Composable ERP: Meaning, Features & Key Components

Businesses are changing quickly, and old ERP systems are finding it hard to keep up as they must adapt to changing market demands. That’s why many companies are now moving to composable ERP, a newer, more flexible way to manage business tasks.

Instead of using one big system, a composable ERP lets you use smaller parts that fit your needs. The global ERP software market is expected to reach $78.4 billion by 2026. It’s not just a new tool, it’s a better way to handle business in an evolving world with technology. Let’s get started.

What Is Composable ERP?

Composable ERP is a modern approach to ERP systems that emphasizes flexibility and modularity. Unlike traditional ERP systems, which are typically built as a single, monolithic application, Composable ERP is composed of a collection of modular, loosely coupled components.

These components can be easily assembled and reassembled to create custom ERP solutions tailored to the specific needs of an organization. So, this is the composable ERP definition. Now, let’s understand how it works.

Pro-tip

Carefully assess your current ERP systems and business processes to identify areas for improvement. Focus on selecting a Composable ERP platform that offers a modular architecture, open standards, and strong integration capabilities. Prioritize user training and change management to ensure a smooth transition to the new system and optimize your Composable ERP system.

How Does Composable ERP Work?

Composable ERP is built on the principles of modularity, interoperability, and configurability. At its core, Composable ERP consists of a set of core modules that represent different functional areas of an organization, such as finance, human resources, and supply chain management. These core modules are designed to be modular and interoperable, allowing them to be easily integrated with other modules or third-party applications.

In addition to the core modules, Composable ERP also includes a set of platform services that provide common capabilities such as identity management, data integration, and workflow automation. These platform services are designed to be reusable across different modules, making it easier to build and maintain custom ERP solutions.

What Are the Benefits of Composable ERP?

Composable ERP comes with various benefits, and below, we have listed the top 4 advantages for businesses –

1. Flexibility and Customization

Composable ERP offers unparalleled flexibility and customization options compared to traditional ERP systems. Organizations can easily add, remove, or replace modules to tailor the ERP system to their specific needs. This flexibility allows organizations to adapt their ERP systems to changing business requirements without the need for extensive customization or reimplementation.

2. Scalability and Adaptability

Composable ERP systems are highly scalable and adaptable, making them ideal for organizations of all sizes. As businesses grow and evolve, Composable ERP systems can easily scale to accommodate new users, locations, and business processes. Additionally, Composable ERP systems can adapt to changes in technology, regulations, and industry trends, ensuring that organizations remain competitive and compliant.

3. Integration and Interoperability

One of the key benefits of Composable ERP is its ability to integrate with other systems and applications. Composable ERP systems are built on open standards and APIs, making it easy to integrate with third-party applications such as CRM systems, e-commerce platforms, and business intelligence tools. This seamless integration allows organizations to create a unified view of their business data and processes, improving decision-making and efficiency.

4. Cost-Efficiency and ROI

Despite the initial investment required to implement Composable ERP, organizations can achieve significant cost savings in the long run. The flexibility and scalability of Composable ERP systems mean that organizations can avoid costly upgrades or re-implementations as their needs change.

Moreover, the ability to integrate with existing systems and applications can further reduce costs by eliminating the need for duplicate data entry and manual processes. Overall, Composable ERP offers a high return on investment (ROI) by enabling organizations to optimize their operations and adapt to changing business conditions more effectively.

What Are the Features of Composable ERP?

Now that you understand the benefits, explore the main features of composable ERP for businesses –

1. Modular Architecture

Composable ERP systems are built on a modular architecture, with each module representing a different functional area of an organization, such as finance, human resources, and supply chain management. This modular architecture allows organizations to easily add, remove, or replace modules to customize the ERP system to their specific needs. Additionally, the modular architecture of Composable ERP systems makes them highly scalable, allowing organizations to add new modules as their business grows.

