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The term ERP system has for many years been synonymous with an enterprise system that covers all or the majority of the customer's business processes. These comprehensive/completely covering (and often heavy) systems emerged during the 1990s when a large proportion of customers (ahead of the millennium shift in 2000) needed to replace their old and fragmented IT landscapes in favour of a more integrated landscape and often a single large Business System under the slogan "all-in-one".
The advantage of these systems has been that all processes and modules are integrated and built on a unified data model. But the result has often been large and complex monoliths that are costly to maintain and upgrade. Consequently, many organisations have refrained from upgrading and chosen to continue using old versions despite newer versions being available on the market. In a time of increased need for flexibility and rapid changes in business and processes, these monoliths have become an obstacle to customers' development.
In parallel with the general shift towards more cloud-based infrastructure, most organisations are gradually beginning to open up to more service-oriented architecture. This means an IT landscape that provides greater flexibility to upgrade and replace applications/services and add-ons without the entire operation needing to stop or be affected. The consequence of this shift and trend from customers is that even the "old and large players in Business Systems" are trying to meet this and are now investing heavily in breaking up their large monoliths and trying to transform them into more component-based systems.
A practical consequence of component-based (composable) systems is that the vendor can release new versions with a higher frequency compared to "before", which is also expected in a cloud-based context. Being able to offer multiple new releases per year compared to an upgrade every second or third year requires a more component-divided architecture where the puzzle pieces can be managed more independently from each other while still following a common framework and data model. For the customer, this means the possibility of receiving new functionality at a significantly higher pace than before. The customer simply gains more business value for their paid licence fees.
This transition (from the old vendors) should however not be interpreted as the vendors intending to completely break up their Business Systems into small components. It will still largely be a "large and fully integrated" Business System but where specific processes, industry verticals and add-ons will be offered as components that can be connected with limited effort.
At the same time, we clearly see that the shift to a more component-based philosophy and architecture opens up a growing market with "modern" add-on products and services that fully build on and exploit the strength of a cloud-based infrastructure. Not least, this can be noted with an increase in so-called "app stores" that are now emerging among all major vendors of Business Systems. It is no longer sacred for the vendors that everything must be developed in-house; they are beginning to see the benefit of opening up the systems to provide customers with greater flexibility and choice going forward.
The trend we see is positive (and necessary). Many customers have for a long time experienced an obstacle in their development and now have greater opportunities and freedom to enhance and complement their existing applications with add-ons. This also means, over time, greater opportunities to be able to replace and exchange applications and services as the business needs change.
We are currently finalising our latest market analysis of the Scandinavian market for ERP systems and will shortly publish this report, which includes an analysis of nearly 30 different ERP systems. Moving forward, we will regularly share a selection of the trends now evident in the Scandinavian market, starting with the trend concerning the transition to more component-based services.
Follow us on LinkedIn to keep track of the launch of our new market analysis ERP systems in Scandinavia and our upcoming blogs focusing on trends within the ERP area.
