Finance First: ERP Transformation With Strategic Purpose 20 June 2025 - ID G00830468 - 10 min read Viewed By Dixie John TOPICS Companies under competitive pressure to digitally transform struggle to prioritize their sequence of modernization. Application leaders should implement a finance-first ERP strategy to harmonize data, enabling outcome-driven insights and aligning stakeholders for effective, incremental modernization. Shareable Summary View & download slides Overview Key Findings Without a strong foundational application core, businesses struggle to prioritize which capabilities to modernize, resulting in frustration from the inability to make value-based decisions grounded in accurate real-time data. Differing (and sometimes conflicting) stakeholder objectives and priorities make it challenging to collaboratively reach agreement on the priority of capabilities. Given that monolithic ERP implementations are no longer justifiable, CIOs struggle to incrementally modernize capabilities with a business-driven approach to optimize value. Recommendations Applications leaders responsible for ERP strategy must: Deliver faster and more accurate business performance insights by taking a finance-first approach to ERP transformation, introducing AI capabilities for predictive analytics and automation to harmonize the enterprise financial ERP data and enhance decision making. Improve impact and buy-in by giving a diverse set of stakeholders the ability to rally around core business measurements that are then used to influence which future capabilities are selected to create greater business value. Continue the sequence of composing ERP capabilities to modernize over time. Pursue incremental enhancement opportunities that deliver the highest value to the enterprise, defined by the results of continuous business performance measurement. Introduction The ERP is the representation of the organization’s economic activity and is therefore critical to enable analytical insights. Gartner broadly categorizes ERP into two types: administrative ERP and operational ERP. Administrative ERP includes financial management software (FMS) and human capital management (HCM) software, while operational ERP includes core manufacturing and operations software and enterprise asset management (EAM) software. Typically, when organizations are deciding which capabilities to implement first in a phased approach, finance and HCM are the two front-runners. This is supported by the Market Share Analysis: ERP Software, Worldwide, 2023, which indicates that administrative ERP represents nearly 90% of ERP revenue spent across organizations, highlighting the importance of these purchased capabilities. A finance-first ERP strategy first deploys the financial management suite to enable more rapid consolidation of financial results and creates impactful key performance measurements. While putting HCM first is popular — because it is a more narrowly scoped solution with many mature, cloud-delivered solutions available — applications leaders should consider putting finance first. Organizations that have not yet embarked on their ERP journey, are in the process of transforming outdated ERP capabilities or have drifted away from a strong foundational core should give the strongest consideration to a finance-first implementation approach. According to the 2023 Gartner ERP, Procurement, HCM and Finance Apps Survey, 87% of the respondents from organizations that have already implemented ERP applications have plans to replace/upgrade their ERP applications in the next three years.1 A finance-first ERP implementation helps to coordinate efforts to make timely decisions that lead to improved organizational performance. It gives a diverse set of stakeholders the ability to rally around a core set of financial measurements and delivers early benefits by improving the enterprise’s ability to measure business performance throughout the continuous transformation journey (see Figure 1). Figure 1: Finance-First Foundation The two components of finance-first core are: (1) Deliver faster core enterprise insights through consolidation of legacy applications, speed and accuracy, and (2) unite stakeholders around key metrics to prioritize capabilities for greater business value. Further, applications leaders have the opportunity to establish a finance base, then use it to build a value-driven modernization roadmap. Continuous measurement of their evolving driving forces will give insight into how to continuously link and compose the ERP portfolio to meet business needs. Analysis Deliver Faster, More Accurate Insights A finance-first approach is considered because of the traditional benefits it brings in terms of harmonizing the enterprise by providing a strong foundational core. This continues to be an appropriate approach. Organizations can count on the following benefits delivered by the finance-first approach: Opportunity to harmonize and consolidate the financial scope of multiple instances, businesses and/or geographies. Alignment of key master data and relevant insights to provide a sufficient source of truth to the insights’ consumers, serving as an opportunity to rethink whether the current data is appropriate to manage the business going forward. Added visibility, enabling the