This last year was another eventful time for the ERP software industry. Vendors continued to consolidate, the rate of ERP failures and lawsuits accelerated, and enterprise software technologies continued to evolve. Our company, Panorama Consulting Solutions maintained its aggressive growth and merged with TPG Solutions, reflecting the dynamic and evolving nature of the ERP market and its customers.
- Infor acquired Lawson
- Lawsuits, fraud and project failures continued to grab headlines (e.g., Lumber Liquidators, CareSource Management Group, Tesco Bank, Whaley Foodservice Repairs, City of New York, etc.)
- Cloud ERP gained steam
- Social ERP gained credibility
- And, worthy of a second mention, Panorama Consulting merged withTPG Solutions to become Panorama Consulting Solutions
As we look forward to 2012, there are a number of trends we expect to continue, while we expect a few new developments as well. Here are our highly anticipated top ten predictions for 2012:
1. Continued consolidation in the industry. Infor’s acquisition of Lawson was just the start. Barriers to entry in the ERP space are low and there are way too many players in the industry (in fact, we track nearly 200 ERP vendors in our proprietary ERP database). At the same time, global economic uncertainly isn’t necessarily creating an environment for robust industry growth that might support the crowded field, so we expect the merger and acquisition activity to continue among ERP vendors.
2. Shake-up in the Tier I space. This coming year may be when we finally see a shakeup among the big Tier I ERP vendors. While SAP, Oracle, and Microsoft Dynamics certainly aren’t likely to lose their foothold as the Big 3 of the ERP software market, we do expect that some of the larger Tier IIs are going to pose legitimate challenges to their market share and reach. For example, after their acquisition of Lawson, Infor is just a couple steps behind the traditional Tier II players, while companies such as IFS, Epicor, Kinaxis, and QAD are continuing their aggressive growth, especially in the SMB space.
3. Acceleration of ERP failures. Unfortunately, we’re still seeing the collateral damage from poor decisions of years past, and this isn’t likely to change in the next year. Tight IT budgets and a “do it yourself” mentality to ERP projects of the last few years have finally started catching up in terms of the large number of publicized ERP failures in the latter part of 2011. Companies have simply under-invested time, money, expertise, and resources in their ERP projects in recent years, so we will see those bad decisions catch up to us in the coming year.
4. Increase in the number of ERP lawsuits. If we look at demand for our ERP expert witness services as a leading indicator, 2012 is going to entail a huge number of ERP lawsuits. We are typically engaged by courts and legal counsel to consult on lawsuits before they are formally filed, and we have seen a marked uptick in demand for these services in late 2011. Combine this with the #3 prediction above, and it is clear that 2012 will be a year of epic ERP lawsuits.
5. Less “do it yourself” ERP projects. Because of #3 and #4 above, we expect fewer companies to attempt the DIY approach to ERP selection and implementation. Installing a light fixture from Home Depot may work for do-it-yourself home improvement projects, but CIOs and CFOs are becoming smart and risk adverse enough to know better than to try this approach when it comes to transforming their entire business with a new ERP system. These companies will lean on outside consultants and experts more than they have in recent years, with the understanding that an expert consulting firm that has fine-tuned selection, implementation, and organizational change management methods over 100s of organizations will be able to deliver better, faster, and cheaper results than they can internally.
6. SaaS ERP providers will continue picking off smaller pieces of ERP. Software as a Service (SaaS) vendors such as Salesforce, Plex Systems, Netsuite, Kinaxis, and Workday have successfully poached smaller customers from the traditional ERP vendors over the last few years, but next year they will start making broader in-roads among mid-size companies. In addition to riding the SaaS wave of hype, the above vendors offer a sort of best-of-breed system approach that allow companies to rollout enterprise technology focused on one or a handful of specific functions within organizations, such as CRM, supply chain, or HR. Also feeding into this trend is the risk-adverse propensity for organizations to not bite off more than they can chew with their software initiatives.
7. Convergence of CRM and social media. Industry analysts have been talking about it and software developers have been working on it for years, but next year is when we will finally start to see some meaningful integration between the “enterprise” side of CRM and the “social” side of Twitter, Facebook, and LinkedIn. Enterprise and social technologies will finally converge in a meaningful way that will allow organizations to better manage internal customer relationship functions in tandem with the external and less structured social media functions.
8. Misalignment of ERP systems. A lot has changed in the last few years – the economy tanked and recovered moderately while companies evolved, customers demanded more, and mergers continued, but many companies did not proactively invest in their ERP software, leaving organizations with systems that are misaligned with their current business needs. This points to a large subset of organizations wanting to realign their enterprise software with their operational realities, whether it be through investing in new systems or attempting to get more out of their existing software.
9. Conducting a business blueprint as part of the ERP selection process. Fortunately, companies are starting to learn from others’ mistakes (see #3 and #4 above) and are realizing that they shouldn’t rush the ERP evaluation and selection process. Too many failures and lawsuits are caused by choosing the wrong software that is misaligned with business needs, so companies are being more diligent about blueprinting their business processes prior to selection rather than after. We at Panorama are seeing an uptick in the number of companies wishing to engage us to facilitate more robust blueprinting as part of the selection process, which is a reflection of CIOs and CFOs wanting to mitigate their risk.
10. Technology-centric system integrators will continue to struggle to be effective. As I’ve seen in the industry over the years, the traditional technology-focused implementation approach of most system integrators, partners, and value-added resellers (VARs) is clearly not getting the job done. Too much focus on the software, its functionality, and capabilities typically means under-investing in the things that really matter, such as business process design, organizational change management, and effective project management. System integrators will need to either learn to do these things, which they typically don’t have the competency to provide, or partner with firms that do.
Last year was a good year for the ERP industry and we expect even more exciting and positive things in 2012. What do you think? Feel free to leave your comments below or discuss these predictions in more detail in our upcoming webinar, Top Ten Predictions for ERP in 2012, on December 1.