Past and Current Directions in ERP

In keeping with technological changes in IT sector as well as evolving business need, there are discernable changes in ERP market as well. The traditional strength of ERP in back office space such as basic manufacturing, financial management, procurement and distribution, is still unchallenged. But the mind set is changing rapidly and ERP system providers are needed to be more innovative in respect of technology, market positioning and delivery of their products.

Past Directional changes during last decade: ERP systems are evolving constantly from the early accounting or MRP system, which they used to be during their first appearance in the market. The distinct trend in their development, during last decade is as follows:

1. New Market: ERP was first adopted by large organizations including Fortune 1000 companies. However, this market was almost saturated. In order to grow, ERP vendors are more and more targeting Small and Medium Enterprise (SME) segments. In order to penetrate SME segment, the vendors are offering run down version of their products at a lower price. Sometime, they are offering a totally new product under their brand name, such as SAP B1.

2. New Channels: In order to increase their reach over global market, vendors are offering their products through reseller. All large ERP vendors are developing reseller channel. Microsoft has advanced this concept and adopted partnership programme for their ERP offerings, where their partners, in addition to reselling, also take active part in product development.

3. Rapid implementation methodology: ERP implementation is difficult and expensive, due to the necessity of rigorous reengineering of business process and IT platform. ERP vendors are, now providing tools and methodologies for easier implementation. ERP vendors are offering pre configured products depending upon clients’ requirement. The product is then implemented through rapid action implementation methodologies provided by the vendor, instead of formal project management methodology, as is normally used by IT managers.

4. New business verticals: New business verticals for hitherto under represented market such as Government, Health care, financial service and retail, has been delivered by established ERP vendors. Also, new/ smaller companies have brought various niche products to target a specific segment of the industry.

5. Extending value of Back end ERP: Vendors are moving into specialized areas and offering dedicated solutions in the field of Supply Chain Management, Product Lifecycle Management, Customer Relationship Management and Sales Force Automation. One of the interesting trend is that the large ERP vendors mostly followed the route of acquisition instead of in house development, in getting these solutions.

6. Web Enabling: ERP vendors are increasingly using web technology, adding e-commerce capability to their products and adopting open standards.

Current directions - However, some of the more recent trends, are indicated below:

1. Adoption of Application Service Provider (ASP) Model: This model enable an organization to use ERP on a transactional (pay as you use) basis instead of buying an ERP product based on traditional licensing system. Under ASP, the service provider host the ERP product which is accessed by the users of the organization.

   ASP model is a viable option for SMB segment which lacks IT skill and resources. This model may also be a viable option for large organizations where the organization cuts back its internal IT establishment and concentrate on their core business. However, there are limitation to this model where the organizations need to adopt vanilla version of the ERP software as little customization is allowed by the service provider.

2. Cloud Computing: Cloud computing is becoming a popular mode of operating ERP. This is due to the fact that little upfront expense is involved, minimum time is required to deploy and operational cost is, also minimal.

   Cloud computing may be broadly described as Software as an Service (SAAS) where the organizations do not need to install their on hardware or software in house but obtain SaaS ERP over web. The key driver for SaaS ERP is the overall less cost of ownership, scalability where new users of the organization are linked to the system easily from anywhere in the globe and upgradability, where new version of the ERP is easily adopted.