As a career business technologist and CIO, I have thoroughly pondered the idea of how Artificial Intelligence can replace the information systems backbone of the majority of companies, namely the ERP system.
At the very heart of the analysis is the recognition that there is a distinct separation between transactional work and knowledge work in most businesses, and ERP starts fundamentally with business transactions. Wether its a purchase order, a point of sale event, the receipt of a cash payment, or a reconciliation of physical inventory, ERPs are essential to most businesses because they provide a unified and integrated approach to managing the myriad of continuously occurring transactions.
The power of the majority of ERPs lies in the inherent integration of business processes and the near real-time way in which anyone who needs to can gain visibility into the current status of critical metrics within the business.
The next level of benefit from an integrated ERP solution though, is being able to derive insights from the information painstakingly captured and integrated by the ERP. An ERP of course allows for the automation of the operational aspects of a business and creates the ability for managers and leaders to make more informed business decisions based on insights drawn from the ERP data.
So, can AI replace the need for an ERP in an organization?
There is a three-pronged answer to this question.
First, AI solutions will be implemented on top of the data that is being collected by the current era of transactionally focused ERPs. This has already been widely occurring with products such as data mining, predictive analytics, and business intelligence. The concept is tried and true; once you have established that the data being collected throughout the enterprise faithfully represents the state of the business, implement intelligent tools on top of that data in order to draw better insights and to manage both the operations and the finances of a business in a more informed way. Machine learning and analytical capabilities will also evolve and create more accurate forecasting and modeling to enable more effective and efficient operational adjustments to a business on a day-to-day basis.
The second prong will involve the ability of AI to process a significantly broader set of information than is just encompassed within an ERP. When a broader universe of data can be considered and analyzed beyond the ERP such as global economic information, exchange rates, environmental trends and the like, the impact of AI will be transformational on a business. The true AI impact at this level will be felt as the sophistication of the decision models and predictive capabilities evolve to more sophisticated levels that help profoundly impact both business decision making and business strategy through a greater ability to process a significantly larger universe of data. ERP impacts business operations, ERP plus AI will impact business strategy.
While the second prong is probably the most exciting and rewarding to individual businesses, the third and last will be revolutionary in its ability to redefine the global transactional environment. Today, it is difficult and maybe impossible to think of businesses without “transactions”. Transactional processing is, as we started the conversation, the heart of an ERP and at the core of the way business processes work. Inputs and outputs, and debits and credits are synonymous with businesses today. That will change when everything is automated; repeat, when everything is automated. Why should a purchase order be generated from one company to another if the two companies have an established agreement and when both AI enabled supply chains acknowledge that physical goods need to be transferred? The physical movement will be scheduled and then occur and some form of payment will occur within specified parameters. Are these transactions occurring? Certainly they are, but the transactions will look totally different tomorrow than today. Maybe it is a continuously reconciled state of a business or a regular snapshot of all relevant business parameters that becomes the way to measure a business, but organizational departments and transactional work will eventually give way to a continuously evolving and adapting environment without transactional processing but with continuous awareness of the state of what’s important to the business.