business to select subsequent business processes for transformation, which deliver the highest impact. Impact on only a focused group of users, while delivering larger-scale benefits across the enterprise. In addition to traditional benefits, the finance-first approach can enable a better quality and frequency of business performance measurement if designed with this targeted objective. Beyond these traditional benefits, the ERP finance-first approach can be further enhanced by modern ERP solutions, now equipped with AI capabilities. AI offers predictive analytics, enabling accurate forecasting of revenue, expenses and cash flow. By automating data processing tasks like data entry and reconciliation, it reduces errors and allows finance professionals to focus on strategic initiatives instead. AI capabilities enhance financial security by detecting fraud and identifying anomalies in transactions in real time. The organization will have the ability to have more real-time insights, enabling quicker responses to market changes. Figure 2 highlights the components required to deliver faster, more accurate enterprise insight and analysis. Note that legacy applications are still a source of valuable data, but a key driver will be isolating the core enterprise-level attributes with clear business definitions of how they help to run the business. The objective is to increase the speed and frequency, accuracy and perhaps granularity of business health measurements. Figure 2: Finance-First ERP Benefits The diagram shows the components to consider as the Finance-First ERP technique. Source/ Legacy Systems that have sales, operations or finance data required for improved business performance measurement in the new ERP implementation. The center of the diagram highlights the enterprise framework that needs to be constructed with enterprise data coming from perhaps the Chart of Accounts, Enterprise customer or product attributes. The importance here is the defined attributes that will help to provide enterprise level business performance measurement. The final section of the diagram highlights the benefits that can be obtained by this strategy. Included are: 1.) Key Business Driver Measurement 2.) Executive Level Dashboards/Decisioning 3.) Controlled Foundational Core 4.) Measure with greater Speed and Frequency 5.) Gain Insights to subsequent ERP roadmap execution By integrating AI capabilities within a finance-first approach, organizations can leverage both traditional benefits and modern enhancements to optimize their financial management and performance. Recommendations: Accelerate enterprise measurement through consolidation (i.e., if multiple data sources exist) of legacy finance applications. If the legacy finance solution(s) have a high degree of integration with adjacent functional solutions and there are still benefits to defining a new enterprise foundational core, treat the legacy finance application as an input to the new ERP as you build the revised financial core. Determine what level of data harmonization is required at the enterprise level by assessing, cleansing and standardizing any disconnected data that is required. Unblock clogs in the legacy applications. For example, standardize data, fix missing elements and assign ownership of data required to support key enterprise measurements. Capture constraints in business processes and technology performance, taking the opportunity to improve the value of legacy data. Give Diverse Stakeholders Core Measures to Rally Around The core enterprise measurements are meant to keep a diverse set of stakeholders tightly connected to the business strategy. Typically, there is variability in metrics among the same diverse stakeholders, as they seek to measure performance based on lines of business, product groups, geographies or other areas of responsibility. The finance-first implementation is intended to rally them around the selected enterprise priorities in order to drive coordinated action and competitive advantage. In today’s ever-changing and volatile environment, rapid, high-impact actions are essential. Lack of enterprise-level coordination can be detrimental. Focusing on improving business performance measurement can help you to hone in on the mix of key business metrics that support mission-critical priorities. Understanding metric derivation throughout business processes provides a clear insight into the financial components and data that you should prioritize during Phase 1 of the implementation. It embeds arteries in the framework of the organization and empowers the business to identify the most meaningful data, ultimately leading to high-impact and actionable decisions. Enterprisewide collaboration with IT is critical for applications leaders to understand the information required to design an improved measurement capability. Utilize the initial phase to take an opportunistic approach to harmonize ERP datasets with the greatest value in order to measure and run the enterprise. Harmonize data with key stakeholder involvement that supports enterprise metrics, such as sales growth, profit margins, operational costs. Target measures that normally land on an executive dashboard. Avoid including details of the subsidiary ledgers (i.e., customer/vendor accounts) in this