Perhaps you’ve heard me ask the question, “Is it ERP?” about various solutions on the market. Maybe you were thinking, “Does it matter?” The answer to that question is, “Yes and no.” “No,” in that ERP, like any software category, is just that. It’s a category, a label and you shouldn’t read too much into that. “Yes,” in that the category is often misused and maligned.
While the acronym itself (short for enterprise resource planning) can be somewhat misleading, I have always been very clear on my definition of ERP:
ERP is an integrated suite of modules that form the operational and transactional system of record of the business.
The rest of the world doesn’t see it quite this clearly. Of course my definition is intentionally quite broad, but it needs to be simply because the operational and transactional needs will vary quite significantly depending on the very nature of the business. You can’t run a service business like a manufacturing or distribution business. Retailers, government and non-profits all have their own unique requirements.
This situation is also clearly exasperated by the fact that the footprint of ERP has grown to the point where it is getting more and more difficult to determine where ERP ends and other applications begin. Functions like performance management, talent and human capital management, etc, that used to sit squarely outside of ERP, today might sit either inside or outside that boundary. While operational accounting has long been a core competency of ERP, more robust financial management can be an integral part of ERP, or a stand-alone solution. Likewise, the footprint of solutions that have traditionally been marketed as financial and accounting solutions have expanded as well. No wonder there is so much confusion out there.
As a result, I thought it would be a good idea this year to see what people actually think they are using to run their businesses. While I have been conducting an annual ERP survey since 2006, much of the data I collect is relevant to other solution providers as well, particularly those that focus primarily on finance and accounting, with perhaps some project management and/or human resource management included. So this year I changed the name of the study to the Mint Jutras Enterprise Solution Study and added a new question at the very beginning.
Question: Which of the following best describes the software you use to manage your business?
- Primarily enterprise level finance and accounting solutions (might include project management and/or human capital management)
- Integrated enterprise level finance and accounting solutions supplemented with other operational applications (e.g. inventory, warehouse management, etc.)
- An integrated suite of modules that provides a full system of record of our business (often referred to as ERP)
- Desktop solutions such as Quicken, QuickBooks, Peachtree, etc.
- Mostly spreadsheets and/or some low-cost or free tools (Google apps, Zoho, etc.)
- Don’t Know
While data collection is still underway, we have collected almost 300 responses thus far and the results are quite interesting.
Note that participants checking spreadsheets and “Don’t Know” were disqualified and therefore will not be represented in any results. While those running desktop solutions qualified, only 1 participant checked this option and therefore I will only include the first three listed above in our discussion here.
During the course of the survey, participants are asked to check off all the different accounting/ERP solutions they have implemented across their entire enterprises and then asked to select one of those and answer implementation and performance questions for that specific solution. While 84% of the participants selected a solution that is clearly marketed as ERP, only 33% of this segment selected the third option above, which is reflective of the Mint Jutras definition of ERP. So they have purchased an ERP solution, but by my definition, they aren’t running ERP.
The remaining 16% selected solutions that are generally marketed as finance and accounting solutions. And yet 21% of these participants described the solution they were running as an integrated suite that provides a complete system of record of their business (i.e. ERP). So it would appear the majority of those running full ERP solutions are not making the most of what they have. And at least one in five of those running solutions primarily marketed as accounting solutions seem to have all they need to run their businesses. The full breakdown of responses is summarized in Figure 1.
Figure 1: What runs your business?
These (somewhat surprising) results caused me to dive a little deeper, looking for, if not an explanation, at least a pattern. This early sample represented a pretty diverse group with the largest representation from manufacturing (41%) and service related businesses (36%). Given ERP evolved from MRP (material requirements planning), one would expect a higher adoption rate and more mature ERP implementations in manufacturers. While very few manufacturers run the solutions marketed primarily as finance and accounting solutions, 41% indicated the software running the business was primarily a finance and accounting solution. Another 26% had integrated finance and accounting solutions supplemented with other operational solutions such as inventory and warehouse management, presumably purchased from another vendor or a partner of their ERP solution provider. Again, only 33% described their implementation as full ERP. So no, manufacturers are not ahead of the pack.
