In the 90s, ERP officially became a technology market segment challenging MRP, accounting, and financial-only package sales.1 At the time, companies worried that they would confront major replacement challenges when their business changed, grew or (most often) new and better technologies came along, making a compelling argument and value opportunity to replace and migrate upward.2 Always upward. Nolan got that right.3 Though many people challenged him along the way, the seven year or so application turn over, while historically correct, seems to be outmoded. Well into the third decade of ‘ownership’ by many companies, ERPs have been lifetime application purchases. However, ERP revitalization is occurring.
The Seven-Year Itch?
If we look more deeply, we know that many of the companies that have purchased ERPs have had significant changes, upgrades, platform changes and add-ons over the years. Although they may be working with the same provider, they may have a new version of that ERP or have purchased new applications and integrated them into the old version.4 So in one sense, they may have actually had the seven year turn-over.5 Competitors have been circling users hoping for refreshes which would lead to a search for a new ERP provider. But not too many companies have switched.6 The point here is not to say that replacement does not occur, but rather, why it doesn’t happen more. Certainly, larger ERP companies have thrived on the upgrades and add-ons they sell to their own customers.
The technology developments have been significant. As technology has evolved, many ERPs — large and small — have taken advantage of them to develop or buy better solutions.7 In Figure 1 we can see how technology has evolved in the last two decades, creating global, anytime, anywhere enterprise reach for even the smallest companies.
Technological evolution of a product is critical for end-users who always have changes: corporate growth or change; increased customer requirements; and regulatory requirements (SOX, CTPAT, various trade laws, product serialization and traceability, currency changes and taxes).
Who Pays for It?
But who pays for these changes? These are not trivial considerations when you are considering making that lifetime purchase. And here is where there is huge divide between ERP providers.
Let’s look at Oracle and SAP vs. say, HarrisData,8 Epicor and Infor, or SaaS providers like Plex and NetSuite. No doubt SAP and Oracle have deep enough pockets to provide import capabilities, but rest assured if you want these upgrades, you will pay for them. Pricing models for those companies, although more transparent than in the past (basic list pricing is available on their websites), is still confusing. Your 16% to 26% support costs often do not include BI/analytics, collaboration, traceability, social tools, mobility or modules such as CRM or Supply Chain that you might want to add on later.
Conversely, most of the SMB-focused providers such as NetSuite, HarrisData, Epicor, and Infor have been or are developing significant capabilities in these areas, and if you have purchased a recent license you probably have them built-in. If you have the multi-tenant SaaS, you will receive them as part of the ongoing upgrades. The exception is a major upgrade, when you have not upgraded for many years. In reality, this can be a completely new software package/install. End-users are really responsible for this.9
The difference here is philosophy. One cluster of companies feels that the ongoing improvements are part of what you paid for, or are part of support. The other feels that any investment they make in product should be paid for by you. Both have built defensible positions as to why their approach is correct. Hence, it’s important for the buyer to take this into consideration when purchasing software.
These statements — who pays or what’s in or out of the product — vary a great deal based on the provider, the product, and the delivery platform (on premise vs. SaaS/Cloud). But I wonder if there is a significant, basic cultural divide between these companies that can impact your long-term happiness with the company that will be your lifetime service provider.
Education and Training
Education/training is another element that demonstrates provider philosophy — and what you might or might not have to pay for over time.
Education is often an afterthought for many companies. But survey after survey has shown that a well-trained employee can perform better. Again, we remind users to look at this factor when buying software. Your purchasing and implementation process may take 3 months to a year. But the software is with you for life. And software expertise is the biggest factor in ongoing successful usage and value realization.
Perhaps the old model of delivering education — offsite training at vendors’ training facilities or other classroom facilities — just doesn’t work in today’s leaner workforce environment. And long, complex two-week training courses are huge investments for companies. So, can technology firms apply current technology thinking to the education issue? We think so.
So who is responsible for making sure users are trained? It is partnership. Can the vendor provide you with ongoing knowledge and expertise in a delivery method that works for you, not just in the classroom, but where and when you need it?
