integration

Enterprise Odd Couple: Plex Systems Partners with Workday

Pre-Packaging 2-Tier ERP for Manufacturers

Last week at its annual PowerPlex user conference, Plex Systems announced Plex Connect, along with several new partnerships and packaged connections. The goal of this new open integration framework is to “make it easier for manufacturers to connect people, things and applications to the Plex Manufacturing Cloud.” One of these partnerships stands out as being somewhat unique in that it is forged with another Enterprise Resource Planning (ERP) solution provider… Workday.

At first glance these two might seem like the proverbial odd couple. As another ERP vendor, Workday would appear to be a competitor. But it is not, because Workday is not a solution that is focused on the needs of manufacturers. And companies that “make things” are the only targets for Plex Systems. So if Workday isn’t for manufacturers, why would any Plex customer be interested in connecting to it? Because typically corporate headquarters doesn’t make anything, but might have sophisticated accounting requirements to support global operations. This partnership is all about delivering a pre-packaged 2-tier ERP.

Making the Case for 2-Tier ERP

Operating across a distributed environment has become a way of life for a large percentage of manufacturers today, even smaller ones. In fact 77% of all manufacturers that participated in the 2015 Mint Jutras Enterprise Solution Study had more than one operating location served by ERP (Figure 1). And 67% operate as a multi-national company. Even those with annual revenues under $25 million average just over 2 operating locations and that average grows steadily as revenues grow. This means very few companies today are able to conduct business as a single monolithic corporation.

Each operating division will have operational needs and must then feed to corporate financials for consolidation and reporting.

Figure 1: Environments Are More Distributed and Remote

Plex WDAY Fig 1Source: Mint Jutras 2015 Enterprise Solution Study

Note In Figure 1 company size is determined by annual revenue.

  • Small: annual revenues under $25 million
  • Lower-Mid: $25 million to $250 million
  • Upper-Mid: $250 million to $1 billion
  • Large: revenues over $1 billion

In years gone by all the different operating locations depicted in Figure 1 were likely to be left on their own to evaluate, select and implement a solution to run their operations. However, that scenario is quite rare today. The vast majority (90%) has established corporate standards for enterprise applications (Figure 2).

Figure 2: Have you established corporate standards for enterprise solutions?

Plex WDAY Fig 2Source: Mint Jutras 2015 Enterprise Solution Study

But this doesn’t necessarily mean a single solution runs the whole enterprise. Very often the ERP solution installed at corporate was selected for its ability to report and consolidate across multiple divisions. Very often these corporate accounting solutions (like Workday) don’t have the necessary functionality to run the operations of its divisions, especially if those divisions are manufacturing sites. In these cases, the standard solution for these manufacturing operations is a different solution – one like the Plex Manufacturing Cloud. Hence…

The Emergence of 2-tier ERP

In fact this 2-tier standard has become quite commonplace. Of those that have established corporate standards, less than half (47%) uses a single standard where all units, including corporate headquarters, use the same solution (Figure 3). At the same time, 31% have established a 2-tier standard and another 22% have a multi-tier standard. This latter category is most typical in a diversified corporation where you might see different types of businesses at the divisional level – you might have distribution warehouses or sales and service locations in addition to manufacturing sites.

Figure 3: Is this a single, two or multi-tier standard?

Plex WDAY Fig 3Source: Mint Jutras 2015 Enterprise Solution Study

It is this middle 31% that is targeted by the Plex Systems/Workday alliance, although it might work equally well in the multi-tier scenario. In fact if the non-manufacturing sites are sales and service operations, Workday itself might be the chosen standard for those divisions, eliminating the need for more than two different ERP solutions.

Plex Systems acknowledges that its solution is not the best for non-manufacturers. In fact Plex makes that point in its bold move to implement Workday for its own operations. The initial knee-jerk reaction might be, “What? They don’t sip their own champagne?” (An analogy I much prefer to eating one’s own dog food!) But while Plex knows and serves manufacturing very well, it isn’t a manufacturer. It makes software. While software companies that deliver on-premise solutions might burn CD’s, package them with documentation and ship a physical product to a customer, as a pure cloud provider, Plex sells software only as a service. The accounting for software, services and subscriptions is very different than accounting for shipping and delivering a physical product. But at the same time, this decision also underscores the fact that Plex is not afraid to make the right business decision in managing its own business.

But getting back to the 2-tier scenario, in the past we have seen solutions from SAP and Oracle dominate the corporate scene. Yet solutions like Workday, born in the cloud, are starting to chip away at the dominance of these two major players. And an alliance like this will only serve to accelerate this erosion. Very often a decision for SAP and Oracle might have been influenced by the efforts involved in integrating and rolling up financials from the distributed sites. While these have typically not been “out of the box” in the past, popular sentiment is that if you go with one of these “giants,” you will likely find systems integrators and other service partners who have done it before. That means they have a lot of experience with SAP and Oracle. You still pay for the connection, but you are at least dealing with a higher level of expertise.

