The year that’s fast coming to close has been an exciting, dramatic and wild ride for the typically staid world of ERP software: 2010 saw unprecedented lawsuits, impressive growth in new software-delivery models, TMZ-worthy executive shake-ups and many critical acquisitions that, combined, should have lasting effects on the enterprise software market.
Even though past performance does not guarantee future results, I believe that in 2011 we will bear witness to just as much dramatic change—spectacular customer successes and failures, some ERP vendors crushing the competition and others crashing and burning, and pent-up customer frustration with the status quo in traditional ERP deployments.
Overall, precisely when things should be getting easier for ERP licensing deals, software implementations and next-gen upgrades, the opposite is occurring: Talking to CIOs, industry analysts and ERP watchers, one finds there is much too much complexity and confusion as we enter the new year.
Here is CIO.com’s analysis on 11 ERP hot topics as well as some bold (and not so bold) predictions for each topic area.
1. ERP Customers (Finally) Get More Selective.
It’s about time ERP buyers got a bit “choosier” with their RFPs and selection processes, as well as upgrades and customizations. Why? There’s more legitimate options and software-delivery models available than ever before to free ERP buyers from being “locked in” to one vendor’s products and services.
Instead of adding a SaaS vendor to your “vendors in the mix” list to make your incumbent on-premise vendor work a little harder, why not give the SaaS vendor a serious look? Many companies, in fact, are doing just that. Survey data from research firms such as Aberdeen and Forrester show that SaaS and cloud-based ERP vendors today receive unprecedented consideration from prospective customers.
In addition, large enterprises should be rethinking the traditional, monolithic and expensive approach to ERP customization, integration, upgrades and portfolio management.
For instance, one strategy for the problematic “quest for a single instance of ERP” is the growing hub-and-spoke trend (as detailed here) rather than trying to force feed a homogeneous ERP system to all a corporation’s offices and divisions.
2011 Prediction: More companies realize that there are many viable alternatives to traditional ERP software. For the majority of companies, non-committal “plans” to implement SaaS, hosted or cloud-based ERP systems change into actual “deployments” in 2011.
2. On-Premise and SaaS ERP to Co-Exist in “The Cloud.”
Legacy on-premise ERP vendors long sought to keep SaaS ERP upstarts at the fringe of business software conversations. The incumbents lost.
Now those same traditional vendors have pronounced “The Cloud” here to stay (gee, thanks!), while also doing everything they can to not denigrate their on-premise software money makers. (Of course, they’ve co-opted “The Cloud” to suit their own purposes and mangled the actual definition of cloud computing in the process.)
Customers have begrudgingly bought into the vendors’ “co-existence” and “hybrid” ploys. Now what?
Remember, CIOs simply don’t want to own more “stuff” these days: they want less hardware, less software, less costs and fewer headaches from infrastructural systems they have to “own.” (As a satirical NetSuite campaign offers, CIOs are sick of Software Hairball Syndrome.)
2011 Prediction: The “co-existence” cloud ERP strategy should be a catalyst for more choice and change in the ERP market in 2011, as CIOs and other senior executives get even more comfortable with keeping their sensitive ERP data outside their four walls. But CIOs will also need to be wary of ERP vendor “cloud-speak.”
3. ERP Implementation Failures Continue Unabated.
So long as top executives and teams tasked with rolling out complex ERP systems continue to underestimate the importance of well-considered, practical and appealing change-management programs, then 2011 will see just as many notable ERP failure stories as we did in 2010, 2009, 2008….
It shouldn’t surprise anyone associated with ERP projects that users will do anything to not use new software (hello spreadsheet workarounds!) if not properly trained, motivated and shown why the change is a good one—not only for the company but also for them.
On Twitter, enterprise-software failure analyst Michael Krigsman recently stated: “Lack of change management is the silent killer on ERP projects.”
2011 Prediction: Too many companies will continue to skimp on training programs in the name of “IT efficiencies” and ignore proven change-management strategies. They will most certainly face the same outcome that Clubber Lang offered on his upcoming fight with Rocky Balboa (in Rocky III): “My prediction? Pain!”
