The Top 10 Trends in ERP

Monday Dec 13th 2010 by Drew Robb
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Led by CRM and business intelligence needs, the enterprise resource planning (ERP) market remains strong.

A decade ago, enterprise resource planning (ERP) was the panacea for all enterprise ills (remember Y2K?). There were even several magazines devoted to the subject. But they all went away in the 2000-2002 tech downturn as the ERP hype died down. Despite the diminished hype, ERP has quietly cemented its place as a mission-critical enterprise application.

So where does the ERP market stand today? Several trends are emerging, led by the growing importance of customer relationship management (CRM) and business intelligence.

 

Top ERP Trends

1. CRM Leads the Way

With companies still very concerned about budgets and ROI, this spells good news for CRM. Many ERP purchases are fronted by CRM, said Eric Kimberling, president of Panorama Consulting Group. The reason: It is a lot easier to demonstrate value for money for CRM packages that will directly increase sales.

"Many realize that the only way to make it out of the recession stronger is to fuel top-line growth and sales, and most will do so without hiring too many new sales and customer service reps," said Kimberling. "For this reason, companies will look to CRM applications to help make their existing sales and customer service functions more effective and efficient."

 

2. Business Intelligence Follows

Just as CRM benefits from a general rise in interest in ERP, so too will business intelligence. Kimberling sees this manifesting in more focus on diagnostics and analytics

.

"Companies have reduced their margins of error for missteps during the recession, so they will continue to rely on ERP systems to provide operational data to make more informed decisions," he said. "Look for diagnostics, analytics, and business intelligence applications to gain momentum in the coming year."

Craig Himmelberger, director of marketing for SAP's Business Suite, concurs.

"Access to business information for decision-making purposes is more and more critical and valuable, as will be supporting business analytics to create information out of data," Himmelberger said.

 

3. ERP Market Stratification

In the roaring nineties, it seemed like there were hundreds of vendors in the ERP space. Many were relatively small outfits serving narrow verticals. What a difference a few years makes. These days, there are a few recognized players at the pinnacle as well as a smaller group of competitors in general.

"The big guys are SAP, Oracle and Microsoft," said Kimberling. "But there are a number of up and comers such as Netsuite for smaller organizations, along with Tier II solutions in the SMB space such as Plex, Deacom, Epicor, Syspro and IFS, all examples of very strong and viable solutions."

According to Gartner, the top five vendors in the $20 billion ERP market are SAP, Oracle, Sage, Infor and Microsoft.

 

4. Mergers and Acquisitions

Vendor consolidation has been a feature of the ERP marketplace for quite some time. Microsoft, for instance, literally bought itself into this sector with the acquisition of companies such as Great Plains and Navision. That trend has continued ever since and another period of acquisitiveness is predicted.

"Look for the stronger players to acquire some of the weaker ones, resulting in a wave of consolidation," said Kimberling.

 

5. ERP Tiers

There were plenty of tears in the early days for those implementing the software. While there are still a few failures reported, deployment has smoothed out considerably. This assertion is supported by the fact that ERP has moved its way down the food chain successfully into many SMBs.

The latest shift is the emergence of two-tier ERP structures within organizations. According to Guy Weismantel, director of ERP marketing at Microsoft Dynamics, companies are increasingly realizing that administrative, headquarters ERP solutions do not work in their subsidiaries and are not optimized for the key processes required to run the business.

"These systems are expensive to maintain, and companies are paying more maintenance costs," he said. "This provides an opportunity to have a discussion about the right solution for global subsidiaries."

 

ERP Trends

6. Y2K Redux

It seems that Y2K is rearing its head again. Fortunately, though, there is no bogus scaremongering about doomsday bugs inside old computers. Prior to the end of the millennium, large numbers of organizations updated their software and hardware holdings. And that led to a boom in ERP sales. May of those applications, though, are a bit rickety. This is leading to what Weismantel sees as a realization that it is time for an applications overhaul.

"Many companies that have not updated their ERP solutions since Y2K have been making do for the past two to three years [during the economic downturn] with antiquated, outdated and increasingly unsupported versions of their software," he said.

 

7. Vertical Specialties

The nineties saw dozens of firms offering ERP-type products geared toward niche markets. Then came the era of one-size-fits-all ERP, though lucrative customization packages were often a part of the deal. The pendulum appears to be swinging back to addressing key market verticals.

"We are again seeing ERP implementations geared to specific industries, as well as companies having a central administrative ERP solution at headquarters that is fed by individual ERP implementations in its divisions, subsidiaries, factories, branches or departments," said Weismantel.

 

8. Web ERP

Software as a Service (SaaS) has long been used for secondary functions such as backup. But executives have been reluctant to entrust the corporate crown jewels to SaaS — and ERP falls in that category. Despite that, ERP is beginning to show its head as a service delivered over the Web, thanks in part to online CRM's strong acceptance.

"On-demand and SaaS offerings have increased the choices for ERP software purchasers and deployment options," said Himmelberger.

 

9. ROI Matters

ERP has often been held in a kind of religious zeal by its champions. Despite massive costs to rip out mainframe systems, convert data to a new format and implement ERP across the enterprise, some projects were allowed to run way over budget without complaint. It was the way forward, after all. Those days are gone. Organizations specifying ERP are focusing much more on clearly defining a business case and demanding return on investment (ROI).

"Purchases tend to be smaller and more frequent, as rapid ROI becomes more and more essential to buyers," said Himmelberger.

 

10. Mobile ERP

The mobile device market keeps shifting and changing. iPads, iPhones, smartphones and more are now everyday business tools. Thus ERP suites have to keep pace.

"Mobile applications will continue to proliferate, driving functionality out towards employees," said Himmelberger. "Mobile and other self-service options lower costs and increase transaction quality while improving timeliness."

 

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