Talk about a grab bag of legacy applications. Easton Bell Sports, formed over the years via the merger of several independent sporting equipment manufacturing businesses, until recently had a half-dozen aging enterprise resource planning (ERP) systems in place. Since early 2000, the company had tried, in fits and starts, to orchestrate an enterprise-wide migration to a more current and consistent platform. The privately held mid-size manufacturer conducted research, brought in outside consultants, and even went as far as to create a comprehensive ERP migration document. Yet, by 2005, Easton still hadn't pulled the trigger.
Eventually, however, the pain of living with multiple, aging ERP systems hit Easton's C-level suite, and a search was initiated for a CIO who could implement a migration strategy.
"There were stability issues, growth issues, and we couldn't do the innovative supply chain processes we wanted to do with the existing ERP systems," explains Sharon Nelson, the CIO hired to oversee the ERP consolidation and upgrade project. Using its patchwork of ERP systems, for example, Easton couldn't easily automate the process of contracting with outsourcing partners or gain visibility into in-transit inventories.
Easton finally decided to migrate to the MySAP Enterprise 5.0 ERP platform. The company went live with the new ERP system in three divisions in October 2006, and it plans to complete its rollout to all five of its divisions by the third quarter 2008.
Just as Easton struggled to build momentum around an ERP migration, many small and mid-size manufacturers remain leery of pulling the plug on legacy systems that can still get the job done. Given the cost and complexity associated with an ERP implementation, many don't see the value in ripping out old systems for the sake of implementing state-of-the-art technology. At the same time, many others with highly customized legacy applications are gun-shy about interrupting day-to-day operations to put new systems in place and retool key business processes.
For many manufacturers, however, this reluctance to let go of legacy ERP may no longer be an option. Today's business climate demands that even small manufacturers address global collaboration and supply chain visibility that older ERP systems may not support. Customers are also demanding new ways to conduct business over the Web that bring many legacy systems to the breaking point.
In addition, manufacturers with multiple sites, like Easton, are increasingly looking to gain competitive advantage and address compliance issues by whittling down the number of ERP packages in use to a single instance, if not a small handful of applications. Add to that the rampant consolidation among mid-market ERP providers in the past few years, and many manufacturers say the time is ripe to re-examine the whole issue of migration.
"If their software in its current state can't allow them to connect with customers in the way they want to over the Web or through electronic data interchange (EDI), or their customers are changing the rules on how to do business and the software can't accommodate that, then there becomes a compelling reason to do something," says Judy Sweeney, senior vice president at AMR Research Inc. "Companies will make the move, but they'll move more for business reasons than the fact that they're afraid their product won't be supported."
Making the Business Case
Not surprisingly, ERP vendors — many of which have traditionally targeted larger manufacturing customers — are now aiming their products and messages at mid-size companies with aging legacy systems. And many of those vendors, SAP included, are crafting their migration stories around service-oriented architecture (SOA), a foundation that they say is a prerequisite for adapting to a continually changing business climate and serves as a flexible platform for integration.
SAP, for example, makes the pitch that the combination of its NetWeaver enterprise SOA platform and its focus on industry best practices and preconfigured solutions can help mid-level manufacturing customers achieve best-in-class business processes not possible with legacy ERP systems.
Mid-size companies are under the same pressures as larger manufacturers to improve collaboration and inject agility into their responses to changing business conditions, according to Bob Frey, industry principal, consumer products at SAP. With SAP's preconfigured set of offerings, Frey says, mid-market companies can get into a modern ERP system and avoid much of the time, expense, and consulting commitment that traditionally has been required to create a blueprint for best-practice business processes.
"One of the biggest roadblocks has been the cost and risk attached to migrating from legacy ERP," Frey explains. "Our biggest competition has been when customers opt to do nothing — not necessarily losing to other competitors. Once a customer understands a deployment can be done rapidly with lower cost than they thought, it becomes a legitimate alternative to consider."
In a bid to attract more mid-size manufacturers, SAP is expected later this year to roll out a new ERP suite, code-named A1S. The product, now in beta review, is said to offer easy deployment and a Windows-like user interface. A1S, targeted at companies with 50 to 500 employees, also will reportedly be available on a subscription basis.
To sweeten the value proposition to mid-market customers, SAP also offers its Safe Passage program, in which it is targeting JD Edwards and other Oracle legacy ERP customers with monetary credits on older systems in exchange for a license to the SAP SOA-based ERP architecture. SAP's Safe Passage deal, while effective in enticing companies like Easton to follow its migration path, recently came under fire, however. Rival Oracle Corp. filed suit in March, alleging that SAP illegally acquired Oracle materials that gave SAP access to customers that might be candidates for Safe Passage. SAP has said it will vigorously defend against the claims.