4. Oracle Fusion Apps to Debut with a Thud.
Oracle’s next-generation suite of enterprise applications has had more stops and starts than a Times Square traffic light. Fusion Applications Suite is *supposed* to debut in 2011. (You’ll recall that it was supposed to debut in 2010.) And in some type of “Bizzaro World” fashion, Oracle is quietly and gently nudging its customers (not pushing or threatening them) toward Fusion Apps.
Why all the strange delay from Oracle and CEO Larry Ellison?
Think of a very hungry and very large man walking into McDonald’s. He’s drooling. And he’s got lots of money to spend. Now think of the exact opposite of that person, and you’d have the majority of Oracle’s customer base: There’s simply no appetite or money for a new, next-gen platform of business apps. And Oracle knows that all too well.
For example, a recent survey of Oracle’s apps customer base by Computer Economics found that Fusion Apps “are not on the radar for most customers, with only 10 percent planning to migrate to Fusion.”
2011 Prediction: Fusion Apps debuts to solid reviews from the “critics” in 2011, but not many paying customers are in attendance to see the show. Widespread adoption? Think 2015.
5. SAP Business ByDesign: Lukewarm Reception, Then Good Reviews.
This is the make or break year for Business ByDesign (ByD), SAP’s suite of on-demand ERP applications. ByD went GA in summer 2010, and SAP and its customers are still in the honeymoon period right now.
SAP’s continued financial success with its on-premise apps demonstrates that many companies are not turned off by SAP’s history of selling high-quality but complex business software.
Despite competitors’ and critics’ complaints, SAP has brand prestige. I believe that will translate well for midsize customers who do not need all the bells and whistles (and costs) of SAP’s on-premise software but want the cache of running SAP software—the cheaper on-demand ByD application. (It’s like driving those mini-Mercedes or BMWs.)
2011 Prediction: Going by the law of averages, SAP simply cannot screw up the expansive rollout of ByD anymore, so this has to work. A big year for ByD in 2011.
6. ERP Licensing: More Options, More Confusion, More Gotchas.
Guess what, folks? More licensing options in the ERP software universe—hybrid deployments, public and private clouds, hosted deals, SaaS and on-demand—bring with it a new level of complexity for those tasked with figuring out “What’s the best deal for my company?”
That will typically fall to the CIO or some licensing specialist, in larger organizations. But as IDC software licensing guru Amy Konary told CIO.com, there’s a new role for tech leaders: The “Economist CIO” who can crunch the financials of new metric-laden software agreements. And when it comes to the cloud, well, beware of the fine print.
In addition, don’t think that traditional on-premise vendors won’t find clever, subtle ways to make their customers pay for all this new software licensing “flexibility.”
2011 Prediction: Those CIOs and companies who neglect due diligence when buying ERP software in 2011—whether going the on-premise route or moving to the cloud (or some variation on it)—will open themselves and their companies to greater risk and financial exposure. A handful of CIOs will get burned and could lose their jobs.
7. Midsize On-Premise ERP Vendors Get Squeezed.
Here’s the doomsday scenario for mid-tier on-premise ERP vendors: 1. Upstart SaaS and on-demand ERP players continue to gain more traction with SMBs; 2. Larger ERP vendors’ efforts to infiltrate midsize companies (either with their own on-demand applications or on-premise offerings) are successful, capturing midsize companies and snaring them for the long haul.
The result: Market forces start squeezing out midsize and smaller ERP vendors that can’t differentiate their services enough from the nascent SaaS and cloud vendors or stand tall enough with the big boys.
One such vendor to watch is Infor. This will be a make or break year for the $2 billion ERP vendor that primarily serves the mid-market. A new CEO (Charles Phillips), a splashy product launch (Infor ION) and an attempt to step out from the big shadows of SAP and Oracle are in store.
2011 Prediction: Midsize ERP vendors, like Infor, will have to differentiate themselves and be all things to all customers. If not, and the doomsday scenario plays out, we will likely see venerable ERP players on the proverbial chopping block: sold for a low, low price or forced out of business.
