In this exclusive article, our Primary Advisor, Chris Houghton, talks about the divisions between ERP suppliers, the changing face of large enterprise software, and the “ERP Borg”.
Editor’s note: For those readers not familiar with Star Trek, in that TV show the Borg are a race of cyborgs sharing a hive mind, and are known for forcing other cultures to join with them or be destroyed.
Not long ago most ERP companies were under the impression that more is better. More function, more platforms, more languages and more modules. Now, is this all beginning to change?
The advent of tablet computing, bring your own device (BYOD) and app markets/stores has seen an astonishing rise in the development of relatively inexpensive and interoperable applications. And we see no signs of that trend slowing down.
But, for the purpose of this article, let us go back to the heady days of large corporate ERP systems and try and get into the psyche of the business managers of these companies.
When developing an ERP solution (either from scratch or upgrading an existing system) the expanse of function required for a typical company ranges from finance, distribution, warehousing and logistics, retail and of course PLM. This requires deep pockets for the developing company and most don’t have the resources so tend to start by buying in big chunks of the system or partnering with companies who have already written sections of the overall system. This is fine, but it is the ERP company who has made the choice, not you. Put another way: it’s the equivalent of stating to a supplier, “I would like to buy a new hi-fi system” only to be received by, “You can have this amp, but it will only work with this deck, or with those speakers.”
So, what happens is that the ERP company “badges” the part of the system they don’t have (and consequently buy in) as their own. This is, of course, until they can write their own! We have to remember that the profit in ERP systems is in reselling large numbers of the software, and not necessarily in the consultancy required to install it, nor the hardware upon which it operates. So, wherever possible, ERP companies will want to serve up as much of their code in the final offering, in favour of paying for someone else’s.
Take a look at the ERP system that you currently use: I’ll bet there are at least 4 different suppliers involved in delivering the code alone?
As buyers, we have always had the approach that if we can get our systems from one supplier then we only have one person to kick if it goes wrong! And so ERP suppliers have structured their systems to appear that they are indeed solely from them.
Where does that leave us? At the moment we have a rationalisation of the current systems out there, with larger groups buying up the smaller ERP suppliers and creating a matrix of offerings from the same company. Not naming any names but some large companies have a number of systems on offer – but these don’t actually communicate with each other, have different platform requirements and in some cases are even written in different computer language frameworks.
So whilst assimilation may work fine in science-fiction, in reality it’s a promise that’s never been delivered, leaving the prospective purchaser lost in a sea of options and half-truths.
The major winners in recent software stakes are those that have embraced the technologies available and concentrated on small, specifically written applications that perform a simple job – yet do it well. These appliciations, often relatively inexpensive, leverage the new tablet platforms and integrate seamlessly with other applications due to the capabilities of the operating systems that they are based upon. We will see more of this as Microsoft and Apple develop touch based, portable operating environments where the data being inserted and stored can be shared between application to a common standard, thus negating the need for costly integrations and the removal of your choice of applications by the ERP supplier. To quote Bob Dylan, the times they are a changin’.
The future therefore, which we all know is never guaranteed, seems to consist of diametrically opposed suppliers: the tankers and speedboats. The larger ERP suppliers, or tankers, will still command the lion’s share of systems for a while – there’s too much money involved for them not to compete. I am, however, certain that we will see a steady rise in the new breed of ERP suppliers who can develop applications, quickly, aggressively and collectively due to the nature of the application development environment being offered by the hardware companies.
As they say on the final frontier, the Borg are coming and resistance is futile.