One of the biggest stories in the mid-market enterprise applications space during 2006
was Infor's acquisition of SSA Global, the
latest in a string of acquisitions that has taken the enterprise applications vendor to
revenues in excess of $2 billion in just four years, according to a recent article by AMR Research analyst Jim Shepherd
(subscription required). This particular piece of news is consistent with an overall trend in
the ERP space -- vendors are operating in a saturated and mature market and are
increasingly turning to acquisitions for growth.
Following a boom in IT purchases in the 1990s and a near universal decline in the early
part of this decade, the ERP market has made somewhat of a comeback that has seen
stronger demand from both existing and new customers, AMR's Shepherd told
Managing Automation. With its support for major business transactions, ERP is
unrivaled among enterprise software applications, and is regarded as a necessity for any
manufacturer with at least $5 million in revenue, Shepherd says.
Approximately 150 vendors were offering ERP software during the late 1990s, but the
market has been contracting ever since. Shepherd notes that the market has shifted from a hot environment for startups on an IPO trajectory a decade ago to one in which private equity companies are acquiring ERP vendors for their technology and maintenance streams under the assumption that the value of the whole is greater than its pieces. While Infor's case might be extreme, many of the largest ERP vendors have completed major acquisitions within the last couple of years, including Oracle (PeopleSoft, JD Edwards, and others); Lawson (Intentia); and Microsoft (Great Plains, Navision, and others).
In the mid-market ERP space, Made2Manage Systems has exhibited a similar strategy of
growth-through-acquisition, but with more of a micro-vertical approach.
It is logical that large ERP vendors would look to the mid-market to sustain growth,
according to Shepherd, where "millions of dollars" are up for grabs, as well as the fact
that in certain geographical areas and vertical markets there is no "high end" market per
se. Rick Parker, senior vice president of global marketing at Infor, notes that mid-sized
manufacturers are facing increasingly complex challenges nowadays, as their supply
chains become more sophisticated and as they work to comply with a growing number of
governmental regulations. Accordingly, Parker told Managing Automation he
estimates that approximately 30% of the mid-tier market is starting to look at new ERP
systems.
Those who aren't interested in an entirely new system, Parker says, are looking to "round out" existing systems with increasingly essential applications, including performance and service management, supply chain management, PLM, MES, and warehousing. Randy Flamm, founder and president of ERP purveyor IQMS, agrees, noting a trend in the market toward "extended ERP," whereby manufacturers are calling for solutions that fill in the gaps between traditional accounting and inventory functions with EDI, quality, and WMS applications.
Technology
On the technology side, "in a transition that will ultimately be viewed as profound,"
Shepherd says, ERP is shifting from client/server-based platforms to an environment
based on service-oriented architectures (SOAs). Drawing a parallel between the market's
"first major paradigm shift" from host-based MRP to client/server ERP in the early
1990s, and now from client/server to SOA, Shepherd suggests that the ERP universe
eventually will be based solely on industry-standard Web services.
SAP, Oracle, and Microsoft are "well down the path" of defining their SOA strategies.
These vendors are currently engaged in rewriting their various ERP offerings, Shepherd
says: Oracle's Fusion is due out in 2008; SOA-based components of SAP's mySAP suite
are available today; and Microsoft is taking a "wave" approach, having applied its so-
called "Project Green" rewrite to five products in the Dynamics set so far.
While offering an SOA-based product for sale today is not mandatory, vendors should
have a strategy that reflects how and when the technology will affect their customers,
Shepherd suggests. Unlike the shift from host-based to client/server platforms, the shift to
SOA can, in most cases, be done on an evolutionary basis -- via a series of releases that
introduce Web services as a foundation for enabling application components to share
business logic and data. Many vendors are choosing this gradual, release-by-release
approach to SOA, with an eye toward easing the transition for their customers, Shepherd
says. The last thing they want to do, he says, is send a message that an existing product is
or will soon be obsolete, for fear of losing maintenance revenue, from which much of
their profitability and R&D funding come.
Infor's Parker says his company's customers are just beginning to hear about SOA, and
that most are looking for an integrated solution, as opposed to purchasing disparate
technology from several vendors and having to worry about configuring their systems
accordingly. That said, Parker says an SOA strategy is "critical" for Infor moving
forward, with some of its offerings already SOA-enabled, and specific plans to continue
on this path in 2007.
Areas manufacturers should consider addressing first with Web services, Shepherd
suggests, are those in which their ERP system interacts with the outside world: for
example, accepting orders over the Internet or passing requirements on to suppliers.
These types of applications are perfectly designed to capitalize on standards-based Web
services.
A main benefit afforded by SOA is more flexibility in terms of how vendors can package
their products. The modus operandi in the traditional packaged software business,
Shepherd says, is that vendors write one version of the product and try to sell it to as
many customers as possible. However, he emphasizes, the one-size-fits-all approach is
not optimal for varying types of markets and business sizes, and vendors are looking to
SOA for a way to offer separate versions of their software with certain capabilities
configured according to vertical market or company size.
Below, a look at the 10 listings in MA's ERP software directory most often viewed through our new
Product
Comparison Tool during the last quarter of 2006.
1. Vantage, an "out-of-the-box" offering from Epicor
Software Corp. targeting make-to-order and mixed-mode manufacturers
2. IFS Applications, the vendor's suite of more than 60 Web-based components
3. Vista, Epicor's ERP package for small and mid-size
businesses
4. Oracle Applications, the vendor's integrated ERP package
comprising sales, service, supply chain, manufacturing, finance, and human resources
modules
5. Intuitive
ERP from Intuitive Manufacturing Systems (a Made2Manage Systems business unit)
for small and mid-size companies, which integrates enterprise resource planning and
customer relationship management functionality
6. Microsoft Dynamics' GP (formerly Great Plains), with key
features including financial management, HR, analytics, and supply chain management
7. mySAP ERP, SAP's next-generation ERP application and
successor to SAP R/3, powered by the vendor's NetWeaver platform, addresses the core
and extended business software requirements of mid-size to large organizations.
8. Infor's ERP SyteLine, built and deployed on Microsoft's .NET platform,
presents data in a Microsoft-like interface with the data management abilities of standard
Microsoft productivity applications.
9. Exact Software's Macola ES (Enterprise
Suite) provides native business process management tools including exceptions
monitoring -- such as a change in a customer's buying pattern -- which can be defined and
monitored from start to finish.
10. Infor's ERP Visual, for small and mid-size users, offers scalable applications
that support a range of planning and production strategies, including custom, make-to-
order, assemble-to-order, make-to-stock, or mixed mode.