2. Open Standards and APIs

Composable ERP systems are based on open standards and APIs, making it easy to integrate with other systems and applications. This open architecture allows organizations to create a unified view of their business data and processes by integrating Composable ERP with third-party applications such as CRM systems, e-commerce platforms, and business intelligence tools. Additionally, the use of open standards and APIs makes it easier for organizations to customize and extend their Composable ERP systems to meet their specific needs.

3. Configurability and Customization

One of the key features of Composable ERP is its configurability and customization options. Organizations can easily configure Composable ERP systems to match their existing business processes and workflows. Additionally, Composable ERP systems offer a high degree of customization, allowing organizations to create custom reports, dashboards, and workflows to meet their specific needs. These configurability and customization options make Composable ERP systems highly adaptable to changing business requirements.

4. Real-time Data and Analytics

ERP composable systems provide real-time access to business data and analytics, allowing organizations to make informed decisions quickly. Composable ERP systems offer a wide range of reporting and analytics tools, including dashboards, ad-hoc reporting, and predictive analytics. This real-time access to data and analytics helps organizations identify trends, track performance, and make data-driven decisions to improve efficiency and profitability.

How to Implement a Composable ERP Strategy?

Wondering how you’ll be able to implement the composable ERP strategy? We’ve got you covered! Check out the complete steps for implementing ERP strategy –

1. Assessment and Planning of Business Needs

Conduct a thorough assessment of your current ERP system (if any) and business processes to identify areas for improvement and determine the specific needs of your organization.

Define clear objectives and goals for implementing a Composable ERP strategy, such as improving efficiency, reducing costs, or enhancing customer service.

Engage key stakeholders from different departments to gather input and ensure alignment with business goals.

Develop a detailed implementation plan that includes timelines, resource requirements, and key milestones.

2. Selecting an ERP Platform

Evaluate different Composable ERP platforms based on your business needs, budget, and technical requirements. Consider factors such as scalability, flexibility, ease of integration, and vendor support.

Look for a platform that offers a modular architecture and open APIs to enable easy customization and integration with other systems. Ensure that the ERP platform complies with industry standards and regulations relevant to your business.

3. Integration and Interoperability

Identify existing systems and applications that need to be integrated with the Composable ERP platform. Develop a data integration strategy to ensure seamless flow of data between the ERP platform and other systems.

Implement standard protocols and APIs to facilitate interoperability between different systems and applications. Test the integration thoroughly to ensure that data is being exchanged accurately and efficiently.

4. Solution Deployment

Planning The deployment process involves creating a detailed plan that outlines the steps, timelines, and resources required for a successful deployment. This plan should also include communication strategies to keep stakeholders informed throughout the process.

Conducting thorough testing of the Composable ERP solution is crucial to ensure that it functions as expected and integrates seamlessly with existing systems. This testing should be done in a controlled environment to identify and address any issues before deployment.

5. Performance Monitoring

Establishing key performance indicators (KPIs) is essential to measure the effectiveness of the Composable ERP solution. These KPIs should be aligned with the organization’s overall goals and objectives and should be specific, measurable, achievable, relevant, and time-bound (SMART). Monitoring KPIs regularly allows organizations to assess the performance of the Composable ERP solution and identify areas for improvement.

Using data analytics and reporting tools can help organizations gain insights into the performance of the Composable ERP solution. These tools can provide valuable information about user behavior, system performance, and areas for optimization. Implementing performance monitoring tools is essential to track system performance and identify any bottlenecks or issues. These tools can help organizations proactively address performance issues and ensure that the Composable ERP solution is running smoothly.

6. Continuous Improvement

Soliciting feedback from end-users, stakeholders, and IT teams is essential to identify areas for improvement in the Composable ERP solution. This feedback can provide valuable insights into user needs, pain points, and areas for optimization.

Regularly reviewing and updating the Composable ERP solution is important to address changing business requirements and technological advancements. This may involve releasing regular updates and patches to address bugs, improve performance, and add new features.

What Factors Help to Develop a Composable ERP System?

Developing a Composable ERP system requires careful consideration of several key factors. Here are some factors that can help in developing a Composable ERP system:

1. Cloud Technology

Cloud platforms power the composable ERP architecture by supporting flexibility, speed, and cost efficiency. They allow companies to start small and grow by adding only the modules they need. This modular approach helps reduce initial investments compared to monolithic ERP systems. Cloud systems also ensure better data security and seamless data flow across multiple components.

