Some of the excitement of moving to a new house dwindles with the thought of sorting and packing the accumulated stuff over the years. We often discover items we didn't even know existed and are surprised by the amount of "junk" we've lived with all this time. Anyone who has transitioned from a legacy Enterprise Resource Planning (ERP) system to the latest system can relate to similar sentiments.
Investing in an ERP system is one of the most expensive undertakings a company can make in its IT journey. Over time, many customers don't realize the extent of customizations made to the system. Many of these customizations become outdated and redundant, much like the clutter accumulated in a long-occupied house. When it's time to upgrade the ERP system to leverage the latest technologies, we often face the same realization as when moving to a new house. This is why the Clean Core Strategy is gaining attention in the ERP space.
Making Sense of Clean Core
The concept of a "Clean Core" within the context of ERP systems like SAP refers to maintaining a standard core system with minimal and absolutely necessary customizations. Clean Core as a concept has existed since ERP systems were first built but remained a pie-in-the-sky pursuit due to a lack of technological advances. With the large-scale adoption of cloud-based ERP systems and increased processing capabilities of today's data servers and networks, it's time for "Clean Core" to be added as an implementation strategy.
Discussion of Clean Core starts with the context that 80% of the business processes can be implemented with out-of-box solutions from the ERP vendor, and the remaining 20% make up a company's differentiating capabilities. The unique way a company does business that gives them the competitive edge is something that would require customization to the ERP system, but we have an opportunity to look at the remaining 80% for a clean core strategy. There are many micro-services available on cloud that can be leveraged to improve even the 20%.
Key Aspects and Benefits of Clean Core
Minimize Customizations
Reducing the number of customizations made to the core ERP system. This helps in maintaining the integrity of the system and also helps companies reduce the costs associated with system maintenance, upgrades, and troubleshooting.
Use Extensions
Instead of customizing the core system, companies are encouraged to use cloud-based micro-services or extensions provided by third-party vendors. These extensions are built using the provided frameworks and tools, ensuring they integrate well with the core system without altering its fundamental structure.
Leverage Cloud Capabilities
Cloud-based ERP systems have quickly become the go-to option over on-premise options due to the agility and cost-effectiveness they offer. ERP vendors often promote a clean core approach by offering configurable options and extensions that can be integrated seamlessly. This reduces the need for deep customizations.
Standard Processes
Companies are encouraged to align their business processes with industry best practices. This helps streamline business operations and enhances agility in adopting new technologies and processes. It allows for quicker implementation of updates and new features released by the ERP vendor.
Clean Data
All the aspects of the clean core listed above lead to having clean data. Having clean business-critical data helps with good analysis and better decision-making.
Continued Governance
Continued governance establishes and enforces standards for data consistency and accuracy. This involves regular checks and updates to ensure that data remains reliable over time, which is essential for a clean core strategy.
💡 The 80/20 Rule
80% of business processes can be implemented with out-of-box solutions, while the remaining 20% represents a company's unique, differentiating capabilities. Clean Core focuses on optimizing that 80% while providing flexibility for the critical 20%.
The Impact on Artificial Intelligence
Nowadays, any discussion related to technology is incomplete without considering its impact on Artificial Intelligence (AI). AI and Large Language Models (LLM) rely heavily on good and accurate data. So, it becomes imperative for a company to strive for having their core business data clean. This will significantly improve the quality and accuracy of output from their AI models, resulting in better decision-making.
Conclusion
Coming back to the original reference to moving to a new house, it is not always easy to only buy things that we really use and there will be some clutter that we accumulate over time. That will be the case with a company's ERP system too, but having a process in place would significantly reduce redundancy, improve data quality, and set a company up for great agility in this ever-changing landscape of ERP systems.
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Pingalaa Team
The Pingalaa team consists of experienced SAP consultants and AI specialists dedicated to helping businesses transform through innovative technology solutions.