I also looked at individual solution providers where I had a sample of at least 20 responses for smaller vendors or 40+ for larger ones. What segments were most likely to be running an integrated suite that provides a full system of record? The answer: Those running solutions that specifically target small to mid-size businesses. Does this mean small and mid-size businesses were more likely to describe what they were running as ERP? Not necessarily. It depends a lot on the solution provider and the solution itself.
Sixty-eight percent (68%) of those running Aptean’s solutions and 67% of those running SAP Business One described what they were running as ERP, per the definition above. Those running Acumatica’s cloud-based solution were also more likely to do so at 55%. And yet those running any of the four Microsoft Dynamics ERP solutions (AX, NAV, GP, SL), all of which target small to midsize enterprises (SMEs), were less likely, with only 28% indicating they were running a full ERP. Instead, they were more likely to report running integrated enterprise level finance and accounting solutions supplemented with other operational applications. My guess is that the partners that sold them the Dynamics solution (note: all Dynamics solutions are sold exclusively through partners) provide these other operational applications. Yet clearly these add-on’s are not so fully embedded and seamlessly integrated that they appear to simply be part of the ERP solution.
This is in stark contrast to solutions sold by Intacct partners, where I have noted previously that it is nearly impossible to distinguish where Intacct ends and the partner solution begins. As a result, 23% of Intacct customers indicated they were running an integrated suite that provides a full system of record, even though Intacct doesn’t portray its solution as ERP. It is one of those financial and accounting solution providers.
Another factor at play here is the whole concept of 2-tier ERP implementations. A full 85% of our survey respondents operate in more than one location and 69% are multi-national enterprises. This lends itself to the scenario where each operating location (division, subsidiary, business unit, etc.) may be run as a business all on its own. In fact if these units are in different countries they are also separate legal entities, requiring their own P&Ls. So you might have one system running at corporate headquarters (HQ) and other systems running the divisions.
The requirements at corporate HQ are largely financial, particularly if all orders are placed and fulfilled at the divisional level. This contributes to a larger percentage of respondents only running financials.
In days gone by these operating units might have been left to their own devices to find a solution to help them run their individual operations. Those days are long gone though. Today, 96% of our survey participants with multiple locations have established corporate standards and 64% of the time these are multi-tier standards, meaning a different ERP is used at the divisional level than at corporate. But even with a corporate financial solution in place, divisions still need some sort of finance and accounting in order to roll up to corporate. You can push the corporate financials down to the divisional level and then supplement them with other operational solutions. Or you can implement a full ERP at the divisional level and then integrate the divisional ERP with corporate financials.
This alone could be a very good reason why SAP Business One customers are more likely to be running a fully integrated suite. Of course if they are truly a small stand-alone business, they need a complete solution and probably don’t have the budget to be looking for disparate solutions that need to be integrated. Even if they are part of a large corporate enterprise, there is a pretty good chance corporate is running some version of SAP ERP. Because SAP Business One is pre-integrated with SAP ERP, the division has an integrated suite of modules providing a full system of record of the division’s business, that also happens to roll up to corporate financials.
With this as a likely scenario, you might think that the vast majority of SAP ERP customers are simply running integrated financials. They are not. Only 19% reported running primarily enterprise level finance and accounting, while 29% reported running integrated financials and other operational applications and a (relatively) impressive 52% reported running full ERP. Many assume SAP, being the 800-pound gorilla and therefore open to attack, is so complex and hard to implement that many never get beyond the basics of accounting. Yet in comparison to others, it is actually more likely to provide that full system of record.
This is not the case with Oracle, the other giant in the ERP industry. Almost half (46%) of Oracle users participating in the survey characterize their implementations as primarily accounting and only 28% describe them as ERP.
So while I would like to conclude that I found a distinct and recognizable pattern in all this data, the bottom line is that implementations vary quite significantly, particularly in comparing different solution providers. I am excited to have the beginnings of this new and extensive data set and look forward to sharing other insights as we move through the data collection and analysis phases.
Solution providers interested in collecting data from your own installed bases, feel free to contact me directly at email@example.com. There is still time but the window of opportunity will be closing soon!