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Are ERP Systems Becoming a Commodity?

Half-way to becoming a commodityIt depends what we understand by ERP. The R and P are crystal clear: The software plans resources. But for who? Traditionally, the E related to enterprises is situated in the industrial environment where manufacturing and the supply chain are the main activities. Prior to that, the -still young- IT industry served the market with accounting software. We could consider that as the first ´big bang´ of commercial software.

It might be good to shed light on the term ‘commodity’ in this context. The market describes a commodity as a class of goods or services that is supplied without qualitative differentiation with regards to who produced or delivered the product. An ERP-as-commodity would thus be a software system that does not really offer any distinctive functionalities or advantages compared to the other ERP offerings available. Arguably the current ERP system offering can be considered a commodity. For some enterprises it is, but for those that require specific functionality or flexibility is isn´t. The fact is that the gaps are closing and time is expected to erase or minimize the differences.

One of the few independent ERP Consultancy firms, Panorama Consulting, describes the ERP offer and implementation result in their 2014 ERP Report. This result is based on feedback that they received from their surveys. A remarkable finding in this report is that only 3% of the companies, or Enterprises, had no “true-system” and were “paper-based” prior to the implementation. That leaves 97% that repeat… And only 9% report to have obtained the business benefits that they expected. With regards to the ERP offer, relating to their shortlist of 16 ERP Vendors, most implementations have selected their final supplier after extensive research and comparison. The phrase “…after extensive research…” actually means that it was not easy to spot the 10 differences.

So, if traditional ERP systems are becoming a commodity, what is the next -or third- ´big bang´ in commercial IT systems? To get a closer view, let’s take a look at the key ERP trends. Other sources confirm the same of what is nicely put together in this infographic: Gartner calls this the nexus of forces and it is known by their acronym SMAC.Are ERP - SMAC

Each of these forces affect a number or range of industries, and these industries are bound to adapt strategies that allow them to ride the wave of change. There is however one industry, or sector, that is –heavily- affected by all four and that is retail. Luckily, for those enterprises that are in retail, there is a new and rising breed of company-wide software systems that are not the typical ERP: These are the commerce platforms. The main difference compared to traditional ERP systems is that these commerce platforms are customer centric and offer a complete, intuitive and compelling front-end that runs on any web browser and that either is connected to a legacy back-end ERP or feeds into their own complementary back-end. What should be specifically scrutinized during the selection of the commerce platform is the ability to adapt. SMAC has only recently been identified and who knows what is still to come. Retailers should therefore value native web architecture, cloud deployment, agile aAre ERP - Quote Jeff Bezos what is NOT going to changend extendible solutions combined with robust on and offline operations. The quickly changing world and Omni-powerful customer wants this and the retailer needs this.

Concluding, if you are in a business that is facing the Omni powerful Customer in retail, and where SMAC still has several surprises up its sleeve, then the offering is not that big. Retailers thus, cannot implement the old school of ERP systems and need agility in their deployment more than anything else. They need an assemble-to-fit software tool that is capable of facing current and future challenges. And there is really only one. For retailers ERP is not a commodity.

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