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HerbertNathan & Co is in the final phase of our production of the upcoming market analysis of ERP systems. This will be the 10th edition of the Scandinavian market for ERP systems since our business was founded in 2003. The analysis, which has been conducted over 6 months, will summarise the market including a total of 27 ERP systems that wholly or partially cover Sweden, Norway and Denmark.
What differentiates this year’s edition from previous years is the strong influence from the outside world regarding AI, Machine Learning and so-called intelligent services. Until recently, the market for ERP systems has stood firmly on its own legs and driven its own development. What we now see, over just the past 1-2 years, is that it is no longer the ERP system industry driving its own development. Instead, we see that the ERP system industry has fallen behind and taken a reactive role where it is the external environment forcing the ERP system industry to speed up. Now it is about following instead of leading.
We will write more about the current trends in AI, Machine Learning and intelligent services in upcoming blogs. This time we instead focus on the effect this transformation has and requires of our existing vendors of ERP systems.
As we have written about in earlier analyses, it is practically a law that all ERP systems over a lifecycle of approximately 30 years are forced to carry out at least two comprehensive generational shifts for the product to remain competitive when technology changes occur. And what is happening right now cannot be viewed in any other way than a huge shift – not only technical but also regarding the approach to what an ERP system is and how the customer can and should secure their future platform for process and information support.
The future will not be about large and comprehensive ERP systems that contain everything and at the same time are sluggish and complex. Instead, the future will be about offering a wide range of digital services that, based on modern architecture, can be connected, disconnected and replaced with more and other specialised services as new needs arise.
Twenty years ago we would have called this a fragmented landscape with applications, but with new conditions and a more mature and modern perspective we now call this a flexible process and information platform. And tomorrow cannot in any way be compared with the situation twenty years ago.
For the older and established vendors of ERP systems, this is a huge challenge and risk. Breaking up a +25 year old supertanker into a sleek racing boat simply cannot be done. At the same time, the vendor must somehow maintain their existing customers who expect the product to keep up into the future.
We are now seeing more and more vendors start to rebrand their products and in several cases this leads to a paradigm shift in how the vendor presents and sells their product. This paradigm shift usually results in a new product name containing the phrase "Suite". With this, the vendor intends to mark that it is no longer about a single product but rather a framework within which the vendor offers a wide range of functions that follow the framework. The consequence is also that several very well-known ERP systems are being phased out under the names we have known them for many years. Instead, the vendor bundles several applications under their "Suite".
Tactically, this is a wise strategy for those vendors who lack the muscle or competence to develop a new modern platform and product family based on new principles. The first step is to move all applications under a common concept and then gradually start renovating the engine. For the customer, this may mean that the product can gradually be transformed into something modern. At the same time, the customer must be aware that what lies within the Suite still consists of a number of applications with different databases and completely different information structures which creates great complexity when it comes to maintenance and upgrades.
No vendor wants to get the label "Outdated" especially in a time when everyone realises that technology is now making giant leaps every year. The technical changes which previously took place over 10 years now happen in only 1-2 years. And no vendor can escape these changes. Big or small are affected and all must maintain a high investment pace to be able to offer a modern ERP system even in 5-10 years, or rather a modern ERP system platform.
That a vendor renames and begins to offer their products under the term Suite does not necessarily mean that one or several products are lost technically, but the customer should be alert when this phenomenon occurs. Not even the very largest vendors with billion-dollar resources manage to repack their products into a new framework in just a few years; it is simply too complex.
