The Future of ERP: A Look at the Industry's Past and Where It's Headed
Last month Sage CEO Stephen Kelly announced that ERP is bad news — or at least implied as much when he proclaimed that the decades-old acronym carries an overwhelmingly negative connotation, and as a result his (primarily ERP) software company would be banishing the three letters from its vocabulary.
Despite this disclosure and a number of articles floating around the internet that tell readers otherwise, ERP is not dead — nor is it on the verge of extinction. In fact, a recent report estimates that the ERP industry will reach $41.69 billion by 2020. Not too shabby for a dying market.
If ERP is still alive and well, why do so many articles make claims about the industry’s imminent demise? The disparity between comments like Kelly’s and statistics revealing market growth can be traced back to the industry’s stalemate on innovation — an obstacle only recently surmounted by newer companies looking to revolutionize ERP. Let’s dive into why industry experts have declared ERP dead, what’s actually going on in the market and where the future of ERP is headed.
What’s Wrong with ERP?
What IS wrong with the ERP industry? It’s a valid question, and one with many factors contributing to the answer. For starters, a large number of ERP platforms have become outdated and stagnant, ignoring innovative technologies while continuing to charge a premium for clunky, time-intensive software.
Now, it’s not entirely unreasonable to see why many ERP vendors haven’t adapted new technology at the rate of other software segments, as the systems are much more complicated and contain vast amounts of important data. Clients (especially those using on-premise iterations) who have invested considerable time, money and personnel resources into their ERP solutions simply aren’t interested in starting over with an upgraded version that may showcase new technology but requires data transfer, re-installment and setup.
ERP systems have also deterred or frustrated users by their cost and lack of flexibility. Specifically:
- A high upfront investment can include costs for the base platform, additional modules, implementation, training, supplementary users and customization.
- Altering systems to meet changes in the business model or processes can be incredibly difficult.
- Potential restrictions on integration with existing platforms create data silos and increase the probability of errors.
- Many solutions aren’t designed to scale as a company experiences growth.
Although a must for many businesses in need of comprehensive operational oversight, ERP models have for many years included numerous limitations that cause users to view them as an unavoidable pain in the you-know-what.
The Current ERP Landscape
Luckily, a few key elements are coming together to shift the landscape of the ERP industry, led by a technology already well-utilized across other segments: the cloud. A 2014 Gartner survey on cloud ERP adoption rates revealed that 45 percent of organizations are expecting to migrate within the next 5 years. And that’s not even considering the businesses looking toward two-tier or hybrid strategies, which can boost scalability without requiring a total system overhaul.
Though NetSuite has been offering cloud ERP for years, they’ve been among few vendors to do so. Yet now, the tables are turning as choices for data hosting proliferate and as statistics prove that cloud options are secure, efficient and cost-effective. SaaS-based companies like FinancialForce, Plex and Acumatica are all shaking up the ERP industry with lighter, more versatile platforms designed with a much broader audience in mind.
Cloud and other innovative ERP vendors are attracting smaller organizations interested in their ease of use, scalability, lower upfront costs and quick adoption. Newer ERP solutions enable users of all kinds to benefit from a platform that oversees operational activities, automates tasks and analyzes data without blowing the budget or taking months to implement.
3 Factors that Mark the Future of ERP
In order for the ERP market to maintain growth in the long term, more vendors and customers need to jump on board with the FinancialForces and NetSuites of the industry. Both market leaders and newer players alike must recognize the importance of shifting priorities to address changes not only in the ERP segment, but the entire software industry.
While giants like Oracle, Epicor and others are expanding their offerings to improve versatility, great strides still remain for the ERP industry to make. Below, we outline three of the top considerations ERP vendors should keep in mind when evaluating the longevity of their solutions.
By its very definition, enterprise resource planning is a robust and complex software. Yet too much complexity can be overwhelming and off-putting to potential and current users.
Regardless of their size, businesses need a platform that performs all vital workflows and offers the right tool set to manage daily operations without sacrificing clarity. Today’s ERP vendors must be able to balance simplicity with functionality — offering not only a desirable assortment of features, but presenting them in an easily operable interface that emphasizes usability.
Modern businesses require software that can grow in conjunction with the company and accommodate intricate operations and bustling employees. In short, they need flexibility.
ERP vendors must build their platforms around adaptability — not attempt to repurpose an already clunky solution — allowing the system to easily scale up as the company grows or needs expand. In addition, mobile versions and mobile accessibility are also proving vital to the modern enterprise, free users from their desktops and enabling them to access the system anywhere, at their convenience.
Innovation breeds stronger, more powerful tools that continue to optimize how intelligently a software solution works. Embracing innovation will become an essential component for vendors looking to retain relevance in an ever-evolving market space where the next big thing could be just a few weeks or months away.
As new technologies and advances in software occur, ERP vendors need to be cognizant of how these developments can positively impact their users. In the case of cloud ERP, virtual updates make it easier than ever to advance capabilities without significantly impeding daily use (assuming the advancements have been properly tested).
Innovation, flexibility and the proper usability-to-functionality ratio may not be the only factors for ERP vendors to consider, but ignoring their growing significance within the segment will certainly be at the vendor’s peril. As the past few years have proven, the vendors most likely to continue rising are those working to keep up with the progression of the software industry as a whole — and working to return the ERP acronym to its previous glory as the great, all-powerful business tool it once was.
Catch up on all of our industry insights and ERP news and trends by visiting the Business-Software.com blog. If you’re interested in researching your ERP options, be sure to check out our free Top 20 ERP Software Vendor Comparison Report.
[Photo courtesy of Flickr user Flazingo.]