Roll Over, ERP

E-business favors best of breed, not monolithic erp solutions

“The reign is over!” declared Bruce Richardson, senior vice president with AMR Research. “SAP used to be like Mohammed Ali in his prime. Now it’s like a pudgy Mike Tyson, and everyone’s saying, ‘I can take him.’” So convinced was his audience at AMR’s Spring Executive Conference, Richardson was able to lead a rather wistful chant: “Classic ERP is dead; classic ERP is dead.”

Note his modifier: classic. SAP, with its R/3 System, not only defined but dominated the classic enterprise resource planning (ERP) market, which, Richardson observed, opened in 1992 and closed precisely on December 31, 1999. The goal of classic ERP systems was to convince customers that for the sake of cost and business process efficiency, it was more sensible to buy rather than build core applications to manage financials, human resources, and some aspects of manufacturing, procurement, and fulfillment. With the specter of Y2K looming, classic ERP offered CIOs and business executives a forward-looking alternative to rewriting large chunks of ancient applications. Baan, Oracle, J.D. Edwards, and a range of other corporate application suite vendors also ran in the race, but SAP built a formidable market share, particularly at the top end.

Unfortunately, SAP’s concentrated brainpower has been unable to extend the company’s dominance beyond the “inflection point” that we are now living through. Web-enabling classic ERP applications is helpful for the installed base but not enough to command the attention of prospective customers, particularly among the fast-moving dot-coms. The Internet can’t be at the periphery of how corporate applications come together: it must be the backbone. As David Caruso, AMR vice president and general manager pointed out at the conference, ERP solutions no longer compete with ERP solutions. Instead, they bump against an emerging paradigm for how enterprise applications serve new business models: a paradigm that values collaboration, virtual asset management, customer focus, and a strong emphasis on creative supply-chain relationships. In Richardson’s view, our current inflection point is ushering in the age of independent trading exchanges (ITEs).

Although they don’t match up precisely, the ITE is AMR’s spin on what GartnerGroup calls “collaborative commerce.” Readers of this column know that this topic is a favorite, and is a fundamental part of the Intelligent Enterprise vision—or, as someone suggested to me at the conference, that of the “intelligent inter-enterprise.” One of the key concepts of ITE and c-commerce is that next-generation corporate applications must start by looking outward at partnerships with suppliers, customers, and even solutions providers. With the advent of e-business, IT has been in a mad dash, turning attention away from internal systems and toward the outside world. Needless to say, classic ERP solutions providers have been writhing in pain as they have watched what used to be their portions of IT spending go toward supply-chain management, e-procurement, and CRM providers.

The expression “ITE” brings to mind online B2B auctions, both public and private. However, these will represent only a specialized activity within a larger, Internet-based collaborative environment. Other exchanges will depend on deeper inter-enterprise integration and sharing of business processes, transactions, business intelligence, and customer knowledge. We’ll let AMR and GartnerGroup duke it out for who has the best buzzword, but both organizations share a common vision of an outward-looking, post-ERP era dominated by best-of-breed service providers, outsourced, rented, and hosted applications, and partnerships between “hub” organizations and their “spokes” of suppliers and customers.

For transaction-based corporate applications, the pendulum is swinging decidedly away from monolithic, single-provider systems and toward best-of-breed solutions. Obviously, when technology is evolving as rapidly as it is now, line-of-business managers want the latest toys and IT must reach for the cream of the crop. But the best-of-breed approach may stick this time: The continuing evolution of business models means that, in Caruso’s view, companies cannot afford to lock up their business processes in one system. A company needs flexibility; it needs an IT posture that allows business managers to refine the “recipe” and deploy it into new circumstances in time to capture market share.

Ash Heap of History?

Before we bid adieu to “classic” ERP, what are the chances that its standard-bearers will live on to dominate the collaborative world of ITEs? In Richardson’s view, it will be tough for the classic ERP players to retain their power. The sheer effort to update, upgrade, and then make backward-compatible new versions of enormously complex systems will demand much of their attention. SAP might have the best shot, despite continuous management turnover and delays in getting out key products to support customer relationship management (CRM) and Web-based applications. Baan was on life support when it was scooped up recently by Invensys. “We are saving this company from a serious financial meltdown,” said Allen Yurko, Invensys chief executive.

Throughout our industry’s history, the arrival of a dominant player with an overwhelming market share has signaled the final maturation of a market. Examples include Microsoft with personal computer operating systems and Oracle with database management software. Unfortunately, with that dominance comes the heavy baggage of supporting the existing infrastructure, even as things change around it. Microsoft, Oracle, IBM, and Intel (after all, Andy Grove coined the term) are among the few dominant players to survive inflection points, though none have come out unbloodied. Microsoft’s struggle to bridge its past, present, and future have earned it a special place in the hearts of Justice Department lawyers and Judge Jackson.

It is entirely possible that SAP, like the mythical Phoenix, could emerge from the “classic ERP” ashes to join this illustrious pantheon and live on to dominate another era. Like IBM with mainframes, few Global 2000 enterprises are going to “unplug” their R/3 applications without a strong, compelling alternative. SAP is beginning to enjoy some positive momentum in the supply chain management space with Advanced Planner and Optimizer. And over time, mySAP.com, backed by retooled and refocused technology for business intelligence, Web application server support, and vertical industry specialization, could develop into a preferred ITE platform.

However, most industry analysts are watching i2 Technologies, Siebel Systems, Broadvision, Ariba, CommerceOne, and a bunch of “wild cards” such as The Internet Capital Group. At the AMR event, i2 sure sounded like the heir apparent to the classic ERP crown, with Oracle not to be forgotten. But is the brave new world of c-commerce and ITEs really calling for the crowning of a new one-stop shop supplier? Probably not until the “e” disappears in front of “business.”