This is a guest blogpost by Mark Armstrong, GM and GVP EMEA, Rimini Street.
In the next 5-10 years I see three business and societal trends that will potentially lead to a radical shift in how we adopt and use enterprise applications. Ultimately, I believe this will lead to enterprises consuming applications in a very different way, namely shifting to a best-of-breed model rather than the traditional one stop shop suite approach.
Three trends impacting enterprise software
The first trend is the generational shift in the workforce. In 2019 Millennials in the US became the “most populous” generation. This generation has only known the internet era and is incredibly comfortable with digital applications. They are already moving into senior positions in the workforce and in the next 11 years they will become the elder, experienced citizens of the workforce as they hit 50. Their attitudes to technology are going to be increasingly influential in how enterprise software is used.
The second trend is the app culture we operate in today. Data suggests the average smartphone user accesses over 30 applications per month (I typically use that each day). As the current workforce becomes more dominated by Gen Y and subsequently Gen Z we will see enterprise users expecting similar experiences to the ones they have as consumers. They are used to operating multiple applications using different interfaces, comfortable in the knowledge that they are going to a particular application, because it best serves the function they require. Additionally, it can be easily downloaded, used and discarded when it is no longer relevant. This mindset shift is going to have an increasingly important impact on how we use enterprise applications.
The third trend is the growing competitiveness in the global economy. According to the Boston Consulting Group in the mid-20th century 77% of companies remained industry leaders (measured by income) for five years. Today, only 44% of companies remain industry leaders for five years. In the same timeframe the rate at which companies drop out of the Fortune 100 has increased by 60%. If you stand still you are going backwards and the status quo is therefore a strategy for disaster which means they must continuously strive to innovate and evolve. This, again, supports the case for best-of-breed consumption over enterprise software suites. Best-of-breed ensures companies can choose the software that is “best-in-class” for their industry or particular business function. Using SaaS models it also means software can be added and changed much more rapidly to respond to changing requirements.
Changing your ERP system will not drive your innovation strategy
If you don’t want to be average the harsh reality is that you should not direct your precious investment dollars wholesale to upgrading to the Oracle Cloud or SAP S/4Hana platform. Why? Bluntly, your ERP platform does not hold the key to your competitive advantage. Upgrading to the latest version of SAP Financials in S/4Hana will not enable you to get closer to your customers, identify market opportunities or fend off threats from rivals.
Investment in ERP systems are trailing significantly behind Cloud Computing, Machine Learning/Artificial Intelligence, and Digital Transformation. CIOs that I talk to have clearly identified where competitive advantage can be gained. This further supports the argument that how we consume enterprise applications will evolve dramatically, as a best-of-breed strategy is better suited to driving such competitive advantage.
While the traditional enterprise software vendors claim they are developing cutting edge technologies, their apparent focus is on shifting customers to their cloud propositions and are investing significant dollars to build out the functionality in these platforms. Today these platforms often do not offer the equivalent functionality compared to existing internally-deployed platforms, so they have a long way to go to convince customers their core propositions are enterprise-ready, never mind that they both can deliver cutting edge solutions in fields such as artificial intelligence (AI).
On the contrary, in my experience, there are many start-ups in fields such as AI, the Internet of Things and cybersecurity, which offer far more innovative and industry-relevant functionality. These technologies can be adopted as SaaS applications quickly and affordably without the threat of long-term vendor lock-in.
“But my vendor is pushing me to move to their Cloud ERP platform…”
There will definitely be enterprise customers who will benefit from adopting the cloud solutions offered by the likes of Oracle and SAP. For those multi-national organisations that have been SAP shops for many years with operations all over the world using SAP it makes sense to consider S/4Hana. If not now, then at least at some point in the future.
However, there are a large number of SAP and Oracle customers who increasingly see their relationship with these vendors as transactional – just review the user group surveys. Customers do not feel these vendors are fulfilling their requirements, particularly the desire for greater flexibility in how they use and interact with applications. The more digitally savvy the enterprise user workforce becomes the more they will recognise the limitations of existing enterprise software to fulfil their needs.
Of course, Oracle and SAP will likely resist this paradigm shift as much as possible to defend their market positions. Therefore, users need to understand the strategies these vendors will deploy and know what their options are:
- End of Full Support Deadlines are a Red Herring. Both Oracle and SAP have impending deadlines on existing applications to end premium support to encourage customers to move to their Cloud platforms. Users should know they do not have to move and can stay put on their existing platforms, but still get full support from third-party support vendors like Rimini Street
- Plan your strategy at your pace. It will be important not to be distracted by the encouragement to shift to Oracle Cloud or SAP S/4HANA. You must assess your existing IT infrastructure and understand where you can drive quick wins by innovating through best-of-breed applications; and where you need to plan a longer-term strategy to modernise your enterprise applications. If you adopt third party support there will be no forced march to the Cloud. You will be able to maintain existing applications internally-deployed with full support while you decide your approach
- Be business-driven. This is maybe obvious, but your strategy should identify those applications which have the most impact on the bottom-line and if modernised could drive competitive advantage. Adopting a more selective approach, using best-of-breed, will enable you to demonstrate more clearly how you are delivering value to the business
- Funding innovation. Often the trickiest question for the CIO to answer, but if you maintain your existing licensed ERP applications using third party support you will also have resources that can be re-directed to funding innovation.