The recession that altered the future of business software
If anything positive has come out of 18 months of economic and business chaos, it is that companies of every size, in every industry, in every country, have made a much needed and thorough reexamination of their ERP investments and strategies. (And some might add the word "finally.") "What's the true cost?" ask CEOs. "Does the benefit equal the investment?" query CFOs. "Are we getting the expected value from ERP systems?" demand line-of-business managers.
Of late, when those core constituents haven't been satisfied with the answers they've gotten in response from IT leaders, they've been brazen enough to raise once-heretical questions: What are the alternatives? Do we have to stick with SAP or Oracle, just because we always have? How about looking into software as a service? For instance, Siemens, the German electronics and engineering giant and long-time customer of SAP, created an uproar when details leaked that it was questioning its ERP maintenance and support service agreement. Though Siemens and SAP eventually hammered out a deal -- the details of which remain clouded -- the players and relationships involved in the dust-up made it a watershed event. If Siemens is challenging the status quo, then maybe you should too?
Change was already in the air. The global recession just accelerated it.
To Jon Reed, an independent analyst, SAP Mentor and blogger at JonERP.com, outdated pricing models (such as ERP maintenance agreements) and ERP systems' turtle's pace of innovation are going to be two critical areas for the vendor community in the near future. "I think the economy is a game-changer," he says. "Even when it returns, it will return in a way that will support different ERP business models than have been dominant in the past. Companies that can reinvent themselves -- with more flexibility around service offerings -- that's going to be key."
Make no mistake: Enterprise software vendors have recently felt more economic hardship and had to tolerate more customer objections than ever before in their histories. And for many, more pain lies in wait. "The big ERP vendors are going to get a big punch in the gut, and to some degree they've already gotten it. They've already gotten some body blows," Reed says. "How they respond is a really interesting question."