The ERP market is set to undergo a significant transformation over the next five years. At the heart of this transformation is the decade-long evolution of a set of technologies that are enabling a major shift in the design of ERP systems – the most significant change since the introduction of client/server systems in the 1990s. Some ERP software vendors increasingly are utilizing in-memory computing, mobility, in-context collaboration and user interface design to differentiate their applications from rivals and potentially accelerate replacement of existing systems (as I noted in an earlier analyst perspective). ERP vendors with software-as-a-service (SaaS) subscription offerings are investing to make their software suitable for a broader variety of users in multitenant clouds. And some vendors will be able to develop lower-cost business systems to broaden the appeal of single-tenant hosted cloud deployments for companies that cannot adapt their businesses to share with other tenants or prefer not to.
Vendors also will be using analytical capabilities to broaden the scope of their ERP offerings – especially in financial performance
An important value proposition behind the addition of analytical capabilities to ERP is to make it easier for companies to obtain useful information directly from their system. Our research finds that companies are split on this issue: Half (50%) said that it’s easy or very easy to get information from their ERP system, but nearly as many (48%) said it isn’t. One benefit of having analytics built into a transaction system such as ERP is that it automates and therefore often speeds up the transformation of data into useful, digestible information. Our research also finds that nearly all (86%) of companies saying that they have up-to-date data are able to respond to changes in business conditions in a coordinated fashion, compared to 38 percent in which most data is current and just 19 percent of those whose data is less than up-to-date.
The FPM category includes closing and reconciliation, statutory consolidation, planning and budgeting, and financial and management reporting as well as external financial reporting. In the past vendors of software other than ERP have offered these capabilities because constraints in database technologies prevented consolidating them. In some cases, an ERP vendor acquired an FPM vendor but still sold the product as a stand-alone. The addition of any of these financial analytical capabilities increases the value of the ERP system to the owner.
Some ERP vendors are demonstrating or at least talking about providing the ability to handle intraperiod “soft closes” (using a degree of simplification to quickly produce nonstatutory financial reports) to enhance visibility and control. (History buffs may recall that Coda Software, the first ERP system to be built on a multidimensional database, offered this in the 1990s.) Some are taking steps to facilitate the ongoing consolidation of accounting information from all of a company’s systems into a central system. This permits corporate-wide intraperiod soft closes.
Providing analytical capabilities within an ERP offering also can facilitate the fusion of financial and operational data captured by the ERP system without a data warehouse. It can speed up reporting on this information and eliminate the need to maintain connections from the ERP system to a data warehouse to be able to perform analysis and reporting. Operational data may come from the
The addition of FPM and other analytical capabilities to ERP systems is creating an overlap between these two categories, but the two aren’t on a collision course yet. Most FPM vendors offer suites with exceptionally rich functionality that will be time-consuming and expensive for an ERP vendor to replicate to a significant degree. Rather than replacing software that can execute specific tasks or provide rich functionality, the incorporation of analytics will simplify how companies perform the basics. In this sense, it’s more of a positive for the ERP vendors that are able to harness
Robert Kugel – SVP Research