It’s becoming harder and harder to talk about any vertical market asuy Matthews reports. if it were one entity, and manufacturing is no exception. All three consultants we spoke to recognise the need to drill down and address niches within vertical sectors like manufacturing, and the same task confronts ERP vendors.
No one size of ERP solution fits all any more, which is both a threat and a promise: on the one hand, there is the opportunity for vendors to develop more solutions, and make themselves indispensible within a field; on the other hand, with clients demanding more and more services to help them integrate varied solutions on varied platforms, the role of the resource planning provider is moving beyond the relatively simple world of software development and into the market for system integration. If it were not for vendors’ partnerships with consultancies, it is hard to see how they could manage this transition with any credibility.
David Truman, partner at Ernst & Young
“The market for ERP solutions within the manufacturing sector has grown rapidly over the last five to 10 years,” says Truman. The last year in particular has seen a dramatic surge in demand: “A lot of organisations are going ahead with implementations now that they would otherwise have done in 2001 or later.”
Truman argues that the common assumption that the market for ERP solutions is becoming saturated is a fallacy. “It’s true that most major firms have got ERP somewhere in their business, but not across all business units and not utilising the full range of functionality.”
Truman sees this functionality actively expanding from the traditional ERP heartland of back office systems through to the front office, driving market expansion. “ERP vendors are also expanding their offer for specific target markets. They are moving from the one size fits all, largely financial-led solutions through to technologies, tools and applications for particular needs, like manufacturing.”
The latter two trends are creating much demand for integration and development of solutions with other business processes, a role currently keeping the likes of Ernst & Young busy adding value. “We add in the knowledge of markets, like manufacturing, where we are very much a thought leader. Our expertise can make one and one add up to three.”
He says that ERP work extends beyond implementation. “There is a lot of optimisation to be done, to ensure that those who buy ERP solutions get all the benefits of their investment.
Another important trend, he says, is the moves of functionality, once the exclusive preserve of only the biggest multinationals, through to the mid-sized enterprise and even small firms. He believes, however, that the jury is still out on how such companies will benefit from taking on board products with much richer functionality than they are used to.
Truman recognises that as ERP vendors battle to boost their appeal to mid-sized firms, they will look for partnerships with a wide range of third parties. Value added resellers and system integrators as well as major management consultancies will be up for a piece of the action, provided they can prove to the vendors that they have competency in the technology and knowledge of particular markets.
Mary-Sue Rogers, partner with PwC’s technical solutions division
“Manufacturing ERP business is good right now,” says Rogers. “Whether it will still be good after 2000 is another matter,” she adds.
“There are two ERP markets now. One where enterprises are frantically trying to get everything right before 2000, and another where short-term solutions are being cobbled together with a view to starting again when the dust settles. There are some major companies in both sectors.”
The best chance of good ERP growth in the long term is a stable economy, and successfully introduced monetary union, says Rogers. “Let’s hope the press don’t talk us all into recession.”
Divergent requirements within markets are forcing ERP vendors to come up with increasingly tailored solutions, she says. “Lots of vendors are trying to get better in niches than the competition. We at PwC are getting better at offering expertise in particular areas.”
Like Truman, she feels that it is too early to judge the progress of major ERP vendors in the mid-market. “There are already lots of players successfully addressing that sector, like JBA. Bigger vendors are moving down for fairly transparent reasons – after all, there are only about 2,000 really big companies in the world.”
She argues that the approach that a second tier firm takes to resource planning is very different to that of a major one. She says that while PwC has a quite separate structure to look after first and second tier clients, many larger ERP vendors have not made an adequate distinction.
“They have not worked out pricing and how to sell in the mid market. They don’t have to worry too much now, because they are so busy addressing EMU and Y2K needs. But someone will come up with a unique second tier proposition soon, and everybody will be forced to follow their lead.”
Asked what manufacturing clients are most concerned about, Rogers replies “They just want to survive the next 18 months. People keep telling them to get on with e-commerce and so on, but really they are focused on getting through to better times in one piece.”
Tony Kelly, alliance partner manager, Cap Gemini UK
Cap Gemini is highly active in the ERP sector, according to Kelly, with partnerships with eight vendors – SAP, Oracle, Peoplesoft, Baan, SSA, Manugistics, IMI and I2. To make sense of a complex marketplace, Kelly says that Cap Gemini recognises the vertical areas of expertise of each of these vendors.
“They all play to their strengths, and we play to ours. Our clients expect us to have a point of view in a particular market, and to help them with a shortlist of who’s who. Our role is increasingly prescriptive: that’s what clients want.”
Kelly identifies a gulf between ERP vendors who, while claiming to back open systems, in reality would rather be single source technology backbones for their clients. But he believes that the introduction of a new tier of integration vendor is making it increasingly easy for enterprises to choose best of breed solutions from multiple vendors. “Best of breed is something that many manufacturers are after, but they won’t choose that strategy unless they can be assured of integration.”
He says that many firms are looking to ERP software to reach outwards, and that this too is militating against the choice of a single source.
The integration that makes best of breed possible is where consultancies like Cap Gemini come in, says Kelly. It works not only with clients and ERP vendors, but with new vendors of integration tools like Neon, Crossworld or Constellar. “Our role is expertise in business and technology that bolts the whole deal together.”
It’s been an up and down year for ERP vendors, says Kelly. “Most have had an upset or two, like a dramatic share crash. And to make them even more uncomfortable, nobody is sure yet how the market will hold up once Y2K has passed. The jury is most certainly still out on that one.”
Guy Matthews is a freelance journalist.
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