Of Sap And The Current Erp Space
An article published by Forbes magazine towards the end of 2012 boldly predicted that the days of ERP (Enterprise Resource Planning) were numbered. ‘ERP is on its death bed’, the article claimed. While this prediction has not been fulfilled to date considering the global ERP market has seen an average growth of 10% since 2006, the article quite rightly predicted that cloud based ERP services and subscription based revenue models such as Software as a Service (SaaS) were to be the future of the ERP world. Four years down the line, there is a major shift of focus from on-premise to cloud solutions in the world of ERP. The global ERP market has been seeing an average growth of 10% since 2006. The same companies that dominated the ERP world back then are still the ones dictating its direction currently. In this article, we shall take a look at the current ERP scene and the actions of the market leader, SAP SE.The ERP World At A Glance
The ERP world can be classified according to the category of sectors served. The two main categories of sectors served by the ERP world are small and medium business sectors and the large business sectors. Traditional players in the ERP world such as SAP SE have mainly catered to the large business sectors for such a long time. However, since the current growth in the global ERP market is largely driven by the small and medium business sectors, many of the vendors have started unveiling new products targeting the small and medium business sectors. For example, SAP SE unveiled SAP Business ByDesign to target the Small and Medium sized Enterprises (SMEs).
The Industry Players In The ERP World
There are several vendors in the ERP world. Some of the most notable vendors include SAP SE, Oracle, Microsoft, Infor, Epicor, Lawson, QAD and Sage. We shall take a brief overview at the major industry players in the ERP world:-
The Top Vendor: SAP SE
SAP SE is a German multinational software corporation that makes ERP to manage business operations and customer relations. It is the undisputed market leader in the ERP world boasting of revenues in excess of 17.5 billion Euros. The company has over 293,500 customers in 190 countries. Its current ERP version has over thirty thousand relational database tables that enable it to handle extremely complex business situations. It is always a great idea to focus on the industry leader to determine the key performance indicators of that industry. In that spirit, let us have a look at what makes SAP SE the leader in the ERP space.
What Makes SAP SE Tick
SAP SE remains the undisputed ERP leader. There are several reasons why SAP SE has remained the leader in ERP over the years to the point of dictating the direction of the whole industry as we will see later in the article. Firstly, SAP is a global solution- not a local one. SAP SE has been able to traverse geographical boundaries and place its footprint in 190 countries. Secondly, SAP ERP is implemented in accordance to industry best practices and case studies. Thirdly, SAP AG is reputed for delivering new versions of ERP systems.SAP R/2 was replaced by SAP R/3 which was subsequently replaced by SAP ERP. Fourthly, SAP ERP solutions are highly scalable- they are designed to grow with the business. Fifthly, the implementation process of SAP ERP systems is well defined and optimized for success. SAP ERP implementation has a clearly defined software implementation roadmap which acts a reference point during SAP ERP implementation.
Sixthly, SAP ERP implementation follows a low risk approach that ensures conformance to requirements of regulatory bodies. This of course augurs well with SAP SE’s customers operating in the 190 countries it serves. No company wants to be caught on the wrong side of the law. SAP SE continues to have an edge over other ERP vendors also because it delivers industry-specific ERP solutions. There is SAP for Utilities, SAP for Retail, SAP for Oil & Gas, SAP for Healthcare, SAP for Financial Services Network, SAP for Banking, SAP for Public Sector, SAP for Insurance, SAP for Telecommunications and so on. It is because of these reasons that SAP SE continues to be the leader in the ERP space.
The Oracle Corporation is an American global computer technology corporation that makes ERP software in addition to computer hardware systems. It is the second largest player in the ERP space. It boasted of revenues in excess of 8.6 billion US dollars in the first quarter of 2015. Oracle is currently very aggressive in pushing the ERP scene to the cloud and if its financial results are anything to go by, it is doing very well. Its SaaS and Platform as a Service (Paas) revenue grew by 32% in the first quarter of 2015.
Info Global Solutions is a privately held American software company specializing in ERP software. It is the third largest ERP software in the world following the aggressive acquisitions it has made in the last couple of years. Infor has a global footprint similar to the top 3 ERP vendors- it has clients in 194 countries. Infor provides ERP solutions in as many as in 14 different domains. Infor’s flagship solutions are in financial systems, supply chain and customer relationships.
Microsoft is synonymous to its founder- Bill Gages. Microsoft is an American multinational technology company that develops, manufactures, licenses and sells a plethora of technology products including ERP software. Microsoft offers Microsoft Dynamics ERP solutions targeting mid-sized companies. Its Customer Relationship Business domain is particularly impressive.
The Direction Of The ERP World
Like any other segment in the IT industry, the ERP industry is going through phases of rapid evolution to meet the ever changing needs of customers. One major disruptive technology in the ERP industry that stands out is cloud computing. Any cursory search of ERP in your favourite will give you search results linking ERP to cloud computing. Cloud based ERP solutions are particularly attractive to small and medium sized enterprises (SMEs) since they are affordable. Cloud based ERP solutions just like many other IT solutions use the Saas revenue model. Under this model, users of the cloud based ERP solutions pay for the ERP services on a regular basis (mostly on a monthly basis). The costs paid for using the ERP services under this model are a fraction of the initial costs one would be required to pay for using ERP services on premise.
