Top 10 ERP predictions for 2013

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 21 Nov 2012

The year 2012 has been a quite interesting one for the enterprise resource planning (ERP) market, as vendors continued their acquisition spree, such as SAP's purchase of Ariba, Oracle's acquisition of SelectMinds HCM software, and Epicor's acquisition of Solarsoft.

This is according to Eric Kimberling, president of Panorama Consulting Solutions, an ERP consultancy firm, who also believes the trend will continue into 2013.

Kimberling predicts 10 trends that will dominate the ERP market in 2013.

Continued shake-up and consolidation

"We predicted increased vendor consolidation in our 2011 and 2012 lists, and we believe it will continue," says Kimberling.

He explains that with the global economy and business capital spending volatile at best - and some economic forecasts suggesting that the US and Europe could face recessions in 2013 - it isn't clear if total worldwide ERP software revenue growth will continue at the same pace it has in recent years.

These macroeconomic challenges will pose opportunities for high-growth SaaS and cloud ERP vendors to continue eroding the market share of Tier I ERP vendors such as SAP and Oracle, especially among small and medium customers, he notes.

Best-of-breed solutions to continue

According to Kimberling, with more companies moving away from big, single-system ERP deployments, there will be a continuing opportunity for niche and best-of-breed ERP systems to capture market share in 2013.

He believes larger ERP vendors will continue to provide more niche solutions to counter the advent of these smaller cloud providers, pointing out that vendors like Oracle and Infor, with their best-of-breed solution focus, will be better positioned to respond to customer demand of this type.

In addition, Kimberling states, this trend will continue driving merger and acquisition activity as more ERP vendors look for industry solutions to augment their core ERP systems.

Integration and solution architecture

Panorama says the increase of best-of-breed, niche and SaaS ERP systems will put more pressure on both CIOs and ERP consultants to provide better integration between systems and address potential silos of processes and data that often come with the territory.

As a result, the firm notes, solution architecture and integration will become increasingly important competencies required to support effective ERP implementations.

Continued adoption of mobile and BI solutions

Kimberling also points out that as companies look to increase ERP benefits realisation, more will invest in mobile solutions and business intelligence (BI) software to get increased return from their existing ERP systems.

"An increasing amount of companies will recognise that newer ERP systems will not necessarily help them make better use or sense of business information without the tools to better support decision-making among both employees and leadership. In addition, executive teams will be under increasing pressure in a shaky economy, which will put more pressure on their employees to provide decision-making tools and dashboards designed to support executives' need for information."

SaaS and cloud hype will subside

Panorama also notes: "While many industry pundits are still pronouncing the death of traditional ERP and the hands of SaaS and the cloud, we find that our large, multi-national clients still aren't comfortable with the relative lack of flexibility, control and security offered by SaaS ERP solutions."

However, it says, smaller and medium companies will be more likely to adopt SaaS and companies of all sizes will be more likely to adopt niche solutions such as CRM or HCM, which generally bodes well for SaaS.

Perhaps, most importantly, SaaS and cloud options will become so baked into the delivery model of most ERP vendors that the hype will naturally subside as they become integrated into everyday ERP options.

Uncertainty and risk aversion

Kimberling explains that given the uncertain global economic environment, CFOs and CIOs are more likely to be risk-averse in the coming year.

"Much like we saw in 2009 and 2010, IT budgets will be tighter and ERP project teams will be asked to focus more on low-hanging fruit and high-value activities rather than massive, full-blown and global ERP implementations."

Nonetheless, he says, the exception to this trend will be among mid-size and high-growth companies, which will continue to grow despite economic conditions and will need the enterprise systems infrastructure to support this continued growth.

Winners and losers in ERP

"We will likely see a growing dichotomy between smart, sophisticated organisations that understand the need to implement ERP systems the right way versus the less knowledgeable organisations that try to leverage more of a 'do-it-yourself' approach," says Kimberling.

"Continuing job insecurity will lead some CIOs and project managers to bite off more than they can chew without expert help while smarter leaders will recognise that ERP implementations are more successful with the help of independent ERP consultants."

Increase in ERP failures and lawsuits

Unfortunately, says Panorama, those that lose in their ERP implementations are more likely to find themselves with ERP failures and lawsuits on their hands. The firm backs this assertion by pointing out that its ERP expert witness practice has grown quickly for the last two years and it expects that growth to accelerate as more companies try ill-advised implementation strategies, such as the do-it-yourself approach.

In addition, these less sophisticated organisations and project teams will continue to focus too myopically on the technical services provided by their ERP vendors and system integrators, which will contribute to higher failure rates in the coming year.

More organisations saying 'no' to ERP

The coupling of economic uncertainty with high ERP failure rates will translate into more organisations declining to embark on large-scale ERP implementations, Panorama states.

Instead, it adds, these organisations will focus on improvement measures including business process reengineering, organisational change management and benefits realisation.

These activities can often help organisations get much more immediate benefit at a lower cost than a "traditional" investment in an ERP system, all while better leveraging the ERP systems and other enterprise software the companies already have in place, the firm notes.

More focus on competitive advantages

According to Kimberling, over the last few years of global economic uncertainty, cost cutting and standardisation has been the name of the game for many CFOs and CIOs.

"In this quest to minimise expenditures, many organisations tried to leverage industry best practices and, in doing so, neglected their sources of competitive advantage along the way. Over the next year, look for companies to work harder to more clearly define their unique sources of competitive advantage via business process reengineering and organisational change management activities designed to help deliver tangible business benefits and improve their ERP ROI."