ERP is dead, long live two-tier ERP

As SAP has been grabbing the lion’s share of the ERP headlines in recent weeks, it seems only fair and just to look a little further afield.

Updates on the ERP newswires today even feature commentary on the fact that some of SAP’s products are now being certified for use with Oracle’s Database Appliance.

All SAP products based on SAP NetWeaver 7.x that are also certified for Oracle Database 11g Release 2 (single node or RAC) can now be used with the Oracle Database Appliance.

But the market is not just developing with these two firms running the show.

Magic ERP Quadrants from Gartner also feature Oracle’s wider product set (including eBusiness Suite, Peoplesoft and JD Edwards), Sage ERP, Microsoft Dynamics, Epicor ERP, Lawson M3 ERP Enterprise and Infor.

Is mobile ERP the next big thing?

But what’s really coming next in Enterprise Resource Planning and is it just mobile interface extensions to ERP suite so that users can interact and view dashboards on the move?

The truth is that mobile ERP really IS the next big thing…

… but there are extensions to this truth i.e. a new breed of two-tier ERP is surfacing and the practice is currently being championed by business management software company NetSuite.

The two-tier model has been constructed in order to allow business customers to keep hold of their “on-premise” ERP investments in Oracle (or some other ERP system), but at the same time still be able to equip and fit out subsidiary companies (or smaller divisions of a main company) with what is hoped to be a more agile cloud-based ERP/financials system that gives the central HQ operation the real-time visibility it needs, but at a lower price.

In basic terms, two-tier ERP enables subsidiaries to tailor the ERP to their own special needs and support their local accounting requirements. It ensures that a remote subsidiary doesn’t end up with a burdensome, hard-to-maintain on-premise ERP deployment.

The developer message

The message for software application developers who will have to work to engineer the integration and deployment of these systems is that they can keep hold of investment in your existing ERP systems at the corporate level, while “empowering” these subsidiaries and divisions with a second ERP system that gives them more agility and better total cost of ownership.

NetSuite’s Craig Sullivan is bullish about his assertion that the old ERP systems drain the innovation from the IT budget. The company’s VP & GM of international argues the key to knowing how aligned your ERP systems are with your business imperatives is measuring how much of the IT budget is devoted to innovation rather than maintenance.

“Analysts from Forrester to Gartner measure this closely and have found maintenance spend ranges from 50% to more than 90% of a typical IT budget.

Simply changing the equation and reallocating the IT budget from maintenance to innovation is almost impossible with old, on-premise ERP because every costly upgrade, patch and fix equals money and time that isn’t spent on tailoring ERP to meet the needs of the business,” said Sullivan.

New decentralised business = decentralised ERP

So we operate in a world of increasingly decentralised business. Software application developers have to be able to work with more distributed a) teams and b) users — and plugging a firm’s ERP centric so-called “systems of record” into these decentralised hubs will not be easy.

“Old [non decentralised] ERP forces you into an expensive centralised structure unless you can afford to dispatch IT teams to every corner of the globe,” said NetSuite’s Sullivan. It means maintaining desktops at multiple locations, upgrading clients and dealing with information fragmentation across local clients.”

So the call here is to get out of the stone age ERP age. Is a call to shout that “ERP is dead, so long live two-tier ERP” too strong? NetSuite’s Sullivan speaks of what he calls “modern demands for real-time information and boundless flexibility” and says that there is only one answer available to us here: the cloud.

So going forward then — you can forget centralised ERP as we move to decentralised cloud-based ERP with automated upgrades that aligns continuously with a firms operating environment.

Does it all sound to perfect and conceptual or are we about to toast a new monarch?