This article starts our ERP series. ERP is an interesting and complex tale not unlike the Panchtantra or the Arabian Nights . . .
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This begins our series on ERP. As the market is always evolving, we do not know how long this series will go. But taking a cue from other great story formats such as the Arabian Nights or the Panchtantra, stories that have many authors and transcend time and place, ERP’s story can thus be told.
In 2000, Gartner declared that the battle was over and that SAP had won.1 My own tenure at AMR Research (no more an independent firm, certainly a reflection of changing market conditions) reflected a similar philosophy. We debated inside often. I was a standard-bearer of rich choice and alternatives, but many of my colleagues believed that it was all about big, bigger, biggest—SAP, Microsoft, and maybe Oracle (this was before the Oracle purchase of PeopleSoft/JD Edwards and other buying sprees they had done).
During this tenure an interesting visit occurred from Jim Schaper, who had just acquired a little company called Agilisys2 (a supply chain planning vendor) and was looking for more acquisitions. But clearly, I, the SC geek, was not really the one who would be the advisor. He was looking for much different territory—ERP land.
If we had frozen the camera in 2003 thru 2007, on the surface it may have appeared that some of my colleagues from the past had a strong argument. At ChainLink we were already writing about On-Demand, Clouds and such, but we admit it was truly tough going. In spite of how things might have looked on the surface, we were doing client work, very in-depth research and strategy with ERP and large software firms regarding this On-Demand thing and what they should do about it.
And a few strange things happened in the last few years, such as a new younger profile in business, mobile/wireless, a pesky global earthquake, the economic meltdown. This has opened the door for a new kind of thinking about technology.
But let me begin at the beginning…
The key point here is legacy!
Legacy Still Drives the Market Today
Though we called them mainframes, they were not very large—physically yes—but processing power and memory was tiny. The concept of a ‘main’ frame helped to create the enterprise cohesion ‘movement,’ if you will. Centralized ‘data processing’ was the goal, and as computers got bigger, we got more opportunity to do so.
Alas, the enterprise was not as centralized as the 1950s style manager, the love of financial application, still a holdover of the "grey flannel suit" corporate philosophy (as viewed in this man in "The Man in the Grey Flannel Suit"—YouTube )
Figure 1: From Mainframe to Pervasive
Corporate surely had their ideas, but so did Manufacturing—they had a business to run and a focal point for methods that complemented automation (YouTube from "Modern Times"). Thus, the birth of MRP, MES, etc.
Also, that pernicious lack of centralization (and the proliferation of desktop devices) drove the mass adoption of client server (a huge market change that helped make SAP move from R2 to R3 and become wildly successful).
Rather than this being a boring history lesson, it does have relevance. These core focal areas still drive the thinking at the software firms, and more importantly, at the enterprise. It is déjà vu all over again, with remote or outsourced manufacturing.
Along Comes the Internet!
Alas, our walk thru history is not quite finished. (For more on supply specific and architecture that drives the value chain go here). The blossoming of the internet brought us an explosion of ‘e’ companies, ecommerce, eProcurement, etc. Companies adopted this with frenzy in fear of their demise without a web presence.
Of course, users quickly got tired of integrating from their back-end to their ‘e’ front end systems—very clunky. Thankfully, both the financial centric ERP and the commerce centric ERP began their migration to absorb the other paradigm.
So today we have ERP companies that were born on the web, which are full ERP solutions. And we have ERP companies that were born on mainframes or client servers, with a financial or manufacturing centric architecture; that have acquired e-solutions such as CRM, procurement, and supply chain collaboration, in order to have the web presence. Such examples are NetSuite—evolved from commerce; Plex, Syspro and Visibility with their manufacturing roots; and PeopleSoft/Oracle with their financial roots, to name a few. We’ll come back to the Internet at the end of this article.
Fusing - The Myth of Integration
Alas, buying your way into the web, integrating other acquisitions in Supply Chain, PLM, Business Intelligence, etc., and making all those apps talk to each other, is no small feat; one that has created another segment of products—middleware.
In addition, the lack of cohesion in architecture and applications actually catalyzed the Business Intelligence market3 to bigger sales since we could not get all our reporting out of the ‘one system.’ There were (and still are) too many systems, even from the same provider.
