Review of the Gartner ERP Magic Quadrant

magic-quadrantIt’s been six years since I posted my views on the Gartner ERP magic quadrant for Tier 2 vendors. It has been one of the most viewed posts on my blog, but I think it’s now time to have a relook at the ERP magic quadrant (MQ) and the ERP market as a whole.

For reasons that don’t seem to make sense Gartner have changed a number of points about this MQ category.

  1. It’s now called “Single-Instance ERP for Product-Centric Midmarket” which changes the whole category completely
  2. The term ‘product-centric’ was added, but since ERP is a product this new term would seem to be an oxymoron,
  3. They now don’t differentiate between Tier 1 (ie, expensive for large corporations) ERP and Tier 2 (for midmarket companies), which was why the original MQ was useful for midmarket companies.

The obvious Tier 1 ERP products are SAP, Oracle and now Microsoft Dynamics AX. The growing issue in the ERP market however is that other vendors might be called Tier 1.5, ie, getting there, like Infor; not forgetting of course about brand new entrants like Workday. The old Tier 2 vendors are still there – QAD, SYSPRO, JDEdwards, Epicor, Sage – but now up-and-comers are appearing – NetSuite, Plex, Acumatica. Why not have a category for the Tier 1.5 and Tier 2 vendors?

So, here are my views on the ERP MQ, and where ERP is going.

  • The ERP sector is getting to resemble the old days of the big car manufacturers – eg GM, Ford, VW, Toyota – who didn’t realize that there was a new bunch of manufacturers emerging – eg, Hyundai, Kia, Mahindra – who would take a large slice of the market. That’s leaving out the brand new set of competitors with disruptive technology like Tesla. IDC analyst Mike Fauscette recently commented about incumbent business software vendors:

your business is at risk more from new models that can appear almost overnight than from new products/services or changes in pricing … A large part of the future of business software is tied up in the new platforms (PaaS) that are forming and evolving today.

  • 10 years ago companies needed the MQ to get a insight into the category. Now it’s easier, quicker and cheaper to search the Internet these days to find out about ERP vendors. You may only need to refer to the MQ if your board needs placating.
  • What’s the value of ERP? Aberdeen research pointed out the the prime reason for leading companies to implement is to “serve as a complete and auditable system of record”.  ERP therefore should be your system of record, the ‘single source of truth’ for financial reporting and auditing, but it doesn’t have to do everything else. For the industry-specific line-of-business functions – customer support, supply chain, etc – consider best-of-breed and cloud. The way you make it work is by integrating those apps back to the ERP. Another post by Mike Fauscette predicts:

As software as a service (SaaS) replaces old monolithic systems, the need for the older application packaging becomes irrelevant. The new reactive systems are a loose coupling of microservices based on a business process not a collection of monolithic application blocks that can be integrated into a “suite”.

  •  The ERP vendor market will change significantly in the next 5-10 years, because the use of technology for business transactions and processes will change due to the growth of cloud computing. When your company invest in an ERP, bear that in mind.
  • For ERP vendors, they need to stop thinking that customers value ‘an integrated business management system’. They used to in the past when there wasn’t any alternative, now they want something that benefits the part of the business they need to fix or transform, the rest is unnecessary fluff. A recent PWC report by uses the term ‘hybrid ERP for applications that are fit-for-purpose and cloud-based, not be the highly complex, expensive ones of the past.

Traditional ERP systems have long been criticized for their high cost, lack of flexibility, and difficulty of implementation. Hybrid ERP assemblages of modular components, on the other hand, typically cost less, allow companies to pick and choose among their various functions, and offer greater mobility.

The ERP landscape is going to go through a period of disruption and change in the coming years. As a customer or future customer of an ERP vendor, make sure you don’t lock yourself in for too long, or spend too much time and money on lots of specific customizations. There will be options in the next few years that many businesses don’t even realize yet. Keep your options open by leaving some of that ERP investment for better tech spending in the future.

Taking the steam out of STEM

Taking the steam out of STEM

stemFor the last few years, there have been many calls and articles about the importance of STEM – Science, Technology, Engineering, Mathematics. I’ve seen the acronym used most often in US-based communications, but it’s seen as an issue in other countries as well; for example, in South Africa we tend to talk about “Maths and Science”. The STEM proponents say the growing these skills is the only way we will be able to ensure employment in a world that is becoming more automated and smarter. But I am now hearing a different view, that there is more to work and life than maths and science skills.

