There seemed to be lots of talk and a bit of controversy floating around NetSuite’s SuiteWorld conference this week about the future of ERP (enterprise resource planning), CRM (customer relationship management) and other TLAs (three letter acronyms). NetSuite itself is a provider of ERP, CRM and ecommerce. Yet CEO Zach Nelson opened this door by attacking other vendors that don’t have solutions with footprints quite as broad as NetSuite. Zach said Salesforce wasn’t CRM because it didn’t capture the customer order. WorkDay’s HCM and accounting applications aren’t ERP. Zach has been known to go on the attack before, so this wasn’t out of character, and to a certain extent I agree with him. Sales force automation (which is Salesforce.com’s claim to fame) is often referred to as CRM even though I would argue it is only a subset. And Workday’s solution doesn’t fit my definition of ERP. (To be fair, I also haven’t heard Workday call its solution ERP.)
However, some “influencers” in attendance also picked up on this theme. One went so far as to suggest ERP and CRM should go away as software categories. Another stated that “cloud ERP” is redefining what we mean by ERP.
I disagree on both counts.
Companies in search of solutions to run their businesses need a frame of reference, a starting point to define what it is they need. They can’t start with a search for vendors offering “something to run my business.” As loosely as ERP and CRM are often defined, they do accomplish that. And I also don’t believe ERP needs to be redefined, at least not the way I define it.
Too often industry analysts and other influencers over-complicate definitions, perhaps in an attempt to prove just how much the average businessperson needs them, or perhaps to prove how smart they are. I prefer to keep it simple. I define ERP as follows:
ERP is an integrated suite of modules that provides the operational and transactional system of record of the business.
Of course, today most ERP solutions do more than this, and I have been saying for years now that it is getting more and more difficult to tell where ERP ends and other applications begin. But this definition is timeless. It also implies ERP cannot be static. The way companies operate is changing and therefore ERP must also evolve to reflect new ways of transacting business. NetSuite has been responding to this challenge over the past few years, through its approach to omnichannel commerce and with several announcements this week including:
- A brand new, modernized, mobilized user experience (first available on Apple IOS, to be followed by Android)
- The unveiling of a “next-generation services resource planning (SRP)”, a unified cloud solution to meet the combined needs of project- and product-based businesses. The solution can be configured as a stand-alone SRP solution or combined with NetSuite’s ERP. It targets software, IT services, consulting, advertising and marketing services companies.
- A new SuiteGL, intended to “transform the general ledger from one size fits all into a custom business asset.” New capabilities are being developed to add
o New custom segments to the chart of accounts (example: to support fund accounting and advanced managerial reports)
o Custom lines (example: you might post additional journal entries based on the country in which the transaction originates)
o Custom transaction types (example: vendor billing accrual, employee expense report accrual, payroll journal, depreciation journal, statistical account entries)
- Mobilization of its newly acquired HCM solution: NetSuite TribeHR Mobile for iOS brings collaboration tools, enterprise search capability, time off management and employee recognition (kudos) to Apple iPhone, iPad and iPod Touch mobile devices.
- A new B2B Customer Center built on NetSuite’s SuiteCommerce platform providing
o A self-service customer portal
o Customization, billing and payments, account and product management capabilities, including lists for seasonal purchasing
o Responsive web design capabilities that can optimize sites for multiple devices
So NetSuite is in tune with the desire and need for business transformation, largely based on the new requirements of this digital age. But… back to the issue at hand.
What impact does the cloud have on this perceived need to redefine what we mean by ERP? Cloud does have an impact, but it is not so much changing what we mean by ERP as changing what we should expect from ERP, a subtle difference, but a very meaningful one. We still need to track inventory assets, record orders, deliver, invoice and collect payment. In a B2B environment, these end-to-end business processes (like order-to-cash and procure-to-pay) have traditionally spanned weeks or months. The cloud connects us and it might help us automate processes, compressing them to days, hours or even minutes. But we still need to keep that system of record. We still need ERP. We just need a better ERP.
I spent a lot of time evangelizing these new and better ERP solutions in 2013. I called them “next generation” ERP: providing better ways to engage with ERP, replacing invasive customization with configuration that is preserved from release to release, more innovation and better integration. Much of what NetSuite has done, and is still doing, is driven by the need for a modernized, technology-enabled ERP.
