5 reasons why classic ERP systems urgently need to reinvent themselves
For many years, the big players in the ERP industry, such as Microsoft, Sage or SAP, dominated the market and still have the largest market shares today. But little by little, market dynamics are causing the big battleships to falter. Five reasons why the major ERP systems must reinvent themselves or suffer significant losses in the long term.
1. Monolithic Architecture
Until well into the 2010s, the maxim was "The more that comes from one source, the better." The picture has changed completely. Individual smaller and more agile systems perform subtasks much more efficiently than large ERP systems, whose implementations are usually weaker in the overall solution concept. CRM systems are a good example of this. If anyone knows an ERP module for CRM that can come close to Hubspot, please let me know ;-) This is one of the reasons why SAP is buying an Emarsys, so as not to lose further ground here. The dependencies of the individual components are so high in traditional systems that even small deviations usually mean huge projects. More on the topic here ...
2. Missed the leap to the cloud
How difficult it is to maneuver the large solutions is also shown by how slowly the move to the cloud has progressed. Anyone who hosts their SAP ERP on premise today is likely to have fallen off their chair at the cost of moving to the cloud. The scope of the cloud solutions then also only gradually affects all the necessary features. Those who urgently need smaller modules are again dependent on the big picture. Cloud hosting, SaaS or PaaS models only gradually achieve real market maturity. You can hardly talk about API-first with the big players.
Those who want to implement unique business processes in classic ERP systems are always heavily dependent on the inventiveness of their agency. While modern systems can be flexibly adapted in the back- and frontend and extended almost infinitely via modules or APIs, the classic systems can often only be individualized with workaround solutions or deep interventions in the core (loss of updateability). A good example of this is the SAGE task center, a great flexible tool with which you can map individual processes and integrate any fields of the database. However, the range of functions is severely limited and creativity is required to implement the necessary functionalities.
4. No focus
For a very long time, the big battleships have dominated the market without having to make a big effort, and as a result, they have not only overslept the technology, but also lost focus. If you take a look at the solution and version history of the big players, you will no longer know what distinguishes which product. In addition, there are numerous industry solutions whose justification for existence is not entirely clear. Once you are trapped in this world, you will be talked into the other solutions and the lockin is perfect. If you ask me, in the not too distant future you will have to ask the legitimate question "Why do I need an ERP at all?" if the major ERPs do not deviate from the path of "We can do everything".
5. Inflexible license models
The crowning glory of incompetence are the licensing models. My favorite example here is always Microsoft. If you have a Microsoft on premise server, you pay a flat rate per month for each user who works on this server. If you also use an ERP system on this server, you again pay a flat rate for each user per month, which would be ok in principle. However, in the meantime personalized accesses are sold, i.e. you have to register the users completely with the provider. No other user is allowed to use the computer with this account, which is completely impossible, for example, on a warehouse computer at a picking station. If you also have an agency that offers its own software modules in this ERP, you pay license fees again :-) You don't even need to dream of flexible cancellation periods in this "spider's web".
The big battleships are still ahead, mainly due to their high lock-in potential. But if they don't think more customer-oriented in time and recognize AND implement the trends of the market (API-first, cloud hosting, modularity), this will change in the foreseeable future. More agile systems like Odoo or Actindo are already waiting in the wings to take over.