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. Gartner is now using the term ‘postmodern ERP‘, saying that cloud vendors are now disrupting the old ERP providers. When your company invests 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.


One thought on “Review of the Gartner ERP Magic Quadrant

  1. Pingback: Revisiting the Gartner Tier 2 ERP Magic Quadrant | The Manticore blog

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