Moving Off and Moving Up: A Discussion of Moving to New ERP Platforms

    The following article, written by Ann Grackin of ChainLink Research, discusses how many organizations are still relying on outdated and nearly defunct versions of popular ERP systems, and how ERP developers are providing incentives for users to move up to the new platform. Does this sound like a scenario that you've encountered? Check it out:

    Infor, Epicor, Aptean, QAD, UNIT4, SAP, Microsoft, Oracle and others all have the challenge of owning many solutions built over 20 years ago or more. In fact, many enterprises are still running twenty-year old software. Still, many firms have yet to buy their first ERP, and they will certainly not purchase the old ERPs written in RPG, BASIC, and ABAP or with Progress databases and so on.

    That many companies continue to use the older systems is a testament to the developers who, back in the day, created a truly functional product. However, these older systems are costing more and more to support and ultimately, may not be supported. Though most of the solution providers have promised to continue to support the older software, there is ticking time bomb here. At some point they may stop providing updates and give old customers a push to move off the old systems. And the baby boomers who wrote and support this code will be alsomoving on, retiring, making it difficult to support the old code. Having fewer resources means less responsiveness and more expensive support fees over time.

    In this ERP series we will explore the road ahead for ERP as ERP companies reinvest to reinvent themselves. We will also look at the strategies that ERP providers are using to incent their customer to move up to the new platform. We will look at the portfolio companies and compare what they offer to assist their customer’s journey to these new environments.

    Part One—Moving On

    We know the back story—somewhat. Through the 1980s and 90s there was an explosion of ERP companies as the software market moved from module-based approaches to an enterprise approach centered on financials and the processes that are part of accounting and administrative processes. The market looked very different then. Companies like Baan, Ross Systems, SSA, PeopleSoft, JD Edwards, Made2Manage, QAD, and of course, SAP and Oracle were all growing. From 1995 through 1997 it was unclear who would wind up on top. Some companies made mistakes (some CEOs wondered if they should have a client server offering, but too late) and there were some clever moves by others that just knocked out their competitors from some markets.

    Interestingly, due to some key decisions most of the ERP made—industry and micro-vertical focus, many customers hung on. But many others did abandon their old ERPs due to growth, changes in their own company or the need for assurance that their technology partner would be by their side for the long haul. ‘No profit’ is a nonsustaining business model. Enter the investors. (You can read about them in Who Owns the ERP Market?) Many users breathed a momentary sigh of relief since at least they knew there was somebody with some cash and ‘a plan’ behind the software. But….

    The business world has moved on again with virtual, federated, and Omni models. The tech world has also moved on to the cloud with mobile, social, and search representing the biggest tech investment areas for both consumer and business applications. (The decision by ERPs to have a cloud offering looks an awful lot like that mid-90s decision about client server. Those who made the move thrived. Those who didn’t ….well, you know.)

    For many end-users, the world does not look at all like the 90s. They need to move on technologically. The older software does not provide access to all the new capabilities, platforms, and performance advantages offered by the new technology. It can be expensive to continue to integrate to the many more applications and technologies required to conduct business today. And face it. Those kids you hire today know C# and Android—not RPG and EDI.

    However, it is a huge effort and an emotional undertaking to implement an ERP. A lot of time, money, and faith have to go into such a project. That effort is what hundreds of thousands of companies are thinking about now.

    At the same time, a new generation of businesses is emerging. Entrepreneurialism is exploding, leveraging federated and virtual business models, enabled by the internet and cloud/SaaS software.   These companies ‘get technology.’ And they are putting competitive pressure on the traditionalists. Small and mid-size businesses, therefore, are buying ERP at a fast clip. They can’t and won’t go back to old platforms. We are all moving on!

    It has been no trivial task for Epicor, Infor, Aptean and others to modernize their offerings. Billions of dollars have gone into this work. As well, it is big risk to move beyond continued innovation on all the old products they have. After all, once a customer decides it is time to move on, that opens the door—possibly widely—to evaluate new solutions from other providers. ERP providers have had to create an enticing road map and services to keep customers in the family. 

    So what does it take to entice customers to move off the old ERP and move up to a new platform? In this report we will look at the major ERP enterprises’ transformation: What did they do and what skills, products, and services have they developed to support their customers as they move off the old and move up in technology access and performance?

    The Year, or Years, of Living Dangerously

    There are been several critical juncture points where decisions made—or not—may have made the difference about whether an ERP package is thriving today.