2. APIs and Integration Platforms

Modern ERP software uses API to integrate tools in departments and external systems. It removes obstacles between uneven systems, creating a more connected and unified system. With strong integration platforms, businesses get a real-time data stream and actionable insight. This increases operating efficiency by reducing manual efforts and placing everyone on the same page.

3. Vibrant Composable ERP Ecosystem

A strong network of solution providers offers best-of-breed applications for specific business functions. You can select top tools for financial reporting, customer relationship management, or supply chain management. Unlike monolithic systems, composable solutions support unique processes and business capabilities. This flexibility gives companies a clear competitive edge and enables better business outcomes.

4. Agile Development and Middleware Solutions

With a composable ERP strategy, updates and changes happen faster and with less risk. Thanks to agile development and middleware solutions, the entire system is easier to manage. Each tool works independently, so fixing one won’t disrupt the core ERP system. This supports streamlined operations, allowing teams to adjust quickly to new market conditions.

5. Scalable Infrastructure and Modular Components

Technologies like containers and microservices support the modular nature of composable ERP solutions. They help manage multiple locations, workloads, and user needs with high operational capabilities. This setup is more flexible than older legacy systems with a monolithic structure. It ensures your ERP can scale to meet future growth and business needs.

6. Industry Standards and the MACH Alliance

The MACH Alliance guides companies adopting adaptive technology strategies and composable ERP architectures. It encourages using modular components, cloud technology, and open systems for better results in an adaptive technology strategy. This helps businesses avoid being locked into rigid ERP vendors or outdated traditional systems. By following these standards, companies enjoy smoother adoption and a more stable ERP experience.

How Does a Composable ERP System Compare to Traditional ERP?

Understanding the differences between composable ERP and traditional ERP systems is key for modern businesses. This comparison helps you choose the right ERP system that fits your business needs and goals.

1. Composable: Modular vs. Traditional: Monolithic

Traditional ERP systems follow a monolithic structure, where all tools are tightly connected. Changing one part often requires changes in the entire system, making updates slow and costly. These legacy systems limit flexibility and delay growth. They also make it hard to support unique processes across business functions.

In contrast, composable ERP systems are built with modular components. Each module works independently but can still seamlessly integrate with others. You can add or replace only the modules you need, like customer relationship management or financial reporting. This modular approach supports better operational efficiency and faster updates.

2. Composable: Flexible vs. Traditional: Rigid

A traditional ERP system forces companies to change their business processes to match the software. Custom changes are expensive, risky, and often break down during upgrades. These systems are not created for emerging technologies in today’s dynamic business environment. They slow down teams and delay progress towards business objectives.

Composable ERP architecture gives you complete flexibility to do your best work. You can tailor tools to match your specific business needs. This allows for smooth operation, better seller options, and easy support for disparate systems. It also helps improve business results and adaptability.

3. Composable: Easily Scalable vs. Traditional: Challenging Scalability

Scaling traditional ERP systems is hard. You often need new hardware, complex changes, and full system upgrades. Even if only one part grows, you must scale the entire ERP system. This results in higher costs and wasted resources.

Composable ERP solutions are easier to scale. You can grow only the modules that need more power, like during month-end financial reporting. This improves cost efficiency, resource use, and speed. It supports changing market conditions and boosts operational capabilities with advanced security features.

4. Composable: Phased Implementation vs. Traditional: Long & Complex

Traditional ERP implementations take months or years to finish. Everything must go live at once, which increases risk and delays. It also demands long training and heavy planning. These monolithic ERP systems are often costly and hard to change once started.

With composable ERP, you can launch in steps. Start with one module, like supply chain management, then add more later. This phased setup lowers risks and allows better testing. It also helps teams adjust and focus on real business needs.

