ERP software systems combine horizontal and vertical attributes to meet the needs of specific companies in specific industries. Because an ERP system is similar to a central nervous system for companies, those who implement ERP will want is reach to extend wide and deep to fulfill needs in all areas.
The horizontal attributes of ERP systems are well known and have been in use since the beginning of ERP in the 1990’s. Examples of horizontal attributes of ERP systems include the presence or absence of features for:
- Sales and marketing
- Human resources
- Supply chain
On the other hand, vertical attributes of ERP systems are related to functionality for specific industries. At the most basic level, they define suitability for broad industry groupings like manufacturing, distribution, retail and professional services. At a more detailed level, vertical attributes of an ERP system may include industry-specific functionality for markets such as:
- Manufacturing (specific types)
- Distribution (specific types)
- Retail (specific types)
- Professional Services (specific types)
- Aerospace and Defense
- Government organizations
- Non-profit organizations
- Construction and Real Estate
- Financial Services
- Hospitality Industry
Many of the larger ERP vendors not only have great horizontal range but also have developed vertical feature packages for particular industries that often include custom enhancements, pre-configuration settings, industry best practices, industry KPI’s and more. Some of the smaller ERP vendors are more vertically-focused and provide niche offerings that specialize in a particular vertical industry market. These ERP vendors may sell only into those vertical industries where they are specialized. Industry examples would include ERP for insurance and healthcare.
A third option, enterprise software vendors (also known as value-added resellers or VAR’s), sell add-on modules to supplement the offerings of traditional ERP vendors. Many VAR’s provide implementation and technical services for broad ERP offerings. Adaptation to specific vertical market specializations is sometimes a significant part of the value-add that VAR’s bring to ERP implementations.
Extended Horizontal Functionality Enables Better Vertical Industry Fit
Extended horizontal extension functionality is sometimes implemented as an add-on or bolt-on module to a popular ERP packages. These extensions enable better system fit for specific industries. Common extensions include:
- PLM (Product Lifecycle Management)
- Forecasting (for sales and inventory)
- CAD (computer-aided design)
- Container space optimization
- Time and expense entry (project-based)
- Warehouse management systems (WMS)
- Industry-specific modules to support very specific niches such as restaurant catering, bowling alleys, plumbing and heating and many others
Another form of vertical software attribute includes features for the currency, language, tax laws and regulatory requirements of specific countries.
Horizontally-defined ERP packages have been used in a variety of industries. However vertically-defined functionality often provides a better fit for specific situations in both companies and industries. When horizontal ERP packages are implemented without any vertical industry features, companies can expect to have to perform a significant amount of the customization work to develop vertical industry functionality.
Just as ERP implementation strategies should be custom-fit because each company and implementation situation is unique, ERP system configurations should be tailor-fit to meet the full set of horizontal and vertical needs specific to each company.
Please talk to the experts at Panorama Consulting for help in developing and implementing a tailor-fit system to best suit your organization’s needs.
Blog post written by Greg Griffith, a business analyst at Panorama Consulting Solutions.