Where has ERP gone?

The case for the latter is rather well put by Dennis Keeling, CEO of BASDA, the Business and Accounting Software Developers Association.

?In my view, traditional ERP has obviously failed to deliver on its fundamental promise. This view is now quite widely shared,? he says. Keeling points out that several of the major vendors have been very hard hit. Baan has reported a series of severe losses. JD Edwards, he says, got into such a state that the founder, Ed McVaney had to be brought back to sort things out. Oracle claims it is doing well, but SAP reckons Oracle is playing games with the definition of its ERP suite sales and its RDBMS sales. Second tier vendors like JBA and SSA have got into real difficulties. Systems Union has been bought by Freecom. The list goes on and on.

?We knew for some time before Y2K that tsmahere was a lot of advance purchasing going on. Now that we have the millennium safely behind us, many people who had deferred upgrading their core systems are still not buying because they view the market as too confusing and too confused. This is causing pain to vendors and complicating our view of where things are going,? he notes.

The alternative view is that ERP, either in a new guise or completely transformed into something like collaborative e-business, has already begun to see substantial new growth. (See the box breakout on recent results for SAP, Oracle, PeopleSoft and JD Edwards, for details).

Peter Robertshaw, marketing director at SAP UK, for example, admits that the company had a quiet 1999, after three consecutive record years in 1996, 1997 and 1998, but he says that the present year has seen ?a very rapid bounce back?. He makes the point that SAP?s fourth quarter 1999, first quarter 2000 and second quarter 2000 figures have been its biggest ever.

Tony Kelly, alliances director UK, Cap Gemini Ernst & Young, offers a way of resolving the apparent contradiction between these two views of the future of ERP. He suggests that what is happening is that while the market is undoubtedly improving again, all the major vendors are redefining themselves away from traditional ERP.

?As it once was, ERP is now a historical reference, a ?90s thing whose time has gone,? he says. All the major players have turned their attention from inward looking, core business systems, to embrace extended enterprise applications like supply chain management, e-procurement and collaborative markets. ?Back-office ERP is now substantially in place in most blue chip corporations. The new value added systems investment by companies is all about customer relationship management, supply chain initiatives, and opening up core systems to the web. We saw a dearth of this kind of investment through 1999, because everyone battened down the hatches to get through the millennium. Now the brakes are off,? he says.

Alastair McGill, marketing director at PeopleSoft UK and Northern Europe, agrees with Kelly?s analysis. He argues that PeopleSoft has been steadily moving out of traditional ERP for at least the last few years. ?It wouldn?t be right for us to call ourselves an ERP vendor now. We are about so much more than that,? he says. Obviously, the purchase by PeopleSoft of CRM vendor Vantis (a distant second behind the CRM market leader, Siebel) underscores this claim. But so does the stake PeopleSoft has taken in marketplace software vendor CommerceOne.

However, one of the key questions going forward is whether the big ERP vendors will ultimately be successful in achieving a similar kind of dominance in the new world of extended enterprise applications. The first point to be made is that they have some formidable competitors out there in ?best of breed? vendors. Some of these vendors, one thinks particularly of Siebel, are also transforming themselves into full blown enterprise ?e-services? companies, rather than remaining as best of breed vendors.

A second, equally important point is that mainstream ERP, in the old style, had the advantage of leveraging very substantial sums of money out of corporates. It is not yet clear either that ?new age? extended enterprise services will generate sums of an equivalent size (given that they are layered on top of existing multi-million dollar ERP investments), or that if they do, these sums will necessarily go to born-again ERP vendors, instead of best of breed vendors.

It is perhaps worth noting that the coming struggle has largely to be fought in the applications software arena, rather than the services market. Kelly makes the point that all the top ERP vendors have limits on how much they can expand the consultancy services side of their business. ?When you have the huge reliance and partnering agreements that these companies have with the top consultancies, you obviously have difficulties having your cake and eating it,? he notes. Either you base yourself around partnering and alliances in the consultancy space or you don?t. The ERP vendors have done very well out of partnering with the top consultancy companies and no one wants to spoil that party.

