VideoBrilliant as a descriptor of national unity, e pluribus unum isn't a bad rallying cry for IT strategy either. From the many databases and complex software systems that run large companies, every CFO would love to extract one complete, reliable, and timely view of operations extending from the factory floor to the bottom line.
Yet technological unity has proved to be, if anything, even more elusive than the political kind. Most companies rely on a huge number of software systems, either by choice (a given product is deemed a must-have regardless of its fit with existing infrastructure), circumstance (mergers have resulted in a company reliant on a host of competing products), or mismanagement (various divisions have made independent buying decisions with scant regard to overall strategy).
The resultant multitude often seems less like a rainbow coalition than an unruly mob, a situation that enterprise resource planning (ERP) software vendors continue to capitalize upon. Their pitch? Given that most software applications need to interact with other applications — not to mention underlying systems such as databases, the Internet, and an expanding array of "middleware" — integration has to be a top priority for IT departments. And what better way to tie applications together than to buy as many of them as possible from the same company, thus enjoying out-of-the-box integration?
The appeal of that argument is a major reason why IDC analyst Dennis Byron predicts that despite the current economy, spending for ERP software will increase by 6 percent this year, slightly outpacing growth in the overall software market. That's a far cry from the boom times of the late 1990s, when Y2K and E-commerce drove massive investment in ERP. But, declining stock prices aside, ERP vendors have proved resilient to a subsequent bust. Their customer relationship management (CRM) software has provided one lifeline, and beyond that they have proved adept at offering a continually expanding array of other products.
That array, says Jim Morlan, CFO of Viewsonic Corp., explains why his company's investment in ERP software accounts for "the lion's share of our total IT budget." What's more, even though he believes his company, a $1 billion manufacturer of CRT monitors, LCD displays, and related products, must "make IT leaner," he sees little problem with relying on his ERP vendor (Oracle Corp.) for the majority of his company's software needs. "We want to rope everything together," says Morlan, "so ERP becomes the Golden Fleece of corporate data."
Some CFOs might argue that "fleece" is all too apt a word for software that can run to more than $100 million and often take years to implement. Yet ERP is as integral to corporate life as the computers it runs on, and most analysts expect it to become more so as software makers continually extend ERP far beyond the factory-oriented "resource planning" role for which it was originally designed.
Financial to the Core
In fact, while ERP began as rudimentary industrial automation software, it now provides not only the core financial functionality that most large corporations depend on but also an increasing number of ancillary financial applications. John Van Decker, senior program director at consulting firm Meta Group Inc., says one key trend for ERP in 2003 will be to "fill gaps in the financial value chain" by adding modules that address everything from credit decisioning to collections to electronic bill presentment and payment. "Financial applications are back in vogue," says Van Decker, propelled by government mandates to speed reporting and corporate anxiety over accuracy and transparency. "Companies are all asking, 'Is what I know correct?' and they're willing to invest in software that helps them drill down and understand performance."
Byron of IDC agrees, and adds that during the next few years "profit management automation" (PMA), which combines profit planning, activity-based costing, and treasury and audit management into an integrated suite, will become a major growth area within the ERP universe. "PMA will give controllers and treasurers the same sort of control over capital that traditional ERP provides regarding transactional data," he says, but cautions that the trend is in its infancy and won't mature until 2005.
Nearer term, helping customers do more with the vast stores of transactional data they already have will be a priority for most ERP vendors. Steve Miranda, vice president of applications development at Oracle, points to his company's new "Daily Business Intelligence" as one example. This portal-based interface gives employees in finance, human resources, sales, and other functions the ability to drill down into data and analyze it in real time.
Scores of software companies that specialize in business intelligence (BI), data warehousing, and related areas do the same, essentially making a nice living by making ERP data more accessible. But Miranda argues that bolting a separate product onto ERP is expensive and cumbersome, and that customers would welcome the chance to use ERP tools to access and analyze ERP data. And not surprisingly, analysts expect most ERP vendors to take BI much more seriously in 2003.
"The pendulum is swinging away from so-called best-of-breed solutions," says Bruce Myers, vice president at Cap Gemini Ernst & Young and leader of its ERP service line in the Americas. The allure is not only the aforementioned push toward integration and standardization, but also the fact that ERP vendors are investing in research and development and offering good deals as well. SAP America is so convinced that integration is key that it just launched a global initiative around the idea, after years of downplaying suites in favor of selling modules on their individual merits.
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