5. Composable: Faster Innovation vs. Traditional: Slow to Adopt New Tech

The traditional system struggles with emerging technologies. It is slow to add new features as it affects the full platform. The sellers delay the update, and the business misses new tools. This slows down innovation and weakens your competitive edge.

A composable ERP ecosystem supports rapid adoption. You can plug into new tools or best-of-breed applications anytime. It is easy to use advanced analytics, support data security, and achieve actionable insights. This business enhances your enterprise resource planning strategy through business intelligence and supports future development.

What Are the Key Components of a Composable ERP Architecture?

A good composable ERP architecture has three main parts. Each part supports different business needs, but all work together to create a flexible and strong ERP system. This setup helps companies move away from monolithic ERP systems and build smarter, modular enterprise resource planning solutions.

1. Core ERP Functions

This is the base layer of any composable ERP system. It includes everyday tools used by all businesses, like financial reporting, payroll, procurement, and HR. These tools form the core ERP system and help manage key business processes like data entry, approvals, and rules.

For example, finance tools handle the general ledger, invoices, and payments. HR modules manage employee records and payroll. Procurement tools help with purchase orders and working with vendors. These basic functions ensure smooth and streamlined operations across the entire organization.

2. Industry-Specific Modules

This layer adds tools based on your type of business. A retail company might need inventory management and sales tracking. A manufacturing firm may need modules for planning, production, and quality checks. These features support unique processes that vary by industry.

Healthcare providers may need patient records and compliance tools. Service-based companies may add time tracking and resource planning. These modules help you build a composable ERP strategy that supports your industry and meets your business objectives.

3. Point Solutions / Business Capabilities

This top layer brings in special tools for solving specific problems. These may include tools for predictive analytics, better reports, or supply chain management. You can also add tools for customer relationship management, compliance, or performance tracking.

This layer lets you test new tools without changing your entire system. You can add only the modules you need and remove them if they don’t work out. It helps you respond to market conditions, add new capabilities, and stay ahead with composable ERP solutions.

What are Some Real-World Examples & Case Studies of Composable ERP?

Several organizations have successfully implemented composable ERP strategies, demonstrating the key benefits of this approach.

1. SAP S/4HANA

SAP’s ERP lets companies pick and use only the tools they need. It connects well with other systems and helps reduce extra work. Businesses using it save time, spend less on changes, and can adjust faster when things change.

Example:
A large manufacturing company used SAP S/4HANA to add only financial and supply tools. They skipped what they didn’t need and connected it with their sales system. This helped them go live faster and cut down setup costs.

2. Odoo

Odoo is simple to start with and grows as your business grows. You can turn on apps as needed, like HR, billing, or inventory. It works well for smaller companies that want flexible tools without a high cost.

Example:
A small online store began with just invoicing and stock management. As sales grew, they added customer tools and reports. With Odoo, they didn’t need to switch systems; just added new parts.

3. Deskera ERP

Deskera is made for growing businesses that need simple, useful features. You can choose only what’s needed, making setup faster and easier with lower initial investments. It also connects smoothly with the tools many businesses already use.

Example:
A service company chose Deskera to manage employee records and payroll. Later, they added billing and project tracking. This helped them keep costs low and scale up as they hired more people.

4. Rootstock (on Salesforce)

Rootstock works on top of Salesforce, so companies can use both without needing two systems. It helps bring together sales and operations, making work easier and faster.

Example:
A company using Salesforce added Rootstock to manage orders and delivery. Since both tools worked together, staff had a full view of customer data and inventory in one place.

5. TechStyle Fashion Group

TechStyle used different tools for each part of its business, like inventory, customer care, and finance. Instead of one large ERP, they used smaller tools that worked together. This made it easier to launch new brands quickly.

Example:
When launching a new clothing brand, TechStyle added just the tools needed for that team. They reused customer tools from another brand and added new finance tools. This helped them save time and move fast.

6. Adidas

Adidas added tools to improve how they manage products, orders, and customer experience. They didn’t replace everything, just added useful tools where needed. This helped them stay quick in a fast-moving market.

