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Top Ten ERP Trends

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Posted December 21, 2012 By Drew Robb     Feedback

From the cloud to social, how are software trends impacting ERP? And is the economy impacting ERP choices?

There is a lot going on in ERP right now. But what are the dominant trends? Enterprise Apps Today asked the experts.

Customer Power

Allan Davies, chief marketing officer of Aldata, Inc., thinks the major trend in ERP over the past year was a change of focus from supply-led to customer-led business.

“The massive take-up of mobile devices and their ability to understand, compare, order and share information across social groups means all ERP systems have to think of the customer first and adjust their supply, manufacture, logistics and marketing operations to fit what the customer wants, when and where he wants it,” he said.

In 2013, Davies believes the same trend will accelerate so that customers will be an integral part of the supply planning process. The ability to interact with them at all levels at any time means that new product development, introductions and deletions can be driven by direct customer interactions rather than by market studies.

“Prices can be tested and adjusted, service levels compared and changed, and margin models created by sharing social and incentivized communications,” Davies said.

Tighter Purse Strings, ERP Delays

After the 2008 crash, money hasn’t exactly been flowing freely to IT projects. But there has been an easing of the purse strings over the past few years. Eric Kimberling, managing partner at Panorama Consulting Solutions, thinks that budgets are going to tighten up a little in the coming year.

“Most companies are facing an uncertain macroeconomic environment, which is likely to cause CFOs to keep a tight handle on investments in ERP,” he said. “This is likely to result in less all-in ERP investments and more low-hanging fruit investments focused on specific functionality or processes to help drive stronger ROIs and lower risk.”

A consequence of the economic climate will be more ERP proposals taken off the table, POs not approved, and projects delayed or even canceled entirely. But companies can’t entirely abandon their existing ERP investments in the face of stiff competition. So if they aren’t going to leap headlong into new ERP projects, what will they do? 

“More companies may opt out of ERP investments and focus more on re-engineering processes and providing better training to employees to get more out of their current systems,” said Kimberling.

Best-of-Breed Revival

Another possible choice might be augmentation of the major ERP investments companies have already made. Thus in 2013 we will see a shift in the eternal battle between best-of-breed systems versus all-encompassing ERP platforms by the likes of Oracle and SAP.

When economic pressure is combined with the continued growth of software-as-a-service (SaaS), it will result in momentum away from single ERP platforms and toward best-of-breed solutions, Kimberling said.

“Companies will be more likely to look for best-of-breed solutions for CRM, HCM and financials and phase those rollouts, rather than trying to implement more complex and costly single ERP systems,” said Kimberling. “This will put more pressure on companies to address integration and solution architecture.”

Legacy ERP Cost Crunch

While there are plenty of shiny modern ERP systems out there, the bulk of systems can be classified as legacy – 10 years or more old. R "Ray" Wang, principal analyst and CEO at Constellation Research, sees a trend toward many of these legacy transactional systems being consolidated, upgraded and stabilized.  

“The goal: drive down operational costs to fund innovation,” Wang said.  For instance, he noted, “Many companies are moving to third-party maintenance to reduce costs.”

Best of Both Worlds

Another cost cutting strategy being employed by those with older systems is one designed to milk maximum longevity out of older systems. The idea is to use the older systems for traditional transactional and ERP functions while adding new functionality via the newer Web-based application vendors.

“We are seeing a growing trend toward legacy ERP being surrounded by best-of-breed SaaS applications,” said Wang. “The bottom line is that a lot of innovation is now coming from these SaaS-based providers. However, when you follow this path, integration becomes a key competency.”  

Desire for Quick Results

Microsoft’s take on the economy is a little different. While the company sees signs of a recovery, it says that one dimension appears to have permanently changed – the way in which businesses look at software projects.

“The era of IT projects centered solely on a technology agenda, scoped as wholesale systems replacement, or with investment extending over multiple years against a promise of future benefits is over,” said Mike Ehrenberg, Microsoft technical fellow and chief technology officer (CTO) for Microsoft Business Solutions. “Time to value is now an essential component of any investment – shortening the time between initial expense and positive economic benefits returned to the business is critical.”

As a result, users want to pay for capability and capacity as used instead of up-front investment for anticipated usage.

Forecast: Gradually Cloudy

Derek Singleton, an ERP analyst at Software Advice, said the ERP industry tends to evolve more slowly than other software segments such as customer relationship management (CRM). Still, megatrends such as cloud computing are beginning to make an impact.

“ERP got off to a slow start in terms of adopting cloud technologies, and the industry was unsure whether it could be a viable model for delivering ERP software,” Singleton said. “But now everyone is now trying to figure out how to design and develop their ERP software for the cloud.”

SAP, for example, got into the game with the release of Business ByDesign and Oracle is working to develop its Fusion Cloud ERP. SAP's and Oracle’s recent acquisitions of SuccessFactors and Taleo, respectively, demonstrate the growing importance of cloud solutions. Other major players such as Infor, Epicor and NetSuite all have Cloud ERP offerings.

Analytics for ERP

Analytics has long been the province of business intelligence (BI). But the advent of simpler BI means it is finding its way into broader usage – and that includes ERP.  “There’s a major focus on developing technologies that help companies make sense of all the data generated by their ERP system,” Singleton said.

Going Slow on Social ERP

Lots of software is going social right now – but not ERP applications. As the world goes mad  for social channels like Facebook and Twitter, Singleton said ERP vendors have been reluctant and/or slow to attend the party.

There have been moves to incorporate activity streams into ERP software to improve internal collaboration. Yammer, for example, has a partnership with NetSuite and it recently opened its API for integration with SAP. Salesforce, too, has been pushing its collaboration tool Chatter in large enterprise deals. It also pushes Chatter directly through Kenandy, a Cloud ERP system built on the Force.com platform.

Meanwhile, middleware provider TIBCO’s Tibbr product is able to draw on machine information to create what it calls an application event stream. Tibbr can pull information such as days sales outstanding (DSOs) from an accounting application and create an event stream that employees can see and then add their qualitative assessment of the data, which others can follow in an activity stream.

Despite these offerings, “It’s difficult to tell whether social functionality is something that will make a discernible difference in ERP,” Singleton said.

ERP App Stores

Inspired by the Apple App Store, the ERP App Store is coming. Vendors such as SAP, NetSuite and Microsoft are actively building app stores to provide smartphone access to ERP data. As these ecosystems mature, we'll see more native apps built out to connect ERP systems to smartphones.

“ERP is being impacted by mobility and the proliferation of smartphone apps,” Singleton said. “Right now, there is a focus on building out an ecosystem of apps that will run with native functionality on the iPhone and Android.”

Drew Robb is a freelance writer specializing in technology and engineering. Currently living in California, he is originally from Scotland, where he received a degree in geology and geography from the University of Strathclyde. He is the author of Server Disk Management in a Windows Environment (CRC Press).

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