Cloud, integrations top ERP trends in 2024

The year ahead will be crucial for ERP as its ability to help businesses address persistent issues and adapt to new conditions is tested.

ERP still operates as a back office environment, often as an on-premise system. But cloud migrations and the integration of technologies such as generative AI into ERP suggest that this traditional back-office technology can become a vehicle that helps companies improve productivity and develop new business models.

ERP industry analysts and veterans expect several trends to characterize ERP in 2024, including the continued adoption of cloud, the introduction of useful generative AI capabilities, and the integration of other applications such as enterprise application management and field service management (FSM).

Cloud ERP momentum continues

The move to cloud ERP will continue into 2024, according to experts. Much of this will be driven by a desire to access the latest features such as AI and the need to modernize business processes.

The overarching ERP vendor strategy is also centered on moving customers to the cloud, and technology development is centered on cloud applications, said Isaac Gould, research manager at Nucleus Research.

Some vendors have launched programs designed to make it easier for customers to move to the cloud, such as SAP’s Rise with SAP program and Microsoft’s Accelerate, Innovate, Move program. They also pledged to continue to support customers on-premise, but technology development is clearly centered on the cloud, Gould said.

“From a business standpoint, vendors discount migration services to help you move,” he said. “From a development standpoint, all the tools are either just for their cloud users or they’re IT technology designed to help move your data to the cloud.”

Anise Madh, global Infor practice general manager at Wipro, an ERP system integrator and service provider, also sees cloud as the biggest ERP trend in 2024, especially for mid-market companies.

There are two main reasons companies are moving ERP to the cloud, Madh said. The first is the skills available to handle the infrastructure, security and development of ERP systems as companies find it increasingly difficult to staff on-premise environments.

“The legacy skills are becoming obsolete, nobody wants to code anymore, and network infrastructure is a commodity that someone can provide you at a lower cost,” Madh said.

The second is the development cycle, as vendors including SAP, Oracle and Infor prioritize the development of new functionality for cloud versions of the products, he said. Additionally, businesses run the risk of high costs and outdated technology if they remain on outdated ERP systems.

However, the move to cloud ERP remains challenging, Madh said, because companies that have legacy on-premises systems must prepare data, figure out integration issues and transform or delete customizations.

“But before you even get to that point, how do you get it approved by the executive team? Because it’s a big investment, and [they think,] ‘Why touch [the legacy system] if it works,” Madh said. “You have to show them what they’re missing — not what [they] don’t have work, but what they will miss in a few years.”

Useful generative AI will slowly emerge

That AI is a part of ERP systems should not come as a surprise since most ERP systems have been using AI and machine learning technology and capabilities for years. In 2023, however, ERP joined the generative AI explosion, with virtually every vendor unveiling functionality—often a chatbot like SAP’s Joule built on large language models that can generate text, images, or video from data to help users complete tasks. to execute.

The product news has tended to be forward-looking, and there are still relatively few generative AI use cases in ERP. Nevertheless, the GenAI trend is expected to continue in 2024, with vendors continuing to implement functionality for ERP applications.

Transformative GenAI applications are still a few years away, but generative AI chatbots will be useful tools for productivity improvement, Gould said.

“A lot of this is helping people question their data,” he said. “The idea is that these co-pilots allow you to ask questions of your own data, essentially helping you generate and pull reports very quickly.”

GenAI is too much right now, and it will take time to see real use cases appear in ERP applications, said Greg Leiter, a research director at Gartner.

GenAI works better in areas outside the system-of-record processes of ERP systems, such as on the customer-facing side and CRM. Some of the use cases in areas like HR applications are interesting, but they are not necessarily that compelling yet.

In the near term, there will likely be a combination of applied AI and GenAI that will provide opportunities for productivity improvement, Leiter said, with some ERP use cases beginning to emerge in 2024.

“GenAI works better in areas outside the system-of-record processes of ERP systems, such as on the customer-facing side and CRM,” he said. “Some of the use cases in areas like HR applications are interesting, but they’re not necessarily that compelling yet.”

