Role of ERP in Digital Transformation
Take a close look at the role of the ERP in digital transformation — and discover why DX can’t happen without it
Digital transformation (DX) is about leveraging technologies to “transform” processes, culture, and customer experiences so that orgs can meet new challenges and market requirements.
“Foundational” ERP elements like unified data, cloud infrastructure, and composable design remain essential building blocks for DX. Those benefits might sound like old news.
But the reality is, a lot has changed – in such a short amount of time. We don’t mean from one generation of ERPs to the next. A lot has changed since COVID. Since ChatGPT. Since whatever recent black swan disruption is your preferred reference point.
As such, ERP transformation strategies are evolving. The stakes are higher and the competition is becoming ever more fierce. All that in mind, here’s how we should think about ERP’s role now – and moving forward.
How ERPs Drive DX Amid Today’s Conditions
We’ve covered ERP’s role in driving DX at least twice in recent memory. Here’s one that examines DX through a D365-specific lens, and another that focuses more broadly on the role that ERPs play in supporting DX initiatives.
Both posts explain how the ERP functions as a supportive backbone for all digital strategies, the first steppingstone in your DX journey, a fundamental building block – you get the idea.
All of this is still true, but given all the recent shifts in the B2B landscape (aka: generative AI’s explosive arrival), it’s worth considering how the ERP helps us set the stage for success – in this new reality.
In these next few sections, we’ll explain what, specifically that means for your ERP strategy – and long-term DX plans.
Data Centralization
Centralizing data in your ERP provides a single pane for digitizing processes, breaking down silos, and implementing simple time-saving automations.
From there, you can start making more strategic improvements to drive efficiency, increase agility, enable collaboration, or other high-priority goals.
Here’s a look at how data centralization paved the way for two very different DX scenarios:
PwC helped MGM Resorts consolidate its US-based finance and service operations into an integrated Oracle platform. Disparate systems made it difficult for employees to access the information they needed to do their jobs, while finance leaders lacked the visibility they needed to make strategic decisions.
By centralizing their data in the cloud, MGM was able to strengthen security protections, streamline financial processes, and provide self-service analytics tools to empower employees on the job.
Screens R US, a New Zealand-based security services company started their DX journey from scratch in 2021 – after years of relying on paper-based processes for everything from inventory management to sales, finance, and bookings.
The company used Odoo’s integrated website, CRM, and Project modules to digitize all business data in that central hub, which, right away, allowed them to start making improvements across the entire business.
Integrated Business Processes
One of the key benefits of working with a cloud ERP is that it allows you to integrate all different departments, functions, and line-of-business apps into one cohesive platform.
Then, you can use data from across that entire ecosystem to design processes that align with specific goals. And – goals can be anything – improving productivity, cutting costs, enabling cross-functional collaboration, or leveling up your data strategies.
In Dynamics 365 F&O, admins can set custom security protections for business performance analytics. They can create roles that define which reports users can access – and how they can use them. They can also control which dimensions users can see within individual reports.
D365 Supply Chain Management automatically stores accurate, auditable records of inventory movement, lot numbers, expiration dates, which helps orgs operating in tightly-regulated sectors — growers, medical device suppliers, food & beverage companies, healthcare providers — enforce compliance, reduce risk, and keep consumers safe.
But – that data can be integrated with other processes – procurement, inventory, supplier management, sales, etc. to streamline operations and create greater transparency throughout the network.
Boca Terry, a company that provides towels and linens to luxury hotels, replaced QuickBooks with a connected commerce platform built on Acumatica.
The new platform integrated data from the entire network; customers, suppliers, ecommerce, wholesale distribution, manufacturing, outsourcing partners, and more.
This allowed the company to automate manual tasks – receiving inventory, data entry, customer notifications, and order confirmations. Customer statements, which used to be printed and mailed, are now sent via email – saving the company about $500 each month.
Acumatica’s native connector automatically syncs online B2C order data from BigCommerce to the main platform – which, prior to the upgrade, the company wasn’t consistently tracking. Co-owner Edward Cohen estimates that this disconnect was costing them around $500k per year.