With pre-packaged connectors, the need for this prior experience goes away and the expense of forging the connection drops dramatically.

Impact on Roadmap

So after hearing about this and other partnerships (with Salesforce and DemandCaster) the first question I posed to Plex was regarding the impact these might have on their own road maps. In terms of Workday, my specific concern was over enhancements planned to make its ERP more “global.”

Plex already has customers running the Plex Manufacturing Cloud from more than 20 countries, but it has let its customers essentially “pull” them into those countries and doesn’t necessarily support all the localizations and legislative regulations required in each… or all the complexities of growing multi-national companies. About a year ago Plex Enterprise Edition made its debut at PowerPlex 2014 along with an aggressive roadmap to support complex, global, multi-plant manufacturing organizations with multi-entity financial and supply chain management requirements.

In answer to my question, Plex has assured me none of these partnerships will result in taking planned innovation off the table. It will continue to invest in these globalization efforts. Similarly, other solutions such as DemandCaster will not prevent Plex from developing its own forecasting / demand and supply planning software. The alliance with Adaptive Insights will not prevent Plex from developing more robust financial planning and budgeting offerings. But I am thinking Plex doesn’t really need to compete against Salesforce for CRM.

 Conclusion

In the meantime and well into the future, Plex Connect should indeed make it easier for manufacturers to connect people, things and applications to the Plex Manufacturing Cloud. And in today’s connected, digital economy, isn’t that what it’s all about?

A Side Note: Is Workday ERP?

In the past I have posed the question about Workday: Is it ERP? Does it Matter? Many refer to Workday as ERP, but by my definition (an integrated suite of modules that provides the operational and transactional system of record of a business) an integrated finance and accounting solution that does not manage the “order” falls a bit short, But it does manage a contract, which for “talent intensive organizations” including software and Internet service companies like Plex) is equally, if not more important. Feel free to read my full analysis in the highlighted link above but for purposes of our discussion here in terms of 2-tier ERP, I am comfortable in referring to Workday as ERP.

Tagged , , , , , , , , , , , , , ,

Thoughts From NetSuite’s SuiteWorld: What’s wrong with calling it ERP and CRM?

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

Netsuite fig 1Source: 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.

Tagged , , , , , , , , , , , , , , ,

What’s New in the Annual Mint Jutras ERP Survey

I am excited to be preparing to launch my annual 2014 ERP survey. This will be my 8th and I’ve learned a lot through the years about how to ask the questions and how to best analyze the results. Since founding Mint Jutras in 2011 I have gradually shifted the timing of the survey, so that now (and in the future) it will be launched early in January, and I will use and reference the data throughout the year. As most of you know, I collect a massive amount of data. I try to be consistent with many of the questions from one survey to the next in order to make legitimate year over year comparisons, watching prior trends and spotting new ones. But each year I remove some questions that didn’t produce much insight (that’s how I learn) or that really don’t change much in one year. I do that to make room for something new.

It will be interesting to continue to watch trends, particularly around:

  • Buying cycles: Last year the percentage planning to purchase a new ERP within the next three years more than doubled from 24% to 47%, with another 15% undecided.
  • Deployment preferences: In the 18 months between the 2011 and 2013 surveys, the percentage of companies that would consider a traditional on-premise deployment dropped from 56% to 27%. Preference for both SaaS and hosted models increased.
  • ERP is reaching more users: On average 50% of employees actually use ERP today, including more executives. All executives have access to and regularly use ERP in 47% of companies, a far cry from just a few short years ago. We suspect the growing use of mobile devices has been and will continue to be a game-changer here.
  • Results measured since deploying ERP rose considerably with improvement percentages rising from the 5-7% range to double digits. These are improvements like cost reductions and improvements in on-time delivery, customer retention and inventory accuracy. “World Class” ERP implementations produced results in the 20-24% range. Was this an aberration last year or is new technology fostering better results?

What’s New This Year?

But what I am even more excited about is our new approach to capturing information about how the full spectrum of business applications, with ERP at the core, are implemented. Back when I started benchmarking ERP in 2006, I set out to quantify its usage. My first five annual surveys were done while I was at the Aberdeen Group where I came up with a formula for determining the percentage of ERP that was actually used. When I founded Mint Jutras I used what I had learned in those five years and modified that formula in order to get what I felt was a much more accurate result. But after eight years of this type of measurement, not only has this become old news, it is also harder to get an accurate read.

