What’s Next For Enterprise Resource Planning (ERP)?
As a computer engineering student in the early 2000s in India, I remember when SAP was all the rage. In fact, such was the popularity of this ERP (Enterprise Resource Planning) product then, that it seemed it provided the sole option of making a career in the computer services industry. A lot of ERP’s popularity then can be attributed to the Y2K problem; companies used the disruption as an opportunity to adopt ERP like never before.
The ERP story had begun a decade before that, when Gartner coined the term as an extension of material requirements planning (MRP). Over the next two decades, ERP grew out of its manufacturing roots to encompass many other industries, and also disaggregated into tiers.
Tier 1 vendors sell ERP systems are typically those that are used by global corporations with annual revenues in excess of $1 billion. Such systems are more complex, provide greater functionality, need higher numbers of trained personnel and have higher cost of ownership. Tier 1 vendors are likely to offer global support to their clients. SAP, Oracle and Microsoft are considered Tier 1 vendors in the ERP space.
Tier 2 ERP vendors mainly serve mid-market businesses, with revenues from $50 million to $1 billion. Their products are of medium complexity and functionality, and have lower ownership costs than their Tier 1 counterparts. Often they are focused on individual industry verticals, whereas Tier 1 products are broad-based. Fujitsu, Epicor, Ramco and Sage Software are some Tier 2 ERP vendors.
Tier 3 vendors sell ERP systems that are designed for small companies that have annual revenues from $10 million to $50 million. Such systems have the least complexity and costs of ownership; at the same time, their broader functionality is also much lower. However, they often have greater focus on individual industry verticals. Expandable, NetSuite and Syspro are some examples of Tier 3 vendors.
So, what’s next for ERP?
One obvious direction is to the Cloud. In this highly informative article, John Schlemmer makes an eloquent case for Cloud ERP, stating that 45% of companies are already implementing or investigating this option.
Another direction, which is not necessarily exclusive to Cloud ERP, is consolidation. Many organizations which had adopted ERP earlier had found it necessary to implement multiple systems to address diverse needs. While this may have been optimal some years back, improved functionality today can allow consolidation. Also, the boundaries between the ERP tiers that I mentioned earlier have become increasingly porous, with many vendors providing services that overlap multiple tiers.
In a nutshell, it provides four reasons:
- Rolling up cost and revenue
- Risk management
- Economies of scale
- License and maintenance cost
Download it for free to get a detailed insight.
By Sourya Biswas