In our last article Redefining the boundaries of ERP, we discussed how cloud and the growth of Software as a Service (SaaS) are paving the way for a new, emerging paradigm steadily disrupting the established players. And we also shared our view on how forward-thinking organisations are ‘shrinking the core’. This second article in our ERP series looks at the rise of challenger ERP and explores both the plus points and the areas to watch out for when embarking on the ERP replacement journey. Here’s what you should know…

The ERP ‘mega vendors’ are increasingly under pressure from a new breed of challenger ERPs. Where once options were limited to a choice between Oracle, SAP or Microsoft, today cloud focused providers such as Workday and Infor along with former SME platforms such as Unit 4 and Sage, are making big inroads into the large enterprise space.

The established giants are responding with their own cloud offerings (S/4 HANA from SAP, Cloud from Oracle and Microsoft’s Dynamics 365 offering). And in some instances, such as Oracle’s 2016 acquisition of Netsuite, even acquiring the competition! However, there remains confusion among many current and potential customers about how some of the big players’ cloud platforms fit into their broader portfolio of offerings.

Growth of the disruptors

Cloud native providers such as Workday and Infor have continued to gain traction with large and small enterprises alike. Providers who were historically perceived as SME focused are also making inroads by offering more complete functionality (take Unit 4 and Sage for example).

It’s not hard to see why their relatively simpler go-to-market messages have resonated with both business and IT decision makers:

  • Straight forward pricing and subscription models
  • Configuration only options which are faster to deploy and restrict customisations
  • Consumer grade interfaces
  • ‘Plug and play’ integration via standard APIs to integrate with other applications, hardware and data sources
  • Perceived lower total cost of ownership (TCO)

But many of the old challenges remain (and some new ones!)

There is reason to be cautious…

Integration continues to be an extremely challenging area. Almost all ERP implementations require systems to integrate with legacy environments. A fast-growing API economy has emerged with the likes of Mulesoft, Talend, OpenLegacy and others specialising in working across both the new and the old technology landscape. The reality? Integration often delays projects. Start analysis as soon possible to mitigate downstream disruption.

Data quality is and will continue to be another complex area that is frequently underestimated in terms of the effort required to clean and load. Any solution is only as good as the data running through it. Start the data analysis and cleansing early.

The TCO may not be as attractive as often pitched when extrapolated over longer time periods (beyond the 5 year mark for example). Subscription pricing is attractive up front but, it remains fixed and is subject to annual price increases (depending on how good your negotiation is). This is versus the more traditional perpetual licence model (and on premise hardware depreciation) where you would expect to see a marked reduction in TCO over time. Go into the commercial discussions with your eyes open and look to build longer range cost forecasts to understand what the true TCO looks like.

The different pricing models offered by the newer players, such as per employee / workers, versus traditional seat licences, is attractive for lean operators. But it also means there are certain things you need to consider when negotiating, especially if you are a fast-growing business with a heavy contingent, part-time or seasonal workforce. Again, make sure you model different scenarios as part of your analysis.

While security concerns regarding cloud are not what they once were, accountability for performing proper due diligence still sits with the client – read the small print and seek external advice if needed. Pay especially close attention to what happens if you need to reclaim your data.

Don’t fall into the trap of assuming that quick and cheap aligns with high quality delivery.

Some of the smaller players claim to have a complete offer, but in much the same way as the bigger providers scaled over time, functionality has been acquired and questions need to be asked about how truly integrated these solutions are. Don’t assume that just because the supplier owns the solutions that they have tightly integrated them.

Implementations from the newer providers are still subject to overruns on delivery timelines and budgets. The need for quality project oversight is still there, and the trade off of time, quality and cost still applies when selecting systems implementation partners (SIP). Don’t fall into the trap of assuming that quick and cheap aligns with high quality delivery. You need to factor in the overhead to manage your partners.

There are now genuinely competitive alternatives to the big players – from functional, architectural and commercial perspectives. There are massive upsides to moving to the cloud and adopting the emerging platforms, but taking the time to perform proper due diligence continues to be critical to the decision making process.

Read the first article here.