Interim Upgrades
For its part, Oracle is also dangling SOA as a carrot to lure mid-market manufacturers running legacy applications to migrate to its next-generation, unified Fusion ERP platform. However, in recent months, the company has downplayed the full Fusion migration story in favor of talking up its Applications Unlimited Initiative, under which Oracle promises to continue building out its existing ERP applications, including new versions of JD Edwards World, popular among users of the IBM System i platform, and the PeopleSoft Enterprise release. With this strategy, Oracle is service-enabling its existing ERP products to let customers take advantage of new capabilities, including easily integrating modules, as an interim step before a wholesale migration to Fusion, explains Lenley Hensarling, Oracle's vice president and general manager of JD Edwards EnterpriseOne.
"We're enabling customers to address their needs today without having to make a leap before they're ready," Hensarling says. "We're allowing customers to take on new products in the SOA architecture in areas like compliance, service and warranty management, and workforce retention, and do so in a way that costs less to maintain integrations while making them more flexible."
This leg of Oracle's strategy is similar to the approach taken by Infor, which, in recent years, has snapped up many mid-market legacy ERP players, including MAPICS, Geac, and SSA Global Technologies. Infor in March unveiled its Open SOA strategy, an event-driven, standards-based architecture that promises to allow applications and modules to be deployed and upgraded with little disruption to other enterprise systems, according to company officials.
Incremental Change
Unlike SAP's and other companies' SOA approaches, which will require users to replace older systems with new, proprietary SOA architectures, Infor will deliver the new capabilities in incremental product releases, at no additional cost to customers. That approach will allow customers to add the functionality to older platforms as they need it.
The company has already started on the Open SOA journey, embedding the basic event-driven infrastructure within many of its enterprise applications. In addition, it is now building out some of the core components of its SOA infrastructure, such as master data management. More details on Infor's product roadmap are expected to become available in the fall of 2007.
"It will take the next three to four years to complete the journey," says Bruce Gordon, Infor's CTO. "We're taking an evolutionary approach because we need to help customers evolve at their own pace along the [SOA] path to get to more agility."
Infor's SOA roadmap was a big selling point for Organic Valley Family of Farms. The organic dairy farmer cooperative knew that its legacy ERP system — Exact Software's Macola — was tuned more for discrete manufacturers than process manufacturers, and that it wasn't meeting the company's needs, particularly regarding supply chain functionality. Organic Valley was also experiencing huge growth. And while it wasn't quite ready for a full-blown SOA platform, it liked the idea of leveraging SOA in an evolutionary fashion to integrate new functionality in areas such as warehouse and transportation management.
The company opted for Infor's Adage ERP system in 2004 and went live with the software in January 2005.
"We were comfortable with Infor's approach towards moving to SOA," says George Neill, director of IT at Organic Valley. "We don't need it today, but knowing the way our business is going, we'll have to improve the foundations of integration to keep up. Infor's SOA roadmap fits with when we're ready to take it on."
Exact declined to comment on the replacement at Organic Valley.
Not every ERP vendor expects to attract mid-size manufacturers migrating from legacy systems by promising an SOA future, however. IQMS, for one, made an early bet on a single database strategy built on Oracle database technology and is pursuing a path of filling out all of the "white space" around basic ERP functionality to help its customers avoid the need for best-of-breed software and what it says is complex integration. That strategy, founder and President Randy Flamm says, is what's attracting a lot of legacy ERP customers to the IQMS platform.
"A lot of the SOA hype has come about because ERP companies merged or acquired other products ... and they need to come up with a way to hook things together so they can talk," Flamm says. "Part of our philosophy — and our biggest strength — is [that] when you're with us, it's all or nothing."
Whether a manufacturer takes the all-or-nothing IQMS approach or reaches for a blockbuster SOA environment like the one SAP promises, migrating from one or more legacy ERP systems to a new environment is a huge undertaking, fraught with all kinds of cultural and change management issues, in addition to technology challenges. Before taking that step, Easton's Nelson says, mid-size manufacturers should know exactly what they're getting into.
"When you do a migration, it's a huge amount of work. You can't imagine how much," Nelson acknowledges. "You wouldn't go through it unless you got business benefit and added all kinds of capabilities you didn't have before."