ERP Redux: Part II; The ERP Landscape
The global ERP market offers more flexibility than ever – for all kinds of organizations across “every” industry. Having recently completed a research project for a private equity firm exploring the ERP market we identified well over ~100 ERP application vendors. These numbers reflect the evolving definition of an ERP platform and a dynamic market with many new entrants catering to all segments. So, if you’re in search of a new solution there’s one out there that will likely meet your requirements. The challenge is deciding which one is best for your organization. This article will provide an overview of the ERP landscape and help you answer that question by providing a framework for selecting the ERP platform that best meets both your current and future needs – by examining the following factors:
The Market (what is ERP?)
Key Selection Criteria
1. The Market (What is ERP?): At the risk of dating myself, I remember the early 90s when Enterprise Resource Planning began to be broadly adopted by large multi-national manufacturing companies, and the term was formalized by Gartner. ERP was defined as an integrated suite of business applications sharing a common data model and database. Core ERP delivered capabilities to enable “end-to-end” business processes such as finance, procurement, inventory management, manufacturing, distribution and supply chain. A massive industry was born as thousands of organizations around the world spent billions of dollars to implement these systems. Over time, new vendors emerged to address functionality gaps in “legacy” ERP platforms and introduced an entire new market (i.e. HCM, CRM, Supply chain). Vendors began to develop solutions targeting other market segments and industry verticals, including; life sciences, high tech, retail, services, higher education, government, financial services etc. – no longer catering to large multi-national companies by offering products suited for all market segments from enterprise to medium to small business. The historical market leaders responded by going on an acquisition spree (i.e. SAP’s acquisition of SuccessFactors, Ariba, Concur) to round out their portfolios while also making significant investments to cloudify their solutions and modernize their technology stack (i.e. Oracle Cloud ERP). ERP systems once monolithic platforms have expanded to encompass master data management, business intelligence, CRM, Ecommerce and marketing automation with robust integrations and APIs. The “best of breed” vendors that specialized in HR, Sale Force Automation, Finance and other discreet business processes now offer solutions that span other functional areas and are now included in the ERP market. For example, Salesforce.com now offers Finance modules and is a relatively new entrant into the higher education vertical and Workday has expanded from HCM to include “end-to-end” financial . In addition, dozens of cloud native ERP application vendors have entered the market catering to the small to medium market segment by offering robust functionality at a fraction of the cost. The good news is that we as ERP consumers have a lot more choices and that vendors have made great strides in releasing modern technology platforms with a much-improved user experience, including mobile, social and analytics. ERP vendors have also put a much greater focus on simplifying implementation efforts with a goal of reducing timelines, cost and complexity. With this background in mind, let’s explore how to make an informed ERP choice.
2. Key Selection Criteria – what’s the right ERP solution for my organization? With the wide array of ERP options, it’s critical to use a structured framework to make your ERP selection – especially since your organization will likely have to live with this solution for ~10 years or more, and to demonstrate a well-defined and quantitative decision process to your leadership and board. Working with clients, we’ve identified the following key evaluation criteria which form the basis for an overall selection scorecard.
Solution and Functional Fit: How well does the software meet key requirements for each process area? How much “out of the box” configuration is included? Will the ERP solution enable standardization and control? How does the vendor protect data, manage access and meet other compliance requirements?
Industry Landscape and Benchmark: Does the vendor have a strong presence in your industry? Breadth and depth of industry knowledge with specific capabilities and future investment plans.
Technology Vision: Completeness of architecture vision with strong integration capabilities. Does the vendor have a robust cloud, mobile and analytics offering?
Overall Risk/Change: Level of operational disruption to your organization, especially if you are moving to a new platform (i.e. Oracle eBusiness to SAP). Magnitude of impact / change management required to implement the new platform.
Total Cost of Ownership: Includes software acquisition costs, implementation and 3 to 5-year operating costs.
These criteria may have different weighting depending on the most relevant factors for your organization.
3. Other Considerations: Several other important qualitative factors when selecting an ERP vendor include:
How will the prospective vendor mesh with your organization’s culture?
Is the vendor willing to partner and invest in the long-term success of your chosen ERP platform?
Does a strong eco-system of implementation and support partners exist?
And maybe most importantly, organizations should take a collaborative approach in their ERP selection process – engaging key stakeholders from the various business units in