Future-Readiness
If you’re trying to lock down plans for your next big ERP investment, you’ll need to consider not only how emerging tech trends fit into the equation – but also how you might incorporate solutions that may not yet exist.
According to Forrester, composability helps you become the kind of adaptive, resilient org that thrives under uncertain conditions. Fortunately, most of today’s top vendors have already shifted to composable ecosystems – which were built specifically for rapid innovation, phased capability-building, and the continuous improvement cycles that fuel “forever transformation.”
Users can swap old modules for new ones, add storage capacity or new features on an as-needed basis.
For example, if you’re using Dynamics 365 F&O ERP and D365 Sales, you might add D365 Customer Service & Customer Insights to support growing customer service operations as your company expands its reach across the globe. These modules plug right into your existing stack, allowing customer service agents to work with data from finance, sales, and the rest of the org.
You can also tap new capabilities through partner solutions like pre-built accelerators, apps, and reusable templates.
Or, you can take a more proactive approach – leveraging low-code platforms and reusable components to build new solutions, make structural changes to existing ones, or combine data in unexpected ways to uncover new opportunities.
Microsoft’s Power Platform, NetSuite’s SuiteCloud, and Acumatica’s Cloud xRP provide direct integration with all solutions in their respective ecosystems – allowing users to leverage real-time insights to ensure solutions stay aligned with changing requirements.
But – Gartner analysts warn that pursuing targeted innovation strategies without first transitioning to a modular platform will put your business at risk. Emerging technologies like low-code, self-service analytics, and generative AI need reliable, real-time insights to produce the desired outcome.
That means, you’ll need to implement really granular controls, compliance policies, and layers of security protections to ensure that data doesn’t become compromised.
Automation
With more orgs struggling to meet the relentless demands of an increasingly harsh digital landscape, automation is no longer an advanced strategy. It’s a foundational pillar of digital transformation.
ERP automation supports transformation at every phase. Early on, orgs can leverage newly-established visibility to automate basic tasks like data entry or redesign processes that make it easier to access information or collaborate with remote colleagues.
These “smaller” improvements can deliver high-impact results — increasing efficiency and productivity by eliminating manual tasks, lowering operational costs, and preserving data accuracy and integrity so that it continues to generate value.
Automation also allows you to capture more data that can then be used to drive continuous improvement. For example, you can monitor newly-automated processes and take immediate action if you’re not getting the results you were looking for.
Insights become more valuable with time – providing a foundation that allows orgs to gradually bring more technologies into the fold — IoT, digital twins, process mining, etc. – and fuel the next phases of transformation.
Automating compliance helps orgs save time and prevent errors from putting them in harm’s way. Employees spend fewer hours updating and enforcing policies, while built-in protections prevent mistakes that put the business in harm’s way.
Final Thoughts
ERP plays a critical role in digital transformation by enabling organizations to streamline processes, leverage emerging technologies, drive innovation, and adapt to changing market dynamics. It acts as a catalyst for organizational growth and success in the digital age.
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Frequently Asked Questions
What is ERP digital transformation?
ERP (Enterprise Resource Planning) digital transformation is the process of integrating advanced digital technologies into an ERP system to enhance capabilities, streamline processes, and improve overall efficiency. This transformation involves adopting cloud-based solutions, utilizing artificial intelligence and machine learning, and leveraging data & analytics. The thought is to create a more responsive, and data-driven ERP system that can better support an organization’s strategic objectives and drive digital innovation.
What are the benefits of ERP transformation?
The key benefits of ERP transformation include improved efficiency, enhanced decision-making based on real-time insights, and cost savings. An ERP transformation offers expandability with cloud-based solutions, better collaboration across departments, and improved regulatory compliance through robust reporting and tools.
What technology does ERP use?
ERP systems use an abundance of different technologies, including cloud computing, artificial intelligence & machine learning, and data & analytics. ERP systems also utilize IoT (Internet of Things) for real-time data collection, mobile technology for flexibility, blockchain for security, and process automation to reduce error.