Troubling, Challenging 2014 ERP Predictions
- December 18, 2013
- Posted by: Parwinee Piyapongpaisarn
- Category: Articles-EN
On that program, I had a chance to get out three predictions. One concerned the upswing in large enterprises adopting cloud financial accounting software. Another prediction looked at the collision coming with an aging CPA population and radically different financial software. If you’d like to hear the predictions and the discussions they triggered, hit the link above and watch the replay.
I’ll be offering another prediction this Wed. morning on SAP Radio. I’ll get 2 minutes to posit some gem there.
I have no shortage of other predictions, some good and some troubling. And, I thought I would detail some of these here.
Continued in-fill sales by major ERP vendors shouldn’t be confused with a bigger trend or a major resurgence in these firms’ popularity. Big, established vendors often buy innovation (rather than build it). They then turn their sales forces loose on their installed base of customers to sell these add-on products. Total revenue gets a boost and Wall Street is happy for another day. But, this activity doesn’t really do more than buy more time and keep maintenance monies flowing into their coffers.
For the time being, some customers will license an add-on product or two from their old ERP vendor. But, that time is coming to a close as cloud ERP suite sizes are growing in breadth and depth. Just look at how big the ERP suites of NetSuite, FinancialForce, Rootstock, Salesforceand others are growing. The old oligarchy days are coming to a close.
Bad behavior by many older vendors has definitely hurt their respective brands. I’ve spoken with technology leaders who are fed up with never ending usage audits, incremental license fees, decades’ long waits for promised re-platformed products, etc. For an ERP vendor to sell CX (customer experience) software and then mistreat their own customers so badly is more than ironic (or moronic).It’s a death wish. Yet, it happens.
I predict that in 2014, many major ERP buyers will start to move their old ERP vendors off the ‘strategic IT vendor’ list and replace them with the Workday, salesforce.com, Marketo, etc. vendors of the new era of cloud ERP solutions. These software buyers are tired of bad behavior, vendor indifference and old products. Given a choice, customers will look for true love elsewhere. I know I would.
The gap between ERP users that truly realize the value from some of these solutions and those that don’t is widening – not lessening. If your ERP solution predominately tracks internal transactions, facilitates reporting of same and helps your firm achieve a modicum of efficiency, congratulations – you are, at best, mediocre.
I saw a SMB manufacturer use massive point of sale data, their ERP’s supply chain information and a cloud, in-memory analytic tool to grab major market share from competitors. It wasn’t expensive or hard to do. It was, though, inspired and plucky.
What is defining success in ERP anymore isn’t the race to be internally efficient and effective. Success now occurs in how well companies connect their people and systems to all manner of constituents (e.g., customers, machines, prospects, governments, social media influencers, etc.), all kinds of technologies (e.g., machines, hand-helds, mobile devices, etc.) and in a myriad number of rapidly changing, highly morphing business processes. ERP never was static and unchanging although many older solutions frequently possessed immense rigidity to change. Somehow people got used to ERP solutions as being inflexible and accepted that as a price of doing business. Wrong!
In 2014, we will see the gap become ever more pronounced between those firms that possess old, rigid, inflexible systems and processes versus those than truly change and adapt in wondrous ways. The best firms will have fleshed out competencies around:
the successful exploitation of social content
interpreting big data feeds and how they’ll impact planned and actual financial results
understanding all manner of new mobile applications (not just the ones their firm created) and how their constituents will apply these in a business context
modern process designs and how their firm can quickly support new processes, mobile cloud-powered applications, machine data, etc.
triangulating data from internal, third party and other sources
Lots of ERP cleanup projects remain– Although we’ll be looking at a new year, 2014, I’m still running into firms that have yet to finish big ERP initiatives that were started as much as a decade or more ago.
Some shared services and other initiatives got stuck during the big recession of 2008. Businesses that had great plans to achieve single, global systems with global efficiencies and standard processes had to put a lot of this on hold for very practical and economic reasons. Yet, in the years that have passed, businesses have been very cautious. Their revenues are now much improved but they’ve resisted the urge to re-staff some of the IT and back-office functions to pre-2008 levels. To put a fine point on it, there simply aren’t enough internal people today to complete the backlog of unfinished projects.
I suspect that 2014 will be a year of frenzied catchup for many long-delayed and/or incomplete ERP transformation initiatives.These projects have to get to full-term before these companies can start to focus on more strategic IT and business unit initiatives. Competitors are running laps around these companies and they need these projects finished – STAT.
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.
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.
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.
(Source : ZD Net)