When I first began my career as an ERP consultant nearly 20 years ago, the clients I worked with 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 that I was accustomed to working with at the time. Smaller to mid-sized organizations were even more out of luck since most could not afford SAP and Oracle. Instead, they were largely 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 such as Microsoft Dynamics, Infor and Epicor provide viable alternatives for organizations looking for new ERP software. Throw in the variety of Tier III, functional point systems and industry-focused solutions available – such as Plex Systems, Workday and Salesforce – and organizations now have quite the variety of options to choose from. In fact, our 2014 ERP Report shows a healthy mix of competition between the leading ERP vendors among roughly 200 organizations that purchased and implemented ERP software in the last year.
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 two or three ERP vendors:
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. In Panorama’s current client base, for example, we are implementing Microsoft Dynamics, Infor and Epicor for just as many small to mid-size organizations as we are 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. When conducting our proprietary technical fit assessment as part of our PERFECT Fit™ selection process, 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. Each of the 200+ clients we’ve worked with since Panorama’s founding in 2005 has unique and evolving business and operational needs, so it is important to consider solutions that can keep pace with these changing landscapes. The larger, 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 more niche, industry-specific solutions provide alternatives as well. 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 unique to specific industries. Bottom line: not only is this topic not nearly as much of a concern as it was several years ago but the bigger concern and risk for most organizations is how to facilitate internal business process reengineering to best capitalize on the flexibility of available ERP systems.
Vendor viability. Many of our clients are often scared of the lesser name ERP vendors because they’re worried that the vendors won’t be around in five or ten years to support their software. For example, ever since Oracle acquired JD Edwards several years ago, there has been a widespread fear (and misguided belief) that Oracle is just months away from pulling the plug on JD Edwards. This is simply not true. Add to the fact that some smaller ERP vendors have had financial difficulties in the past and organizations tend to be fearful of the lesser known names. However, in recent years, we have seen a wave of private equity money rushing into ERP vendors such as Plex Systems and Epicor, while others such as Infor have gone on acquisition sprees themselves – all of which doesn’t change the rate of change in the industry but it does provide some certainty that most vendors will be around for some time. In addition, 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 and independent 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, while inaccurate perceptions have held them back from gaining even more market share. This is not to say that these three topics are moot points nowadays, but instead, it is to say that many of the downside risks can be mitigated. The upside benefit of having more ERP vendor options to choose from almost certainly justifies the potential risks and tradeoffs 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 global, leading and 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.
Learn more by registering for our upcoming webinar: Panorama’s ERP Vendor Showdown: Overview of Upper Tier II ERP Vendors