PeopleSoft?s McGill points out that his company has a target of expanding its consultancy services business to the point where it is taking around 20%, but no more than that, of the available consultancy around PeopleSoft package implementations. Much of the growth in services, he says, will come from PeopleSoft looking for at least some representation on every project. ?We have the product expertise. Our partners have global management skills, business re-engineering and change management skills. It?s a good combination.?

SAP?s Robertshaw makes a similar point, except that SAP has a far more modest target figure, which will probably make it better loved by the consultants. ?We have only ever looked for between 5% and 7% of the consultancy market. However, instead of owning a few projects totally, we are now looking to be represented on a lot more projects,? he says. Partially, in SAP?s case, this is a defensive rather than a revenue-earning strategy, anyway. As Robertshaw notes, if there is a problem on an implementation it always tends to be seen as an SAP problem, regardless of who the lead integrator is. By having a representation on the project, SAP will be better placed to get a handle on any issues that arise.

Another often cited zone of struggle is the mid-tier market. Kelly points out that the mid-sized market remains an attractive?if problematic?hunting ground for the top players as well as for second-tier ERP vendors. (Problematic, since these players are not geared for low margin volume business, though the likes of SAP are certainly trying this, with a ?template?, pre-configured approach to mid-range installations). As Kelly notes, ?The ERP second tier players have been pushing at the underside of the big corporate market for some time now. It was inevitable that the big ERP vendors would start to push down to try to extend their market share in the mid market.?

The problem this gives to the second tier players is that they then have to defend their market investing heavily in adding much the same kinds of extended enterprise capabilities as the big players?without having the same resources to draw on.

As a consequence, these vendors often have to virtually bet the farm when they develop a ?next generation? product. Adrian McNay, managing director at ERP vendor Symix (a US based company with a presence in the UK since 1991), for example, points out that the company recently brought out its ?E-Syte? suite of products, e-customercentre, e-channelcentre, e-procurementcentre and e-supplychaincentre, at a very substantial R&D cost. However, its target market base, the small to medium sized enterprises (SMEs), are not exactly dashing to e-enable themselves, which leaves the company with a difficult period ahead recouping its outlay.

?Mid-range businesses generally take a more cautious approach. They like to let the big blue chips act as the early Christians,? he comments. The result is that Symix is still waiting for the upturn to take it out of the doldrums of the first few loss quarters in the company?s history. The figures for the latest quarter will be announced before this article is published, and McNay expects the result to show an upturn, even if the company doesn?t quite make it back to profit.

The R&D bite has been hard for the company but, as McNay observes, ?You?ve got to question the viability over the next 12 months of any player in the second tier who does not make a similar investment in ?next wave? applications.? Symix, he says, is determined to shed its ERP label. ?The market now demands that you show an ability to supply across the whole digital supply chain,? he says.

Colin Addison, e-business marketing manager at Oracle, reckons that one thing all the ERP vendors have going for them as they move to extended enterprise e-services, is the integration card. Transforming a business to be an e-business has a wide impact on a large number of issues. For everything to work well, and for the business to be able to fulfil its promises, everything relies on integration, he says. Products have to be web enabled but all elements of the solution have to work well together at the deepest level. If they don?t, the inevitable result is inefficiency and breakdowns somewhere in the chain between the customer?s expectations of deliver and the realities of the fulfilment process.

?There are now plenty of reports to prove that the best of breed solution is no longer appropriate for most companies. Stand alone tactical package solutions are failing, and they are failing precisely because of the costs associated with building and maintaining integration links between the stand alone systems and the company?s core business processes,? he argues.

Instead of going for whatever marginal benefits a stand alone solution may seem to possess over a module in a fully integrated offering, companies are realising that they need to focus on their medium term goals. ?They need to ask: what are my aspirations in terms of connected business practices? What technology deployment will get me there?? he says. Chasing ?nice to have? features in point solution products is the high road to an integration nightmare in the medium term.

