Is it the right question?
While I do admit it is a relevant question, I think it’s often phrased as “bait” and thrown out there every few years when editors get bored. But then again, magazines need readers and analysts need spaces to conjure magic quadrants and opine about. (Plus it works – we all instinctively react to defend the TLAs we identify most with. And now I am writing about it…) While there are good reasons for defending ERP, let’s also remind ourselves that SAP did not come up with ERP. That credit goes to Erik Keller, who coined it about a decade and half ago (in 1992?) when he was an analyst at Gartner. And we benefited from it. But maybe we need to pause and wonder why are we defending a definition that was given by (a) someone else and (b) is over 15 years old? Sure it makes sense from a marketing perspective (nothing like being #1), but from a product strategy perspective, one could argue that the “ERP” identity can actually be a distraction or constraint when looking ahead to the next 10 years. A similar case can be made for SCM, PLM, CRM, etc., which I elaborate in this article (“How Should We Define Supply Chain Management?”) since it was too long for a blog topic. The main premise of this article is that SCM has evolved dramatically over the past 10 years and will continue to evolve at least as much over the next 10 years to a point where the TLA or label “SCM” will become obsolete. And for SCM to remain relevant to the CEO agenda, we must not forget that the true mission was about “breaking down the walls.” And this is precisely how TLAs hurt us because it puts up artificial walls.
How do TLAs obstruct the value perspective?
Let’s look at the statement made by one of analysts that “ERP is no longer strategic.” Well, that depends on who you ask. I doubt a CFO would agree with this. OK, let say that the implication here is that best-of-breed offers greater strategic value than ERP. But that’s not entirely accurate either because despite having best-of-breed PLM, SRM, SCM, and CRM applications, the only “space” that can reconcile information about products, suppliers, assets, and customers to show stakeholders that the business actually made money is… (drum roll)…ERP. How non-strategic is that? And ten years from now, the linkages or interdependencies are going to be even greater – so how are the best of breeds going to address this from their functional silos? As opposed to accusing anyone of making misleading statements, what I would like to point out here is that the real culprit is the TLA. The question “Does ERP Matter” is a lot like arguing that the heart is more important than the brain, or the right eye is more important than the left eye. Vendors are driving customers crazy by arguing about “who’s on top of whom; who’s at the center vs. who is the add-on; what can ERP do or not supposed to do; etc.” It is wasted energy and gets weary fast – and most importantly fails to see the problem from the customer viewpoint that doesn’t really care much about the TLA as much as “how are you helping me make money?”
Where is the value?
If you are looking for new sources of value, then look across the edges. This is what the supply chain lesson taught us. Because the enterprise is organized functionally, naturally there is greater efficiency within the functional silos. In contrast, there are many inefficiencies across the silos, and even more so across enterprises. And this is where most of the captive value now exists. Let’s take PLM, SRM, and SCM for example. To design a cheaper product, PLM needs to work with SRM to achieve part reusability. PLM and SCM need to work together to design the right supply network that balances cost and responsiveness objectives. And I believe these types of challenges are too big for best-of-breeds to bite off. Everyone has a key part to play, most of all ERP. The truth is that a lot of value to “ERP” becomes apparent when we start asking questions like “what processes do we touch; what kind of data do we capture; what can we do with that data, etc? In many cases, the real difference between ERP vs. best-of-breed comes down to whether we are doing mundane things with the data or focusing on things that bring huge value. And that’s what makes a killer app.