The role of ERP modernization in digital transformation

In a conversation with Asia Business Outlook Magazine, Jayantha Peiris, Chief Information Officer, MAS Holdings, shared his views and thoughts regarding the role of ERP modernization in digital transformation. He has over 30 years of experience across commercial, operations, technology, supply chain, and Enterprise Resource Planning (ERP) sectors. Jayantha Peiris is a seasoned management professional renowned for his expertise and leadership. Jayantha began his career in finance before transitioning to marketing, planning, and operations. His journey continued with leading ERP implementations and advancing into the realm of Information Technology.

ERP modernization is a cornerstone of digital transformation. How can modernizing ERP systems contribute to an organization's overall digital transformation strategy?

Laying the right digital architecture is key to digital transformation. Organizations should focus on establishing a “best of breed” application landscape, using the core ERP solution as the foundation and a single source of truth. Digital transformation should empower organizations to create and offer unique value propositions to both existing and new customers, as well as to new markets. Additionally, it should enhance productivity significantly, which in turn reduces the cost of service. ERP modernization, along with connected peripheral applications, should help achieve these goals. The ERP system must facilitate scalability, allowing organizations to grow and expand without drastic changes to the core applications while also enabling agility and flexibility to adapt to dynamic business requirements. Finally, incorporating the latest technologies, such as AI, machine learning, advanced analytics, chatbots, and automation, are essential elements in ERP modernization to support any organization's digital transformation efforts.

Security and compliance are top concerns for companies. How can organizations ensure that their modernized ERP systems meet necessary security and compliance requirements?

Conducting a comprehensive security and compliance evaluation of the ERP is crucial, emphasizing both application security and infrastructure. It's essential to ensure that the ERP systems adhere to regulations and accepted standards while obtaining the necessary certifications. Additionally, performing vulnerability risk assessments and collaborating with a third party for regular evaluations and audits is vital. Establishing a well-governed access management system will help prevent unauthorized access and it's important that all connected applications are secure and thoroughly tested for vulnerabilities.

How should organizations approach cost-benefit analysis when considering ERP modernization, and what factors should they prioritize?

ERP modernization projects are primarily business-driven rather than IT-driven. Any digital transformation initiative should focus on creating value and impact for businesses, with technology serving as a means to achieve end business objectives. Investments in these projects should yield both measurable, tangible business results and intangible benefits, and both should be quantified to assess return on investment (ROI). While measurable business benefits are crucial for justifying investment, it is also important to prioritize staying relevant with proven technologies, enhancing decision-making capabilities, utilizing data for analysis and future predictions, and improving user experience—capabilities that may be challenging to measure in financial terms but are vital in an ERP modernization project.

Upgrading legacy ERP systems often involves significant challenges. What challenges do companies face when modernizing legacy ERP systems, and how can they overcome these obstacles?

The challenges organizations face include a lack of top management support and buy-in, process standardization across the organization, varying levels of process maturity, and differing digital maturity and dexterity within user communities. Additionally, there is often resistance to change, significant deviations from ERP best practices due to excessive customizations, project delays, and cost overruns linked to these challenges, as well as issues with the cleanliness and quality of data used for migration. To overcome these challenges, it is crucial to communicate effectively, implement a strong change management methodology, and align all stakeholders with the project's objectives and deliverables. Organizations should focus on training to enhance the digital maturity of business users, conduct a business process reengineering (BPR) exercise before blueprinting, establish a robust project management structure and methodology, and cleanse and validate data prior to migration.

What are the future trends in ERP systems that organizations should be aware of as they pursue digital transformation?

 Digital architecture plays a key role in establishing an application landscape that aligns with the organization's best-of-breed applications. While ERP is integral to the digital landscape, creating an orchestration layer with multiple applications will drive digital transformation efforts within the organization. CIOs should focus on managing the total cost of ownership (TCO) of the entire digital landscape to keep costs low. The adoption of new technologies, such as AI, analytics, RPA, and the use of large language models (LLMs) to generate insights, should be embedded in technology modernization efforts. Minimizing customization is crucial for enabling seamless upgrades and scaling innovations introduced by ERP vendors. Transitioning to the cloud and modernizing applications to be cloud-ready is essential to leverage the benefits offered by cloud IaaS and SaaS vendors. Another aspect to consider is IoT. Using IoT devices for real-time data capture facilitates timely decision-making and should be included in the application landscape. Enhancing user experience through access via any device, mobile connectivity, and personalized offerings improves user adoption across different profiles. Furthermore, traceability of material and process flows is a vital aspect of new ERP solutions, addressing the growing customer demand for sustainable and traceable product flows. Lastly, integrating social responsibility and sustainability through Green ledger accounting is a crucial trend within the broader theme of digital architecture, as it emphasizes creating systems that not only advance technology but also prioritize ethical practices and environmental stewardship, complying with ESG reporting standards.