Techie Tonic: How AI is reshaping ERP to cut costs and boost business agility

Interesting discussion among Many CXOs on Enterprise Resource Planning (ERP) as ERP systems have been the backbone of large organizations, managing everything from finance and procurement to inventory and human resources. Most of the organisations invested heavily in building complex ERP environments, often customizing them extensively to support evolving business needs. However, the emergence of artificial intelligence (AI), cloud computing, and low-code technologies is challenging the traditional ERP model and prompting executives to rethink its role in the modern enterprise.

Today, many organizations find themselves spending millions on maintaining aging ERP systems, while receiving little innovation in return. Annual application maintenance and support costs continue to rise, upgrades are complex and disruptive, and even minor process changes often require significant technical effort. At a time when businesses are expected to move faster than ever, many traditional ERP environments have become barriers to agility rather than enablers of growth.

The more important question facing business leaders today is not, "Does every business process belong inside the ERP system?" but rather, "Which processes truly require ERP, and which can be delivered more effectively through AI, automation, and specialized digital services?"

Our Many CXO’s experts believe the future lies in a "Digital Core" approach, where ERP remains responsible for essential transactional functions such as finance, procurement, asset management, compliance, and inventory control, while surrounding business capabilities are delivered through specialized cloud services, workflow platforms, and AI-powered applications.

In this model, ERP no longer serves as the center of digital transformation. Instead, it acts as a stable, lean transactional engine while innovation occurs around it. Organizations can increasingly leverage specialized platforms for customer engagement, workplace collaboration, data analytics, and process automation like low code-no code platforms, integrating these capabilities with their core ERP environment to improve agility and reduce complexity.

Perhaps the most significant change is the emergence of AI-driven business operations. Historically, employees interacted directly with ERP systems, navigating multiple transaction codes and complex screens to complete routine tasks. In the AI era, users can increasingly interact with digital assistants and copilots that translate natural language requests into business transactions.

Imagine an employee simply requesting, "Create a purchase requisition for twenty laptops," or a finance manager asking, "Show me overdue vendor payments and prepare an approval summary." The AI assistant performs the heavy lifting, interacting with the ERP system behind the scenes. This dramatically improves productivity while reducing user training requirements and dependence on highly customized ERP interfaces.

Another major opportunity lies in reducing costly customizations. Many ERP environments contain thousands of custom objects developed over decades to satisfy unique business requests, as periodic business management changes demands changes in ERP system according to their model of operations. Though there is stringent WRICEF (or RICEFW) kind of mandate still in operations. While these modifications may have delivered value at one point, they often create substantial technical debt. Organizations are now discovering that modern workflow platforms and low-code applications can replace many custom ERP developments at a fraction of the cost.

The financial benefits are compelling. Businesses that simplify their ERP landscape and adopt an AI-enabled operating model can potentially reduce support costs by 20 to 40 percent, optimize application maintenance spending by up to 50 percent, accelerate reporting cycles, and significantly improve process automation.

For organizations running legacy ERP environments, the transition does not require a risky "big bang" replacement. Instead, a phased transformation approach is increasingly favoured. Initial efforts focus on rationalizing customizations, freezing non-essential changes, and optimizing support contracts. Subsequent phases concentrate on standardization, process simplification, AI enablement, and the development of a future ERP roadmap aligned with business objectives.

As economic pressures continue to drive cost optimization initiatives, executives are under growing pressure to ensure that technology investments deliver measurable business value. The AI revolution presents a unique opportunity to redirect spending from maintaining complexity toward enabling innovation.

The future of ERP is not bigger systems, larger support teams, or more customization. It is about creating a lightweight, cost-effective digital core surrounded by intelligent automation, cloud services, and AI-powered business capabilities. Organizations that embrace this shift will be better positioned to reduce costs, improve agility, and remain competitive in an increasingly digital economy.

In the AI era, the smartest ERP strategy may not be expanding the system but simplifying it.

We are in conversation with many experts in this topic. Please stay tuned…