Thoughts On The ERP Market As 2012 Shifts Into 2013

It’s the time of year when business apps observers adopt a Janus stance toward market trends. Like the ancient Roman god of beginnings and transitions, analysts look back at the recent past while also peering ahead into the future. Here’s my contribution to that ongoing debate highlighting three areas of enterprise resource planning (ERP) I thought of particular interest in 2012 and in the years ahead. Customers are set to benefit as more ERP deployment options and additional SaaS financials apps become available.

  • ERP vendors are going all-in with the cloud. Many ERP vendors debuted product or fleshed out their strategies for software-as-a-service (SaaS) ERP in 2012, and further developments are set for 2013. While the focus this year has been on SaaS ERP — and often how a SaaS offering can live in hybrid harmony with its older sibling, on-premises ERP — some vendors also revealed their platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) strategies. When it comes to PaaS, ERP vendors are opening up their own development platform and/or partnering with vendors like Amazon.com and Microsoft. Cloud-focused acquisitions also continued in 2012, notably SAP’s purchase of procurement rival Ariba to help fill out the suppliers pillar of its four-pillar app cloud — the other three pillars being people (HR), money (financials), and customers (CRM).
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Common Market Trends Emerge As More ERP Vendors Bet On SaaS ERP

In the Business Apps Casino, change is afoot. For a long time, one table – software-as-a-service ERP – attracted a limited number of players and fans. However, over the past 12 months, an increasing number of ERP vendors have lined up to place sizeable SaaS bets, while more potential customers are paying close attention to the gambles those vendors are making.

In Forrester ERP inquiries, it’s now the norm for clients to ask us about SaaS ERP. In fact, it’s unusual to field a call where SaaS isn’t mentioned. Firms may be actively considering a future change in deployment model or simply wanting to kick the tires on SaaS ERP adoption, pros and cons, and comparisons with on-premises ERP. They also seek more information about SaaS ERP market players and likely future entrants. In general, what’s changed since a year ago is that companies want to include SaaS ERP options in their assessments.

Each ERP vendor’s SaaS bet differs somewhat from those of its peers, determined both by the type of customers it’s aiming at and architectural concerns. However, there are some shared themes:

  • Repurposing existing apps. Some ERP vendors began their SaaS endeavors with apps targeted at small and midsize businesses. They’re now working to deepen the functionality of those apps to appeal to a broader, more enterprise audience. There are two key approaches: 1) expand the scope of an existing SMB product and aim it up market; or 2) carve off functionality from a SaaS midmarket apps suite (while retaining that suite) and create a new enterprise app.
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Your New Billing Model: Can You Tell What It Is Yet?

Growing up in the UK, one of the TV shows I remember watching featured Australian artist and musician Rolf Harris. As each show drew to a close, Rolf would quickly set to work filling a large empty board with seemingly random brush strokes of different colors. About mid-way through his painting, Rolf would turn to the studio and TV audience and ask with an impish grin, “Can you tell what it is yet?” As he continued painting, the strokes would finally resolve themselves into a recognizable image like a portrait or a landscape.

When it comes to revisiting billing software and established practices, many firms are reaching that middle phase. While they have the sense of something starting to take shape, they don’t yet have any clear sense of what the ultimate endpoint will be. Is that your experience with your organization and the industry it serves?

Firms are simultaneously trying to anticipate which types of billing will resonate with prospective and existing customers, while also responding to what their peers are offering. Frequently, one or more competitors in a given industry have emerged with a fresh approach to packaging and charging for products and/or services, which often involves some type of subscription billing. However, what tends to remain unclear is whether the billing type in the ascendant is the ultimate market destination or just a midpoint on the way to a completely different billing model.

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Whither Application Marketplaces?

Everywhere you turn in ERP-land these days, up pops another app marketplace. The roster of ERP players large and small with online showcases includes Lawson, Microsoft, NetSuite, Openbravo, SAP (with EcoHub and its upcoming SAP Store), and xTuple.

Today’s ERP app marketplaces have a stronger focus on window-shopping than trying to be a software equivalent to Apple’s iTunes store. Vendors are using their marketplace websites to draw attention to an increasing variety of their own and third-party ERP app extensions as well as complementary products and services, segmented by industry, line of business, and product type.

What do you think is driving the move by ERP apps vendors to open marketplaces and what might those sites may evolve into? Here’s some of my current thinking on both topics:

Why have an app marketplace?

  • Reflected glory. By the scale and breadth of its offerings, an app marketplace can give customers a sense of a thriving ecosystem growing up around the vendor’s ERP software. At the same time, overstuffed marketplaces with limited ratings and segmentation can be confusing places for customers and partners alike.
  • Future M&A. ERP vendors can mine their app marketplace to gain insight into the extensions and apps of particular interest to their customers. The vendors can use that knowledge as a basis for future investment, either taking a stake in or buying outright the most popular third-party software.
  • Expansion of app usage and customer retention. ERP vendors are working to make their apps more usable and opening up the data they hold to a wider set of users. App marketplaces can help flag ERP-related extensions and apps suitable to non-traditional ERP users.
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Drivers To The Cloud And Other Lawson CUE Takeaways

I had the pleasure earlier this week of attending Lawson Software’s conference and user exchange, aka CUE, in Boston.

The midmarket ERP apps vendor had the singular misfortune to throw its annual user party at a time of great uncertainty for both Lawson and its customers. Lawson has yet to respond to an unsolicited $1.8 billion acquisition offer from ERP rival Infor, aside from acknowledging receipt of the offer on March 11. Despite the Infor elephant in the room, CUE was a good-humored affair. Lawson execs exhibited grace under fire while customers expressed concern but remained cheerfully stoic and pragmatic.

Do you think Lawson will end up part of Infor? Alternatively, will it remain independent or will it be bought by a private equity firm and no longer be publicly traded à la Epicor? As apps vendors try to navigate fluctuating revenue mixes — rising subscriptions versus falling maintenance — being privately held may prove to be an attractive option.

Lawson is currently evaluating whether to break out subscription revenue as a separate line item in its next fiscal year. Of its 4,500 largely on-premise customers, around 350 use a Lawson SaaS product, the fruit of purchases such as Enwisen and Healthvision. Like other apps players, Lawson’s embraced Amazon.com’s EC2 as the cloud infrastructure for its HCM, M3 and S3 ERP apps. Several Lawson cloud services early adopters at CUE talked about their organizations’ experiences and there were some similarities in those stories:

  • They faced hardware refreshes and/or obsolescence of the app and database versions they used
  • They were already successfully running third-party SaaS apps or remotely hosted software
  • They used Lawson managed services as a steppingstone between the on-premises and cloud services worlds
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Greetings Fellow ERP App Enthusiasts!

Hi, and thanks for stopping by. I joined Forrester just over a month ago and I plan to post here regularly with some thoughts on the ERP apps arena. I’m hoping this blog will serve as a place for us to exchange views, and I very much welcome your input.

As you know, Forrester is structured around roles, and I’m part of the analyst team serving the needs of business process professionals. My primary area of focus is enterprise resource planning software. I’m currently pulling together my research agenda for 2011, and I was wondering what top-of-mind issues you think I should be tackling.

At a high level, some of the areas I’m considering include:

  • Midmarket ERP.
  • SaaS ERP and PaaS.
  • ERP-flavored project management.

I’m also interested in hearing about midsize organizations and enterprises that have benefited from the successful deployment of one of the following:

  • SaaS ERP.
  • A two-tier combination of one vendor’s SaaS ERP integrating with another vendor's on-premise ERP.
  • Commercial open-source ERP.
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