Crossing the Chasm

The ERP software of the future will look nothing like the suites we use today. It will manage the same business processes as modern ERP applications, but will automate many manual functions and provide real-time connectivity with customers, suppliers and financial institutions.

During the past decade, many businesses implemented fully integrated enterprise resource planning (ERP) suites to handle their back-office transaction processing. Then they added to these suites modules that manage front-office functions, such as sales-force automation and customer-relationship management (CRM). And now ERP is in transition again. Over the next decade, the scope of business-management software will expand dramatically in ways that no one could have anticipated in 1990.

The Internet has made the concept of the extended enterprise — a company that is tightly integrated with its business partners — a reality. As a result, inward-facing ERP suites designed to serve a select group of employees are morphing into outward-facing software that serves everyone from a company’s customers to its suppliers via the Web. These new suites, which I’ll call e-business management systems, will integrate a myriad of external services into what were previously closed, internal business processes. They will monumentally reengineer corporate workflow in areas such as buying, selling, cash management and financial reporting. Following are 10 major improvements to ERP that companies can expect from the e-business management suites of the future.

1. XML Document Exchange and Interrogation

E-business management suites will rely on extensible markup language (XML) to share information with one another and gather information on the Internet. XML is set to replace electronic data interchange (EDI) as the transaction-exchange standard between business partners. It is revolutionary because it can describe data in ways that a variety of proprietary applications can understand. (For a history and description of the language, see XML Means Business in the November 1999 issue of Business Finance.) Through XML, companies with different e-business management suites will be able to interrogate one another’s business documents and reports.

For example, an e-business management system could generate a purchase order in XML, then transmit the file electronically to a business partner’s software system. The supplier’s e-business management suite could read the purchase order and use the enclosed data to post a new sales order to its order-entry module. This process eliminates manual entry of the sales-order data and reduces the length of time the transaction takes.

A company’s e-business management software might also download any competitors’ financial statements that are stored on a Web site in XML format, then automatically search those documents for data to use in comparative reporting. Such functionality would enhance a company’s reporting, while requiring minimal effort on the part of report users.

XML will become the default import and export format for data in every e-business management system. This new language will facilitate almost every aspect of the next decade’s collaborative commerce over the Internet.