With best regards from Lise Neely

Have you ever thought that the famous Gartner hype cycle was missing the last stage of “slow painful descent to oblivion?” This study may be another milestone in the obsolescence of the ERP model.

ERP is predicated on the notion of one solution to do all things regards of industry, business domain, geography, company size etc. Your report points out many of the signs that the ERP value proposition is waning:

- Rapid adoption of the cloud because of cost and agility reasons. It should be noted that most first and second tier ERP are built on legacy code. It is very difficult for ERP to migrate to SaaS without rewriting.

- Industry-specific and last mile concerns have become increasingly important. Many industries can become less efficient through homogenized ERP. Despite the “portfolio management” argument, it turns out that less expensive industry-friendly solutions are more effective and cost less even when integrated with different systems.

- Acceptance of so many companies of using Tier 2 solutions shows that the once-dominant notion that biggest is best is on the descent. Organizations realize that big ERP is not materially less risky than other solutions.

- Upgrade costs including the maintenance of customized code has become more visible to CIOs. The ERP market seems to be a diminishing returns for upgrades era. Each new version adds risk to what is actually working.

There are some other signs of the descent:

- Recognition that the entire software stack has commoditized. Proprietary stacks are holding customers hostage.

- The end of technology proprietary “economies of scale.” Many in the ERP business suggest that smaller firms can no longer compete with the top tier. Not enough people, not enough customers. Nothing is further from the truth. While the top tier is struggling to maintain legacy code and integrate among consolidated company products, more agile vendors are building extensible net-native applications on the open source or Microsoft stacks.

- General resistance to high-cost maintenance with little value. This recently created some backlash. And, the emergence of 3rd party service providers are digging into ERP company maintenance revenue. That’s with maintenance representing the majority of ERP vendor revenue.

Where are we on the descent? Tier 1 ERP companies might be in the same position Tier 1 networking companies (Novell, Banyan) were in 1994.

Business has always moved faster than ERP’s could keep pace. They just weren’t made to keep up…they were made to consolidate and control vast empires of process, data and technology.

The Two-Tier strategy, while actively being considered, seems to have ginormous draw back: it uses another ERP to innovate changes in process, data and technology.

Doesn’t this seem like doubling down on the initial problem? It didn’t work the first time so lets try it again. Except this time, let’s integrate two disparate systems and create more support, upgrade, compatibility and change management issues. Pushing two of these complex, rigid systems together seems short sighted.

A new category of enterprise software exists that offers a different strategy: one that achieves the agility and constant innovation required without any of the “risks” associated with the two-tier strategy. We call our version of this new category BabbleApps.

BabbleApps de-couple the needs of business for employees, vendors and customers from the existing ERP. Companies are able to rapidly deploy on-going, simple, powerful, grass-roots innovation.

BabbleApps are designed, executed and measured for results BEFORE investment is required in as little as one week. Those resources that know your business and opportunity the best define exactly how the BabbleApp needs to work. Every company is unique and BabbleApps fit your Great Idea like a glove.

BabbleApps live on any network, are accessible via any browser capable device, are purchased on a subscription basis (even for “on-premise” deployment) and they consume and generate corporate and desktop level data without any hesitation.

BabbleApps are scalable down to a single user in a single function. Only those employees who need to be impacted are impacted; reducing change management. You can start with just one employee with the new BabbleApp before interrupting any others.

Full Disclosure: BabbleWare created this next generation of software and has delivered dozens of BabbleApps to its customers.

Re:

“Organizations continue to face an onslaught of business requirements that their existing ERP systems can no longer address. Stuck in the past century, these ERP systems are expensive to run, difficult to upgrade, and impossible to modify for today’s fast changing requirements.”

This is spot on–and a new breed of “Agile ERP” can supplement the existing corporate standard legacy ERP, to deliver the business agility required to capture opportunities and respond to change. At Openbravo, the main thrust of our new Openbravo 3release is toward SMBs, but we think it could make a lot of sense for the larger enterprise as well. What is your take on web-based open source ERP in the two-tier context? I notice you mention cloud, but not open source, which is why I ask.

Thanks for your consistent insights and solid writing!

Two-tier ERP, to optimize while gaining innovation, seems to be a hallmark of large cap companies. Examples I’ve experienced

Berkshire Hathaway, doesn’t toss out existing systems, for the corporate boiler plate system.

Another case is the largest Nasdaq high tech companies (under NDA here), who rapidly ramp up new product lines, especially in green field locations (can be overseas without Cloud broadband infrastructure).

It seems the CIO’s at mid-size companies get drawn into one-size fits all ERP…

And what seems to tip mid-sized CIO’s hands is the absence of proper Cloud based ETL services to roll up Two-Tier figures for reporting figures to HQ. Consolidating MRP for central purchasing, being another missing service…