A good friend of mine recently became CIO of a financial services firm and was given his first major project last month: make the complete accounting, financial, and loan provider data and applications available 24/7 on any iPad or Android-based tablet from any office, at any time.
The majority of loan provider applications are cloud-based and his company is running NetSuite. His corporate office is in Asia and cloud-based applications made it possible for the company to launch and operate in California within months. He’s been given six months to transform this mobile vision into reality.
Another CIO of a major A&D manufacturer I recently visited wants vendors to challenge him more to get greater value from his investments in legacy data and ERP systems. Using ERP to run batch reports alone has nearly caused project schedules to slip, so the focus internally is on real-time system integration of project management and accounting systems. He’s also been given the task of revamping accounting and financial systems by October, 2012, and they just started late last year.
Gartner’s Hype Cycle for ERP
Considering these two extremes in the context of the Gartner Hype Cycle for ERP (shown below) and the recent report SaaS and Cloud ERP Trends, Observations, and Performance 2011 (free for download until January 9, 2012) published by Aberdeen last month several take-aways emerge.
- CIOs are under increasing pressure in 2012 to enhance, modify even replace existing ERP systems while standardizing technology across the enterprise at the same time. The most risk-averse way around this is to add applications to single instance ERP backbone systems, with analytics and Business Intelligence (BI) being the among the most in demand.
- Cloud-based ERP in the Enterprise and Small & Medium Businesses (SMB) are accelerating along the Hype Cycle faster than Gartner indicates. Enterprises are using Cloud-based ERP systems as part of their two-tier ERP system strategies due to the Total Cost of Ownership (TCO) and time-to-deploy advantages, and the flexibility of tailoring everything from user interfaces to workflows to their specific requirements. Highly specialized Cloud-based ERP suites including those from Plex Systems are gaining traction due to their expertise in specific industries and the compliance-related challenges inherent within them. In SMBs, the cost and time-to-deploy are two major drivers with concerns over security being the biggest impediment to growth. Gartner reports that they are seeing Cloud-based ERP adoption fastest in companies with fewer than 200 users overall.
- Cloud-based ERP systems most often considered in industries that have high variable costs, rapid transaction cycles and tend towards higher Return on Invested Capital (ROIC). Based on the research SaaS and Cloud ERP Trends, Observations, and Performance 2011 the industries who are the most willing to consider Cloud-based ERP versus on-premise are Financial Services (22% SaaS versus 44% on-premise); Healthcare (42% SaaS versus 58% on-premise); and Professional Services (56% SaaS versus 58% on-premise).
- Large companies (over $500M in annual revenue) using Cloud-based ERP systems are opting for hosted deployments managed by their ERP vendor (10%) or an independent 3rd party (11%), with just 2% relying on a SaaS platform. Aberdeen defined small organizations as those with annual sales under $50M, midsize organizations having annual sales of $50M – $500M. The following is from SaaS and Cloud ERP Trends, Observations, and Performance 2011:
- ERP mobility will be a dominant force from the shop floor to each sales call where quotes, orders and contracts deliver real-time order and pricing updates. How a given manufacturer chooses to sell is even more important than what they sell in many industries. Equipping manufacturing, quality assurance, production scheduling, procurement and sales to have immediate data on what’s going on with orders, customers and suppliers is critical. For the sales and service teams, real-time data is the fuel they run on. There’s a chronic time shortage in many, many companies right now, and bringing greater ERP mobility from the shop floor to the sales call will increasingly be seen as a means to lessen the time crunch. 2012 is the year where mobility gets real across the enterprise with solid performance numbers being generated as a result. For companies with large sales forces and service organizations, integrating to key ERP systems to gain real-time data will quickly lead to increased sales and higher gross margins on service and warranty repairs.
- Gartner predicts that by 2015 enterprises who are successfully using extreme information management strategies (Big Data) will outperform competitors in their industry sectors by 20% in every available financial metric. The following is the Priority Matrix for ERP, 2011 showing what Gartner believes to be transformational technologies and strategies in ERP.