Does ERP matter?

SAP leadership shakeup underscores frayed nerves in the corporate boardrooms of leading ERP vendors

If there was any question about whether the ERP market was in turmoil, the recent shakeup in senior management at ERP stalwart SAP that pushed out rising star Shai Agassi should have answered it.

If you recall, Agassi was denied a job as co-CEO after SAP chairman Hasso Plattner asked current CEO Henning Kagermann to retain his position until 2009 instead of leaving the job this year. According to reports, Plattner wanted Kagermann's hand on the wheel as SAP readied the launch of new products in the coming year. That didn't sit well with Agassi, the mastermind of SAP's NetWeaver and OnDemand offerings, who was recognized as a visionary thinker willing to embrace technologies such as SOA and Web services.

The shakeup at usually sedate SAP underscored the frayed nerves in the corporate boardroom of many leading ERP vendors, as technologies such as SOA and Web services enable enterprises to turn to smaller vendors and service providers who can deliver applications that meet their demands for speed, flexibility, and low overhead.

The question for industry analysts and best-of-breed software vendors is: "Does ERP still matter?" The answer: "Yes, but not as much as it used to."

Remembering the good ol' days

It wasn't always so. Back in the early to mid-90s, ERP was all the rage and there was little choice or debate about how to spend millions of dollars to implement applications like SAP's R3 ERP system. Soon, companies were swapping war stories about the complexity and disruption of ERP implementations and wearing their tribulations like a badge of honor. Why? Because ERP was worth it, the thinking went. And implementing it meant your company was not only on the cutting edge, but it had the competitive edge over its rivals.

Today that kind of thinking is out of step with the market, which is all about the add-on applications companies are willing to deploy to augment ERP. In response to that shift, Oracle has been buying up everything in sight to expand its core. SAP, meanwhile, has a two-fold strategy: Products such as Duet, in partnership with Microsoft, and its governance, risk, and compliance solutions -- one of SAP's top new money-makers -- extend the core while its A1 (All-in-One) solution for the midmarket expands its base. It is probably fair to say that ERP software is racing to stay ahead of the commoditization of its basic functionality, with additional pressure coming from companies such as NetSuite and its hosted solution, as well as from open source and on-demand.

"ERP is no longer strategic," says Josh Greenbaum, principle at Enterprise Applications Consulting.

In fact, just as Oracle and SAP are trying to convince customers they have what customers need, word on the street is that ERP is nearing its limits in terms of the overall value it can bring to customers by itself. To stay competitive and to adapt to changing business conditions, companies are looking to plug in highly tailored, best-of-breed solutions, according to Vance Checketts, vice president of Global Supply Management Research at the Aberdeen Group.

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