Enterprise resource planning (ERP) turns 21 today, marking its maturity amid evolving economic realities and enterprise needs which are changing the way ERP software is implemented in organizations. In particular, midsize businesses want more flexible, analytics-based deployments, according to market analysts.
John Brand, vice president of research at Springboard Research, noted that the desire for greater centralization and deduplication of common business functions within the enterprise, provided the basis for the rise of major ERP software suites in the late 1990s. Customer perception toward ERP, however, has changed over the past two decades, he said.
Midsize companies, for example, are "no longer as interested" in pursuing major ERP brands as part of their growth strategy, Brand told ZDNet Asia in his e-mail. Tier-two vendors that are more nimble and flexible are now favored by this market segment, as are integration strategies that revolve around "business intelligence (BI), reporting and analytics". This segment of users is also the primary driver of ERP today, the analyst added.
Brand explained: "These strategies enable companies to have a more comprehensive view of the combined organizational structure, but without the additional complexity of transforming and filtering data within an ERP environment."
Additionally, this trend has only emerged over the past four to five years, but Springboard Research expects to see more interest and activity in BI-centric integrations, particularly by more progressive, less risk-adverse companies, he said.
Yanna Dharmasthira, research director at Gartner, also singled out mid-market companies as growth drivers of the ERP market. She told ZDNet Asia that as these businesses enhance their competitiveness in line with the returns of economic growth, "more aggressive ERP growth" can be expected.
Within large organizations, customer needs have also been evolving. Brand noted that for those with existing ERP implementations, on-demand cloud-hosted "best-of-breed" software are deployed to augment these companies' existing systems.
"These discrete and hosted solutions can often penetrate the organization very quickly because they can be easily procured by business units without any involvement from its IT department," he noted.
While he does not expect any mass migrations from major ERP vendors' suites, Brand said such cloud or hosted applications will eventually erode the traditional footprint of ERP suites within the enterprise environment.
Evolution of ERP
To preserve their customer base, though, Dharmasthira said software vendors are raising the bar and enriching their product lines by embedding features such as analytics.
James Norwood, senior vice president of worldwide product marketing for Epicor Software, acknowledged the need to innovate and evolve together with its customers. This was partly why the vendor underwent a "painful" eight-year process of re-architecting its ERP products.
In an interview with ZDNet Asia, Norwood said its ERP suite has moved from being focused only on manufacturing-related business processes to now address a company's needs across its entire mission-critical platform.
Epicor also adopted "disruptive technologies" such as cloud computing and mobility, he revealed. "We chose to re-innovate our product right after we emerged from the dot-com bust and gone from multiple product lines to a single one," the executive recounted. "This experience is why our product is now built for change instead of building to last."
He pointed to the fact that Epicor, five to six years ago, had identified cloud computing as a technology that would be widely adopted once security concerns were addressed, leading to its adoption of a multi-tenanted architecture for its ERP product.
Now, with certain markets such as the United States moving past the security barrier, customers there are looking into choices of cloud deployment, such as on-premise or via a third-party cloud service provider--all of which Epicor's products are now built to run on, he explained.
SAP, on the other hand, is keen to emphasize its range of assets in ERP, customer relationship management (CRM), human capital management (HCM) and supply chain management (SCM), as well as the different deployment options available to its customers.
Simon Dale, senior vice president of solutions at SAP Asia-Pacific and Japan, said in his e-mail: "[Customers can] either get the whole functionality managed by a third-party vendor or consume specific functions on an as-needed basis in a private cloud arrangement, or delivered via the cloud.
"We are doing more of these kinds of arrangements and we expect this trend to accelerate," Dale added.
The software vendor is also looking to tap increasing customer demand for analytics-based offerings, he said, pointing to SAP's In-Memory Appliance as an example. The product offering, which is a big data engine that combines in-memory analytics with high-performance computing, allows customers to "pour through terabytes of data in seconds so they can drive the analysis around things such as managing global inventory and supply chain", he said.
Oracle, meanwhile, is focused more on alleviating application complexity and customization within the ERP space. Lim Teck Wee, country manager for applications at Oracle Singapore, shared that this was what customers were asking for.
"[Oracle has] standard, prebuilt integrations across our ERP, CRM and other industry-specific suites that will eliminate potential integration upgrade burdens," Lim said, adding that its roadmap of "next-generation applications" would assure customers that their investments can now be "future-proof".
Gartner's Dharmasthira noted that, ultimately, as vendors continue to innovate, ERP will retain its position as the largest software market compared to SCM or CRM.
She said that within the Asia-Pacific region, excluding Japan, the ERP market is expected to grow by 14 percent this year and have a compound annual growth rate of 13.8 percent for the next five years.
ERP is also considered as one of the top 3 software purchase priority in emerging markets such as China and India, which bodes well for the industry as a whole, the analyst added.