PeopleSoft?s McGill agrees but still stresses the importance to a new age ERP vendor of well behaved, open systems that are capable of playing nicely with other people?s products. Open standards and open APIs are the name of the game in the present environment, he suggests. Deep integration is a winning message, but there are still loads of new point solutions appearing out there, and it is not exactly a wise strategy to try to shut corporates out from buying what they please, he claims.

Moreover, in a supply chain context, where participants all have different IT investment histories, no one package or application can dominate, so the ability to move data to and accept it from any system is critical.

The key according to McGill, lies in vendors rewriting their core ERP modules and developing their new modules using ?new wave? technologies like XML, for data interchange, and what PeopleSoft calls a zero client approach for data access. Zero client means no downloads of applets to the client in order to web enable the applications suite. Everything happens on the server. This means that users then have a free choice of what access technologies they use, be it a PC, a WAP mobile phone, a PDA with a GSM card or whatever.

PeopleSoft?s argument is that they are the first ERP vendor to come out with a true zero client technology, and that this will give them a cracking head start in the new, collaborative commerce marketplace. ?We?ve rewritten 108 applications and launched 59 new applications, all as pure Internet applications, all based on XML and HTML. We?ve completely moved away from two-tier client server architecture. It cost us half a billion dollars to do, representing some 27% of our turnover going on R&D for this project. It involves 14,800 re-architected panels that were client server panels and are now pure HTML panels,? he says. By contrast, McGill claims that Oracle?s e-suite relies on Java applet downloads to make the browser work (which he suggests is the wrong way to go in a world of ultra thin access devices like mobile phones). He argues that both SAP and Oracle are going to find that they are going to have to move to a zero client technology, and that both are going to struggle?the implication being that PeopleSoft has a grand window of opportunity for the next 12 months to two years to make hay at its rivals? expense.

However, in the judgement of Nigel Wood, research director, enterprise and supply chain management at Gartner, PeopleSoft and Oracle have both dramatically underestimated the way their major rival, SAP, has responded to the new, collaborative commerce model. Part of the reason for this failure to adequately appraise SAP?s present strength, he suggests, is that SAP has made a right pig?s ear of marketing mySAP.com, its key e-collaboration vehicle.

Goaded by criticism, SAP is now hurrying to put this right. However, a good deal of damage, in terms of market fear, uncertainty and doubt, and misunderstanding has already been done.

?You need to understand some pre-history to know why SAP made such a botch of marketing mySAP.com. Basically it announced the product a Sapphire too early (?Sapphires? being SAP?s annual US and European user conferences). It did this because it had to react to Oracle?s announcement of Oracle 11i in 1999,? he says. When Oracle announced its web-enabled ERP suite, Oracle 11i, it stole a lead in the market. Oracle?s timing was exactly right in that businesses wanted to hear about software that would enable them to work collaboratively with partners in tightly integrated supply chains, collaborative markets and so on.?

The result was that Oracle won mind share fast. SAP had to respond or risk some serious defections among its blue chip base. Accordingly, it elected to share its plans on mySAP.com, at its European Sapphire in May 1999, even though it did not have a product to show until the US Sapphire in September that year.

When SAP did finally start showing mySAP.com, however, it still failed to orchestrate a coherent view of what is actually a rather complex product. Woods points out that the view people got of mySAP.com depended pretty much on which SAP spokesperson they talked to, and what that spokesperson?s key interests were. The absence of a coherent, consistent marketing message generated the impression that SAP itself was confused about what mySAP.com was supposed to be about.

In fact, as SAP marketing director Robertshaw points out, mySAP.com is actually a combination of four elements. Before we develop those, it is perhaps important to allow Robertshaw to make the point that mySAP.com is a ?zero client? in the PeopleSoft sense of the term, since the mySAP.com server generates dynamic HTML for browser based applications, with zero downloading of applets to the browser.

The four elements, according to Robertshaw, are: first, the standard SAP applications set, accessed via the Workplace server; second, a template and roles based personalisation for everyone accessing the applications suite; third, an extension into communal marketplaces, and the fourth element comprises alternative delivery channels, including application hosting.

