VideoY2K giveth, and Y2K taketh away. The Year 2000 problem was a bonanza for the major enterprise resource planning (ERP) software vendors in 1997 and 1998, as many companies replaced their noncompliant legacy software with new ERP systems. But that windfall petered out in 1999. Many companies even established a so- called Y2K lockdown, vowing not to purchase more financial software until the problem had run its course.
"The number of new ERP deals is down 70 percent compared with 1998, primarily due to [Y2K]," reports Timothy Tow, analyst for Gartner Group Inc., a Stamford, Connecticut- based technology advisory firm. "We believe this market is in semihibernation and will rebound between 2001 and 2002."
But if ERP was dormant in 1999, E-commerce was roaring. As a result, the past year saw massive changes in the financial software industry, so much so that some analysts have been heard to utter the phrase "ERP is dead." The back-office vendors at the top, such as SAP, Oracle, and PeopleSoft, are running hard to catch up with the demand for Web-enabled front-office applications. Almost every ERP vendor is working one or more of the following:
- E-commerce. Customers need to be able to place orders via the Internet; to do so requires tapping into a company's pricing software and inventory software.
- Customer relationship management (CRM). This includes software that can provide sales- force automation, keep track of all customer interactions, and make appropriate views of each customer's data available online to salespeople, accounting staffers, and the customer itself.
- Supply-chain management (SCM). This enables the automation of distribution and logistics from suppliers' warehouses through manufacturing and deliveries, and permits customers and suppliers to track orders online through the company's ERP software.
While the larger financial software vendors can afford these massive investments, their smaller, cash-poor brethren have been striving just to stay in business. At Computron Software Inc. and Ross Systems Inc., a top priority in 1999 was simply to hold on to their existing customers. Clarus Corp. and JBA International were bought by Geac Computer Corp., while Prestige Software, once an independent business unit of Computer Associates International Inc., was absorbed into Interbiz, CA's new E-business applications division.
Here's a longer look at how these and other high-end accounting software vendors fared in 1999, and how they plan to rebound in the new millennium.
Second In Erp, First In Internet: Oracle For one vendor, the mood in 1999 was decidedly upbeat. Oracle Corp. posted 1999 ERP revenues that were higher than the previous year's, solidifying the Redwood Shores, California- based company's hold on second place in the industry.
Oracle now has the lead in offering Internet- based products and in integrating those products with back-office systems. "Oracle is a year ahead in Internet focus," says David Dobrin, an analyst at Benchmarking Partners Inc., in Cambridge, Massachusetts. "Its CRM and E-procurement products could do with some improvement, but it's ahead of SAP and everyone else."
"It's also made a number of functional improvements, such as in project accounting, where there were gaps," adds Daniel Sholler, an analyst at Meta Group, a technology consulting firm in Stamford, Connecticut. "Two years ago, Oracle was perceived as lagging, but now it's perceived as equivalent or ahead."
New And Old: SAP
For the industry leader, SAP AG, embracing the Internet has been a very different kind of challenge, because of the nature of its software. SAP's ERP software, R/3, is a monolithic, highly integrated system, not easily given to integrating with other applications, including Internet ones. In 1998, the vendor announced several Web-based technologies, collectively referred to as New Dimensions, that run independently of R/3.
"The SAP Supply Chain Management, SAP Business Intelligence, and SAP Customer Relationship Management initiatives are based on R/3 core technology, but they are genuine stand-alone solutions," says CEO Hasso Plattner.
This lack of integration could grow to be a problem for users of the "classic" R/3 system, according to Bobby Cameron, an analyst at Forrester Research Inc., in Cambridge, Massachusetts. "The accounting and human- resources processes are well-known, stable processes, and SAP has a home run in those areas," he explains. "But the Internet economy requires companies to implement the entire process--the whole order-to-cash cycle-- through accounting, manufacturing, and distribution." Although the New Dimensions environment is evolving rapidly, says Cameron, "it's clear that SAP has no intention of making a radical transformation of R/3 accounting technologies. All the supply-chain and CRM activity is completely outside of the R/3 environment."
SAP has smoothed over this separation with marketing and packaging, changing the name of its product from the colorless R/3 System to the chic mySAP.com, which encompasses both the R/3 modules and the CRM and SCM products. But the mySAP.com initiative is aimed more at SAP's existing customers than at new ones, says John Hagerty, an analyst at AMR Research Inc., in Boston.
Reader Comments» Post a comment