In 2007 Geoffrey Moore started arguing a new case – the revenge of the liberal arts graduates – saying that as we move from computing to communications, this new connected world will place

an enormous premium on people who are fluent in communications.

It took a while to catch on, but in 2015 there have been a number of articles that are pushing the ‘arts’ argument.

An article in the Harvard Business Review titled Build STEM Skills, but Don’t Neglect the Humanities argued that we need a STEMMA focus – the M referring to management, and A to Arts.

how could it be beneficial to the future to deemphasize the arts, which inform our knowledge of beauty and meaning in human affairs? All the brilliant discoveries of STEM will not solve the grand challenges of today’s world — ignorance, poverty, intolerance, and political conflict – without the practical wisdom of humanities-trained leaders.

… It is only through the humanities that we will be able to appreciate the answers that superintelligent computers will give us when we ask them the hard questions. It is only through the humanities that we will increasingly recognize and build on what we humans uniquely are. It is through STEM plus MA progress that we have the chance to become practically wise.

Analyst Vinnie Mirchandani on his New Florence blog alerted me to an interview with a NASA astronaut Leland Melvin who uses the term STEAM (A=Arts).

My passion with the “A” is that it helps us be inclusive in school and also promotes project-based learning … Project-based learning is what prepares students for real-world problem solving

The issue was discussed in another Harvard Business School article which asked the question:

As machines increasingly perform complex tasks once thought to be safely reserved for humans, the question has become harder to shrug off: What jobs will be left for people?

and answered it with:

it’ll be those that require strong social skills — which it defines as the ability to work with others — something that has proven to be much more difficult to automate.

citing research that showed:

nearly all job growth since 1980 has been in occupations that are relatively social skill-intensive … high-skilled, hard-to-automate jobs will increasingly demand social adeptness.

It appears that social skills are still important.

  1. They are valued in jobs across the entire wage distribution
  2. Social and cognitive skills are complementary not competing
  3. Work that only needs low levels of social skills are also likely to be routine jobs that have a high risk of automation.

Taking somewhat of a middle ground was a 2014 article on Medium that discussed the essential skills needed to survive the new future of work. Technology was one needed skill, but problem solving and self-management were the other essential skills.

As someone whose degree was more in arts than science, and got into the tech industry almost by accident, I am glad to see that arts are starting to make a comeback. The difficulty from a personal perspective is that I am surrounded at home by family members with engineering and medical backgrounds who believe that an arts education is a wasted one. Next time the issue comes up, I will try to use the points raised in this blog.

Bimodal IT doesn’t mean complexity

bimodal_itFor over a year the Gartner analyst group has been talking about the need for ‘bimodal IT’. An article in InformationWeek described it as the need for an IT organization to

split its focus between the core services that make other things possible and the more exciting possibilities of digital innovation.

When I first heard of bimodal IT I was still working in the ERP software space. Coming from that traditional background I used to think that any bimodal IT effort had to be somewhat big and complex. But now I’m at a cloud software company I’m beginning to see things differently.

According to a recent study, 44% of enterprises expect cloud computing to help launch new business models, and this will increase to 55% by 2018. Moving some of your enterprise apps to the cloud may therefore give you one bimodal IT project.

There will be cases however where an IT department needs to develop apps. The growth of platforms-as-a-service (PaaS) offer higher productivity gains than traditional on-premise developments environments, and these don’t just enable faster starts but also quicker results.

Then there was something I learnt recently about the power of the much used, and also much maligned, product – Excel. If people are going to organize, format, tabulate or calculate data, they will most probably use an Excel spreadsheet. Excel formulas are a standard business application logic than everyone understands. But Excel is also architected for integration because it is stored in a standards-based XML-based format. This means that using an PaaS for integration, business users can create sophisticated reporting and analysis solutions using a tool they already know and understand using data from other sources. This is something we wrote about on the company blog recently – making Excel awesome.