While this explanation is not exactly intuitively obvious to a non-mySAP.com user, the key elements to take from it are the roles-based approach and the extensions into collaborative e-business. As Robertshaw puts it, SAP is now focused on three primary marketing messages, as far as mySAP.com is concerned. ?Collaborate?, ?integrate? and ?liberate? are its slogans?the last point meaning that client organisations are now free to choose whatever delivery channel they please, from mobile devices or an ASP rental model, to the traditional centralised server approach.

What all this adds up to, according to Gartner?s Woods, is that SAP is extremely likely to continue to dominate the new age collaborative ?e-whatever? market, just as it dominated the ERP space in the ?90s. However, all the mainstream ERP vendors, he suggests, have a chance of doing very well out of the next wave of e-enablement, since at bottom, collaborative commerce needs core ERP to deliver on its promises. ?ERPs, re-fashioned to deal with the extended, collaborative enterprise concept, are the foundations upon which the new markets will work,? he says.

The integration message is even more important in the extended enterprise model since there you really cannot afford to have clumsy manual processes intruding and introducing that element of human fallibility that we all know so well. If this is true, best of breed vendors will need to snuggle up ever more closely to the dominant ERP vendors if they want to have a long- term future. New Age

ERP shows growth

Recent results from Oracle, SAP, and from PeopleSoft have been positive. On 20 June this year, Oracle reported its fourth quarter figures, as the world?s largest applications software company. This was a massive side-swipe at SAP, which Oracle claimed to have now overtaken with an increase in application software sales to $447m in the fourth quarter, up 61% on the same quarter in the previous year.Revenue for the quarter was $3.4bn, up from $2.9bn for the same quarter in 1999. More importantly, adjusted net income increased by 76%, to $926m, from the 1999 fourth quarter figure of $527m, proof that any slowdown due to Y2K was now well and truly in the past.SAP also claims a major revival. SAP?s second quarter figures, for example, showed a 19% increase in revenues, at DM1.5bn, for the period ending 20 July, 2000, over the comparable quarter in 1999 (DM1.26bn). Licence revenues increased by 23%, to DM554m, with sales of mySAP.com, the company?s e-business ?vehicle?, accounting for some 47% of total licence revenues.PeopleSoft?s second quarter results for the period ending 30 June 2000 show a 37% increase in software licence fees, at $109.8m, on the previous year. Revenues for the quarter were $420.2m. Craig Conway, PeopleSoft president and CEO, called the results ?a major milestone?, pointing out that it was the first time since 1998 that the company?s licence revenues had exceeded the $100m mark for a quarter. The launch of its zero client technology, PeopleSoft 8, is expected to add to the positive momentum.JD Edwards also showed substantial licence fee growth for its third quarter, ending 31 July 2000. Revenue grew by 56% to $116.7m, over the same period in 1999, with more than half the total licence fee revenues representing orders over $1m. However, the company still made a loss for the nine months of fiscal 2000. Total revenues of $723.9m show a net loss of $7.3m. This is better than the net loss of $11.7m for the same period for 1999, but is still not where the company would want to be. However it launches its new e-suite on 2 October and great things are expected…

Nigel Wood, research director, GartnerGroup

?I doubt if we will ever see the ERP market regain the growth levels of its heyday in 1996 and 1997. Loads of companies pulled forward their investment plans by several years, which means we?ve had a compaction wave, and we?re now having a rarifaction wave?like one of those walking spring toys… ERP vendors are having to evolve again and the future for e-commerce will be very different…?

Dennis Keeling, CEO of BASDA

?There has never been a stranger, more confusing time in the market. What we have are loads of players, all making lots of noise and no clear direction anywhere. The new wave EDI players like Ariba and CommerceOne have had very little buy in as yet. CRM doesn?t seem to be delivering. There are new ideas everywhere but the typical customer seems to be keeping his/her head down at the moment. Trade shows are full of people looking, but no one seems to know which direction to go in next. The only people doing really well seem to be the consultancies with big integration projects and web design boutiques.?

