There’s been a recent rebirth of a technology meme familiar to those who’ve followed enterprise IT for years: “The Death of ERP!”
The raconteur this time is Tien Tzuo, founder and CEO of Zuora, a cloud-based provider of subscription billing systems, and a former employee of Salesforce.com. So it’s safe to say that Tzuo comes at this “Death of ERP” concept from, shall we say, a certain point of view.
His recent posts found their way onto Forbes (The End of ERP), investor site Seeking Alpha (Great Cloud Acquisitions Oracle And SAP, Now Put A Fork In ERP) and even graced the pages of TechCrunch (I guess TechCrunch isn’t that disinterested in covering SAP and ERP?).
The gist of Tzuo’s point of view: SAP and Oracle have failed in their respective cloud efforts and their customers are getting hoodwinked. He writes (on Seeking Alpha):
The bottom line is this: A series of cloud acquisitions won’t help lumbering old ERP one bit. Acquiring cloud companies doesn’t make you a cloud company any more than buying a Giants jersey makes you Eli Manning. It’s not a strategy for an on-premise solutions company. It’s an attempt to distract customers and hope they will forget about the ERP boat anchor they’re stuck with.
This “Stick a Fork in ERP—It’s Done” thinking has been around for decades, of course. For instance, here’s The Death of ERP, circa 2000: “ERP is dead because western business investment in infrastructure is dead.” (So noted.) And CIO magazine proclaimed in 2010: “Today, ERP is the Jack Nicholson of software: Its repertoire hackneyed, the old and expensive dog finds it hard to learn new tricks.” (How far away are we from a Karate Kid-inspired “Sweep the Leg” marketing campaign from cloud vendors? No mercy.)
My post is not meant to be a response to Tzuo or defense of SAP (I’ll leave that up to SAP). I merely want to look at how companies are actually approaching it today.
Let’s take a look at recent ERP sales as well as how respected ERP industry analyst Paul Hamerman projects the future: $40.6 billion total ERP sales in 2009 and $43 billion in 2010, according to his research, with forecasts growing from $45.4 billion last year all the way up to $50 billion by 2015.
Next: How much cloud ERP is selling? According to Panorama Consulting’s 2012 ERP research, the majority of companies implementing ERP systems are taking the traditional approach: 58 percent are deploying via on-premise and 21 percent are rolling out traditional ERP hosted off-site. Of the rest: 16 percent are going the SaaS ERP route and 5 percent are taking the enigmatic “other” approach.
Another metric to consider is whether ERP customers are upgrading to the latest versions—if it really is the “Armageddon of ERP,” wouldn’t businesses today be less inclined to spend all that time, money and effort upgrading to the latest version? According to Impanaya‘s 2012 survey of SAP ERP customers, 96 percent of those that run ERP 5.0 or earlier versions are either currently upgrading their software or have plans for a future upgrade.
No doubt cloud-based software and services are gaining traction in all sizes of businesses, but there’s still significant uncertainty from some risk-averse executives. Most midsize and large companies have invested too much in their core on-premise ERP systems to make drastic changes right now. (Anyone up for a “Rip and Replace” ERP discussion?!)
I’m not judging any businesses’ approach to ERP or speculating about what’s right and what’s wrong in this case. As I’ve learned from ASUG members, every company has its own way of doing things—not right, not wrong, just different.
But what I do see is companies such as Kimberly-Clark and Analog Devices that are approaching ERP this way: Building off that stable ERP core with cloud-based apps where those can provide competitive differentiation. Call it a hybrid-based strategy or what you will, but that appears where the future for SAP customers is headed.
That doesn’t sound like the End of ERP to me. Perhaps just a New Beginning.