPT writing proprietary Java Script code for Oracle NetSuite Solutions , which is a completely closed ERP system (not open source), using just information found on the internet. Wowzer.

That’s like an AI bot programming itself! Not so crazy if you ask James Cameron, btw.

Potential Risks in the Future of AI and ERP

The potential risks are the reason why guys like James Cameron and Elon Musk are understandably freaked out about the rapid progress of AI.

For instance, what will prevent ERP vendors that have data on the cloud from sharing comparative data with other customers, endangering competitive advantage? Obtaining data from company ERP systems or other related data in the cloud increases the risk for fraud, data piracy, and stealing proprietary secrets.

As discussed previously, ChatGPT and other AI-enabled tools can already write tight code and insert it into other systems including competitors' proprietary software. Why couldn't AI write a new, better ERP system using code and other information from the intranet or even company intranets if it can access them?

I think we’re fast approaching a time when an AI-powered robot could learn a competitor’s code, write new code, review it, fix it, and embed it into a proprietary ERP system. That’s insane!

Conceivably AI in ERP could also make decisions on its own, such as reviewing customer accounts receivable data like aging history and credit checks to determine what’s a “good” or “bad” customer; and then going ahead and blocking them if they’re “bad”. In order words, humans could be delegating authority to AI to make decisions on behalf of the company without human oversight or intervention. Skynet, anyone?

At the very least, we’re fast approaching a time when AI in ERP could transform from the benevolent “pops” (T1) to the unstoppable, liquid metal T2. So, we have to be careful as it evolves.

Conclusion – Are we facing a dystopian future?

To me, although there is almost unlimited potential for good in AI and ERP, there also needs to be much more discussion about the dangers. For instance, AI can access internal ERP data sources like customer master data files and the internet together to pit one company against another or unearth competitive advantage.

Using the Terminator analogy, it would be as if the competitor chasing you is a late-model Terminator in a tractor-trailer who's tapped into a satellite that’s tracking your every move in your pickup truck. Oh…and that tractor-trailer can time travel!

While I don’t think AI in ERP is going to completely replace human users anytime soon, I believe the writing is on the wall for job reductions and machines taking over certain functions.

As Arnold Schwarzenegger says:

“Today, everyone is frightened of it, of where this is gonna go. And in this movie, ‘Terminator', we talk about the machines becoming self-aware and they take over… Now, over the course of decades, it has become a reality. So, it’s not any more fantasy or kind of futuristic. It is here today.”

As James Cameron says:

“You got to follow the money. Who’s building these things? They’re either building it to dominate marketing shares, so you’re teaching it greed, or you’re building it for defensive purposes, so you’re teaching it paranoia. I think the weaponization of AI is the biggest danger.

I think that we will get into the equivalent of a nuclear arms race with AI, and if we don’t build it, the other guys are for sure going to build it, and so then it’ll escalate… You could imagine an AI in a combat theatre, the whole thing just being fought by the computers at a speed humans can no longer intercede, and you have no ability to de-escalate.”

And finally….“I warned you guys in 1984! And you didn’t listen.”

I’ll leave you with this. When speculating on the future of "real AI", in ERP or otherwise, there’s no better authority than Sam Altman whose company OpenAI created ChatGPT. Here is his interview with podcaster Lex Fridman :

OpenAI CEO Sam Altman on GPT-4, ChatGPT, and the Future of AI | Lex Fridman Podcast . Enjoy!

I hoped you liked this blog and the blast from the past with the Terminator. I’m going to be writing 4 more articles about the Future of AI and ERP, one each for the ERP “Titans”: SAP , 甲骨文 , 微软 and 恩富软件 . So, in the immortal words of Arnold Schwarzenegger, I’LL BE BACK!

Suggested Links for Viewing and Reading

In the Age of AI (full documentary) | Frontline PBS : https://www.youtube.com/watch?v=5dZ_lvDgevk

ChatGPT for Beginners: https://www.youtube.com/watch?v=uCIa6V4uF84

谷歌 AI?The AI War Has Begun! Every 谷歌 I/O AI Announcement (Supercut): https://www.youtube.com/watch?v=Y9i3OIMitRQ

How Generative AI Can Help SMBs Improve Customer Experiences ( Solutions Review ): https://solutionsreview.com/crm/2023/06/28/how-generative-ai-can-help-smbs-improve-customer-experiences/

Sage article: The Future of SaaS Finance: Machine Learning and AI. https://www.sage.com/en-us/blog/the-future-of-saas-finance-machine-learning-and-ai/

What are the benefits of AI? Is AI Good for Humans and Society https://youtu.be/mvCxUrT1c3c from Third Stage Consulting Group Eric Kimberling .

What is Automation (vs AI)? Third Stage Consulting Group Eric Kimberling https://youtu.be/2DxMPyD4Cdk

Will AI be replacing jobs? From Eric Kimberling https://youtu.be/4NXsY6VF3us

Harnessing AI for ERP Innovation: Balancing Growth, Ethics, and Governance ( Nestell & Associates ): https://youtu.be/yZema8-RM_I