Can Your ERP Do This?

Digital transformation is sweeping every zone of the enterprise, including tax. But legacy enterprise resource planning (ERP) systems can impede transformation.

The Risky Assumption About ERP

A host of new technologies, from cloud to mobility to artificial intelligence, is accelerating and upending traditional business processes. Yet even digitally advanced companies sometimes overlook their ERP systems, believing that what worked in the past will transition smoothly to digital-first business strategies.

That’s a risky assumption, according to a new Vertex white paper: Digital Transformation Demands a New Approach to ERP. “ERP significantly impacts an organization by requiring adherence to a set of best practices coded in software. Installation has traditionally been complex, expensive, and time-consuming, meaning that organizations had little incentive to change once the software was in place.” As a result, legacy ERP systems strain to support innovative processes or match the pace of business change in today’s fluid, unpredictable markets.

Enabling Change Without Disruption

Modern ERP solutions are a different story, however. They’re designed to enable the business to integrate change without disruption. The white paper describes some critical factors to consider when choosing an ERP platform, including:

• New business models. Today’s ERP systems must be able to accommodate large-scale shifts such as the transition to a subscription model – with all its ripple effects across accounting and operations, logistics and forecasting and more – or new payment preferences and financing options.
• New business structures. ERP software built with open APIs can provide a unified view of changes resulting from M&A, divestitures, and partnerships.
• Regulatory changes. New compliance mandates are constantly popping up, and they can be costly. The European Union’s GDPR rules are a good example. “GDPR compliance has cost many enterprises millions of dollars, and the fines for non-compliance are potentially much greater,” the whitepaper notes.
• Accounting changes. A flexible, modern ERP system supported by a strong ecosystem of partners can soften the impact of changes in International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) rules.
• The global business environment. Operating internationally brings new challenges in legal jurisdiction, taxation, and accounting structures. ERP systems with baked-in knowledge of local tax and compliance requirements can help you cut through the complexity.

The white paper also offers some key recommendations for ensuring that ERP is a booster, not a blocker, for digital transformation:

• Choose a system that’s future-ready with extensive APIs and web services so you can add new capabilities easily.
• Keep agile development techniques in mind when implementing and expanding the system.
• Look for vendors with a strong partner ecosystem so you can expand functionality as needed.

And, most important, don’t overlook the important benefits of tax awareness – a topic that my colleague Amita Prabhu will pick up in a future post.