More Cloud, More Customization, More Lawsuits in ERP’s Future, Predicts Panorama

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by Jill Rose, Contributing Writer

Predicting the future of ERP can be tricky, but Panorama Consulting fearlessly unveiled its Top 10 Predictions for the ERP Industry in 2016 in both a blog post and a webinar hosted by Panorama Director January Paulk.

Some will sound familiar to CIOs who follow the sector, including a blurring of lines between Tier 1 solutions and lower-tier players. Some contain cautions and/or opportunities for companies and vendors as customization gains popularity and flexibility becomes more desirable. Here are the predictions, upon which Panorama President and Consulting Managing Partner Eric Kimberling elaborated for us.

Classification of Tier 1 systems will become obsolete.

The abundance of sophisticated options now available means that ERP titans like SAP and Oracle are no longer the only packages capable of addressing the needs of large corporations, according to Paulk.

As we reported in October, Panorama views Tier 1 as an ambiguous term coined by industry analysts, based on everything from headcount to customer revenues. Panorama for its annual Clash of the Titans report on the Tier 1 competitive landscape chooses its titans based on the size of their install bases; the size of customer organizations; flexibility, and breadth of function. Until 2015, the report included just SAP, Oracle and Microsoft Dynamics, but this year added Infor. Perhaps in 2016, the titans will include one or more of the traditionally Tier 2 companies with broad reach and breadth of solutions like Sage, IFS and Epicor.

Adoption of ERP by small and mid-sized organizations will increase.

SaaS and mobile technologies are becoming more cost effective and easier to deploy, noted Paulk, helping smaller companies catch up with their Fortune 500 counterparts. “You no longer need to feel your options are limited when looking to integrate and have an all-encompassing ERP,” she said, “There are many options, and they are more affordable.”

Cloud ERP will become a non-issue.

Cloud ERP is shifting from being a buzzword used mainly by analysts to an accepted part of ERP. Cloud providers have addressed the costs associated with the subscription model and allayed security concerns, ensuring that cloud-based systems can compete with on-premise ones. Paulk said Oracle is leading the way with large R&D spending on Fusion, and Panorama expects the rest of Tier 1 and Tier 2 to follow.

High-profile ERP lawsuits will expose the causes of ERP failures.

Strong growth in Panorama’s expert witness service reflects the state of ERP implementations. The majority fail because companies fail to address the human aspect of change, said Paulk. Other projects fail from lack of project governance, especially when it comes to deciding on an appropriate level of customization.

Microsoft Dynamics in the Titans report garnered comparatively low marks for ERP success – a subjective measure in which respondents were asked if they consider the implementation a success or failure. Microsoft Dynamics scored 57% success versus next-lowest SAP at 50%. Oracle scored 90% and Infor 83%.

At the time, Kimberling observed that a “fragmentation” of Microsoft’s VAR/ISV network gives it less control over implementation outcomes. He notes now that vendors with lower marks for implementation success, including Microsoft, might consider consolidating their VAR networks. “By weeding out some of the weaker players and taking a more active role in sales and implementation efforts, they can begin mitigating some of that risk,” he says.

The gap between ERP implementation successes and failures will increase.

Successful implementation teams are not only looking at the project’s technical activities, they are addressing business activities in both their project plan and their budget. Failed implementations continue to ignore or underinvest in these areas, said Paulk. “That’s why we’ll continue to see differing results between the two groups, and it’s going to get even more extreme if the companies that are failing do not get on board and start to take change management, business process reengineering, and project management seriously.”

Change management may be especially important for Microsoft, given that in the Titans report, Dynamics returned the highest disruption rate at about 70% of organizations, followed by Oracle. Disruption was defined as material disruption to business, led by an inability to ship product or to close books timely.

ERP project recovery will become a hot skill set.

Getting to the root cause of an implementation failure will require a unique set of skills. More companies are seeking people with the ability to turn around troubled implementations, Panorama believes.

Best of breed will make a comeback.

Many companies are finding that their need for comprehensive CRM, HR, or warehouse management is pushing them toward a best-of-breed solution that can be integrated with their ERP. “There are some areas where companies need more than an ERP provides,” said Paulk. “Look for best-of-breed solutions to take an increasing share of the market from incumbent ERP vendors,” and in areas like CRM, e-commerce and human resource management (HRM).

SOA and tech integration will become cool again.

There’s some question as to whether or not service-oriented architecture (SOA) was ever really “cool,” but the rise of best of breed means that in-house integration skills are becoming increasingly important in many IT departments.

Customization will become more accepted by the mainstream.

Panorama’s Clash of the Titans report found that nine out of 10 ERP implementations required some sort of customization to meet the organization’s business needs. Only Dynamics required “extreme customization,” cited by 22%. Of course, customization is always a slippery slope, said Paulk.

One key to success is making sure that your contract identifies a certain percentage of allowable customization, with change orders used above that level. The second key is putting the right governance structures in place so excessive customization doesn’t cause timelines to be pushed out or costs to become so significant that the project fails.

Although systems known for their customizability, including Dynamics AX, GP, and NAV, might appear to have an advantage as customization goes mainstream, Kimberling is hesitant to go that far. “I think customization is a double-edged sword,” he says. Many companies don’t have the type of sophisticated IT needed for customizing and maintaining that customization long term, and even more have executives who are scared by customization, he says.

IT will begin regaining control of ERP implementation.

The need to integrate best-of-breed and to customize ERP installations is causing the balance of power to shift toward the technical, something Paulk said companies should keep a close eye on. “Technical complexity increases dependence on IT and creates the risk of underemphasizing the business transformation aspect of your implementation,” she said. “Don’t lose sight of the importance of the business activities-if you skimp on them, you could set your project up for failure.”

This is in large part why more flexible systems like Dynamics ERP solutions are gaining ground of late, says Kimberling. “You have a lot of people going toward the best-of-breed model or the fast model, and I think Dynamics fits well with those types of evolving platforms. Companies appreciate the power of flexibility when it comes to modularity and being able to accommodate a number of industry verticals, and that’s why Microsoft is getting some good traction compared to the Tier 1s,” he says.

About Jill Rose

Jill Rose is co-founder of content provider Landscape Creative. She is a long-time business writer specializing in technology and health IT topics. She can be reached at [email protected]