The last year in the ERP industry has been an exciting one, with plenty of advances, changes and opportunities for improvement. As another year winds down and we prepare for the holidays, it is helpful to look ahead at what we think will be in store for the next year.
We may not be able to predict the future with 100% certainty, but there are a number of existing and emerging industry trends that will affect potential ERP buyers and implementers in the next year. Below are our top 10 predictions for the ERP industry in 2016:
1. Classification of Tier I ERP system will become obsolete. Although the systems themselves may not become obsolete, the definition of and difference between Tier I, Tier II and Tier III ERP systems certainly will. There are simply too many options and sophisticated technologies in the market to think that the big 3 incumbents (SAP, Oracle and Microsoft Dynamics) are the only packages capable of addressing the needs of large, upper mid-market and high-growth organizations. Even the biggest and most complex organizations have a multitude of options at their disposal. Our classification of Infor as the new Tier I system earlier this year was the first domino to fall in the demise of this dated and arbitrary classification scheme.
2. Increasing adoption of ERP systems among small and mid-size organizations. Up until recently, larger enterprises had a big technological advantage over their small and mid-size rivals. However, new SaaS ERP software and mobile technologies are becoming more cost-effective and easier to deploy, which is causing the smaller and mid-market to catch up to their Fortune 500 counterparts. Gone are the days where a company needs millions of dollars to deploy new enterprise technologies, which will make ERP systems, CRM software and other business technologies accessible to most.
3. Cloud ERP becomes a non-issue. The buzz behind cloud ERP systems is finally starting to die down – largely because most ERP vendors and third-party hosting providers have provided plenty of affordable options for companies wanting to migrate to the cloud. Research and data outlined in our 2015 ERP Report suggests that this trend will continue for the foreseeable future, but the big difference is that it will become a normal and accepted part of most ERP systems rather than a trendy buzzword hyped by industry analysts. The question is no longer about whether or not the cloud trend will continue, but it is instead about which organizations will move in this direction and which ones won’t.
4. High-profile ERP lawsuits expose the causes of ERP failures. Our ERP expert witness practice is growing like gangbusters, which is a reflection of the state of ERP implementations. Too many are failing and getting mired in lawsuits, many of which are very high profile and will expose the industry’s shortcomings. The parties and issues involved in these lawsuits are likely to underscore the reasons why ERP implementations fail, and more importantly, what can and should be done to avoid them.
5. Increasing gap between ERP implementation success and failure. ERP failures do not appear to be dissipating anytime soon. On the other hand, there are still plenty of success stories out there. The difference between the two extremes, however, will continue to become more apparent. The successful ones will do all the right things – effective project management, business process reengineering and effective organizational change management for example – while the failures will continue to ignore or underinvest in those areas. The differing results between these two groups will be even more extreme.
6. ERP project recovery becomes a hot skill set. As ERP failures continue to accelerate, those that can recover troubled ERP implementations to get them back on track will be in high demand – perhaps even more so than traditional project managers. It requires a unique skill set that can get to the root cause of what is causing the failure, which is why our project recovery services are in such high demand at the moment. Add to the fact that ERP failures are not likely to slow anytime soon, and it’s easy to see why these skills and toolsets are so hot right now.
7. Best of breed makes a comeback. For the last several years, single ERP systems with very little integration to other third-party systems have been the name of the game for most organizations. However, the increasing ubiquity of Salesforce, Workday and other functionally-focused enterprise systems has provided viable alternatives for companies looking for solutions that aren’t trying to be everything to everyone. Look for these best of breed solutions to take an increasing share of the market from incumbent ERP vendors.
8. SOA and technology integration becomes cool again. I’m not sure how cool it ever was – and there are certainly plenty of organizations that have been burned by trying to integrate a hodgepodge of ERP systems – but there are plenty of tools that are making this a feasible option for many. Given the rise of best of breed systems (see prediction #7), integration-related skillsets and toolsets are becoming important to a growing number of organizations and IT departments.
9. Customization becomes more accepted by the mainstream. For as long as I’ve been in the ERP industry, the word “customization” has terrified CFOs, CIOs and other executives. As outlined in our 2015 ERP Report, 9 out of 10 ERP implementations require some sort of customization in order to meet business needs, suggesting that this is a hard risk to hide from. Current ERP systems are making this concern a more acceptable and less risky form of implementation. It’s a slippery slope for certain, but one that can be managed in small doses.
10. Techies begin regaining control of ERP implementations. The previous three predictions are in many ways shifting the balance of power back toward the technical types and away from business stakeholders. Technical complexity typically increases dependence on IT and creates the risk of underemphasizing the business transformation aspect of ERP implementations and other enterprise software initiatives. This is not a welcome trend by any means since it escalates the risk of failure and runs counter to the fact that ERP implementations are more successful when treated as business transformations, but it is the reality of the current technological landscape outlined above.
The ERP industry is constantly changing, so understanding the dynamics at play are important in helping navigate and prepare for success. The above trends are the 10 biggest things to keep in mind as you prepare for your ERP implementation in the new year.