Focus on Enterprise Resource Planning

Analysis of News Events
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The computer industry is replete with transitions, evolutions, revolutions, distractions, and unforeseen discontinuities. These elements turn all the trends on their ears; upset all the apple carts; and cause plenty of fear, uncertainty, and doubt in companies that invest large sums of money in technology on a regular basis and in companies, on the other side of the bargaining table, that try to peddle their hardware or software so they can pay their own bills. Years from now—or maybe only months from now, depending on your time horizon—the 14 months from June 1999 to August 2000 will be remembered as an extremely trying time in the computer business, particularly for vendors that sell what has come to be called enterprise resource planning (ERP) software. To put it bluntly, ERP vendors have never had to do so much for so many customers at such low prices and in such a hurry.

ERP software is, like computing itself since about the mid-1970s, one of those necessary evils that the modern world has to contend with. ERP programs are outrageously expensive to install, difficult to use, troublesome to customize, and nightmarish to extend and support as the years roll by. In this respect, buying ERP software is more like making a capital equipment investment, such as building a factory, than it is like buying software. But hardly anyone would argue that ERP software, whether you build it yourself or buy it from one of the 100 or so companies that offer full suites, is something that modern companies can do without.

The main culprit of ERP vendor woes in the past year was thought to be the Y2K bug, but I think that the Y2K bug’s direct effect on ERP sales has been overstated. Yes, many companies bought modern ERP software to avoid having to rewrite their own code to become Y2K-compliant, but most did so not because they couldn’t kill the Y2K bugs in their code in time to meet the December 31, 1999, deadline but because they had no hope of ever matching in their own programming the level of sophistication that a third-party ERP package offers. The Y2K crisis has come and gone, and ERP vendors are still in crisis mode. Why? E-business. ERP vendors have spent the better part of a decade trying to convince companies large and small around the world that they need the sophisticated accounting, manufacturing, and distribution control that only a modern ERP suite can deliver. And they were on track to start reaping the benefits of the ERP revolution that began in 1999 and extended out as far as any of us could see. Then, along came e- business.

The fundamentally disruptive Internet is making ERP vendors sweat bullets as they try to figure out how to extend their products not only to work with the Web but also to reach into supply chains and out to customers and partner trading networks. Not only that, but ERP vendors also have to contend with new software delivery methods, notably the application service provider (ASP) model that this focus section looks at in depth. If they don’t become ASPs as well as ERP vendors, their competitors may eat up their market share. Just being a good ERP vendor is not enough anymore.

For companies that have to buy ERP software, the issues have not changed all that much despite all of this tectonic activity in the ERP market. They still have to decide whether to build or buy an ERP suite; they still have to go through an arduous and rigorous selection process; and they still have to decide whether to outsource those programs or run them in house. There are very few midrange companies that have the software and business expertise of the top 100 ERP vendors. Maybe it is time to get out of the software writing business and back into your own business. This focus section on ERP intends to make that process a little easier for those of you who think that now is maybe a good time to reconsider your core application strategies.