Enterprise resource planning (ERP) and ERP II today represent the combined evolution of manufacturing-centric MRP and MRP II systems over the past 30 years. During this time computer technology has become orders of magnitude powerful, and businesses are barely recognisable from their forerunners in the 1970s. Is it possible to envisage the future of ERP and visualise a picture of what things could look like in the next five to 10 years?
Industry analysts have introduced concepts such as Gartner`s "real-time enterprise" that have inspired business and IT leaders to see the potential of their companies, through effective use of IT. With the credibility gap faced by the IT sector, post-Y2K, should business take the future of ERP seriously?
Previously, the evolution of ERP had been characterised by the incorporation of more and more functionality into the core system, driven by the technology capabilities of the vendor and their imperative to retain or grow market share. Hence the dominating vendors have become even bigger and many niche players have lost out as their innovations were eventually assimilated into the offerings of the few survivors. Will this trend continue?
We need to recognise that the evolution of business software has always been and will for the foreseeable future be driven by a number of key trends:
* Increased computing (processing) power;
* Improved connectivity and communication
* The dominance of mega vendors; and
* The increasing requirements of businesses.
Can we predict the future of ERP software by projecting these four key trends into the next five to 10 years?
There is no doubt that processing power will continue to increase over the foreseeable future. This will impact in the short-term on the most process-intensive elements of ERP, such as supply chain management. At the same time, with improved processing power and the reduced costs of computing hardware, we can expect to see the boundaries between business software and traditional plant software increasingly blurring. Business networks and plant networks will continue to adapt the same technical standards, and embedded computers will become pervasive through intelligent plant instrumentation and sophisticated control systems.
Secondly, increased connectivity and communication will drive access to more and more real-time global data. The introduction of Web services will allow software to become more distributed, and as a result more complex. Access to relevant manufacturing information, be it engineering data, product information or commercial information, will increase. We have already begun to see how the Internet has the ability to unite the most narrow, niche common interest groups together across the globe. We are likely to see this trend continue with the continued formation of niche manufacturing industry communities. We are likely to see the emergence and strengthening of a limited number of commercially viable manufacturing industry portals, which provide the important combination of a critical mass of software Web services, commercial transactions, in-depth domain knowledge and professional services.
There is no doubt that processing power will continue to increase over the foreseeable future.
Gavin Halse, MD, ApplyIT
The vendor market is likely to continue its consolidation process as smaller vendors are displaced by those which who can invest heavily in areas that differentiate their offerings. In time, the open source community is likely to suffer from the same security nightmare faced by the larger corporations, and will need to organise (increasingly on a commercial basis) to counter the security threat.
While commoditisation implies that software products are differentiated on price, not functionality, the true differentiators in the future will be the integrity of the whole software value proposition, including the product itself, the capabilities of the platform, the support available and the critical mass of related professional services. This will pose a challenge to the open source movement, which has already come to realise and exploit a viable commercial model around so-called "free software".
Finally, the already complex requirements of manufacturing business are unlikely to get any simpler. The imperative will continue to drive down costs to protect margins, while at the same time maintaining global dominance and competitiveness. Increasing adaptation of pervasive ERP software will continue to raise the bar, and as companies adapt these technologies, so the bar will keep rising.
It is worth mentioning one of the factors that will limit or retard this relentless evolution of business software. This will be the ability of the mega vendors to incorporate vertical manufacturing functionality directly or indirectly into their offerings. The ERP systems of the future will look to the casual observer like another software platform (similar to how we view databases today). However the applications that run on this new platform will be niche and industry-specific. A multitude of vertically focused vendors will arise and exist on the periphery, building their solutions onto the platforms of the future, and seeking to provide that elusive business benefit that can differentiate a manufacturer from the opposition. ERP vendors which provide a compelling technology infrastructure to support vertical vendors and a developer community will survive; the others will disappear.
This ecosystem of connected enterprises, software vendors and industry communities, coexisting with the platforms of only a few major players will dominate what remains of ERP in the future. ERP is by no means dead: in fact it can be argued that it is only just starting to take root.
Share