Now that there are effectively two enterprise ERP vendors bestriding the world, it may seem that they can just sit back and count the spoils. Both have huge net profit margins derived from their market leadership, so it may seem churlish to contemplate their eventual demise, yet a number of factors are combining that should cause a few flutters in Redwood City and Walldorf. Consider for a moment what a transaction system application such as ERP actually does, or used to do:
- business rules/workflow
- master data store
- transaction data store
- transaction processing
- user interface
- (and perhaps some business content e.g. pre-built reports)
This edifice is under attack, like a house being undermined by termites. Transaction processing itself has long been mostly taken care of elsewhere, by old-fashioned TP monitors like IBM CICS or by new-fashioned TP monitors like BEA’s Weblogic or IBM Websphere. These days there are alternate workflow engines popping up, like Biztalk from Microsoft, or even a slew of open source ones. Moreover, more than half of the ERP functionality purchased is unused. The storage of data itself is of course done in the DBMS these days (though SAP tries hard to blur this line with its clustered table concept). As the idea of separate master data hubs catches on e.g. customer data hubs like Siperian’s, or product data hubs, or more general ones, and the serving up of such data is possible through EAI technology, then this element too is starting to slip away from the ERP vendors. The user interface for update screens should hardly be that complicated (though you’d never guess it if you have ever had the joy of using SAP as an end user), and these days can be generated from applications e.g. from a workflow engine or a master data application. This does not leave a great deal.
If, and it is a big if, SOA architecture takes off, then you will also be able to plug in your favorite cost allocation module (say) from a best of breed vendor, rather than relying on the probably mediocre one of your ERP supplier. Combine this with the emergence of “on demand” hosted ERP services from emerging companies like Ataio and Intacct as alternatives, and the vast ERP behemoth looks a lot less secure up close than it may do from a distance. If the master data hubs and business workflow engines continue to grow in acceptance and chip away further at key control points of ERP vendors, then at some point might it be reasonable to ask: exactly what is it that I am paying all those dollars to ERP vendors for?
This line of reasoning, even if it is very early days, explains why SAP and Oracle have been so anxious to extend their product offerings into the middleware space, with Netweaver and Fusion respectively. This is also what SAP has been trying to falteringly launch an MDM application (the rumor is that after the botched initial SAP MDM, the buy-in of A2i isn’t going that well either; maybe a third attempt is in the works?) and Oracle has been keen to promote its customer hub.
Of course it is too soon to be writing the obituaries of ERP yet, but a combination of evolving technologies is starting to illuminate a path for how you would eventually migrate away from dependence on the giant ERP vendors, rather than endlessly trying to consolidate on fewer vendors, and fewer instances of each. Now that would be radical thinking.