Enterprise Resource Planning (ERP) is a staple of many businesses in Asia, particularly mid to large enterprises. There are also several successful local ERP brands that have built their reputation around localization and customization.
The advent of the cloud didn’t necessarily accelerate the shift to cloud for ERP until recently as businesses get accustomed to SaaS solutions.
The case for centralized decision-making and data monitoring has further accelerated the shift from on-premises to cloud applications. IDC estimates that the spend on cloud applications and infrastructure in Asia/Pacific will reach US$124 billion by 2025 at a year-on-year growth rate of 28.8%, indicating a sustained focus on cloud-enabled software applications.
According to Sampath Kumar Venkataswamy, senior research manager with IDC Asia/Pacific Manufacturing Insights, there has been increased traction from on-premises to cloud-enabled solutions in the region over the last couple of years.
“The changing manufacturing landscape along with significant interest towards integrating value chain data for improved operational resilience has been one of the top drivers for choosing a cloud-based ERP application,” he added.
According to IDC, the scale of ERP system use is expanding and seen as a foundational step to improve business performance across functions in individual locations, as well as across the value chains.
“They also look to ERP to get to the next level of growth and transformation. For manufacturers a further use case is to ensure overall equipment effectiveness,” he continued.
What lies ahead
COVID-19 was a wake-up call for many in the region’s manufacturing sector. As Venkataswamy noted several manufacturing firms were caught unprepared during the COVID-19 crisis and, more importantly, did not have robust contingency measures in place to mitigate the effect of market disruptions.
It also revealed the extent to which entire supply chains are vulnerable to the cascading effect of disruption in one part of the ecosystem and the ripple effects that linger for extended periods.
“The pandemic has put supply chain risk on the agenda. Risk mitigation through ecosystem partnerships and platform unifications are some of the key initiatives that organizations will need to further invest in to increase their ability to flex and adapt to changing market conditions," observed Venkataswamy.
He opined that as organizations look to wade through these trying times, they also need to start making strategic process and technology investments that allow them to remain operationally resilient.
"The Purchasing Managers' Index (PMI) scores across 4Q20 definitely showed signs of recovery across Asia/Pacific, and going by the current estimates, the industrial and shop floor activity signals an uptick in IT and infrastructure spending to support the increasing need to remain operationally resilient and prepare for future disruptions," concluded Venkataswamy.
This uptick bodes well for the recovery of the manufacturing sector. It is also a signal for the ERP ecosystem to use the opportunity not only to sell new licenses but to elevate the discussion with manufacturers on technologies and best practices that would enable the region’s manufacturers of all sizes to compete more evenly in the global international market.
Beyond pureplay ERP, IDC is forecasting growth across peripheral tech sectors including RPA, smart warehousing and supplier network management.
Click on the podchat player to listen in detail to Venkataswamy sharing of important trends impacting the adoption of cloud ERP in Asia.
- What is the biggest reason why businesses are moving their ERP to the cloud?
- What is the biggest benefit (#1 is different) for moving ERP in the cloud?
- What is the main reason why some organisations are opting for lift-and-shift as opposed to a full cloud ERP deployment?
- What remains the challenge for organisations moving their ERP to the cloud?
- Specific to SAP S/4HANA. What do you see are attractions for migrating and what is holding customers from moving to S/4HANA?