The foundational DNA of ERP was its design criteria of standardization, compliance and rigid end to end process workflows, which was to eventually cause mounting dissatisfaction among lines of business leadership, who increasingly would blame IT, and in particular the CIO. As demand grew for more ‘business-focused’ systems, CIOs were increasingly characterized as resistant to change and out of touch with the business. However, other forces within the enterprise would continue to hold CIOs accountable for standardization and compliance.

The result was a bifurcation of value that developed between corporate administration functions such as Finance and Human Resources and operating lines of business (LOBs) such as Sales and Supply Chain. Administrative teams such as Finance and HR increasingly prized ERP for its standardization and centralization characteristics. Operating units and functions such as marketing, sales and supply chain increasingly viewed the strengths of ERP as barriers to innovation and differentiation.

There was growing sentiment that ERP would not no longer meet the needs of the enterprise as business models grew increasingly fluid; that no matter what the cost or complexity would be, the end result would no longer sufficient. ERP was designed from the ground up for process standardization and compliance. Its rigidity was part of its DNA. ERP, and the Client-Server model that had enabled it, was not designed for adaptability. In fact, it was designed to discourage continual change. In truth, ERP was not flawed, it was simply designed for a different business era. The need grew for a fundamentally different business technology platform:

CRM and Systems of Engagement

The need grew for a fundamentally different platform –  one that was externally focused on the Customer and that managed relationships, that encouraged open and shared interaction without sacrificing transactional efficiency. The stage was set for CRM.

The problem with first generation CRM was that it was architected in a similar way as ERP, with rigid workflows focused upon automation. There was also a need to manage relationships with customers, which were dynamic. This duality prevented widespread use of CRM; it needed to accomplish both and its architecture could not deliver. Growth eventually stalled. But CRM cultivated a Sales and Marketing audience that was hungry for technology that wasn’t provided by ERP.  They would have to wait a bit longer.

Geoffrey Moore is a management consultant and business author best known for the technology product management classic, ‘Crossing the Chasm’. In his 2011 AIIM.org paper entitled: “Systems of Engagement and the Future of Enterprise IT” Moore proposed that Enterprise IT at the time was focused on systems that store information and transact processes; systems that he referred to as ‘Systems of Record’. His position was that such systems had matured and could provide no further differentiation. He argued that the business environment was transforming to one that was much more open and collaborative, and that it was impossible for Systems of Record to enable this transformation.

He then proposed that “Systems of Engagement that will overlay and complement our deep investments in systems of record.” He characterized such systems as having a focus on Communications and Collaboration.

The need to move beyond a centralized, ERP-driven enterprise platforms was becoming increasingly clear but the solution remained elusive. Many organizations adopted a two-tier ERP approach, but they were still transactional systems of record and the need for them to be tightly linked using closed middleware prevented them from transforming beyond transactions.

Next Time

Learn about how the rise of SaaS applications clouds answered for some organizations the CIO Dilemma with Systems of Record versus Systems of Engagement.