So bimodal IT doesn’t have to be big and expensive, nor does it only need to depend on IT. I would be interested to learn of other options that make bimodal IT easier and quicker.

Why monolithic systems of record will disappear

cloud-computingI thought that having left the ERP industry I would not have any reason or inspiration to write about it, but I was wrong. My experiences since I started working in the cloud application market have led me to believe that the era of the monolithic systems of record, as typified by ERP, might be coming to an end.

When I started in the ERP field as it was taking off in the late 1990s, only large organizations could afford, or saw the rationale for, ERP. It took another ten years for ERP systems to penetrate most sizes of business. Now, because moving off ERP is a mindset change, and organizations have invested hugely in enterprise software, I don’t believe that change will happen overnight. But as the economics and business benefit of cloud become more apparent, and a younger generation assume decision-making roles, it could occur over the coming decade. Several writers have commented that the growth of cloud computing bears many similarities to the expansion of electrification in the early 1900s.

Here some of my reasons for believing that monolithic systems will disappear.

1. You don’t need an ERP as single source for company truth
Many organizations use specialized applications for key customer-facing operations, and increasingly these are SaaS (software-as-a-service) systems. With modern iPaaS (integration platform-as-a-service) apps, software integrations can allow different systems to be a system of record for a set of business functions. The only system that needs to be centralized is accounting, and with companies are already using iPaaS to synch operational data into the accounts system.

2. Legacy systems diminish the ability to innovate
According to a recent survey, 90% of IT decision-makers say legacy systems prevent them from adopting new digital technologies that they need.

3. The push to digital disruption requires new approaches
An article by Constellation Research explains that ERP arose out of the business process re-engineering movement and the disruptive innovation caused by the PC. In its day the emergence of ERP software disrupted the existing business model, but there is now the new disruptive influence arising as a result of cloud and mobile computing. It would be unlikely that a new company these days would opt for an on-premise ERP; more likely it would look for a SaaS solution. “New business model = new ERP model!”

4. The cloud is now acceptable for many business-critical solutions
Analyst companies are reporting a change in the way the cloud is perceived. Gartner notes that fears about the suitability of the cloud for critical applications is now a thing of the past. Forrester Research found that agility is the most important driver of cloud adoption. The fact that many cloud providers are now certified for compliance and security regulations has also made them more acceptable.

5. Ease of SaaS upgrades
SaaS software has the advantage of “bite sized, frequent, managed- by-the-vendor upgrades“, compared to the headaches of managing on-premise upgrades. I am noticing a proliferation of SaaS applications with a fairly narrow industry focus. What enables that is that is a relatively easier to develop and maintain cloud-based applications (compared to on-premise), and SaaS subscription model enables profitability at an earlier stage than the traditional license fee model.

6. ERP consultant recommends alternatives
When ERP consulting firm Panorama recommends alternatives to typical ERP solutions you start to ask whether ERP may be close to its sell-by date.

Companies are increasingly being made aware of the possibility of digital disruption to their business. It’s difficult to cope with a disruptive business model that requires agility by staying with a monolithic legacy system like an ERP.

Why I have really joined the smartphone crowd

iphone4A few years ago I wrote about my experience of changing to a Nokia (now Microsoft) Windows Phone. I was a fan of the Nokia hardware design, and was working at an ERP software company that had a partnership with Microsoft, and I didn’t want to be like the crowd (i.e. iPhone or Android), so it seemed a reasonable decision to go the Windows Phone route. I also referred to reports about smartphone market share that I thought were biased – see here.

The truth is that now I have joined the crowd, the iPhone crowd. At my new cloud software work I had started to become frustrated that I couldn’t use my Windows phone the way my work colleagues used their iPhones. Then I dropped my Windows phone and was told in the ship that it would take weeks to repair; and I couldn’t use my older phone as it was now way out of date. In the same shopping centre was an iStore which was having a sale, so I went there and in less than 15 minutes walked out with an iPhone 4 (the newer phones were far too expensive to buy outright).

Now I marvel at the user experience of the iPhone, both for iOS and for the apps on the phone. It really surprises me that the UX is so good, and I regret not having got an iPhone sooner. In my opinion, the problem with the Windows phone UX is that it has been influenced by the history of Windows and the emphasis on business rather than consumer experience.

