Historically, there was a tradeoff when it came to enterprise resource planning solutions. ERP brought high levels of coordination and operational efficiency, but implementing and maintaining the software took a considerable amount of time and resources.
This tradeoff was the result of ERP complexity. Each business would script and program its ERP solution for its particular workflows and functionality requirements, a considerable undertaking both during implementation and whenever technology updates required readjustment.
A fundamentally new approach to ERP has become necessary as the speed of business and technology has evolved. Businesses need a flexible system or record that can be rolled out and adjusted fast, but without sacrificing functionality or comprehensiveness.
This new approach is a fit-to-standards model combined with deep modularity built into the ERP core. It is epitomized by the SAP Business Suite and its core SAP Cloud ERP that underpins the solution.
The Fit-to-Standard Model
Fit-to-standard is an evolution of the concept that best practices are better than reinventing the wheel.
Most business processes are not unique. A company does not usually gain a competitive advantage from its accounting and payroll processes, although it could be holding itself back by relying on these bespoke processes when they have already been perfected elsewhere.
So, instead of designing business processes from scratch and trying to fit them into an ERP solution, instead of writing lots of custom code that must be maintained, a better approach is to rely on best-practice standard processes that come predefined within an ERP solution by default. A business then only customizes and adds complexity when truly necessary.
With a fit-to-standard approach, a business can implement ERP faster and at reduced cost, but at the same time improve operational efficiency through the use of proven best practices.
Modularity for Operational Flexibility Without Limits
Of course, every business is unique. While standard, best practice workflows make sense for the majority of business processes, there are some processes that drive competitive advantage. Businesses also operate in different environments, have industry-specific needs, and are at different stages of business growth. One size does not fit all.
This is where a modular architecture comes in. There’s not one standard ERP solution and set of processes that all businesses use; there’s a universe of different functionality modules and standard workflows that businesses combine for a unique mix. This is how ERP, using a fit-to-standard model, retains flexibility and can meet the particular needs of a given business.
SAP Cloud ERP and the SAP Business Suite are good examples of this modular approach in practice.
The core SAP Cloud ERP solution is a relatively small kernel that provides only basic functionality services, foundational logic, and hooks for connecting data, applications, and add-on modules to the system. SAP Cloud ERP orchestrates and unifies the solution, but it doesn’t itself define most of the processes and functionality contained within the system.
The actual data and applications that businesses rely on are one layer above, in an ecosystem of applications, data storage, and services that all hook into the cloud ERP core and are called the SAP Business Suite.
The SAP Business Suite consists of cloud ERP applications that a business might use for its given needs, a data cloud for securely storing and accessing all company data, an artificial intelligence layer for incorporating the latest AI models into the system, and an online marketplace for adding or developing additional functionality, integrations and system modifications without breaking the system every time there’s a technology update.
The advantage of this modular architecture is an almost turnkey solution based on best practices that nonetheless can expand, adapt, and meet the particular needs of a given business. Instead of writing custom code, for the most part, a business simply reconfigures the system or changes the applications that sit on top of it. And where true customization is needed, the modular architecture makes these easier to create and maintain without impacting the agility of the overall system.
Solution Packages Make ERP Rollout Much Easier
The combination of fit-to-standard ERP implementation and deep modularity comes together in ERP solution packages. This is the secret sauce of the new ERP methodology.
Fit-to-standard helps businesses roll out a new cloud ERP solution quickly, but the limitless flexibility of a modular architecture would create new deployment headaches were it not for solution packages predefined for given business scenarios and specific industry needs.
Solution packages are prebuilt collections of applications and fit-to-standard business processes crafted for specific industry needs and business sizes. They include everything a business needs for rolling out and onboarding to the new system, including migration tools and frameworks for adopting the new system quickly.
These curated solutions dramatically change the scope and speed of ERP adoption.
Previously, an ERP implementation would require understanding the business processes of each department and creating a blueprint, then coding or scripting these processes into the ERP. With a solution package based on the fit-to-standard model and leaning on a modular architecture, however, the blueprint and setup are already done; all the functionality and business processes are in the system and largely configured. The business now just discovers its needs and lightly configures the system instead.
This shrinks rollout and adoption times from years to months. Our ERP implementation clients now frequently roll out their new system in as little as 90 days.
The Role of the Cloud in This Methodology Shift
While faster ERP implementation time is nice, let’s be honest: The real reason for this shift in methodology is business necessity. Technology is moving fast, and businesses must digitally transform and become more nimble, or they will fall behind.
Moving operations to the cloud is part of this digital transformation, and software-as-a-service requires a little more standardization and a modular approach for faster innovation and greater connectivity with other systems.
So the cloud encourages this fit-to-standard approach and modularity, which is why SAP began moving toward this model 20 years ago when they released SAP Business ByDesign. With the release of SAP Cloud ERP a few years ago, which is basically a public cloud version of its flagship S/4HANA ERP solution, SAP has shifted its whole paradigm toward this model. And so have other ERP vendors.
Businesses also must shift their mindset to adopt this fit-to-standard model as part of their digital transformation journey. That’s why ERP implementation is not just an IT project now. It must be driven by the entire business and include organizational change management. Putting the technology in place has gotten easier, but there’s still the human component.
A New Mindset is Required
Organizational change management is important for success with the fit-to-standard paradigm because shifting to industry-standard processes involves new ways of thinking and operating. These new ways are best practices that make a business more efficient, but they still require getting Sally on payroll on-side, so shadow processes do not develop.
That’s why the CEO and department heads must be involved. Communication about this shift in methodology needs to start at the executive level, and it must be clear that fit-to-standard is how the business will operate.
Making the jump also requires a thoughtful rollout, not ordering change from on high. There should be a good plan for training employees on these new processes, and showing them why the new processes will drive overall business success and ultimately make their lives easier.
Even with change management, changing entrenched employee behavior sometimes can be challenging. So it should be communicated that this is how the business is going to do things, and if the employee doesn’t agree, they have the opportunity to be deployed elsewhere in the company. You can’t have certain subject matter experts going around the system and operating outside of the standard processes.
Where Fit-to-Standard is Not Appropriate
While a modular, fit-to-standard approach leads to faster ERP rollout and future-proofs a business, there are some situations where it is not appropriate. Most but not all businesses will benefit from something like SAP Cloud ERP.
The exceptions are businesses with a high degree of complexity that require custom solutions and private cloud ERP. This category is shrinking, but it still exists.
A forklift manufacturer might have 19 different models and 17 different ways they each can be configured, for instance, lean on several different locations during manufacture, and rely upon consignment to a large dealer network. That’s a lot of complexity, and far from the situation that most businesses face. In such a case, a modular ERP solution based on fit-to-standard might actually make less sense than a bespoke solution.
These situations are rare, however. In most cases, a flexible ERP that uses a fit-to-standard methodology can match between 85 and 90 percent of what a bespoke, private cloud ERP solution can provide.
In other words, most businesses will benefit from standard processes and a fit-to-standard approach both for operations and ERP rollout. Fit-to-Standard, combined with modular ERP structure solutions like SAP S/4HANA Cloud Public Edition, helps drive greater efficiency today and also prepares a business for what’s coming next.
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