Troubling, Challenging 2014 ERP Predictions

Troubling, Challenging 2014 ERP Predictions

Summary: The ERP segment is undergoing a lot of change. Change, though, can create some uncomfortable moments for some folks and ERP vendors, customers and integrators will definitely feel something next year. What are some of these challenges and who will need to adapt?

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Troubling/Challenging ERP Predictions for 2014

 

Last week, I did a televised bit offering my predictions for the financial software space. It was the Workday Predict & Prepare  telecast and predicting along with me were Vinnie Mirchandani  and Naomi Bloom.  

predict and prepare 2014

 

On that program, I had a chance to get out three predictions. One concerned the upswing in large enterprises adopting cloud financial accounting software. Another prediction looked at the collision coming with an aging CPA population and radically different financial software. If you’d like to hear the predictions and the discussions they triggered, hit the link above and watch the replay.

I’ll be offering another prediction this Wed. morning on SAP Radio. I'll get 2 minutes to posit some gem there. 

I have no shortage of other predictions, some good and some troubling. And, I thought I would detail some of these here.

Let’s begin:

 

1) Continued in-fill sales by major ERP vendors shouldn’t be confused with a bigger trend or a major resurgence in these firms’ popularity.  Big, established vendors often buy innovation (rather than build it). They then turn their sales forces loose on their installed base of customers to sell these add-on products. Total revenue gets a boost and Wall Street is happy for another day. But, this activity doesn’t really do more than buy more time and keep maintenance monies flowing into their coffers. 

For the time being, some customers will license an add-on product or two from their old ERP vendor. But, that time is coming to a close as cloud ERP suite sizes are growing in breadth and depth. Just look at how big the ERP suites of NetSuite, FinancialForce, Rootstock, Salesforce and others are growing. The old oligarchy days are coming to a close.

Bad behavior by many older vendors has definitely hurt their respective brands. I’ve spoken with technology leaders who are fed up with never ending usage audits, incremental license fees, decades’ long waits for promised re-platformed products, etc.  For an ERP vendor to sell CX (customer experience) software and then mistreat their own customers so badly is more than ironic (or moronic). It’s a death wish.  Yet, it happens.

I predict that in 2014, many major ERP buyers will start to move their old ERP vendors off the ‘strategic IT vendor’ list and replace them with the Workday, salesforce.com, Marketo, etc. vendors of the new era of cloud ERP solutions. These software buyers are tired of bad behavior, vendor indifference and old products. Given a choice, customers will look for true love elsewhere. I know I would.

 

2) The gap between ERP users that truly realize the value from some of these solutions and those that don’t is widening – not lessening.   If your ERP solution predominately tracks internal transactions, facilitates reporting of same and helps your firm achieve a modicum of efficiency, congratulations – you are, at best, mediocre.

I saw a SMB manufacturer use massive point of sale data, their ERP’s supply chain information and a cloud, in-memory analytic tool to grab major market share from competitors. It wasn’t expensive or hard to do. It was, though, inspired and plucky.  

What is defining success in ERP anymore isn’t the race to be internally efficient and effective. Success now occurs in how well companies connect their people and systems to all manner of constituents (e.g., customers, machines, prospects, governments, social media influencers, etc.), all kinds of technologies (e.g., machines, hand-helds, mobile devices, etc.) and in a myriad number of rapidly changing, highly morphing business processes. ERP never was static and unchanging although many older solutions frequently possessed immense rigidity to change.  Somehow people got used to ERP solutions as being inflexible and accepted that as a price of doing business. Wrong!

In 2014, we will see the gap become ever more pronounced between those firms that possess old, rigid, inflexible systems and processes versus those than truly change and adapt in wondrous ways. The best firms will have fleshed out competencies around:

  • the successful exploitation of social content
  • interpreting big data feeds and how they’ll impact planned and actual financial results
  • understanding all manner of new mobile applications (not just the ones their firm created) and how their constituents will apply these in a business context
  • modern process designs and how their firm can quickly support new processes, mobile cloud-powered applications, machine data, etc.
  • triangulating data from internal, third party and other sources

 

3) Lots of ERP cleanup projects remain – Although we’ll be looking at a new year, 2014, I’m still running into firms that have yet to finish big ERP initiatives that were started as much as a decade or more ago.

Some shared services and other initiatives got stuck during the big recession of 2008.  Businesses that had great plans to achieve single, global systems with global efficiencies and standard processes had to put a lot of this on hold for very practical and economic reasons. Yet, in the years that have passed, businesses have been very cautious. Their revenues are now much improved but they’ve resisted the urge to re-staff some of the IT and back-office functions to pre-2008 levels. To put a fine point on it, there simply aren’t enough internal people today to complete the backlog of unfinished projects.

