Is ERP as we know it dying?

With an ever-shrinking number of new deployments, ERP vendors needs to find a new way

ERP, which used to be the rage a decade ago, appears to have lost its mojo. SAP is dealing with a top-level management shakeup, and Oracle is focusing its efforts on integrating the newly acquired Sun Microsystems.

In the meantime, ERP has stalled. The market has hit a point where companies either already have ERP or aren't likely to get it at all. This leaves SAP and Oracle to try to wring profits out of support contracts as income from new ERP installations declines.

[ Take a look back at the story of ERP in 2009 and what to expect in 2010. | CIO.com's Thomas Wailgum agrees that the big ERP approach is dead. ]

What, then, does the future hold for ERP and for ERP providers like Oracle and SAP? Well, not many large ERP rollouts, for starters. "ERP is pretty mature on the high end," says Paul Hamerman, vice president of enterprise applications at Forrester Research. "There really isn't an alternative because it's a mission-critical suite."

Bud Mathaisel, COO at IT services firm Achievo and former CIO at Disney, Ford, and Solectron, also believes that high-end ERP rollouts have hit a wall. "I don't think ERP is dead, but what I do think is dead is very large-scale deployments of big ERP," he says. "There are very few companies left who can do a from-scratch buy from Oracle or SAP."

The competition, then, is for smaller customers, and the key may be SaaS (software as a service). "I think the battleground is in the hundred-million-dollar to billion-dollar space," says Hamerman. SaaS does need to evolve to have more extensibility in order to be able to serve large companies with ERP, but SaaS solutions will continue to grow in the middle section, Hamerman says.

Mathaisel also sees opportunities for ERP to become more modular. "Very often, organizations want to update a piece of their ERP without redoing the whole thing," he says, noting that sometimes businesses value a particular piece of ERP -- CRM, for example -- and want to keep that aspect updated. The fundamentals of how that company does business haven't changed, but it wants to keep its customer-facing software up to date.

"They aren't changing out their core ERP, but they're updating their CRM module," Mathaisel notes. "What SAP and Oracle would very much like to do is go after that new work as opposed to a customer of theirs buying a third-party piece of software and trying to bolt it on. Hence SAP Netweaver and Oracle Fusion: They don't want to get ripped out of the system if customers do a module upgrade."

Netweaver is SAP's technology platform that can be used for integration with other platforms or apps, while Fusion is Oracle's middleware portfolio that features hot-pluggable architecture, allowing users to integrate or better use third-party apps or systems.

"A lot of these installations are sticky in that the cost of replacement is prohibitive," agrees Hamerman. But he also notes current technology innovation, predicting that there will be competitors emerging with different business models like SaaS and cloud computing.

So there are ERP opportunities out there, and not just for Oracle and SAP. The era of the big-bang ERP rollout is on its way out, but companies still have a need for integrated, scalable apps and modular updates. There's still software to be sold or custom-built, and there's room for more competition. For now, it remains to be seen which companies will seize these opportunities.

This story, "Is ERP as we know it dying?," was originally published at InfoWorld.com. Read more of Pete Babb's Killer Apps blog at InfoWorld.com.

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