Tony Kelly, alliances director UK, Cap Gemini Ernst & Young

?If there is any rebirth in ERP it is because the big corporates have all successfully completed their ERP implementations and now the next wave of services associated with these, namely data warehousing, data mining and CRM are being rolled out, piggy backing on the information held in the core ERP systems. Naturally enough, all the big ERP players are now active in these new areas?why wouldn?t they be??

Adrian McNay, managing director, Symix UK

?Until recently there was an enormous amount of hype associated with e-business. The idea was get yourself e-enabled and your company will make loads of money. Now the mist is clearing. People realise that the Internet is just another channel, and behind it you still need the systems, the logistics and fulfilment systems to deliver on the promises you make online.?

Peter Robertshaw,marketing director, SAP UK

?The big guys of ERP will be the ones to survive, because they have the capacity to invest. The smaller vendors will either find a niche to hide in?and there are fewer and fewer niches left?or they will team up with other suppliers, causing still more integration problems.?

Caralyn Patterson, Internet platform manager, Oracle

?PeopleSoft gets really hung up on what is or is not being downloaded to the client. What matters is whether you are supporting thin client architecture end to end. We need to focus on the overall architecture, not the minutiae of tuning downloads. The aim is to bring a coherent overall view, so that an enterprise and its partners do not have 300 different definitions of ?customer?. Portal technology will be huge in delivering personalised views of all the information across all the applications as we go forward…?

