ERP is an acronym which has proved to induce both positive and negative connotations.. For many IT professionals, it’s the path to a well-paid job and exciting project opportunities. For business owners and managers, it can be a terrifying area with incomprehensible complexity and a daunting price tag. Careers have been made and unmade due to a successful or unsuccessful ERP implementation. The start of a new ERP project for a mid-sized or large company is still viewed, quite rightly, with precaution, excitement and sometimes pure fear.
All these different sentiments have led some consulting agencies to try and re-invent the terms. In recent years, Gartner has tried with ‘Composable ERP’, while Forester has tried to front the ‘DOP’ (Digital Operation Platform) with some success from system vendors, but not much interest from the current customers and users of ‘ERP’. With its somewhat-tainted reputation, the term ERP is still the go-to name for customers when they are out in the market to buy new systems.
Current trends and industry alignments
For an insider, it’s almost impossible to not be carried away with the level of technical changes, architecture and features and functions that are continually on offer. Management consultancies and other trend-setting analysis agencies are well aligned within the industry itself; all the major vendors are pouring lots of money into development and marketing.
The ongoing change from on-premises software to various options of cloud deployments has of course been the major shift, but also, integration capabilities, visual representation of data, accessibility and now of course, AI. Today, a new ERP customer is promised an almost infinite set of opportunities with modern technology and easy deployment. But are they able to harvest these winnings and are they better off than before?
The challenge is in convincing customers that all these new tools can actually be utilized convincingly and effectively, while also implementing the new technology in a speedy fashion.
The role of partnership
One of the major enablers of commercial success for ERP vendors is the ability to work together with partners. SAP has enabled its major system integrators to grow and develop successful businesses based on the SAP product. And while SAP, alongside Oracle, focused on partnering with recognized names, Microsoft (or Navision and Damgard (Axapta)) built a forest of smaller independent software vendors and value added resellers. Both strategies have proven to be hugely successful and are still the main business model for most ERP vendors, even if most of them also do direct business and some do almost exclusively direct.
The result here is that the partner model has moved the implementation effort and commercial risk away from system vendors. The positive side? You can find partners that specialize in various industries, cultures and geographies. A potential downside is that the partners might not follow the intended practices from the system vendors. For better or worse. One of the major promises that vendors use as a selling point when moving to the cloud is that the implementation project would be lighter and faster. Long before cloud options, both vendors and partners would have to make various templates and implementation accelerators to try and reduce the scope and complexity of the projects. Most vendors today offer some kind of “easy start”, “accelerated cloud model” or “industry vertical accelerator”. There are also some smaller, faster projects available, but still it seems like the implementation itself is not getting much faster or easier as intended.
The general landscape isn’t changing, and there are a few reasons as to why. Cloud software can occasionally be complex to deploy, presenting a barrier to the uninformed. When it comes to changes the new tech will bring to the business, it’s paramount that businesses understand the complexities of implementation projects; is the organization ready to undergo the changes necessary for a digital upgrade? ERP processes touch the inner core of an organization and the change to loud or other modern versions can confuse and negatively affect users.
Many partners don’t have much of an incentive to speed up the implementations as they live off consulting revenue. Even if “the new gold” is building recurring revenue, the system vendors may want to retain as much as possible of the subscription revenue for themselves. This could unfortunately leave their partners with implementation and other advisory work to keep earning their revenue.
Stagnancy amidst technological shifts
Even if there has been an industry-wide shift in technology and deployment methods, the ERP space really hasn’t changed much in the last 20 years. The new contenders look quite the same as the old ones when you peek under the hood. Be it Oracle NetSuite, Workday or SalesForce, the business drivers are the same for SAP, Microsoft and Infor. And we have gotten some new successful partners and lost some old ones. The new buzzwords in the industry – AI and ML, won’t change this, neither will a new name or buzzword from Gartner of Forrester.
Daring thinkers exist out there who try out different models, both within the ERP industry and in other markets. In management consulting, some of the major players have tied many of their payments to actually achieve the set goals in a project, be it new revenue, savings or other KPIs. Within the ERP sphere, there have been attempts to include the implementation project in the subscription fee, thus re-aligning the incentives in an exciting way. Fixed price projects have been and still are used in some areas. But there hasn’t been a true shift in how the dynamics between system vendor, partner and end customer work. And maybe it never will change?