Key drivers for enterprise resource planning (ERP) investment in 2002+ will include:
Consolidation of line-of-business and cross-geographic deployments
Global expansion of initial ERP investments
Late-stage ERP adoption.
Most ERP investment will continue to be burdened with the “seamless” (i.e., integrated), or “unseemly” (best-in-class) decision, as traditional ERP vendors continue to move into new product categories with more credible offerings this year (e.g., CRM, eMarketplaces).
ERP Growth Drivers – Mergers & Acquisitions Meta Group Research
ERP rationalization efforts following corporate M&A are significant.
Especially critical when both M&A partners were running the same ERP backbone prior to merging.
“ Major league” M&A (i.e., mergers among the Fortune 500) and smaller but more frequent acquisitions will continue to promote significant ERP spending in 2002 and beyond.
ERP Growth Drivers – ERP Consolidation Meta Group Research
ERP consolidation (i.e., “value investment”) Despite considerable ‘bolt-on’ functionality available in ERP suites, many Global 2000 organizations to operate older point solutions.
Either packages from vendors other than the ERP system vendor, or
Many companies compelled to consolidate existing ERP investments spawned by the initial availability LOB-focused or geography-focused solutions.
Investment to consolidate existing back-office assets will yield greater systems value (and costs savings) and will contain the rash of widely deployed point solutions.
ERP Growth Drivers – ERP Consolidation Meta Group Research
Cross-LOB analysis supporting an organization’s supply-chain strategy will play a key part in the decision-making process for ERP expansion within and across geographies in 2001.
For 2003/04, inter-enterprise business modeling (i.e., including partner/supplier, OEM, as well as vertically integrated divisions) expected to form a routine part of continuous IT/LOB planning.
Expected to dovetail with the data warehousing decision-making process.
ERP Growth Drivers – Late Adoption Meta Group Research
Certain companies beginning to adapt modern HR, finance, and service/supply-chain functions.
Especially evident in the financial services and retail verticals, where ERP vendors have been less successful providing end-to-end solutions,
ERP Trends – Functionality & Architecture Meta Group Research
Traditional ERP vendors continue movement into the best-in-class product categories.
Includes CRM, eMarketplaces, e-procurement, etc.
Leading ERP package providers should be able to sustain growth in excess of the market.
Another factor driving high-end ERP investment in 2001 will be the push to Web-based architecture supporting core business application functionality.
Enterprises are beginning to exploit the development initiatives that vendors like PeopleSoft and SAP have been investing in for some time.
More server-side application logic and less reliance on accessing objects stored on the client side should result in upgrade cycles that require fewer IT/end-user touch points.
Wave of upgrades expected as existing customers wait for successful test cases of new architectural approach.
PeopleSoft and mySAP showing signs of success in moving market.
ERP Trends: Combined ERP & E-business Benefits Improved cash management Improved supplier relationships Capability to manufacture to actual demand Continuous operation Shorter cycle times Frees employees to work on tasks requiring human creativity and judgment Reduced costs, inventories, and collection efforts Improved customer and employee satisfaction Increased revenue INTANGIBLE BENEFITS TANGIBLE BENEFITS
An E-business analytical framework (Service) (Quality) Customer Value = ------------------------------- (Price) (Time) (Agility) (Reach) Competitive Capability = ----------------------- (Time-to-Market) (Revenue) Supply Chain Value = -------------------- (Cost)
Operating demands place a strain on e-business platforms.
Frequent system changes.
24 x 7 operation.
Flawless system stability.
True 24 x 7 availability requires 99.999% reliability.
Dramatic spikes in site traffic.
Exposure of corporate resources on the Web.
Testing tools available.
Examples of AOL, E*Trade, Charles Schwab and eBay.
ERP and E-business: Adaptive vs. Disruptive Technology
E-business is a revolution
Internet (4 years to reach 50 million users)
Television (13 years)
PC (16 years)
Radio (38 years)
Adaptive technologies move earlier technologies forward incrementally while Disruptive technologies change the way people live or the way businesses operate.
ERP is adaptive while e-Business is disruptive.
Touch-tone telephone was adaptive while telephone itself was disruptive.
Electric train was adaptive while the train itself was disruptive.
Life Cycle of Adaptive versus Disruptive Technologies Impact Time Disruptive technology Adaptive technology Critical Mass (1) Initial hype (2) Learning, Experimenting, investing (3) New wave of Technology and equipment (4) Infrastructure consolidation (5) Critical mass achieved. Mass marketing
- Point solutions such as selling over the Web, providing customer self-service and conducting Web-based indirect procurement. ( e-commerce )
VALUE CHAIN INTEGRATION (e.g. Adaptec)
- Integrate customers’ and suppliers’ operations with their processes and systems (e-CRM and e-SCM).
INDUSTRY TRANSFORMATION (e.g. Solectron and Ingram Micro)
- Boundaries between companies and their partners become less pronounced as they link internal systems through the Web, creating new markets, new opportunities, new customers and new products and services. There is an intense relationship between the partners to create an environment for shared business improvements, mutual benefits and joint rewards.. ( Collaborative Advantage )
CONVERGENCE (e.g. Shell, Mobil, BP, GM and GE)
- Coming together of companies from different industries to provide goods and services to consumers. This is not solely a function of e-business technologies: it is equally a function of industry deregulation, globalization of business, evolving customer demand and new competitive tactics. However, it is helped by decreasing costs and rapid adoption of technology. ( Industry Convergence )
Summary: ERP Vendor Responses to E-Business Challenges Traditional ERP versus E-Business Applications Dimensions ERP Apps E-Business Apps Intuitive User Training Required User Interface Simple Complex Business Processes Browser, Portals, IT Through APIs or EDI Method of Integrating with Other Businesses Continuous, Small Changes Periodic, Complex Upgrade Release Process Outside Company In Inside Company Out Focus Vendors Customers Employees
ERP Vendor Responses to E-Business Challenges (cont’d)
Extend ERP Functionality
Build communities of users through portals and trading exchanges
Public versus private
Horizontal versus vertical
Direct versus indirect materials
ERP Vendor Responses to e-business challenges (cont’d)
Create new ERP delivery and pricing models
Traditional pricing includes initial license fee for a specified number of employees, with annual maintenance fees
Introduction of Role-based pricing (part of SAP’s mySAP.com strategy in which users access the system through role-specific Workplaces)
Industry-specific, pre-configured solutions to offset high implementation costs (e.g. SAP’s Accelerated Applications and Oracle’s FastForward RPM)
Pre-configured, pre-installed and pre-integrated (e.g. partnership between IBM and vendors like J D Edwards, MAPICS, QAD and SAP)
Traditional outsourcing (either through ERP vendors or their partners)
Application service provision
Third-party service provider typically licenses the software from the ERP vendor and resells the package to many buyers for fixed, per-month, per-user fee. Users access the offsite system via Internet.
Internet-based delivery of basic ERP system (e.g. Biztone)