    As we have been alluding to, key decisions have to be made on time. Such an example was offering a client server version, probably the one best decision SAP ever made as opposed to SSA, who avoided client server and then were forced to do a ‘hurry-up and fail’ client server migration in the latter half of the 90s. In retrospect, it may be easy to see these decision points as obvious—yes some were—but others maybe not. As a buyer, you have to keep up with the tech market in a timely way to know what to ask your tech provider: What is in the roadmap? What key decisions should we be making together (user community and the provider) to position us mutually for growth on the road ahead? The customers should be actively involved. In fact, they do have much more power than they often sense.

    One CEO we interviewed stated that although he knew that his cloud ERP provider did not have everything some of the mega-ERPs had, he knew that everything in the future would be in the cloud and that he wanted to position his business for this emerging world now. Thus, some companies are making the choice to go with cloud now.

    The Road Often Traveled, Now

    So what are some of the common strategies ERPs are doing to modernize themselves? 

    Restoration Software—Of course, ERPs don’t have to create all these ideas out of thin air or write all that code from scratch. All, or most, of the parts are out there. But they have to be accessible. So the first stage is adopting Service Oriented Architecture and making all the code, tools, etc. as services. Once that is accomplished, both the old applications and the new can access them. ERP developers can then have a modern platform for innovation with either their own on premise or cloud solutions. Most ERPs embarked upon SOA work during the 2000s as part of a way to drive down support costs, increase innovation, increase developer productivity through re-use, and improve integration. 

    The New UI—Mobile tablet and smart phone platforms are the rule now. It is critical to understand how these mobile platforms are implemented and what tools are used to ensure your versatility and integration. Non-proprietary and highly efficient technologies should be used to address the challenges of the mobile platform. 

    Micro Verticals—Industry specialties are not a new thing. Many of the early players got their start by founders who worked for an enterprise that was lacking in good technology options. Many of the old ‘Ms’: MAPICS, Marcam, MaxCim, and ManMan ERPs (many are part of Infor today) all had industry focus. As well, Ross ERP (now part of Aptean) was focused on the process industries; Eclipse (part of the Epicor portfolio) focused on plumbing/HVAC wholesalers/retailers; Visibility on discrete build-to-order businesses; and AspenTech focused on Oil & Gas and Chemical industries. These types of companies frequently have their roots in a functional bias such as manufacturing (those Ms), retail, construction, and so on. So industry focus is not a new story. Those were the companies sprouting forth the in the 80s. In the 1990s, the next-gen ERPs were more generalists, evolving from an accounting base (SAP is such as example). But we digress.

    Cloud—Today’s new ERPers are the cloud group—Plex, NetSuite, etc. They are not the focus of our story, but they are the grain of sand that is causing these oysters—from SAP to SSA (Infor) to re-invent.  Of course the cloud strategy is the number one restoration expense. Some, such as Epicor, who now says cloud is 10% of the business and growing, have added cloud as an option. Others, like UNIT4, have declared “we are a cloud company.” Recent wins—government and education contracts beating on-premise options like Oracle—are validating that strategy for them.

    Tools and Services for Upgrades—Providers need to make moving up as easy as possible. This is probably the most critical and least attended to investment ERPs need to make. You see, there is the risk that while the customer is evaluating your new software, they will also evaluate a new provider. So providers need to think diligently about these upgrade paths to avoid defections. The answer to this may not be coming from traditional consulting/system integrator models. The problem is two-fold:

    • Consultants get paid by billable hours. So although their services are oriented toward supporting the upgrade, they may not offer you all the incentives (semi-automated upgrade, fast-track methodologies, or special pricing) to make the upgrade process faster. It’s not their MO and they may just not have the tools for it.

    • Consulting firms often don’t have the intimate knowledge required for risk-free upgrades. In fact, CEOs of the ERP companies have been concerned about this issue and have had some ‘stern’ discussions with their partners about skill development and getting re-certified on the new software. ERP providers, especially in the mid-market, have been hiring and building up their own implementation teams to meet their need, since many have seen a brisk business of new purchases from their existing, as well as new, customer base.

    The greater goal is keeping the customer in the family, any way they can. However, the more expenses beyond the software purchase that an end-user incurs, the bigger are the obstacles to change. More obstacles to upgrade can actually encourage customers to look outside for replacements. So automated approaches to upgrading, data cleansing tools, and business process management (BPM) tools are often pursued to ease and speed up transformation.

    In Part Two of our ERP series we will provide a side-by-side look at the solution providers and some of their main strategies and see if they are a good deal for users.

    Read the full article, along with the author's references, here.

    -Daniel Ford, DiCentral