Is the ERP System Model Obsolete? A Critical Look at Its Transformation
Benedict Breitenbach
Mon Sep 29 2025
Table of Contents
ERP systems – short for Enterprise Resource Planning – are the backbone of many businesses. Whether it’s accounting, inventory management, human resources or sales: integrated ERP solutions map core business processes and help to manage data, resources and workflows efficiently. For decades, ERP systems were considered essential for digitising and automating corporate processes.
But the world has changed. Digitisation, new technologies and shifting business requirements are increasingly challenging traditional IT infrastructures.
In light of this, a provocative but valid question arises: Is the ERP system business model becoming obsolete? Or are ERP providers reinventing themselves? In this blog post, we take a critical look at the past, present and future of ERP systems – and assess whether we’re witnessing the decline of a model or its transformation.
The Classic ERP Model
There’s no doubt that ERP software has had a lasting impact on the market – and many companies will continue to rely on the systems they once implemented at great cost, aiming to maintain a reasonable balance between investment and value. A look at the German business landscape in 2023 illustrates this clearly: the vast majority of companies still use ERP solutions.
The systems in use are often based on large-scale architectures that integrate operational tools, archiving functions and more into one platform. One central issue is that such systems tend to be maintenance-intensive and expensive to purchase and operate.
What’s more, integrating newer technologies – such as AI modules – often involves considerable technical and financial effort.
According to a market analysis by Software Connect (2023), Microsoft holds a 31.5% share of the global ERP market, followed by SAP with 11.8%. Oracle also ranks among the leading providers.
But this could quickly shift as customer expectations evolve.
Shifting Technological and Economic Conditions
| Driving Force | Description | Impact on Enterprise Software |
|---|---|---|
| Technological & economic change | Rising volatility, uncertainty, and digitisation | The traditional ERP model comes under pressure |
| Cloud technology | Flexible, scalable, cost-transparent applications replacing rigid on-premise systems | Faster updates, greater agility, reduced operating costs |
| Economic uncertainty | Supply chain issues, inflation, geopolitical instability | Demand for responsive, resilient IT structures |
| Changing user expectations | Intuitive interfaces, mobile access, and self-service features expected as standard | Greater focus on UX, mobility, and lower barriers for new entrants |
| Modular system architectures | APIs, microservices, platform ecosystems instead of monolithic suites | Higher integration potential, greater flexibility, but also more complexity |
Challenges of Traditional ERP Systems
| Challenge | Affected Area | Impact on Vendors & Customers |
|---|---|---|
| Complex, grown system landscapes | IT architecture / migration | High transformation effort; difficult to scale or modernise |
| Strongly customised legacy systems | Operations / upgrades | Low standardisation; costly to maintain and adapt |
| Transition to SaaS models | Business model / monetisation | End of traditional licensing; shift in customer retention and product thinking |
| Subscription pricing models | Sales / financial planning | Volatile revenues; new KPIs required |
| Pressure from cloud-native competitors | Product development / market dynamics | Faster release cycles required; risk of falling behind |
| Less agility than new entrants | Time-to-market / responsiveness | Slower delivery of features; lower competitiveness |
| Balancing legacy support and innovation | Strategy / resource allocation | Resources stretched between maintaining old systems and developing new ones |
Companies that opt out of modern ERP adoption for economic reasons must also account for potential revenue losses – particularly when competitors gain efficiency advantages through advanced systems.
Emerging ERP Providers
New, specialised vendors are shaking up the ERP market – but the established names are far from obsolete. In fact, Microsoft, SAP, and Oracle still rank among the leading players. What’s changed is that their current success no longer stems from traditional ERP models, but from strategic transformation.
Microsoft positions Dynamics 365 as a fully cloud-based system deeply integrated with Azure and Microsoft 365. SAP is driving transformation with “RISE with SAP” and the cloud version of S/4HANA. Oracle relies on its Fusion Cloud ERP platform, offering powerful automation, AI, and industry-specific services.
Another key factor: established vendors are increasingly acting like start-ups. They’re launching subsidiaries, acquiring innovative providers, or developing new product lines aimed at mid-sized and digitally savvy businesses. This has led to the emergence of agile, modular solutions – backed by the experience and scale of major tech players.
So, is the ERP system business model becoming obsolete? No – but it is undergoing a fundamental shift. Traditional, monolithic systems are losing relevance, as companies seek flexible, modular, cloud-based solutions. What’s fading is not ERP itself, but the outdated models behind it.
ERP is evolving: into an open, integratable platform infused with automation and AI. Those who rethink early and modernise their landscapes will benefit from this transition. ERP isn’t disappearing – it’s being reimagined.