One thorny issue that needs to be worked out is the cost of GenAI capabilities to customers, Leiter said. Last summer, SAP said it could charge customers up to a 30% premium for AI capabilities, while other vendors such as Workday and Oracle said they would not charge more.

Each vendor will find a way to monetize GenAI capabilities, with costs determined for different levels of users and the value they derive from the technology, Leiter said. Large ERP vendors may also have an advantage in what they are able to deliver.

“It’s not set in stone yet as to how vendors are going to do that,” Leiter said. “It’s expensive technology, the computing power you need to run this stuff is expensive, so the biggest vendors will be able to do it. But it remains to be seen whether the tier 2 vendors will benefit from partnerships with GenAI companies to deliver it.”

AI has already done valuable tasks, including process automation, such as invoice reconciliation and forms management, said Joshua Greenbaum, principal at Enterprise Applications Consulting.

“Taking the machine out of the human is a good thing, and in areas where AI has been doing that for a while — especially with machine learning — it’s a killer ROI,” Greenbaum said. “That’s what we need to talk about with AI, because this is the real world, not the future of language models that are unfortunately going to depend on a lot of bad data that needs to be cleaned before you get anything of value out of it.”

ERP expands to include more functionality

ERP platforms will expand to include more functionality that was in standalone applications, and new capabilities will be integrated more outside of the core ERP systems, according to the experts.

For example, ERP vendors add “growth engines” to systems by acquiring or developing features such as FSM; configure, price and quote; e-commerce; electronic data interchange; and time and attendance applications, said Predrag Jakovljevic, chief operations analyst at Technology Assessment Centers.

In the last few years, ERP vendors have also added capabilities in connected workforce applications intended to improve the productivity and efficiency of the frontline worker, he said. For example, IFS acquired Poka and Falkonry, QAD acquired Redzone, and Epicor acquired EFlex, while Microsoft now offers Dynamics 365 Remote Assist and Dynamics 365 Guides that use HoloLens technology to help technicians.

“An emerging concept suggests that while an ERP acts as the system of record, a connected workforce solution serves as the system of action,” Jakovljevic said. “It is expected that there will be integrations between connected workforce solutions, quality management systems and manufacturing execution systems.”

Major ERP vendors such as IFS, Infor, Microsoft, Oracle and SAP are looking to expand their systems to make them “stickier” by giving customers more options for consolidating functionality, Gould said.

“In the past where ERP vendors wanted to add those adjacent applications like CRM or HCM to their ERP systems, now they’re looking at what IT needs in terms of those solutions,” he said. “[In 2024,] you’ll see many ERP vendors in that space fighting with their own integration and automation platforms, with the idea that it’s better to consolidate more of your data under the ERP platform than to store your data in, say, Amazon S3. “

ERP in 2024 will be a push-pull conflict between the need to innovate and the requirement to have a standardized clean core, where customizations have been modernized or deleted, Greenbaum said.

When companies have a clean core, they can begin to innovate on processes that are outside the direct scope of traditional ERP, such as e-commerce, supply chain, customer experience and employee experience, he said. But they can’t do that fringe innovation without first getting to the clean modern core.

“The problem is that many customers need innovation now — they can’t wait,” Greenbaum said. “They need to make a difference in some basic parts of their business, so they’re trying to juggle these two semi-opposing requirements and get the right combination of edge innovation and ERP innovation to get something done now and setting up the foundation for the future.”

However, some of what will dominate ERP business discussions in 2024 will be familiar, including issues around cost and spend, data, staffing, business processes and risk management. These issues permeate every company of every size in every industry and will continue to influence ERP strategy this year, he said.

“That stuff isn’t going away. We started 2023 with those problems on the table … We’ll start 2024 the same way,” Greenbaum said. “And we’re going to end 2024 with those five issues dominating the thinking of enterprise customers worldwide.”

Jim O’Donnell is a senior news writer covering ERP and other enterprise applications for TechTarget Editorial.