Other than their low costs, cloud-based ERP solutions remain attractive to many companies because of other reasons. Firstly, because no actual deployment of hardware and software is done on the premises of companies, cloud based ERP solutions can be deployed within a short period of time. The huge downtime and other inconveniences caused by on-premise ERP deployment are non-existent. Secondly, it is much easier to scale up cloud based ERP solutions as the capacity of the company rises compared to on-premise ERP solutions. Moreover, scaling up cloud based ERP solutions is significantly cheaper. Thirdly, cloud based ERP solutions are managed by the respective vendors and hence reduced need for permanent IT staff to maintain and manage ERP solutions. Lastly, ERP upgrades are much more transparent and straightforward when handled by vendors in the cloud compared to those handled by consultants on-premise.
Several big vendors are already bracing themselves for the future of ERP in the cloud if there corporate actions are anything to go by. The ERP industry has been hit by a series of acquisitions involving providers of traditional on-premise ERP solutions and providers of cloud based ERP solutions. The most recent moves include:-
Acquisitions By SAP SE To Enhance It Cloud Strategy
SAP SE acquired the assets of Coghead, an Internet based enterprise software in February 2009 after the cloud computing start up opted to terminate its services. This was seen by many industry observers as the first signal of SAP SE to delve into the cloud. The second bold move that showed the clearly showed the intent of the German software maker in cloud computing was the acquisition of Sybase in May 2010 for a staggering 5.8 billion US dollars. The deal enabled SAP fuse cloud computing, application mobility and social media in a single purchase. Although it seemed incredulous at the time, looking back it was one of the bold moves that dictated how the ERP scene was for years to come.
SAP SE then acquired Ariba, the then leader in cloud based collaborative commerce applications back in 2012 for a whooping 4.3 billion US dollars. The acquisition was meant to further help it in its strategy of expanding to the cloud and taking on Oracle. Given that at the time, Ariba’s global trading network connected and automated transactions over 319 US Billion dollars, the acquisition was certainly well-informed. In the same year, SAP acquired Successfactors for 3.4 billion US dollars to take human capital management in the cloud. At the time, Successfactors was an American multinational firm providing cloud-based human capital management solutions using the SaaS model.
In April 2012, SAP SE went on to acquire Syclo, a major provider of enterprise mobile applications and technologies. This was another step by SAP SE to follow through on its strategy of driving growth and innovation in cloud technology. Later in 2013, SAP SE went on to acquire Hybris in a bid to allow it to deliver the next generation e-commerce platform that can be deployed via cloud or on-premise. Following this acquisition, SAP SE was poised to benefit from a high level of customer insight and engagement across all channels. This would ultimately give SAP SE an edge over Oracle and IBM.
Acquisitions By Oracle To Enhance It Cloud Strategy
Following the string of acquisitions by SAP SE of several entities to help it further its cloud strategy, Oracle took the cue to also act swiftly to protect its turf. Oracle acquired RightNow, a leading provider of cloud-based customer service in October 2011. In February 2012, Oracle acquired Taleo, a human resources software company for 1.9 billion US dollars to enable it expand into cloud computing. In March of that same year, Oracle acquired ClearTrial, a cloud-based provider of clinical trial operations and analytics products. In June 2012, Oracle acquired Collective Intellect, a cloud-based social intelligence solutions provier. In September of the same year, Oracle acquired SelectMinds, a provider of cloud-based social talent sourcing and corporate alumni management solution. Oracle then acquired Instantis, a cloud-based Project Portfolio Management (PPM) provider in November 2012. In the following month, Oracle went on to acquire DataRaker, a provider of cloud-based analytics utilities platform.
In 2013, Oracle acquired several other cloud-based companies such as Nimbula, Compendium, BigMachines and Responsys. Oracle continued this trend of acquiring cloud based companies in 2014 as it went on to acquire Corente, BlueKai and TOA Techonologies.
Acquisitions By Infor To Enhance It Cloud Strategy
Infor has also acquired a plethora of cloud-based businesses to further its strategy of going to the cloud since 2012. These businesses include Orbis Global, Certpoint Systems, PeopleAnswers and more recently GT Nexus (in August 2015).
Although taking ERP to the cloud is considered by many in the industry as a necessity, companies especially the large companies, remain sceptical about using cloud based ERP solutions. These companies have already invested substantial sums of money on ERP software and hardware and hence do not find cloud based ERP solutions cost effective in the short and medium term. Such companies are also more likely to prefer stability of their ‘tried and tested’ ways as opposed to the novel cloud based solutions. These companies are also often heavily regulated and monitored that they’d want to keep their valuable data and assets on-site rather than in the cloud. Lastly, these companies are unable to quantify and manage the risks of governance, security and lock-in inherent in cloud based solutions and hence shun cloud based ERP solutions.
The ERP world continues to change by the minute because of cloud computing. Only the vendors braced for the changes will succeed. Let us wait and see!