phase, as they could negatively impact the speed at which this capability can be delivered. There is a balance to strike during Phase 1 as far as the effort to expend, cost to retrieve and mix of selected metrics to pursue are concerned. Pay close attention to the data quality and time required to gather data required for the key measurements. Consider appending harmonized intuitive data, for instance, to the chart of accounts with geographical or product attributes if it helps to gain better business insight. Although this phase is focused on some of the core enterprise-level definitions, it is advisable that the business maps out the full financial measurement framework (i.e., measurements by business units, functions, etc.). In this way, as subsequent capabilities are deployed, there will be a seamless link to the structures introduced as part of the Phase 1 finance core. Recommendations: Convene a steering committee with cross-functional stakeholders to establish the key metrics the ERP implementation must support. Stakeholders will need to understand adjustments to existing measurements, any new measurements and the decisions that will be enabled for each stakeholder group. Identify additional opportunities to accelerate the organization of data being integrated into the ERP for the selected metrics. Many of the metrics may be financial (e.g., ROI, profit, efficiency), based on transactional data or performance to plan. Explore economically viable methods for data collection and integration. Define how you will connect the ERP data being integrated to help understand insights and trends that aid in the growth strategy. As an enterprise, understand what decisions need to be taken depending on the changes in the measurements. After Finance First, Keep Composing the ERP Based on Value of Investments Gartner recognizes that few organizations can adopt an intelligent composable approach to business applications rapidly. Most will need to evolve their current state of inflexible, monolithic applications toward a portfolio that is more modular and adaptable to business change. Even if this composable strategy delivers business capabilities, only gradually, will it notably improve the organization’s agility. Implementing finance first is an intelligent approach to gain business insights that sets into motion the ability to evaluate new features based on their value to the organization. As Figure 3 highlights, as the organization moves beyond the first phase, incremental opportunities for value creation emerge, either through the business measurements themselves or through the level of effort it takes to gain critical insights. This sets in motion a continuous process of building value-added capabilities. Figure 3: Set ERP for Continuous Composability Figure 3 Builds on Figure 2. It includes a first phase of ERP implementation that is the Finance First deployment, it highlights the KPIs, scope of 1st phase and the remaining legacy applications that are left behind. Phase 2 includes the same depiction of KPIs, with additional new ERP scope and smaller footprint of the legacy landscape. The 3rd pillar highlights the reusability of the strategy to continually enhance capabilities based on business insight. The composable strategy that starts with finance first affords the organization a path to continuous modernization of the ERP. In the first phase, through more robust business measurement, it will become evident where functions struggle to gather data quickly enough to support the new rhythm of enterprise measurements. Further investigation will reveal capability gaps, giving the business a more purposeful approach to make ongoing investment decisions that also respond to business performance opportunities. For instance, by gaining insight into business performance at an earlier stage, a company may uncover negative trends in outstanding sales per day and customer disputes. On further investigation, they learn that their pricing models have become more complex due to new cross-selling. If the current pricing capability cannot adequately extend to meet the new requirements, the module that automates pricing becomes a subsequent candidate for their composable strategy. Applications leaders, collaborating with the business, will have the ability after the first finance phase to select advanced capabilities as part of the roadmap. These may either be part of the vendor ERP package or different solutions that more seamlessly address a mission-critical requirement. The ERP is composed according to a purposeful value-driven cadence. Recommendations: Evaluate and select new opportunities in terms of their business outcomes and contribution to modernizing end-to-end ERP capabilities. Consider when there may be sufficient scope to warrant a larger-scale transformation effort. Sponsor an authoritative team of combined business and IT stakeholders to formulate the roadmap and stage deployments driven by insights and value. This team must be tasked with continuously unlocking incremental benefits using a composable capability strategy. Take a sensible approach to integration requirements as the capability landscape is modernizing. You may have to gradually implement integration infrastructure as the building blocks to support future use cases.