The role of ERP in the digital journey

Adhering to digital transformation is no longer an option in the contemporary business environment. Instead of pondering the real need to transition to digital, companies are now wondering when and how to make that change. This does not mean that the road is free from uncertainty. Many organizations are still reluctant to accelerate their journey to the next evolutionary milestones when faced with the possibility that they may have to skimp on huge technology and human capital investments – a legacy that often goes back decades of development. Should we simply erase systems and processes already in use? Or is it possible to think of a model that includes the convergence of existing resources with more efficient and modern solutions?

At the core of this convergence issue between old and new IT models is the Enterprise Resource Planning (ERP) of each company – a system that coordinates all business operations, from inventory to billing, from cash flow to accounting management. Each organization has its own digital maturation stage of its ERP and the decision on how to modernize it involves the same questions. “Companies need to do some internal thinking: What is the business case for migration? Will we deal with a completely new implementation? Will I have to mobilize the whole company on the project? How to promote digital culture among ERP users? What accelerators, resources and methodologies should I use?” says Carlos Fogarolli, Deloitte’s partner in the Consulting area and a specialist in the Technology sector. “The answers are diverse and case-specific, but in fact they should be minimally addressed. We understand that digital transformation is entirely linked to how companies make their decisions. One can innovate at any time and any platform, it is a matter of practice”, says Fogarolli.

Each story involves specific needs. The Canadian financial services company ATB Financial, for example, needed greater transparency in its internal and external transactions; the problem was solved with a new ERP that replaced the old system, which was heavy and full of very complex customizations. The apparel chain Carter’s (USA) dealt with more than 20 different systems and a large volume of processes that still involved paper data; all were replaced by only four digital services, which integrated activities of financial profile, collection and GRC (governance, risks and compliance). In turn, the City Government of Buenos Aires, Argentina, has switched its decentralized and analogical processes by ERPs for the management of public lighting, conservation, maintenance and other urban services.

“There are several examples that reinforce the position of the ERP as an element of centralization and convergence between business areas. These systems are vital pieces for the digital transformation and key elements in the issue of data integrity, such as structure of connection with other systems and platforms of the outside world”, summarizes Carlos Fogarolli. “Besides, the modern versions of ERPs offer everything a digital company looks for, with focus on user experience, cloud infrastructure and minimum demand for customizations, if combined with intelligence platforms. These systems provide the autonomy users need for a different and innovative experience with the tool.”

Strategically, we see organizations increasingly accelerate their studies on the benefits of being ‘early adopters’ of new ERP solutions., Carlos Fogarolli, Deloitte's Technology Consulting partner.

SAP, for example, consolidated as a leader in providing digital business management systems, has in its portfolio complete ERP solutions, cloud computing platforms and design thinking systems – technologies that are often at the top of the list of digital transformation facilitators. The latest version of its ERP suite, the S/4HANA, has already been adopted (in several stages of deployment) by more than 3,600 organizations worldwide; about 1,700 projects have already been completed and are in functional phase. “S/4HANA provides the opportunity for people to rethink how they handle their current ERPs. With process accelerators, the possibility of cloud or local infrastructure, advanced analytics resources and specific layers of experience for each user”, says Fogarolli.

Cristina Palmaka, president of SAP Brazil, recalls that “each company is unique, with different starting and finishing points. The possibilities range from the implementation of a new solution to the digitization of an existing structure in the cloud, ‘on premise’, or a combination of both. Of the list of companies that have implemented S/4HANA around the world, 93 are Brazilian. “There are some barriers to overcome in order to resolve our gap with other countries, such as greater adoption of cloud technology and the maturing of companies” says Cristina on the spread of digital transformation among local companies. “We believe, however, this gap has already been addressed for some sectors of the economy. Agribusiness is already well ahead in the transformation process. There are also great opportunities for acceleration in retail and in the public sector, among others.”

Older legacy systems may be outdated, have low level of integration between processes, or carry complex specifications that hamper their interaction with other platforms. The challenge of getting them to converge with a modern 100% digital ERP is not ignored by SAP. “There are tools that allow customers to start quickly, develop and run functions in a simple way, while continuously innovating in the cloud and anywhere they want”, says Cristina Palmaka. “It could be from a new implementation or the conversion of an existing system, to a hybrid structure transformation.” The SAP president mentions a new feature integrated to S/4HANA that helps companies do what she calls a “smooth transition.” “SAP Activate is a methodology that starts with the best practices, minimizes the number of customizations and streamlines the installation, reducing complexity,” says Cristina.

The latest generation of ERP solutions offers several possibilities for convergence between old and new systems. Cristina Palmaka, from SAP

In addition to technology, the option of updating an ERP and embarking on a digital transformation involves, as always, people. “In the end, the goal remains to find opportunities to release employees’ valuable time for activities that require intelligence in decision making”, explains Carlos Fogarolli. “The adoption of a modern ERP is an important strategic moment in all aspects, both in technology and in business”, he concludes.