As I have been saying for several years now, the footprint of ERP has grown to the extent that it is becoming more and more difficult to determine where ERP ends and other applications begin. That is not only the case when covering, writing and talking about ERP, particularly as integration capabilities have improved, but for users as well. In prior blog posts this year I have discussed the relative advantages and disadvantages of “tightly integrated” versus “loosely coupled” applications. But this distinction is not intuitively obvious to the typical ERP user that takes our survey, particularly since typically less than 40% of respondents are in IT. Most are business users and may not have intimate knowledge of the purchase or the architecture of the product itself. They simply use ERP to run their businesses. And of course, that is primarily what we benchmark.

Modules versus Extensions: No longer the right question

In prior surveys I distinguished between ERP “modules” and “extensions” to ERP – those separate applications that might surround and complement it. I asked which modules were implemented (fully or partially) and then asked (separately) which additional applications were implemented. But as the footprint of ERP has grown, the overlap between these two lists also grew. While having both for any particular function might happen occasionally (e.g. a manufacturer might use supply chain planning functions of their ERP and also complement that with a separate “best of breed” solution), it would be the exception and not the norm. And yet, the number of instances where survey responses indicated they had both a module and an extension for the same function began to grow, casting a shadow of doubt on the validity of the responses. That told me it was getting too hard for the survey participants to answer the questions.

So this year I am changing it up with a different purpose in mind. This year, we will

  • Determine current state of implementations with a single list of functions, including traditional core functions of ERP (e.g. general ledger, accounts payable, accounts receivable, inventory control, order management, purchasing, etc.) and more advanced or “edge” functions (e.g. warehouse management, cash flow planning, BI and analytics, employee expense reporting, supplier collaboration, etc.) that might be a module or a separate application. The survey respondent will indicate whether it is (perceived as) part of ERP or not and, if separate, the level of integration.
  • Ask “what if?” Maybe this current state came about because of limited functionality and technology at the time of purchase. If the respondent were making the same decisions today, how would they go about it?
  • Ask “What next?” Given the state of their current implementation, what are most likely next steps? Add new components? Trade it all in for newer technology? Replace certain embedded functions? Eliminate separate applications now that ERP does more?
  • Have them choose up to five areas they are most likely to invest in next.

While this will tell us a lot, we’ll also drill a little deeper into plans for two areas, which happen to be among the hottest categories on the market today:

  • Human Capital Management (is it a fluke the big ERP vendors are buying these applications?)
  • Business Intelligence and Analytics (Is it time to take these tools out of the hands of IT and put them in the hands of the business user?)

We have also added a couple “Mobility” questions, along with one that will determine just how “usable” ERP data is.

If you are an ERP user, look for a link to the survey in the beginning of the year. We welcome your response.

If you are an ERP solution provider and think

  • The data we collect will be useful to you in making product roadmap or go-to-market decisions
  • Mint Jutras might be able to develop some good educational content for you with our distinctive “call to action”
  • You might like to benchmark your customers against our World Class

Please shoot me a message or contact Lisa Lincoln (lisa@mintjutras.com)

Lisa and I both wish everyone health and prosperity in the coming year!

Best Independent ERP Blog

Best Independent ERP Blog

 

Tagged , , , , , , , , , , , , , , , , ,

ERP, The Next Generation: The Final Frontier? Part 3

This is the third post of a series on Next Generation ERP. If you missed the first two in the series, take a moment and catch up with Part 1 and Part 2. You can find them on “Recent Posts” to the right.

As you recall from the previous posts, one of the hallmarks of “next generation” ERP is the ability to customize without customizations. Sound like a contradiction? Not really.

Customization versus Configuration and Tailoring

Different roles in the organization require different views. And different individuals may require unique views. And what organization today doesn’t think it isn’t unique in some way? With traditional ERP based on older technology this used to mean customization.

Customization also used to mean mucking around in source code, which builds barriers to moving forward with updates and upgrades. That was because in the past all the logic was “programmed” into that source code. This made business applications like ERP rigid and inflexible. Sure, there were always some configuration options, but those options were constrained by the logic embedded in the source code.

But next generation ERP is built in layers that are removed from the source code. First and foremost there will be a user interface layer. By removing this from the source code, you can easily tailor what the users see, and how they see it, without ever touching the underlying code. This is also how translations are much more easily delivered these days, allowing different users to interface with ERP in different languages.

This means tailoring the look and feel is easy. It also means that configuration (versus customization) does not require deep technical skills and is carried forward as the software is enhanced.

In addition, there might also be a set of business rules that are created and maintained. These rules might be used to determine behavior of a function or to configure next steps in a workflow. Business rules might define different thresholds for approval (e.g. all purchase orders require approval but those over a certain value require an extra step in the approval process).

