ERP Innovation

ERP vendors: innovate or die!

Ventana Research believes that the ERP market is moribund and too firmly anchored to its roots in delivering financial, HR, supply chain, and manufacturing functionality. In order to support the innovative organizations of the future, this current functional footprint must be regarded as merely the foundation for the next level of ERP development. Otherwise, customers who have made significant investments in ERP over the last decade will be wondering how this investment will support them in a world where organizational innovation and avoiding commoditization is the order of the day. View
It has taken over a decade, but ERP is bumping up against its own “glass ceiling.” The basic, integrated foundation for a true OMS (organization management system) is in place, but there is still a long way to go. Integrating financial, HR, supply chain, and manufacturing functionality and enhancing it with CRM, BI, E-Commerce, and so forth, has proven to be a formidable challenge to pull off — both for vendors and customers. And doing this while dealing with the demands for performance, reliability, and scalability, on top of the organizational change management required to make all this happen, has been a feat.

But the future of ERP is not about software-as-service, the technology-centric issue of delivering applications as componentized web services operating within service-oriented architectures. Instead, it is all about supporting the innovative organizations of the future — organizations that need to quickly adapt and align to new business models, manage continual change, and innovate consistently and competitively. The future of ERP is about embracing new business processes, including innovation and change management, about new ways of interacting with ERP through visualization, and about a different kind of collaborative relationship between vendors, resellers, and customers — one focused on knowledge management and the development of shared innovation capital.

The new kind of OMS that is needed to support this vision will tax the resources of the largest ERP vendors today and inevitably lead to the extinction of many tier 2/tier 3 ERP vendors who will have to go vertical/best of breed to survive. This future OMS will dig deep into its supporting infrastructure platform and mean that the choice of OMS will drive the IT platform rather than vice versa, which was so often the case in the past. A wider, deeper organizational footprint will inevitably increase vendor lock-in and demand even more resources for managing the organizational impact of implementing and upgrading the OMS.

Ventana Research believes that the morphing of ERP into a true organization management system has many implications both for vendors and customers of ERP. Vendors must adopt more of an organizational, development-centric knowledge management attitude towards the ongoing development of ERP. It’s an attitude that starts not with technology, but with a better understanding of where innovative organizations are going and what they need to get them there.

Current customers must try to engage their ERP vendor on a more collaborative basis, press less for functional enhancements to current product deliverables and more for clear roadmaps that show them how their ERP vendor will support their needs, and how that vendor will develop and execute on the innovative business models that “competing for the future” requires.

Stewart McKie is European Analyst Director at Ventana Research.

Ventana Research is the preeminent research and advisory services firm helping our clients maximize stakeholder value with Performance Management throughout their organizations. Putting research in a business and IT context we provide insight and education on the best practices, methodologies and technologies that enable our clients to leverage assets to understand, optimize, and align strategies and processes to meet their goals and objectives.