Frequently Asked Questions About ERP II

Frequently Asked Questions About ERP II

    These questions on the ERP II vendor scenario serve as follow-up to previously asked questions (see "Symposium Q&A: ERP II," QA-12-6464), as well as the definition of ERP II (see "ERP II Magic Quadrants Defined," COM-12-7104, and "The Transition to ERP II: Meeting the Challenges," R-14-0612).

Verticalization Is a Key Message of ERP II

Can you define vertical strategy? Is this window dressing for existing applications, or are the vendors committed to working with customers and partners to design applications that will focus on the business requirements and outcomes for specific verticals and industries?

A vertical strategy is not defined by a marketing program. Vertical strategies begin in the users' relationships with vendors and extend back to the vendors' R&D efforts in the form of requirements and new product releases. Vendors that have adopted a full vertical strategy will often extend their vertical efforts into customer support in the form of industry-oriented competency centers and industry-qualified implementation and support specialists. Enterprises should gauge their vendors' commitments to their vertical segments through customer references, R&D expenditures, implementation and support.

How do you evaluate vendors that are shifting away from industry verticals? Do we need to change and, if so, when?

In this era of collaborative commerce and ERP II, vendors are being forced by large R&D requirements and smaller-than-normal customer investments to narrow their functionality scope to industries in which their products fit well and to areas of potential growth. Enterprises should evaluate vendor functionality R&D efforts over a two-year period to assess vendors' ongoing strengths in their particular verticals. As vendors shift from verticals, users must evaluate their long-term enterprise strategies and match them to vendors' functionality. If the functionality offered by the vendor does not fit within the short-term window of two years, enterprises should evaluate other alternatives. These alternatives need not be other ERP products, but may involve best-of-breed providers that can easily be used to complete the functionality gaps that are not filled by the ERP vendors.

How do we determine shortlists for specific verticals, including pharmaceuticals and the public sector?

The determination of a shortlist for a specific industry is yet another validation of the ERP II concept. Many of the subsectors of the various ERP II domains have unique requirements. For example, in the pharmaceutical industry, areas such as R&D must have the capabilities for handling projects and portfolios of drugs that include close ties to project costing, human resources and resource allocation. CRM must handle sample histories, clinical tours and marketing campaigns, in addition to integrating external data from healthcare enterprises. SCM must include handling unit management, regulatory compliance and the integration of process control systems. Environmental, health and safety management, recipe and quality management are all important requirements of a system suitable for the pharmaceutical industry. Vendors typically seen on shortlists for this industry include SAP, SCT and Oracle.

The public sector has a different set of unique requirements, with a greater focus in the financials reporting and HCM areas. The vendors identified in the services domain of ERP II operate in the government/public sector space. Depending on the subsector, different vendors will participate. This also varies by geography. Globally, AP and Oracle will operate most consistently in the public sector. PeopleSoft and SCT have a stronghold in higher education in the United States. Coda has had success in the public sector in many European countries. Oracle, PeopleSoft, AMS and SAP have had a presence in the federal government in the United States. J.D. Edwards and Lawson Software are typically involved in the "lower" end of public sector, addressing grades kindergarten through 12 and operating in municipalities in the United States.

Migrating From ERP to ERP II

Given the expenditures committed to existing ERP systems, what is the likelihood that customers will adopt the ERP II approach? What is the migration strategy?

The likelihood of customers adopting an ERP II approach and strategy increases as vendors migrate to that strategy and as enterprises develop the need to become more innovative in their technical infrastructures and become more competitive in their respective industries/verticals. The migration strategy includes using previous ERP investments as a foundation, planning a longer-term strategy, and then prioritizing the additions and migrations accordingly.

Will market consolidation continue? As more enterprises put their software into "maintenance" mode, what can we expect?

Due to the more-finite criteria of ERP II, the turbulent global economy and increased market expectations, we expect continued consolidation in this market. The likelihood of new entrants will be low during the next three to five years. Vendors that are putting their applications in maintenance mode or slowing down their R&D investments are more likely to be part of the ERP II fallout as market consolidation occurs. The due diligence aspect of evaluation — including new and existing vendors and solutions — must take these factors into consideration.

Planning for the Change to ERP II

Is it best to use services from ERP software vendors or other service providers? Which ones?

For midmarket ERP enterprises, large third-party service providers do not generally engage with midmarket vendors. This forces enterprises to choose between working directly with the vendor or working with a vendor-dedicated smaller service provider. These dedicated service providers are typically local to the enterprise and may act as the sales and implementation channel for the vendor. In many cases, they have local references that should be validated by the users.

For larger enterprises, both resources should be evaluated. Evaluations should include such elements as expertise with the vendor solution, industry expertise, cost, methodology and references. When evaluating expertise, enterprises should ensure that the people whose resumes they are evaluating will be the ones who be working on their projects.