A composable ERP strategy helps enterprises innovate and become nimbler. Rimini Street CTO, Eric Helmer, highlights four key principles of composable ERP.
Many CIOs are shifting their ERP strategy to a composable model
To drive innovation and become more agile, many organizations are abandoning a monolithic ERP solution in favor of a composable ERP strategy. A composable ERP strategy allows an organization to add technologies from vendors other than their primary ERP provider (often SAP and Oracle) in a modular fashion to better enable business outcomes. By shifting to this strategy, a company frees itself from the confines of a singular ERP vendor and is empowered to add and remove pieces from their application portfolio in a modular fashion.
Although a composable ERP strategy can help maximize a company’s value, the transition to a composable model may not be easy, particularly if an “ERP vendor first” strategy has been the long-term approach. Organizations should consider four key principles as they develop and adopt a composable ERP strategy.
Composable ERP Principle #1: Focus on the Outcomes
The first principle is the most important: to transition successfully to a composable ERP strategy, a business must adopt an outcome-based thinking model. The desired end results can’t be confined to a single talking point on an executive’s PowerPoint slide. Outcome-based thinking must be part of the organizational DNA for a composable ERP strategy to work.
Historically, business leaders have chosen a technology and then conducted business according to the capabilities of that solution. But when an organization shifts to an outcome-based focus, the technology used to render an outcome becomes less relevant. Decision-makers have more freedom to choose from a mix of vendors and solutions to achieve their desired end results. Why? With a composable ERP strategy, when a solution comes to market that creates better outcomes, the organization can more easily – technologically and culturally – plug in the new tech and remove the old solution.
Adopting an outcome-based approach enables an organization to choose technologies that optimize their ROI and other top-level metrics. No longer hampered by technology, decision-makers can compose an ERP portfolio containing an assortment of products and services that will allow them to achieve their goals.
Composable ERP Principle #2: Define Data Orchestration
The key virtue of the composable ERP strategy is that it creates a system in which technology is interchangeable. Because of this, organizations can use a diverse set of solutions from many different vendors. Ensuring that these systems can be integrated – able to talk to each other – and interoperate – work well together – is paramount. Data integration and interoperability are not optional with a composable ERP strategy — they must be considered from the start before selecting vendors and technologies.
Failure to define an overarching data strategy at the outset will cause a world of pain later. The orchestration layer will become the foundation for all technologies to dock into your overarching system. Down the road, if a particular vendor doesn’t work out, or if a department wants to adopt an alternative technology, you can simply undock that one system and bring in another one that can plug into the foundation. Defining what the master database is and how all the data from different systems interacts and writes to that source of truth is mandatory when adopting a composable ERP strategy.
Composable ERP Principle #3: Secure Your Data
Data orchestration is not the only thing to consider when bringing on multiple vendors — an organization must also be confident that data from every system is secure. When using multiple products and services, you will likely have a series of IDs/passwords and roles. This can lead to a higher threat surface than if your organization uses a monolithic ERP from a single vendor.
This risk can be mitigated, provided that you consider the risk posture from the very beginning and builds in a zero-trust model from the outset. Later, as you bring on new systems and technologies, you can onboard those vendors with these security and role-based access requirements in mind.
Composable ERP Principle #4: Examine the Contracts
The last principle is often overlooked when adopting a composable ERP strategy: the organization must examine the contract to mitigate vendor lock-in. Even if a company adopts an outcome-based philosophy and follows ideal data orchestration and cybersecurity best practices, the fact remains that being unable to easily exchange one system for another can limit the benefits of adopting a composable ERP strategy.
In this situation, rather than the ERP vendor’s platform serving as the operational “hub”, the orchestration layer takes on that role. It is “the bridge to the helm” and you must make sure that your contracts allow for this type of workflow. Cloud subscriptions that tie your software to the vendor’s hardware, support, and managed services can limit the effectiveness of the composable ERP model. Confirm that your contractual relationships with vendors allows for the flexibility you need to thrive.
Excited about composable ERP?
For a more in-depth look at composable ERP, check out our blog series on The Future of ERP where we explore the impact of a shift in ERP strategy from integrated suites to a composed portfolio of solutions.
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