When John Schindler thinks of enterprise resource planning software, business flexibility isn't exactly the first phrase that leaps to mind, he says. But increasingly, that's what he and other users are demanding from their ERP vendors. "We're in a growth mode, and the business needs are changing," says Schindler, CIO at Kichler Lighting Group. The problem is that today's ERP systems haven't adapted quickly enough to those change requirements.
After rising to prominence in the 1990s, ERP systems have evolved into large, monolithic architectures with many functional modules that can take months -- or years -- to plan and deploy. The systems require complex customizations in order to be tailored to business processes, and integration with other applications requires programming to APIs. Many large companies have dozens, or even hundreds, of point-to-point connections that must be maintained. At Starwood Hotels & Resorts Worldwide, for example, Vice President of Technology Kevin Malik says his SAP system supports about 100 external and internal interfaces. As a result, upgrading the system to Version 4.7 was a ve-month project that involved more than 20 people.
"The old way of doing things is just not scalable," acknowledges Roman Bukary, vice president at SAP.
ERP systems have also been relatively inflexible in responding to changing business needs, often requiring major software upgrades to accommodate even seemingly discrete business process changes. "Today, 99 percent of our customers have modified the source code of the systems they use from us, and all of them wish they could undo that. The hidden cost of customizing these systems is really high," as is the ongoing maintenance, says Cory Eaves, chief technology officer at ERP vendor SSA Global Technologies.
Now the major ERP vendors have adopted a new mantra as they race to recast their software offerings under the umbrella of service-oriented architectures. By refocusing their software to support SOAs, replacing proprietary application programming interfaces with message-based Web services, vendors say they can offer unprecedented flexibility. Deployment and integration will be easier and will require less custom coding. And by breaking down traditional application modules into smaller components and exposing those as reusable Web services, users will be able to create custom implementations by choosing and arranging only those components they need, vendors say.
Will it work?
Users have reason to be skeptical. Programmers who integrate and maintain enterprise applications have heard this promise before with CORBA and DCOM, which turned out to be difficult to implement and expensive to maintain. Likewise, integration broker products from companies like WebMethods and Tibco Software promised to break the cycle of constructing point-to-point interfaces between applications by creating a central integration hub, but they were too complex, says Eaves. Like integration brokers, SOA uses a hub-and-spoke design, also called a service bus, but there's one key difference: "These (Web) standards-based approaches have driven a lot of the complexity out of solving these problems," says Eaves. Unlike quasi-standard approaches of the past, the underpinnings of SOA, such as HTTP, XML, SOAP and SSL, are well understood, he says.
For Schindler, the first order of business is "to get rid of 75 percent of the customizations" as Kichler migrates to PeopleSoft 8.9 next year. Although he sees the software's support for XML and Web services as immature, Schindler says he expects it to evolve to the point where, in two or three years, he will be able to "intertwine business processes from different vendors and have reusability."
Spheres of influence
ERP vendors have their own reasons for going down the SOA path. "The issue is not to make the end user happy. It's more to get (ERP vendors) out of the hard-coded API arena," says Bill McFadden, president of Plant-Wide Research Group.
Such moves are also defensive. Increasingly, ERP systems revolve around middleware platforms on which much of the integration work is done. For example, basic processes and application code may be manipulated using IBM's WebSphere or Microsoft's .Net. ERP vendors have had to choose between aligning themselves closely with one of these middleware "ecosystems" or building their own. With projected single-digit growth for ERP software, the build-your-own path is one that few vendors can afford. But that's the course that SAP chose.
"From SAP's perspective, the danger was middleware suppliers would become the strategic platform in many R/3 customer shops," says James Governor, an analyst at RedMonk. NetWeaver is SAP's attempt to control the entire software stack. SAP has also announced that with the release of mySAP ERP 2005 in 2007, it will break its ERP software into even more granular, self-describing components that will be exposed as Web services. Users can then combine them to create customized, loosely coupled composite applications, which SAP calls xApps.
That appeals to SAP user Aaron Nichols, general manager at Canada Post. "There are certain pieces of functionality that we use in order creation that we'd like to extend outside of our enterprise," he says, but each customer has different business processes. He hopes to customize the application for each customer by picking and choosing only the services needed. "It will give them the features they want, and I can reuse them in every application without having to run them more than one time," he says.
PeopleSoft cast its lot with IBM, making WebSphere its preferred middleware, but its acquisition by Oracle. has put the future of that strategy in doubt. So far, PeopleSoft has Web-enabled more than 1,000 "entry points," says Roy Satterthwaite, vice president of marketing at PeopleSoft.