One aspect struck me immediately, and that is the way iOS 8.4 pushes notifications on the screen – when there’s more than one you get a list of notifications. In Windows Phone 8, notifications are like a pop-up, the most recent one supersede earlier ones. I prefer the iOS approach way more. The new Action Center tries to resolve that issue, but it didn’t impress me.

As for individual apps, there seems to be more thought put into the user experience by the app developers. The only apps that are the same on iOS as on Windows Phone are the Microsoft Office apps.

There have been a number of articles recently about Microsoft’s new strategy for mobile phones. I tend to agree with the view that Microsoft is trying too hard to make the Windows Phone experience good, for example there’s a suggestion in Time:

Windows Phone needs a better hook than a great app launcher and some clever design flourishes. It could be in the form of killer hardware that no other platform has, but more likely, it’d have to be through tighter integration with the rest of Microsoft’s ecosystem.

The truth is that having tasted the iPhone experience, I can’t see myself going back to the Windows Phone.

Why cloud computing will grow

cloud computingAn article in the Economist in 2014 noted that the expenditure on cloud applications was small compared to the huge amount business spent on IT as a whole. However, it pointed out that corporate reluctance to cloud computing was starting to be overcome.

Since April when I started my new role at Flowgear, I have become increasingly aware how strong, convincing and valuable it can be for business to embrace the cloud rather than resist it. I also attended the Gartner Application Architecture, Development and Integration Summit in London to help promote Flowgear, and heard senior Gartner analyst Andy Kyte speak on how old applications, i.e., on-premise systems, are being relegated, and even decommissioned, in favour of newer applications, which are increasingly cloud-based. His comment to me about the rate at which cloud computing was replacing some major on-premise systems was startling.

A major reason in my case for my previous ignorance and dismissal of cloud computing came from my work and background. As a baby boomer working in the ERP industry, my whole work experience was around on-premise applications, and I now realise that it was very difficult to see outside that envelope. I think it is also the perspective of many IT people of similar age and experience, and it may mean therefore that until the next generation become the decision makers, cloud computing won’t really take off. This may apply more in large businesses – in smaller ones and start-ups the Generation Xers and Millennials are already in charge.

Two recent articles on the ZDNet site have covered the topic of innovation and why cloud computing will grow. One article discussed how the enterprise technology incumbents were not seen as enabling innovation, and published survey results that showed cloud computing was the main platform for innovation.

The other article reviewed the drivers that would make businesses move to the cloud. It will boil down to competing in a new world of business. This will mean that companies will be running:

mostly off-the-shelf enterprise software with a handful of custom-developed applications, probably containing core IP.

It’s going to take some time, but:

Enterprises will make increasing use of platform as a service, enabling developers to create web and mobile apps for any platform that integrates easily with software as a service and on-premises applications. Cloud technologies will be pervasive, with all corporate data managed using a cloud-based business model, underpinned by a hybrid cloud infrastructure.

I am now starting to wonder – I got my first experience of the enterprise software industry in the late 1990s, when ERP was beginning to come of age; within five years it was booming. I am now doing a similar thing with enterprise cloud computing; where that will be in 2020?

Is Microsoft like the renewed IBM?

In 2007 I wrote a blog that posed the question whether Microsoft was becoming like the old IBM. I used a number of cases that made Microsoft look like the IBM of the late 1980s and early 1990s – before IBM’s near demise and subsequent revival.

Now I see a blog post by James Governor who reckons Microsoft’s new CEO Satya Nadella is like IBM’s saviour Lou Gertner.

CEO Satya Nadella is increasingly looking like Microsoft’s Louis Gerstner – that is, an executive who can look at things from the customer perspective, with a truly outside-in view, and drive the cultural change needed to revitalise a company from the ground up. Nadella has a relaxed, confident demeanor that makes you want to lean in and engage, and now by extension, so does Microsoft. In terms of its corporate evolution Microsoft currently looks like IBM in the late 1990s, supporting whatever environments customers choose, but with Azure playing the role of Global Services, and the key customer being the modern software developer rather than the CIO. In other news Microsoft’s timing is pretty much perfect.

In the end time will tell, but I do believe Governor might be right.