These business rules might also be used to trigger alerts, notifying managers when events occur (e.g. a big order comes in) or when they fail to occur (a scheduled delivery date is missed).

To better distinguish between configuration and customization, Mint Jutras posed the question to ERP survey participants, “What level of customization do you believe you need?” Respondents were allowed to select any or all of the options presented. Their responses are shown in Figure 2.

Figure 2: What level of customization do you believe you need?

Figure 3Source: Mint Jutras 2013 ERP Solution Study

With a next generation ERP, it is highly unlikely that any of these requirements, with the possible exception of “custom logic is required” would require customization rather than configuration. And if an external rules engine is available, custom logic might also be “configured” as well.

 Integration and Innovation

We include integration capabilities and new ways of delivering innovation as a single topic here because the technology used to deliver both are likely to be similar, if not identical. In this context, you will hear two terms bandied about: services and objects, both of which can be shared. We should also throw a third term in there: components.

Before getting into how next generation ERP delivers integration and innovation, let’s first recap how traditional ERP originally worked. Mint Jutras defines ERP as an integrated suite of modules that forms the transactional system of record of a business. This is a rudimentary definition because today ERP is likely to do much more than this, but it will serve us well in drawing a contrast between traditional and next generation ERP.

Traditional ERP was developed as a tightly integrated set of modules, with only one of everything, including master files and maintenance functions. Even though the order management and the accounts receivable modules both needed a customer master, there was only one and it was shared by both. Purchasing and accounts payable shared a supplier master file. Purchasing, shop floor control, engineering and inventory management all shared a common part master file.

Not only do all modules of an ERP solution share a common database, but all are developed using the same tools and technology and they all move forward in lock step. This eliminates data redundancy and any need for separate integration efforts. But it also means purchasing can’t move forward until order management, shop floor control and inventory management modules are ready to move. It takes massive efforts of coordination by the vendor to make sure all the pieces of the puzzle more forward together. And it takes similarly massive efforts of coordination for all departments within their customers’ organizations to take those next steps altogether.

But what if a supplier (or, even worse, a customer) demands that your enterprise change the way you conduct business with them? What if your current solution can’t support that new way of doing business? Maybe you need to upgrade, enhance or even swap out the purchasing (or order management) module for a new solution that does. If purchasing (or order management) was a separate application you could, although that would most likely require additional effort (and cost) to integrate that separate application with ERP. And when you make a change, the integration would likely require change as well.

What if, instead, you could take that tightly integrated purchasing module of ERP and loosely couple it? That way, if you wanted to replace it you would just have to uncouple it and swap in a new one – sort of like uncoupling one of the cars on a train? It just takes a standard coupling, right? Of course it is a little more complicated than that, but that’s the general idea.

Instead of referencing supplier and item master files directly, a next generation ERP will access a standard model of a supplier or an item (a business “object”). It might have its own standard or it might use an industry standard (like OAGIS). Of course a different supplier record (being swapped in) might not be identical to the master but think of the object as sort of a Rosetta stone for supplier information. If you can map to all the elements of the object, you can map to what ERP needs. This provides a leg up when it comes to integration with other internal applications as well as interoperating with those of customers and suppliers. Point to point integration methods are replaced with a hub and spoke approach. By connecting to the hub, you can “speak” with all the different spokes.

And instead of inserting lines of code directly into the purchasing module of its ERP to maintain the supplier master file, next generation ERP might call upon a standard “service” for file maintenance or for adding a new purchase order or any number of different functions. Need to upgrade or add new functionality, simply swap out the old “service” for the new. You might also view these services as external components. Again, this is an oversimplification, but conceptually describes how next generation ERP can effectively deliver new, targeted innovation without forcing all departments served by ERP to march forward together.

It is also how acquisitive ERP vendors can deliver more innovation to broader installed customer bases. The ERP market has been steadily consolidating for the past two decades. Many ERP vendors have grown through acquisition using one of two approaches, or combining the two:

  • Some have acquired market share by buying other ERP vendors resulting in larger development staffs, but also requiring them to support (and develop?) multiple product lines.
  • Others have expanded the breadth of their offering by acquiring complementary solutions. While this approach allows them to potentially grab more share of their customers’ wallet, the acquired products may or may not be fully and seamlessly integrated with their ERP offering(s).

Some vendors will have combined both approaches for growth. Using next generation “services” and “object orientation” provides more seamless integration and also allows them to develop code once and deliver across different ERP product lines.

Even if the vendor in question has not grown by acquisition, this approach also allows delivery of more innovation with less disruption to the customer. The connection will be the strongest when ERP and these components share a common platform of technology.

Tagged , , , , , ,