Twenty years ago, organizations didn’t have many choices when it came to ERP systems. SAP and Oracle had a pretty tight hold on the market, especially among the blue chip Fortune 500 clients. Smaller to mid-sized organizations were even more out of luck since most could not afford SAP and Oracle. Instead, they were forced to settle for homegrown systems, Microsoft Excel spreadsheets and Access databases.
The good news is that times have changed. Companies of all sizes, geographies and industries have a multitude of options to choose from. SAP and Oracle continue to provide very viable options for organizations large and small, while Tier II solutions provide viable alternatives for organizations looking for new ERP software. Throw in the Tier III, functional point systems and industry-focused solutions available, and organizations now have quite the variety of options to choose from.
Fortunately for CIOs, CFOs and the organizations they represent, there are a number of factors driving increasing competition and options in the market. Here are a few trends that bode well for companies hoping for viable alternatives beyond the top ERP systems:
Scalability. One of the biggest lingering concerns among C-level ERP software buyers is the scalability of the software they purchase. This concern isn’t isolated to larger organizations, either. Even Panorama’s small to mid-size clients want the comfort of knowing that their ERP system can scale to meet their business objectives. Fortunately, technical scalability is not nearly as much of an issue as it once was for Tier II and Tier III ERP vendors. For example, we’ve implemented Epicor for just as many small to mid-size organizations as we have for our larger, global clients. Further, it’s been quite some time since we’ve recommended that a client not consider a Tier II or Tier III ERP vendor because we felt the software couldn’t scale from a technical perspective. We are more concerned with how the organization will adapt to the new technical needs of the ERP software rather than whether or not it will scale with the company.
Versatility and flexibility. Just as high-growth and larger organizations are concerned with scalability, smaller, more nimble organizations are concerned with versatility and flexibility to change with their evolving business requirements. In fact, this is probably a more relevant concern than the scalability issue mentioned above. Tier I ERP systems have done a good job of creating and investing significant R&D dollars into industry-specific solutions, which evolve with the needs of the industry over time. In addition, plenty of niche solutions provide alternatives. Plex Systems for the automotive industry, ProcessPro for process manufacturers and Deltek for aerospace and defense contractors are just three of many examples of software solutions that have carved out niches. Not only is this topic not nearly as much of a concern as it was several years ago, but the bigger concern for organizations is how to facilitate business process reengineering to capitalize on the flexibility of ERP systems.
Vendor viability. Many of our clients are often scared of Tier II and III ERP vendors because they’re worried that the vendors won’t be around in five or ten years to support their software. This fear is unfounded. In recent years, we have seen a wave of private equity money rushing into smaller ERP vendors. This provides some certainty that most vendors will be around for some time. The rapid growth of Tier II and Tier III vendors helps increase the likelihood that if they are eventually acquired, their acquiring parent will preserve the software to appease the relatively large customer install bases. While this topic is still a viable concern, it’s something that can easily be mitigated as part of an effective ERP selection process.
These three issues have in some ways helped Tier II and Tier III ERP vendors gain more market share in recent years. This is not to say that these three topics are moot points nowadays, but instead, it is to say that many of the risks can be mitigated. The upside of having more ERP vendor options to choose from almost certainly justifies the potential risks associated with a larger pool of potential systems.
The key is to objectively weigh the pros and cons of your various options using ERP consultants that are independent experts in this space. It is also important to remember that how you implement your chosen ERP software is just as (if not more) important as the actual software you choose.