The globalized, industrialized world is run mostly by Enterprise Resource Planning (ERP) software. That’s been the case since the 70′s, when we first computerized accounting through mainframe and other monolithic, all-or-nothing applications. Dun & Bradstreet eventually dominated a marketplace where only the wealthiest companies could afford to play.
The arrival of client-server applications in the 90′s completely disrupted the ERP giants and we entered the age of JD Edwards, PeopleSoft, Oracle, Baan and SAP. The success of the old generation of vendors was their own undoing. They couldn’t embrace the new model and they faded from the software marketplace.
The Fortune 2000 now rely primarily on SAP and Oracle as a series of consolidations left these two alone atop the heap. The middle and specialty market has vendors like Epicor and small business is now dominated by Microsoft, built on a series of acquisitions. ERP could be easily described as a mature space.
When disruption arrives
This is always the moment when disruption arrives. Nearly everyone has an ERP of some sort and the enterprise house is mostly in order from a cash cycle, reach, and information standpoint. But when we reach a point of stability, we get restless (or we should) for more.
Those reaching for more see three challenges coming into focus, 1) the system that sits atop that mountain of information doesn’t differentiate anyone from the competitor, 2) data in the ERP database or BI data warehouse is ‘static’ and not actionable, and, 3) mobility and an app approach aren’t well supported by the ERP status quo.
Reaching for more
There’s a way to build on a stable ERP system that doesn’t require rewiring your business. The clever enterprise knows that a broad spectrum of external data can be analyzed against ERP and BI ‘dashboard’ data to come up with patterns that represent opportunity, risk and efficiency. Once that understanding is in place, it is just a matter of having a way to watch for those patterns (events) in real-time so that response can be faster than the competition and highly differentiating.
ERP is an enterprise data source and not the way to compete. Events are the way to both compete, lessen your costs and save your skin by enabling real-time decision making based on a broader spectrum of information. Oh, and by the way, it’s very easy to upgrade…
For a Gartner-inspired view of why ERP needs BPM for differentiation, see Why ERP needs BPM…a view from the BPM Summit.
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Chris,
I agree with your assessment of the enterprise software market. It is past due for another disruption. ERP is definitely not a competitive advantage for anyone. It never was, mind you, but it is even less so today. Compounding this loss of advantage is the fact that Products themselves are becoming less of a competitive advantage too. From our perspective, it has always been about the Process.
http://www.babblewareinc.com/index.php/2011/09/process-versus-product-differentiation/
ERP’s need to stay in place: untouched & unmodified. We may be talking about two different things when you say that mobile/apps aren’t well supported by ERP. I disagree. ERP’s speak their own language. As long as the next generation of enterprise software can speak those native languages AND improve the processes of business, especially including Collaboration, then whether or not the ERP supports mobile/apps is irrelevant. We have built and delivered our interpretation of the next generation of enterprise software. It focuses on the processes of employees, vendors and customers. It harmonizes the disparate ERP systems in place by isolating their dissonance and decoupling the process, data and technology that business requires. One of our customers designed and we delivered to its employees and vendors an Inbound Collaborative Supply Chain and reduced transit times by 38% and transit costs by 35%. The ERP systems are blissfully unaware that anything changed. The ERP’s continue to chug along knowing what they knew but the business raised the tide for all boats and was up and running in a matter of weeks.
Will our approach end up being the accepted, widely adopted approach to solving the ERP problem? Time will tell. But you have my full support that something has to change and those companies that make it change will succeed while those that cling to their ERP-centric view of life will suffer a slow death.
Gentlemen, I must respectfully disagree with your assertions. ERP systems have been continually evolving since their invention, which could probably be traced back to IBM’s MAPICS. They have become more integrated and much more flexible. That flexibility was due to a recognition that not all businesses operate the same.
What was once sophisticated configurability and customization has been giving away to full blown process management in recent years. SAP and Oracle are leading the way in this effort. Far from the stodgy old stalwarts that you describe, these firms recognize that their enterprise products must be fully integrated with the BPMS tools they create (such as Netweaver), so that their clients will have the flexibility to add process functionality as they see fit.
Finally, I would like to point out that the best ERP systems have not been strictly transactional for some time. Many have robust quality management subsystems that allow for knowledge and document management; CRM subsystems that track tasks, activities and yes, even workflow; and web based customer and employee self service portals that provide a robust set of functions. All of this is fully integrated into the transactional piping that collects the “Big Data” that everyone is talking about.
Maybe the name is a bit dated. In reality, the alphabet soup of systems: ERP, CRM, EIS, ESM, BPMS are all converging into a single, fully integrated system. For my money, this is always better and less expensive than trying to stitch together a bunch of disparate products that may or may not play nice together now or in the future as their development paths diverge.
One other note, I agree that ERP systems don’t differentiate. I would argue that even Babbleware or UnaPage won’t differentiate your business. Tools never do. It’s what you do with them that makes the difference.
ERP systems were enterprise based and designed in the last century, when business processes were by and large defined by Frederick Taylor’s “time and motion” principles.
For a large part of that era employeess were asked to bring their bodies to work and leave their brains at home.
The sucessful business models in this century are collaborative and multi-enterprise (E.G. Amazon, Apple, Zara) based.
More than 90% of the inputs to the iPhone come from outside Apple and are spread throughout the globe.
Matching dynamic, uncertain demand with complex supply networks is a multi-enterprise endeavour, that must be collaboratively aligned, cooperatively managed; and yet competitively executed.
The value creation paradigm has therefore shifted from the enterprise to the network.
Under this scenario the three primary factors of innovation and competition are time, process and collaboration
ERP systems (while essential to the enterprise) are not designed or equipped to collaboratively manage real time source to consumer networks.
End-to-end networks require a real time dynamic network architecture (DNA) that enables enterprise networks to collaborate, cooperate and compete in real time.
One final point we are now entering an era (internet, mobile, Cloud etc) where employees are being asked to bring their brains to work and leave their bodies at home.
I agree the way work gets done will go thru a big change. Over the last 20 years companies have invested billions in system of record or structured data solutions, applications that lock down the data a business needs to operate. Yet after all that spending people are stuck in age old tools like email. It is now time to invest in the most important asset a company has, it’s people. Work gets done when people can effectively communicate and make decisions. Compliance requirements are also focused on capturing this communication. At Vuuch we’ve taken a social approach to this. We’ve taken a cue from Facebook. Facebook makes money based on the fact it has captured social graph. Facebook has also continued to add node and link types to the social graph making it an even richer information set. What we have done is to extend the social graph to include nodes and links that represent business deliverables. The idea is people generally communicate and interact with respect to some business data/deliverable, for example a part, specification or customer complaint. Vuuch represents these items in a social graph that is exposed thru our applications and our open API. The platform understands a number of deliverable types today and can be expanded to understand other types and we’ve built a series of application or use case starting points. One main thing that we feel is paramount is that the graph understands the users product, as the product is core to what the company does. Therefore we have started most of our deployments with the product people within the customer.
If having an ERP solution does not differentiate your business, does NOT having an ERP system differentiate your business? I would answer, “Yes, not having an ERP solution is a substantial competitive disadvantage.” I am not sure how to square that with the author’s point. I suppose he’s saying that having an ERP solution is now the norm, although I would still argue that not all ERP implementations are created equal and having a “good” one is still quite exceptional.