The words "enterprise resource planning" conjure up ugly images: tortuously complex business processes, missed deployment deadlines, massive cost overruns. For more than a decade, ERP has been synonymous with beastly software projects. Now the three most influential vendors--SAP, Oracle, and Microsoft--are rearchitecting their applications with the promise that things will get better.
No one questions the need for change in a market known as much for its failures as its many successes. The challenge for ERP vendors is to deliver software that supports business process improvements without all the frustrations of the past. They must do more than put a pretty face on the same old problems.
The Big Three's multiyear development efforts involve moving code and functionality from existing products into applications that are more contemporary in design and appearance, and hopefully easier to deploy and manage. SAP, for example, is emphasizing the plug-and-play nature of components in its recently shipped mySAP ERP 2005--a godsend to anyone who wrestled with the hulking R/3.
The tech industry is rife with ERP-gone-awry stories, from the infamously problematic $112 million SAP R/3 implementation at Hershey that led to disastrous order-fulfillment errors just before the critical Halloween season in 1999, to a problem-plagued Nike installation of i2 Technologies' supply chain applications that resulted in shortages of some footwear and excess stock of other inventory in 2001. More recently, medical products maker Invacare's botched implementation of Oracle's E-Business Suite was blamed for a $30 million revenue shortfall in the fourth quarter of last year.
Out with the old, says Ingersoll-Rand's Barry Libenson
Photo by James Leynse
ERP code hasn't always been squeaky clean, either. Oracle's 11i E-Business Suite was riddled with bugs in 2000 and 2001, requiring more than 5,000 patches. Nike blamed i2's demand and inventory management application for the snafus it encountered five years ago, saying the product failed to meet performance and functionality expectations. I2, in turn, blamed the problems on Nike's customization of the software.
The biggest gotcha: Companies must make sweeping changes to their business processes to match the software. "The most time-consuming activity is the training and change management process to move people in the various line offices and departments from one way of doing business to another," says David Ernst, CIO and assistant vice chancellor for IT services at California State University.
Time-consuming indeed. CSU is still a year away from completing installation of PeopleSoft finance, human resources, and student administration applications at its 23 campuses--a project begun in 1999 that will cost $400 million by the time it's over. "It's right on schedule," Ernst says. Amazingly, that's eight years from start to finish--reason enough for the remaking of ERP.
SAP and Oracle are the two largest ERP vendors, and Microsoft is making a major push with its Dynamics applications. Other players include Infor (in the process of acquiring SSA Global Technologies), Sage Group, and Lawson Software, which acquired Intentia International in April. The market is mature: ERP license revenue, at just over $6 billion last year, will grow about 5% annually this year and next, according to Gartner.
Industry consolidation has made product selection harder than ever, as the threat of obsolescence hangs over applications that move from one vendor to another. Oracle's portfolio includes applications from JD Edwards, PeopleSoft, and Siebel in addition to its own E-Business Suite, all of which are being mashed together under a project dubbed Fusion. Microsoft sells four acquired suites--from Axapta, Great Plains, Navision, and Solomon--which are being rolled together under the Dynamics brand name.
A key question is whether all this development work by the vendors will translate into a better customer experience, both for those diving into ERP for the first time and those embarking on upgrades. Will projects be completed faster and at lower cost? Vendors suggest they will--though we'll believe it when we see it. Will employees find the new applications more useful and better integrated with their other desktop tools? Almost certainly. Microsoft already has tied its Outlook E-mail client into the Great Plains suite, and connections between Microsoft's Office applications and other ERP apps are planned. SAP, with Microsoft's help, is going in the same direction.
All three vendors are moving their ERP apps to Web services and service-oriented architectures. That means their forthcoming ERP applications should be easier to deploy and integrate with other vendors' software, so IT departments can react more quickly when business units need new functionality. Companies looking to add features to their core applications should be able to choose from a richer menu, in contrast to when they had to install the whole darned application module whether they wanted the bells and whistles or not.
The vendors are talking a good game. Upgrades from SAP's aging R/3 to mySAP ERP 2005, for example, can be done in 60 days, says Shai Agassi, president of SAP's product and technology group. Early reports of successful upgrades among SAP customers bear that out, says Mike Perroni, president of the Americas' SAP users group and a VP at Halliburton in charge of that company's applications team.