But what about CRM? Zach declared Salesforce wasn’t CRM because it didn’t manage the customer order. I will leave a formal definition of CRM to those that specialize in that category, but I would argue that the customer order doesn’t belong in CRM anyway. It belongs in ERP because it is a fundamental element of the system of record of the business. But does it really matter? Not when we’re talking about NetSuite’s solution, because ERP, CRM (and eCommerce) are all built as one system. And because it is all one system, everything works seamlessly together and there’s no redundancy of data. The end user doesn’t really know or care if it is a function of CRM or ERP, unless of course they only subscribe to one or the other and not both.
So yes, NetSuite certainly has a leg up on Salesforce in providing what CRM vendors traditionally promise: a 360o view of the customers. NetSuite can and Salesforce (or any CRM-only vendor) can’t. And that is because it is delivered all in one set of code: a fully integrated suite. If sales or support representatives need to see all outstanding quotes, shipped orders, open or paid invoices, they just go to NetSuite. They don’t need to worry about whether it is part of CRM or ERP.
Some analysts have started to call this “a platform.” While I would define “platform” differently, my definition really doesn’t matter. Whether you call it a platform, an integrated suite, or just extended ERP, I suppose it does strengthen the argument for making ERP and CRM go away. You don’t need ERP and CRM. You need this integrated platform. But now we’re just getting into semantics and we’re not really adding value to the conversation. For a prospect or customer buying ERP today, the real question is what are the boundaries of the solutions being considered and how much of the needed functionality does it provide?
The footprint of ERP has grown steadily over the past three decades. We’ve reached a point where the boundary of where ERP ends and other applications begin has become quite blurry. Those in search of solutions should strive to clearly understand these boundaries, which will vary from solution to solution. CRM is only one such complementary application now offered by ERP vendors. But not all CRM solutions offered by ERP vendors are developed and delivered like NetSuite’s solution. A NetSuite customer can subscribe to either of these as a stand-alone NetSuite application, but if you subscribe to both, they operate as a single tightly integrated solution. This is not the case with all solution providers. Just because you are buying both from a single vendor doesn’t guarantee the two (or more) applications have been designed and developed as a single integrated solution, particularly if the complementary solution has been acquired.
In the past an integrated module of ERP tended to provide lighter-weight functionality than that provided by separate, so-called “best-of-breed” applications. So there was a clear trade-off between specialized functionality, which came with the added cost and effort of integration. But the capabilities of those built-in ERP modules today often rival or even exceed the capabilities of stand-alone applications. And the connected cloud and other modern technologies have made integration easier. So the trade-off isn’t quite so clear.
We explored this a bit in our 2014 Mint Jutras ERP Solution Study, asking participants about preferences for a suite approach (like NetSuite’s ERP and CRM) or a more specialized solution (like NetSuite’s partnership with AutoDesk for PLM).
It is clear that while there is an overwhelming preference for an integrated solution, most will be cautious about sacrificing functional requirements for ease of integration or for the purposes of having either a single throat to choke or a single back to pat (Figure 1).
Figure 1: Preferences for a Full Suite
Source: Mint Jutras 2014 ERP Solution Study
This of course puts added pressure on software vendors like NetSuite to continue to innovate and expand their solutions. The easiest way to deliver a seamlessly integrated, expanded solution is to develop it internally, rather than to go shopping for additional features and functions (through acquisition or partnership). Those solution providers that exclusively deliver through a multi-tenant SaaS model will have an advantage in this regard because they maintain a single line of code. NetSuite, for example, delivers two releases a year.
Those that offer only licensed, on-premise solutions, or the same solution through the cloud and on-premise don’t have that luxury. Minimally they will have to maintain multiple releases to accommodate those customers that can’t or won’t upgrade. And very often they offer the software on different operating systems and different databases. Any combination of these increases their support and maintenance efforts exponentially and leaves fewer resources to apply to pure innovation. These vendors are more likely to deliver releases every 12 to 18 months.
Of course acquiring functionality (like NetSuite did with TribeHR for HCM) and even partnering (like NetSuite did with Autodesk for PLM) are options as well, providing the integration is seamless enough. NetSuite has proven that it is capable of delivering on all these different fronts.
While vendors and industry observers argue over what to call these solutions, most good business decision-makers tune out to these discussions. Most are more interested in solving business problems than in redefining what we call the solution. The labels we have today: ERP, CRM, PLM, HCM… are all fine as long as we continue to ask and expect more from them. I, for one, am more interested in helping those business leaders better understand the almost limitless possibilities for business transformation, than in coming up with the next new label – or even worse, the next new TLA.