The ERP market in recent years has also undergone significant development. The market leaders have become more dominant (Oracle / SAP). To extend the life cycle of these systems, several additional market-specific applications are developed without changing the underlying transactional processing system. However, because of this the complexity and the costs of these solutions are greatly increased.
The majority of today’s more traditional ERP systems have been developed with the technology of the 80s / 90s. Typically on-premise installations with a client/server architecture and a user interface that is mostly based on Windows 95. The aforementioned technology developments require in our view a fundamental change, where the way in which integrated ERP applications are built, implemented and managed have to be shaped fundamentally different.
Thus, a proper application of the cloud paradigm on integrated business ERP systems will significantly reduce the costs of these systems. In addition, the innovation speed will increase significantly because only one version of the application – with multiple configurations – is used by all customers (‘single code base’). This means that smaller companies in particular, who could not afford a sophisticated ERP system in the past because of the high costs and complex implementations, now are able to deploy integrated business systems at relatively low cost to automate their complete business processes. This creates an expected new market of small and medium-sized enterprises who will deploy integrated cloud based ERP solutions. In addition, in the coming years a large aftermarket of some larger companies that have purchased traditional ERP systems in the past and have made customizations on those systems, is expected to arise to renew their application landscape, partly because of technological innovations and the need to implement cost reductions. This means that in addition to a strong growth potential in the SME segment, also a strong growth is expected in the segment of the larger companies to replace existing systems.
The developments outlined above are reinforced by the maturing of cloud technology and data centers, which also make “mission critical” applications, such as ERP applications, scalable and reliable. Modern techniques, such as fault tolerance, clustering and failover, which have been applied previously in heavy mission-critical systems only, are now also available as standard functionality in cloud-based systems.
The basic principle underlying a cloud-based application is a ‘single code base’ and a ‘multi-tenant’ architecture. This means that all customers use the same application. This has the important advantage of having product innovations as well as product improvements be available for everyone in a fast way. In a cloud-based application customization is in principle excluded. In order to offer customers in case of complex applications, such as ERP applications, still the necessary flexibility, it is of great importance that the application can be configured in such a way that it meets the requirements of the customer. In addition to the application of configuration parameters is the application of flexible business processes (workflow) hereby among others of interest.
For a new generation of business applications that are developed according to the principle ‘Mobile first, Cloud first’, business event management is of great importance. We see a shift from ‘pull’ to ‘push’ oriented systems, where for example the user on his/her smartphone automatically will receive a message when important events, such as late delivery of a product, occurs and that the user’s attention is required. This is also called ‘management by exception’. Also the integration of ‘social features’ in the specific context of a business application is an important development, whereby an increasing integration occurs between the widely used consumer based ‘social media apps’ and professional business apps.
Of course, to provide good support for the implementation process is essential for customers, so that strong cost reductions can be achieved here. To prevent unnecessarily long (and expensive!) implementations, the premise must be that the user interface is very intuitive, whereby the user is guided by the application in a natural way. Here, the mobile apps for smartphones can serve as an example! Furthermore, ’embedded learning’ systems (active) and/or e-learning systems (passive) can be helpfull. When applying ’embedded learning’ systems he idea is the system will follow the user, and acts as such as a ‘personal assistant’. Examples are automatically offering choice options, for example based on previous choices, such as Google Search or Bing Search, or perform tasks based on voice commands (like Cortana for Windows or Sisi for Apple).
Major market initiatives for cloud-based business applications include: SAP Business by Design, Workday, Dreamforce and Microsoft Cloud initiative for ERP systems.
Overall we see the following application trends in the market:
- A shift from ‘on premise’ to ‘cloud based’ ERP solutions. This development was started several years ago with CRM systems (Salesforce, RightNow) and now also starting to extend to ERP systems.
- Ability to adapt the application configuration parameters to changing business requirements. This covers both the flexible and ‘on-demand’ deployment of specific business apps as adjusting the operation of the apps themselves.
- Shift of embedded business logic to business processes to achieve greater flexibility.
- Good support of business event management, allowing an effective response to exceptions (management by exception based on an event push mechanism).
- A meaningful application of social features in the specific context of a business app. This provides ‘native social’ apps, similar to the Salesforce proposition in the field of CRM.