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Death of ERP as we know it

By Richard Minney, co-founder of iBE.net
August 29, 2012 11:26 AM ET

Network World - ERP systems are used throughout most large enterprises, with SAP and Oracle accounting for 80% or more of the installed based in regulated sectors such as pharma and energy. But these same systems, with their million development budgets and long learning curves, have been singularly unsuccessful in smaller enterprises.

Small businesses often rely on long-since outgrown systems such as Quickbooks, lashed together with a range of best of breed point-solutions, each one with its own architecture, user interface, and data input needs, often requiring the same data to be input multiple times.

Try as they might, legacy ERP players have not yet made a dent in the vast and untapped market that is small and midsized businesses. So instead they raise maintenance fees for existing clients, acquire and graft on point solutions, and look for new technology plays to get existing customers interested in spending more money.

At the same time there has been an explosion in the number and popularity of small, best of breed web-based business applications. From Google Documents to Salesforce.com CRM, these applications are often delivered via the cloud, offer fairly narrow functionality with a mostly fixed set-up and non-configurable user interface, have very limited industry-specific functionality, are easy to deploy and use, are mobile and social, and compared to the legacy ERP systems at least, are cheap. Sometimes, in fact, they are even free.

What gave rise to the interest in these Web-based tools? Various factors are influencing business management software decisions, such as:

A* the explosion in mobile users

A* consumer apps raising the bar for business user interfaces

A* social collaboration trends as email gets replaced by chat and conference

A* general acceptance of cloud-based business applications as being reliable, scalable and cost-effective, thanks to a vibrant and competitive cloud-infrastructure market.

But really, it all boils down to one thing: cost. Today's businesses, large and small, simply refuse to pay upwards of $20,000 per seat for the fully loaded software, hardware, consulting and internal implementation labor that legacy ERP systems demand.

And today's businesses, large and small, simply won't pay upwards of $2,500 per seat per year for the fully-loaded subscription, add-on service and outsourcing fees the same ERP vendors are gunning for with their on-demand offerings.

Simple steps to keep your ERP upgrade on time and on budget

What's more, the legacy ERP systems, with their thousands of developers, sales people and global offices, won't survive on fees ranging from $5 to $50 per user per month that smaller businesses in particular are willing to pay for their systems - for all their systems combined, that is. Because they use outdated technology, it costs today's ERP vendor more than that to simply deliver their on-demand software to a new client, even without taking into account their fixed costs such as sales, marketing and software development.

Originally published on www.networkworld.com. Click here to read the original story.
Reprinted with permission from NetworkWorld.com. Story copyright 2012 Network World, Inc. All rights reserved.
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