And here we see the beginning of a silent admission by ERP, that there ultimately would never be the ‘one corporate software system,’ but they would be a provider of a suite of products. Although admissions were hard to extract in public at that time, in private it was well understood,4 and today we see the change in big ERP strategy.
Becoming the Shopping Mall
The shopping mall operator may not care which store you buy your jeans in, as long as you buy them at their mall! Thus is the current thinking at the large ERP company. (This analogy does not apply to ERPs for the SMBs. We will return to them later in this series in-depth). The middleware is the plaza that connects the stores and provides protection from the elements. The Mall also needs common services; thus, a gift card that works at all the stores—Business Intelligence, and Service Oriented Architecture (SOA) strategies, such as Infor that has its ION™ strategy, or SAP’s NetWeaver™, and the gift wrapping services, with common UI, etc.
The SMB ERP has taken a slightly different path. Their customers are not going to spend their lives slaving on an IT department to maintain so many app environments, and wade thru the complexities of all this. The SMB business is looking for a real partner to provide the best their money can buy, but without the complexity (read that as support costs, and confusion on how all this works together). Strategically they may single out a best in class domain module (such as Warehouse Management or advanced Demand solutions) to link to their ERP, but they really try to keep the profusions of solutions limited.
A Product for All Seasons?
Can it be possible for one product to serve all? Hardly. Thus, the drive to specialize on industry or processes and win in the hearts of the enterprises in that segment. And with that recognition, firms in the exciting sector of ERP for the SMB thrive. They work hard, and succeed at a level of specialization that assures that the software fits the business; so they focus on configuration to fit such as a Harris Data and Ramco do. Or the staunch investment strategy by Infor to support their unique acquisitions that represent industry specialized portfolios.
Wave 2.0 web 2.0, IPV6, On-Demand, In the Clouds, Mobile and Global
There are some interesting lessons to learn about markets from the auto industry. Three years ago it was a done deal—Japan was #1 and US auto was sinking fast. But some interesting developments happened lately. The perfect Toyota faltered. Ford found favor in financial respect due to no bail-out. And with the reincarnation of GM, the US auto firms reversed that trend. US buying is up and Japan/Foreign is down.
The point is, as long as you are in the game, there is another inning! A new decade of technology hits its stride. SaaS/Cloud hits Main Street in the ERP markets.
Figure 2: Emergence of On-Demand
Although these apps entered the market a while ago (Figure 2), it takes some time to go from the early adopter concepts to reach the main street. And when SMBs with their ultra conservative approach to purchasing technology get on board, you know you have a hit!
And that is where we are now. We are in a pervasive computing era, where the explosion of ‘clients,’ pads, pods, smart and small are derégur. We are mobile and global with a work force at home and on the road, needing to connect from anywhere to anywhere. The cloud is now that unstoppable force!
It’s not just a technology vision, it’s the economy, too, that is helping ERP for the SMBs to thrive. We have much to say about all this in our series.
So, stay in your seat. With SaaS markets growing two to three times as fast as their other sectors, and SMBs turning to technology to succeed, it will be an exciting inning to watch!
Post script. This article serves as an introduction to our ERP for the SMB series. Future articles will cover topics such as:
Economics of ERP – How the companies operate
S&M vs. Large ERP
Yes, But Can They Scale
User Revolt! Pricing and Services
ERP in the Cloud
Manufacturing Centric Solutions
Wholesale Distribution Strategies
Industry views – Healthcare
Industry Views – Retail
Old vs. New Architecture
Customer Support Models
Features of various companies
Graduating from Quick Books – ERP for the smallest companies.
1This is the same company that said in 1994 that SAP would never gain broad adoption due their closed architecture. At that time, I was an SAP customer, and although I had to agree about the architectural challenges, I laughed at that prediction. Though under $1B at that point, SAP captured the minds of many CIOs across the US. They were the pace setter in the market, already.
2Now part of the ERP/Adage offering of Information.
3Another segment that ERP and other software apps vendors said they will render neutral.
4There are other reasons for this lack of integration beyond software modules such as database vs. in-memory applications (ERP vs. the Supply Chain Advance Planning modules), and web vs. on premise elements such as eCRM’s vs. the core ERP. All these you can buy from the same solutions providers.
To view other articles from this issue of the brief, click here.