Epicor displays a truly impressive education and training capability. Unlike many big firms in which the education team is an adjunct, a separate service offering and team, Epicor has embedded education right into the technology product team. This has a stunning number of benefits such as:
- Keeping the software training in synch with new revisions (This assures users that you are up-to-date in using help and online education.)
- Ensuring the trainers are actually involved in product development (After all, they can see firsthand what users have problems with.)
- Providing a usable and ‘live’ platform for ongoing education, product knowledge retention, and increased usage and value of the systems purchased.
Addressing the issue of user knowledge goes a long way towards companies gaining and retaining the value of their technology purchases. This is particularly true of software applications packages, which usually are not part of university training. Though you may have hired the latest computer science graduate or a supply-chain-certified planner, they generally have little to no exposure to your particular package or release. These embedded education products — provided from desktop to tablet — are the way to go to bridge that gap.
Social Engagement with Customers
One of the more impressive changes that has benefited the user community is the way in which companies interact with their customers. Firms like Plex, HarrisData, and NetSuite have community social networks where the end-users dominate. These are not tips and tricks, or blogs hosted by the techies. These community sites do more. They are driving the evolution of the product.
The App Store
Another current trend in the ERP community is co-development (you can read what BizSlate is doing in that area) i.e. partner development with the most interesting platform for delivery of the new innovation in app stores. As we wrote about before, SAP has encouraged their partners to write analytics/Crystal reports and make them available for sale in the community. But more interesting approaches abound.
Firms like SYSPRO and SAP have launched app stores for their user communities to continuously access new applications that work with the architecture of their solutions. SYSPRO’s approach is most novel. Their SYSPRO App Store, email@example.com, just announced that it will include customer-developed apps, not just apps developed by SYSPRO. This is a real opportunity for customers to share their innovations. It is more than a user group swapping ideas. It allows the community to benefit in a very tangible way. Customer-developed apps for sale! And, it gives users incentives to develop and share their apps by charging for them. In this way, users may recover some of the costs associated with app development (if they are sufficiently interesting to others, of course).
These innovations — embedded education, social networking, app stores and other changes — are refreshing changes from my experience as an ERP and software customer ‘begging’ the provider to make changes to the software. We are in the so-called era of the customer. Why shouldn’t it apply to the technology industry?
In future articles we will talk more about the revitalization of the interface and catch-up with HarrisData. And further in the series we’ll talk about SYSPRO, UNIT4, Plex, Microsoft and more.
Next time we will explore the new analytics models: from elastic clouds from Microsoft Azure, in-memory analytics such as Hanna from SAP, Oracle’s Exalytics, and a unique approach on analytics from UNIT4, their ‘tapas analytics’ approach.
Read more in the ERP series.
1 To be clear, the MRP and accounting segments still exist, but are not the powerhouse markets that ERP is. — Return to article text above
2 Replacing an ERP is a highly complicated and risky project. And on-premise upgrades are a perpetual distraction — time, cost and complexity are the norm.
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3 Richard L. Nolan’s stages of growth,Wikipedia — Return to article text above
4 The number of large and small companies that are on old versions of ERP is astounding. — Return to article text above
5 The turn-over occurs much, much earlier in hardware, for sure, averaging 2 to 4 years now. — Return to article text above
6 That said, it would be a mistake to take a customer for granted. Big deals are still out there for Oracle to SAP switches, and with so many excellent cloud ERPs, firms that want to cut costs and operational activities are moving to clouds and leaving behind old providers who don’t keep up. — Return to article text above
7 Infor, Epicor, SAP for example, have all bought other solutions to augment their portfolio of offerings — Return to article text above
8 Less than 10% of HarrisData’s revenue is in service support vs. most ERP who run over 25% — Return to article text above
9 Think of it like going to dentist — regular cleaning and check-ups, which you pay for as you go. Your maintenance can avoid a 4-year no-show at the dentist followed by big dental problems and costly procedures.– Return to article text above
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