Anthony Harrington is a freelance journalistThe R&D bite has been hard for the company but, as McNay observes, ?You?ve got to question the viability over the next 12 months of any player in the second tier who does not make a similar investment in ?next wave? applications.? Symix, he says, is determined to shed its ERP label. ?The market now demands that you show an ability to supply across the whole digital supply chain,? he says.Colin Addison, e-business marketing manager at Oracle, reckons that one thing all the ERP vendors have going for them as they move to extended enterprise e-services, is the integration card. Transforming a business to be an e-business has a wide impact on a large number of issues. For everything to work well, and for the business to be able to fulfil its promises, everything relies on integration, he says. Products have to be web enabled but all elements of the solution have to work well together at the deepest level. If they don?t, the inevitable result is inefficiency and breakdowns somewhere in the chain between the customer?s expectations of deliver and the realities of the fulfilment process.?There are now plenty of reports to prove that the best of breed solution is no longer appropriate for most companies. Stand alone tactical package solutions are failing, and they are failing precisely because of the costs associated with building and maintaining integration links between the stand alone systems and the company?s core business processes,? he argues.Instead of going for whatever marginal benefits a stand alone solution may seem to possess over a module in a fully integrated offering, companies are realising that they need to focus on their medium term goals. ?They need to ask: what are my aspirations in terms of connected business practices? What technology deployment will get me there?? he says. Chasing ?nice to have? features in point solution products is the high road to an integration nightmare in the medium term.PeopleSoft?s McGill agrees but still stresses the importance to a new age ERP vendor of well behaved, open systems that are capable of playing nicely with other people?s products. Open standards and open APIs are the name of the game in the present environment, he suggests. Deep integration is a winning message, but there are still loads of new point solutions appearing out there, and it is not exactly a wise strategy to try to shut corporates out from buying what they please, he claims.Moreover, in a supply chain context, where participants all have different IT investment histories, no one package or application can dominate, so the ability to move data to and accept it from any system is critical.The key according to McGill, lies in vendors rewriting their core ERP modules and developing their new modules using ?new wave? technologies like XML, for data interchange, and what PeopleSoft calls a zero client approach for data access. Zero client means no downloads of applets to the client in order to web enable the applications suite. Everything happens on the server. This means that users then have a free choice of what access technologies they use, be it a PC, a WAP mobile phone, a PDA with a GSM card or whatever.PeopleSoft?s argument is that they are the first ERP vendor to come out with a true zero client technology, and that this will give them a cracking head start in the new, collaborative commerce marketplace. ?We?ve rewritten 108 applications and launched 59 new applications, all as pure Internet applications, all based on XML and HTML. We?ve completely moved away from two-tier client server architecture. It cost us half a billion dollars to do, representing some 27% of our turnover going on R&D for this project. It involves 14,800 re-architected panels that were client server panels and are now pure HTML panels,? he says. By contrast, McGill claims that Oracle?s e-suite relies on Java applet downloads to make the browser work (which he suggests is the wrong way to go in a world of ultra thin access devices like mobile phones). He argues that both SAP and Oracle are going to find that they are going to have to move to a zero client technology, and that both are going to struggle?the implication being that PeopleSoft has a grand window of opportunity for the next 12 months to two years to make hay at its rivals? expense.However, in the judgement of Nigel Wood, research director, enterprise and supply chain management at Gartner, PeopleSoft and Oracle have both dramatically underestimated the way their major rival, SAP, has responded to the new, collaborative commerce model. Part of the reason for this failure to adequately appraise SAP?s present strength, he suggests, is that SAP has made a right pig?s ear of marketing mySAP.com, its key e-collaboration vehicle.Goaded by criticism, SAP is now hurrying to put this right. However, a good deal of damage, in terms of market fear, uncertainty and doubt, and misunderstanding has already been done.?You need to understand some pre-history to know why SAP made such a botch of marketing mySAP.com. Basically it announced the product a Sapphire too early (?Sapphires? being SAP?s annual US and European user conferences). It did this because it had to react to Oracle?s announcement of Oracle 11i in 1999,? he says. When Oracle announced its web-enabled ERP suite, Oracle 11i, it stole a lead in the market. Oracle?s timing was exactly right in that businesses wanted to hear about software that would enable them to work collaboratively with partners in tightly integrated supply chains, collaborative markets and so on.?The result was that Oracle won mind share fast. SAP had to respond or risk some serious defections among its blue chip base. Accordingly, it elected to share its plans on mySAP.com, at its European Sapphire in May 1999, even though it did not have a product to show until the US Sapphire in September that year.When SAP did finally start showing mySAP.com, however, it still failed to orchestrate a coherent view of what is actually a rather complex product. Woods points out that the view people got of mySAP.com depended pretty much on which SAP spokesperson they talked to, and what that spokesperson?s key interests were. The absence of a coherent, consistent marketing message generated the impression that SAP itself was confused about what mySAP.com was supposed to be about.In fact, as SAP marketing director Robertshaw points out, mySAP.com is actually a combination of four elements. Before we develop those, it is perhaps important to allow Robertshaw to make the point that mySAP.com is a ?zero client? in the PeopleSoft sense of the term, since the mySAP.com server generates dynamic HTML for browser based applications, with zero downloading of applets to the browser.The four elements, according to Robertshaw, are: first, the standard SAP applications set, accessed via the Workplace server; second, a template and roles based personalisation for everyone accessing the applications suite; third, an extension into communal marketplaces, and the fourth element comprises alternative delivery channels, including application hosting.While this explanation is not exactly intuitively obvious to a non-mySAP.com user, the key elements to take from it are the roles-based approach and the extensions into collaborative e-business. As Robertshaw puts it, SAP is now focused on three primary marketing messages, as far as mySAP.com is concerned. ?Collaborate?, ?integrate? and ?liberate? are its slogans?the last point meaning that client organisations are now free to choose whatever delivery channel they please, from mobile devices or an ASP rental model, to the traditional centralised server approach.What all this adds up to, according to Gartner?s Woods, is that SAP is extremely likely to continue to dominate the new age collaborative ?e-whatever? market, just as it dominated the ERP space in the ?90s. However, all the mainstream ERP vendors, he suggests, have a chance of doing very well out of the next wave of e-enablement, since at bottom, collaborative commerce needs core ERP to deliver on its promises. ?ERPs, re-fashioned to deal with the extended, collaborative enterprise concept, are the foundations upon which the new markets will work,? he says. The integration message is even more important in the extended enterprise model since there you really cannot afford to have clumsy manual processes intruding and introducing that element of human fallibility that we all know so well. If this is true, best of breed vendors will need to snuggle up ever more closely to the dominant ERP vendors if they want to have a long- term future. Anthony Harrington is a freelance journalist