Example:
Adidas used new planning tools to adjust to changing product demand. They also connected marketing tools to understand customer preferences better. This helped them serve more markets with fewer delays.

What Role Do Third-Party Support Providers Play in Composable ERP?

Third-party providers play a key role in the composable ERP ecosystem. They help businesses connect tools, manage systems, and make smart decisions using composable solutions. Integration specialists link different ERP modules to ensure seamless data flow and smooth business processes. Independent software vendors offer modular components for specific business needs not covered by big ERP vendors.

System integrators guide the full setup, choosing tools, designing the ERP architecture, and avoiding errors. Managed service providers handle daily tasks like data security, system checks, and fixing issues. Consulting firms give advice on composable ERP strategy, tool selection, and long-term planning. These partners help companies get the most out of their composable ERP solutions while reducing risk and saving time.

How Has ERP Evolved to Become Composable?

The journey to composable ERP took decades. Each stage brought changes in how businesses manage data, tools, and daily work.

1st Gen: MRP / MRP II

In the 1960s, factories used MRP systems to manage raw materials and production schedules. MRP II added features for tracking money and staff resources. These systems ran on mainframe computers, were costly, and suited only for large manufacturers.

2nd Gen: ERP

By the 1990s, ERP software included not just manufacturing, but also financial management, human resources, and customer relationship management. Companies like SAP and Oracle offered full systems with tight control over all business processes. But these were monolithic ERP systems—hard to update, expensive to customize, and slow to launch.

3rd Gen: Cloud-Based ERP

In the 2000s, tools like NetSuite moved ERP to the cloud. This reduced setup costs and gave users access from any location. Still, these cloud ERP systems followed the same old monolithic structure, making it tough to replace or remove individual parts.

4th Gen: Composable ERP

Today’s composable ERP architecture allows companies to use only the modules they need. You can add tools for supply chain management, remove unused ones, and still keep a smooth data flow across all systems. It supports modular components, connects through integration platforms, and fits businesses that need to act fast in changing market conditions.

What Challenges Are Associated with Composable ERP?

Composable ERP systems bring many benefits, but they also come with challenges that businesses need to address.

1. Requires Mindset Shift

Switching from traditional ERP systems to composable ERP requires a change in how businesses approach technology. IT teams must learn new skills to handle APIs and connect different systems. Business users also need to get used to new tools and workflows across different modules.

2. Vendor Lock-ins (Monolithic Contracts)

Many organizations have binding contracts with ERP vendors that make a transition to a composable ERP solution more difficult. Although many vendor lock businesses into their system by limiting access to data, making it difficult to change or find a better alternative down the road.

3. Managing Multi-Vendor Modules

Managing multiple vendors for distinct ERP modules increases levels of risk when it comes to contracting and managing support. When problems arise, organizations must untangle contracts to discover who is responsible for fixing the specific issue. Depending on the number of components, this can take time and add confusion.

4. Integration Complexities

While there are modern APIs and integration platforms that work to connect systems, it is still a challenge to keep data consistent and secure across many different tools. Any data errors or integration failures can affect one or multiple components supporting the overall system. Ensuring everything works together appropriately requires management on an ongoing basis.

5. High Failure Rates for Implementations 

According to Gartner, over 70% of ERP implementations fail to meet expectations. High failure rates often stem from poor planning, unrealistic expectations, and failure to train correctly. To be successful, businesses must commit to taking several ambitious steps down the path of clear goals, good support, and effective project management.

Conclusion

Composable ERP allows businesses to build flexible systems that fit their needs. By using modular components, companies can quickly adapt to changes and improve their operations. 

Although there are challenges like changing mindsets and managing vendors, the benefits of more agility and innovation make composable ERP a great choice. With the right planning and skills, businesses can make the most of composable ERP systems. As technology keeps changing, composable ERP will likely become the go-to solution for businesses in the future.

Jainy Patel

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Jainy Patel is a content editor having over 7 years of experience in the B2B & SaaS industry. With a keen eye for detail, she's always striving to create content that resonates with the target audience. Her interests include reading, traveling, and staying up-to-date with the latest marketing trends.