Johannesburg, 30 Apr 2006
There has been considerable consolidation in the Enterprise Resource Planning (ERP) software industry over the past few years with many smaller players vanishing and two main players dominating. While this new state of affairs will take some time to bed itself down, and while this certainly does not mean that other major IT companies will not still delve into the area of ERP speciality, still broadening the market, the question customers are asking, and rightly so, is if the ERP industry will now be able to focus on delivering value and what this value should be?
Organisations originally bought into the concept of ERP software to streamline and improve their business processes while controlling costs. Increasing the cost and complexity of software infrastructures was not part of the deal, but that is what was delivered. What is even more concerning is the fact that ERP solutions to date have still not fulfilled the promise of delivering critical business information to assist with strategic decision making processes within companies. Unfortunately, this outcome has given ERP a bad name and it is now time to examine what went wrong, what organisations should be expecting from ERP and more importantly is it even worth the investment anymore?
Despite the best efforts of the larger ERP vendors to sell single vendor ERP suites, the reality is that single vendor approaches are not flexible and cannot meet the needs of customers correctly. In addition, due to the number of players in the industry in the past, each with its own areas of expertise, many corporations ended up with multiple business applications from multiple vendors. This 'best-of-breed' approach provided companies with applications that met particular needs, but did little to ease the stress levels of IT which was tasked with integrating applications and consolidating data. But this is exactly where things went wrong! The focus was far too much on the Applications layer and far too little on the infrastructure architecture.
Both remaining key vendors will claim that they now offer industry-leading applications in almost every sphere of business, however, the debate should not be around whether a single vs. multiple vendor model in applications is needed for optimum return on investment in ERP systems, but rather the focus should be on companies building a solid infrastructure that will provide for flexibility and choice in the future. In other words, ironically, it may yet prove beneficial to have an ERP structure built from a combination of packaged software for utility applications and bespoke developments to maximise unique business processes within the company.
In other words, it is the applications infrastructure and middleware layer in particular that should be the focal point for now as this will provide the flexibility and robustness for top-class applications for every aspect of the business, it will allow for functionality that does not need to be reprogrammed, it will consolidate financial data and it will reduce cost of ownership - all of which enhances competitive advantage. Future solutions will be constructed according to services specified by the business, not by processes contained within an enterprise application vendor's software suite.
The major focus of last year (on the Applications vendors) has quickly moved to architecture and the Middleware vendors and in light of my above stated points, the concept of service orientated architecture (SOA) has grown in prominence. The reality however is that customers are still pre-occupied with their historic applications investments and upgrades, cross grades and migrations of existing business solutions - and understandably so! However, until your vendor has clearly indicated its road map to SOA compliant applications, these upgrades may not be a worthwhile investment.
So the question to examine then is: What steps can the user take now towards building an SOA?
Firstly its important to note that SOA as a theory is in fact not a new concept at all and has been around for at least decade. The 'techno-speak' around SOA has put off too many users and this is unfortunate as there are some critical considerations emerging from SOA which need to be translated correctly to ensure every business operating in any sector locally can benefit from the conception of SOA.
Secondly, SOA is moving the power of 'individual vendor strategy' back into the hands of the user community and therefore single vendor ERP strategies are unlikely to prevail in the future and in fact SOA evangelists have lead us to believe that the enterprise application infrastructure will become almost irrelevant.
So to answer the above question of how can companies begin the journey, the following should be taken into consideration and should be a starting point:
Firstly, do not be in a hurry to discard or migrate your 'tried and tested' application assets as they could be put to good use for a lot longer than envisaged. There is also life in the in-house bespoke developments and, provided they are standards based, may well prove to be a key business differentiator in the future.
Secondly, consolidate and optimise your middleware strategy and make sure that it includes a comprehensive integration tool set. In fact, it is here where you should focus most of the company's energy.
Lastly, invest more in your Business Intelligence (BI) technology and you will find that there is a lot of value left in your existing ERP investments. This is an area that can produce the largest ROI.
To end off, I would like to leave you with the following thought: Any and all of the above options will be a fraction of what a re-implementation of any major vendor's latest ERP suite - so does it not make sense to start building towards an SOA layer that will work today and into the future? ITQ
Kelvin Reynolds, Executive Director: Enterprise Software Solutions at ITQ, a subsidiary of Simeka BSG
Share