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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More Troubling/Challenging ERP Predictions for 2014

 

4) Baby steps to cloud solutions will quickly change to big leaps – I’m running into two kinds of firms: those that are rapidly and continuously adopting cloud solutions and those are that are trying to ease their way into the cloud by way of lots of small, intermediate steps. These steps often include:

  • toying around with creation of an expensive private cloud
  • using some ‘experimental’ cloud applications when their main ERP vendor lacks an on-premises solution
  • keeping ‘business unit’ or ‘core’ applications on-premises while relegating 'less core’ or ‘peripheral’ applications to cloud solutions

It’s time to call this activity what it really is: stalling and/or wishful thinking. Utility computing has arrived, bigger cloud ERP suites are emerging and the justifications for remaining with on-premises solutions have been significantly debunked. 

After I wrote those paragraphs yesterday, I got this soundbite in today’s FierceCIO:

"It's impossible to private cloud everything," Gartner Research Director Michael Warrilow was quoted by CIO as saying last week. "We will see ever-more public cloud adoption. The public cloud is probably going to be 70 to 80 percent of cloud workloads."

Starting in 2014, we may finally see IT interventions where CEOs talk CIOs out of additional spending on on-premises or private cloud ERP deployments. Why are companies still maintaining on-premises code when multi-tenant cloud vendors do it as part of the subscription? Why are so many IT people maintaining back office ERP solutions instead of working on more strategic projects?  A change, a big change, is needed. Maybe 2014 will see some movement here.

 

5) The continuing ascent of cloud solutions means that more companies will need valid independent advice to choose smartly. Unfortunately, there won’t be much of that.  If your firm is about to make a major change in its ERP vendor of choice, you might be tempted to call in an integrator to help you decide what vendor could be your new ERP suite-mate.  Well, independent advice and counsel kind of went out the door years ago.

Few integrators are independent. Few of them will actually tell you about the financial, co-marketing and other relationships they have with specific vendors. No, when you call an integrator these days, you’re more likely to get a sales call from one of their ‘solution’ experts. And, guess what, they just happen to be experts in the one vendor that firm has a deep, financial relationship with. Or, to put it differently, they believe that the best solution for your firm is to use the solution that they have the most people trained to implement it. I’m not kidding. I’ve actually heard that justification.

Consultants (as opposed to integrators) are supposed to put client interests above their own. The operative phrase here is “supposed to” as not all firms that call themselves consultants are actually delivering to this standard. As someone who has been a consultant, an integrator and an industry analyst, caveat emptor.

If you want some real insight, I’d suggest you talk to a couple of independent analysts. Yes, everyone has their own personal biases and many independents do some work with vendors (e.g., I probably did ten webinars this year with several vendors). Does that mean their guidance is necessarily tainted? Not really but that’s why I suggest you check in with a couple of folks not just one.

There is definitely value in meeting with people who play in traffic every day. They talk to lots of vendors and customers. Single vendor integrator practices are rarely as cosmopolitan as those who must be in contact with entire market segments. Again, caveat emptor.

For 2014, I expect a lot of independent analysts (and many analysts in established analyst firms) will get a lot of calls requesting help in selecting new ERP solutions.

 

6) Some integrators and vendors will realize, too late, that customers want to be done with application software operations, maintenance, etc. – REALLY DONE WITH IT!  Businesses don’t want to be bothered with patching, maintaining and upgrading software. That stuff was an acceptable price to pay in the early days of application software but not anymore.

ERP software has been around a long, long time but traditional vendors have made only nominal progress (and only recently at that) in making upgrades and maintenance easier, less time consuming, less labor intensive, etc. 

Third party firms, not necessarily ERP vendors, have stepped in recent years to provide a number of connectors that make integration between different ERP and cloud products easier. But this just illustrates another big integration challenge that IT shops have to manage whenever any product in their portfolio is upgraded: they have to re-test all integrations, too.

So, while I am very happy to see cloud multi-tenant applications solve one part of the maintenance issue (i.e., the vendor now applies all of the upgrades and patches), they don’t do all of the re-testing of interfaces and integrations. This is actually a big deal.

In some firms, the HR software alone may integrate/interface with one hundred or so systems. These systems include: general ledger (for budgeting and payroll costs), third party benefits administration systems, a cloud performance management system, etc.

So, what customers REALLY want isn’t just multi-tenancy, they want ALL of the testing and maintenance work to go away. That means that vendors, outsourcers or integrators have to offer more. Businesses want the whole problem to go away not just a piece of it.

In 2014, I suspect that some outsourcers will show some brilliance here. OneSource Virtual is way ahead on this front and other players need to follow suit.

If your firm is an integrator and it still thinks that clients simply want an implementation, your firm is dead wrong. Don’t just install software for these clients, take away all of their maintenance problems/challenges. If you don’t see that the market has evolved in its wants and needs, you’re done for.

What are your ERP predictions and challenges?

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.
    jasonp@...
  • 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