Schindler says he isn't worried about Oracle's plans yet. "The first real impact will come with the release of PeopleSoft 10, which is at best, 36 months out," he says. For now, Kichler will stay the course, says Schindler.
Oracle has its own application server and middleware tools for its E-business Suite, but its overall SOA strategy hasn't been well articulated, analysts say. "Customers don't want multiple siloed repositories of information. They want one source of truth," says Fred Studer, vice president of ERP at Oracle.
The problem is that in the real world, most organizations have to live with many repositories, and that mind-set has held the vendor back, says Governor. Oracle has been busy wrapping its traditional APIs with Web services interfaces and is actively building more. But whether it will go as far as SAP is less clear. "When you break big applications into smaller parts, you can rearrange those or put events in the middle of those tasks. Oracle hasn't really caught up to this yet," says Yvonne Genovese, an analyst at Gartner.
Smaller ERP vendors, including Lawson Software, IFS AB and SSA Global, have launched their own SOA initiatives. "We've standardized on Java and WebSphere," says SSA's Eaves. Analysts say all ERP vendors will eventually fall into the sphere of one of a few middleware providers, which include Microsoft, IBM, SAP and possibly Oracle. But none of the vendor initiatives are fully baked yet, cautions McFadden. "My guess is that it will take at least five to seven years to shake out."
Once ERP systems have made the jump to SOA, improved interoperability could make it possible to use best-of-breed ERP products -- a strategy that up until now has been an "integration nightmare," says Kichler's Schindler. But organizations that fail to first impose a top-down architecture could be destined for trouble.
A mix-and-match infrastructure might work, but only within parameters set by IT, says Governor. "SOA lets the line of business choose a component, but it has to fit into the SOA set by the IT organization. This is not about unfettered, do whatever you want sort of stuff," he says.
Rob Crawford, senior systems analyst at Menasha, an SAP user, worries about version control and service registration issues. "If you upgrade the back end, your Web services are going to change. You'll have to find a way to version your Web services or extend them," he says, as well as a way to know what other components are relying on those services. Canada Post's Nichols also wonders how well these systems will scale. "All of these concepts come along, and they are supposed to be the solution, but then they add more complexity," he says.
Web services are not a panacea, Eaves acknowledges. "If you do a lot of customization, you will get yourself painted into a corner, just as you do today with the native interfaces," he says.
A world of distributed components linked by Web services has Starwood's Malik wondering about regulatory compliance. He says a six-month, all-out testing effort that was part of a Sarbanes-Oxley Act compliance project was complicated enough. "With Sarbanes-Oxley, we're cautious about trying to componentize the system because it's just that much more work to test," he says.
Overall, however, users are pushing for the changes. "I very much support the intent," says Schindler. Governor sees another benefit as well. "Once you begin to describe things as components, it's difficult to maintain control of it. It becomes more difficult to lock in (users)," he says.
Open source ERP advances
Open-source has become an integral part of the technology infrastructure that supports ERP systems. "The ERP vendors are embracing open-source technologies, especially at the platform level," says Albert Pang, an analyst at IDC. Support for Linux and JBoss application servers is common, and many enterprises use the software, says Pang. SAP built its NetWeaver Developer Studio on the Eclipse integrated development environment, and "(Linux) has eclipsed Solaris as the second-most-preferred platform for the Oracle ERP applications right behind Windows," Pang says.
Menasha hosts its SAP software on Linux systems and is contemplating expanding its use of open-source. "I'm trying to make a decision on what application server I'm going to use to host our integration server. I'm leaning toward JBoss," says Rob Crawford, a senior systems analyst at Menasha. Even users who don't run open-source benefit from it as a negotiating tool, says James Governor, an analyst at RedMonk. "If you are going to SAP and IBM, keep JBoss in your back pocket. Open-source is like a personal trainer for proprietary software. It's about that balance point, keeping vendors on their toes," he says.
Now open-source ERP applications are starting to get attention. SQL Ledger accounting software from DWS Systems and Compiere from ComPiere, compete directly with commercial ERP systems. Initially targeting small and midsize companies, the two vendors' represent a "renegade force in the open-source ERP environment" that could eventually shift power away from the large ERP software vendors, says Pang.
In the future, Pang says, companies will standardize on one or two sets of accounting applications and supplement that with some open-source applications at the ERP level. Those applications could be delivered through integrators or value-added resellers as Web services. While initial uptake will be among small businesses, the potential cost savings have attracted the attention of large operations, such as General Electric's consumer appliances division, Pang says. "The bottom line is as a whole the average selling prices are going to be much lower than what you would pay for something from SAP or Oracle or even Sage Group because software is basically free," he says.