I suspect that 2014 will be a year of frenzied catchup for many long-delayed and/or incomplete ERP transformation initiatives. These projects have to get to full-term before these companies can start to focus on more strategic IT and business unit initiatives. Competitors are running laps around these companies and they need these projects finished – STAT.

 

Please continue to the next page for more predictions

Topic: Enterprise Software

About

Brian is currently CEO of TechVentive, a strategy consultancy serving technology providers and other firms. He is also a research analyst with Vital Analysis.

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4 comments
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  • The author seems to ignore...

    everything that companies have done in the last 15 years to make their ERP systems work for them and not vice-versa. ERP customers aren't going to just willingly give up the years of time, energy and money spent squeezing efficiency out of all their processes, and the ERP system played a central role in that endeavor. Handing over the process of patches and upgrades sounds great until you realize that the price for this is losing control over your software. I've been in the business of developing custom solutions, modifying the ERP system to fit customer processes rather than forcing customers to modify their processes to be able to support the ERP system. Demand for my services continues to grow, to the point where there aren't enough competent programmers to meet it by a long shot. The cloud based ERP solution is certainly growing, but it will never...ever...come close to replacing the in-house system with all the overhead that comes along with it. It's all about control. Far too many companies aren't willing to concede control to their software systems, and rightly so.
    jasonp9
  • Jason raises a couple of good points

    Jason's right on a couple of fronts. Companies have had to do a lot to make ERP products work for their firms. But the level of customization or tailoring of these systems has varied materially based on company size (e.g., small businesses do little customization as it's often cost-prohibitive and they change their practices to fit the software), industry (i.e., service firms often require fewer tweaks to an ERP than say a process manufacturer) and global reach. The encroachment of cloud solutions has already been pronounced in smaller firms and in service firms. It's starting to impact small to mid-size manufacturers. Even in large enterprises, cloud solutions are in office automation, CRM, HR, storage, analytics, treasury, financial planning and other areas. Cloud is in every size firm and will continue to make inroads.

    I also get Jason's point of companies wanting to maintain control of their systems. One of the biggest beefs against many cloud solutions is that vendors dictate the upgrade schedule and can add/modify functionality with each new release. For some firms, that's simply too much change, too frequently. I wouldn't recommend some solutions to companies that can't handle this degree of change. On the flip side, there are some firms that use control as a way to avoid change - beneficial or not. Some of the resistance is just people not liking change and some of it is due to a change that is incompatible with the needs of the business. It's important to determine why new solutions are being resisted and assess whether these objections are still valid, conflict with the agility needs of the business going forward and are they creating an expensive infrastructure that the company may not be able to competitively maintain.

    Is cloud right for every firm? No. Is on-premises right for every firm? No. The reality is that new options exist and firms will need to evaluate their options on a business by business basis.
    brian sommer
  • More alignment with the business is required

    Brian,
    You summarized the state of ERP well. Like many applications it is moving to the cloud with increasing haste. Too many IT professionals are still aligned with technology - an ERP provider, an operating system or just the idea of having a lot of equipment and software to manage.

    Too few are really aligned with the needs of their constituents. This is what led to the rise of cloud software to begin with, and for that matter the rise of client-server technology many years ago. User populations became frustrated with the lack of functionality in enterprise apps and the lack of speed and agility to fill the gaps.

    There is a growing number of mature SaaS choices that have robust toolsets. These tools allow IT departments to enhance and extend the functionality and tailor the solution to the organization's needs. They are not held captive to the vendor.

    I agree with Brian's point about SaaS not being right for customers that can't handle change. The FDA, for one, has made companies shy away from making business-critical improvements to their software. I also agree that many companies hide behind this issue. The most successful companies innovate in their businesses all the time. Their ERP needs to adapt with them.
    mls73273
  • My prediction

    The cloud will continue to be a repository of data that is accessible to anyone with minimal security requirements. Mobility apps will run in the cloud to provide information and transactions for customers. Security concerns, especially regarding new products, competition, and patented information, as well as financial matters that impact business decisions such as mergers and acquisitions, will bring back jobs for programmers and analysts with security clearances into secured facilities. The complexity of information technology choices will increase the pay packages of CIOs and their staffs, as will it increase the profitability of those IT vendors who can understand and implement inhouse solutions as well as those in the cloud.
    MominTN