8. Mobile ERP Momentum Stalls and Falls.
The world’s gone gaga over consumer mobile apps. No argument there.
All indications show that we are headed toward a “dotcom+Y2K” frenzy with mobile ERP apps. SAP, for example, is betting big on mobile apps. New co-CEOs Bill McDermott and Jim Hagemann Snabe have designated mobility as one of SAP’s three strategic pillars (“On premise, on demand, on device”).
But with mobile ERP apps, all that glitters is not gold.
As Forrester Research’s ERP analyst Paul Hamerman notes in a recent report: “Mobilizing existing enterprise applications, by itself, will not create business process value scenarios that will motivate companies to invest in the technology…. Enterprise applications vendors appear to universally agree that mobile applications are strategically important.”
2011 Prediction: Consider yourselves forewarned, CIOs. The mobile hype for business apps in 2011 will hit a fever pitch, and too many companies will invest foolishly and without any real business strategy. The inevitable “trough of disillusionment” (thanks Gartner!) will soon follow.
9. Vendors Attempt to Make ERP More Like Other Consumery Apps.
Business intelligence and analytics are red hot. Therefore, many new and old ERP vendors will try to make their apps more “BI-like” in 2011. Now whether any of them actually are, or it’s just a creation of the vendor’s marketing department, is up to you to decide. But be mindful of the buzz.
The overall concept is a good one: Make ERP data more accessible, more flexible and easier to work with. (Which can help with user acceptance, naturally.)
Beware, however, of the other new trend: Vendors that promise more social [insert any business term here] apps. When your vendor rep tells you his legacy financial or supply chain application is now more “Facebook-like,” just leave. Fast.
2011 Prediction: Companies and CIOs will struggle to cut through vendor-speak. But you can gain value from ERP vendors who are actually delivering embedded analytics features inside core ERP systems, and more vendors will reveal this functionality in 2011.
10. Third-Party ERP Maintenance Under the Microscope.
Before Oracle v. SAP (and the Leo Apotheker-HP saga), most folks hadn’t much interest in ERP maintenance and support.
That’s changed. The dramatic trial did its part, for sure. But ERP customers’ frustration over the “value-challenged” expense of maintenance and support had been brewing for years. The global economic crisis of 2008 forced companies to reexamine every IT line item, and “ERP Maintenance & Support” and the head-scratching number of digits that followed the dollar sign caught a lot of CEOs’ and CFOs’ attention.
Oracle, SAP and others have gone to extraordinary lengths to protect their maintenance and support golden eggs even while their customers have voiced frustration and threatened revolt.
For example, a recent survey of Oracle’s apps customer base by Computer Economics noted:
“There is no way to avoid the conclusion that there is tremendous customer dissatisfaction with the quality and cost of Oracle support. Specifically, 42 percent are dissatisfied with the quality, while 58 percent are dissatisfied with the cost. This is across the board for all products, including E-Business Suite users, but is especially pronounced among PeopleSoft customers. The respondent comments in this section are devastating.”
2011 Prediction: Let us not forget that ERP investments sit atop the list of corporate IT spending. And companies are not done looking for efficiencies in IT spending. Maintenance and support will get even more scrutiny in 2011 as ERP customers and their user groups (finally) stand up to their vendors. During the next 12 to 18 months, ERP vendors will be forced to offer more flexible options, even the mighty Oracle.
11. My ERP-Themed TV Reality Series Does Not Come to Pass.
Sadly, this is one prediction that comes with an iron-clad guarantee: My revolutionary idea for the next big reality TV show—“ERP Undercover”—will definitely not start production in 2011. I’m still open to hosting duties, if anyone is interested. Hello?
Thomas Wailgum covers Enterprise Software, Data Management and Personal Productivity Apps for CIO.com. Follow him on Twitter @twailgum. Follow everything from CIO.com on Twitter @CIOonline. E-mail Thomas at firstname.lastname@example.org.