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While the first half of 2019 saw the continuing momentum of the cloud as a top ERP industry trend, the move is not happening as quickly as it could.
Misinformation about the costs and benefits of the cloud remain, according to some analysts. And the willingness and ability to move ERP systems to the cloud can depend on the company's size and industry.
Other 2019 ERP industry trends include the steady pace in competition between the tier one vendors, with SAP, Oracle, Microsoft Dynamics and Epicor holding their market share. However, the large vendors face increased competition from smaller players that are looking to gain market share, such as IFS and IQMS. SAP, in particular, faces a challenge from competitors as the announced 2025 end-of-support deadline for the legacy ECC system looms, and some customers consider other ERP systems instead of migrating to SAP S/4HANA, according to experts.
Interest -- and confusion -- in cloud ERP
Regardless of vendor, cloud ERP is a priority for them and their customers, according to Eric Kimberling, CEO of Third Stage Consulting, an independent ERP consulting firm in Denver. The three top ERP vendors are pushing their customers toward new cloud-based systems, sparking interest from customers, but also creating some confusion, Kimberling said.
"We're getting a lot of inquiries from customers of all three -- SAP, Oracle, Microsoft -- but there's uncertainty around the roadmap and how they are going to go from the on-premises legacy product they've had for 20 years to the cloud versions of some of the newer products," he said. "This is especially true in the case of SAP, because they're the only one of the three that's put out a hard deadline to get legacy customers off of the old systems. But overall there's a lot of angst and uncertainty in the market."
Mid-sized manufacturers that are running aging legacy ERP systems are making the move, finding a better total cost-of-ownership in cloud-based systems, according to Chris Devault, manager of software selection at Panorama Consulting Group, a Denver-based ERP consulting firm.
"If you look at where the true costs are, companies are finding that it's making more sense to go to the cloud," Devault said. "There are different cloud flavors -- multi-tenant, single tenant -- and vendors vary greatly in their cloud model offering, but there's certainly a transition to the cloud."
Cloud gap not closing as quickly as it could
Moving to the cloud has passed the tipping point, and most companies are at least considering SaaS systems, according to Cindy Jutras, president of Mint Jutras R&A, a consulting firm based in Windham, N.H. However, there remains a lot of misunderstanding and a lack of knowledge about the cloud and SaaS.
Cindy JutrasPresident, Mint Jutras R&A
"The gap is not closing as fast as it should because most just accept cloud as the path forward," Jutras said. "There's also less scrutiny amongst the uneducated to better understand the different flavors and the potential benefits."
However, one of the ERP industry trends that's here to stay is the move away from monolithic architectures toward microservices-based architectures and integrations via APIs, Jutras said.
"It's really all about making ERP more agile and adaptable, with innovation [release] cycles getting shorter -- two releases a year is pretty common," she said. "Although many of the changes we're seeing -- like refactoring, architectural changes, new UIs -- are still taking a long time because there is so much work that needs to get done, but this is paving the way for other technologies like all the different facets of AI. Those are still nascent, but more are seeing the potential value."
Stable competition at the top of ERP market
Although the market remained relatively stable in the first half of 2019 for tier one ERP vendors, competition among the tier two and tier three vendors was more active. Some of the activity was due to acquisitions, such as when mid-market, cloud-first ERP vendor Acumatica was acquired by EQT Partners in June. EQT is the corporate parent of enterprise vendor IFS. The two companies are expected to operate independently but share resources to help them better compete in their respective markets.
The relationship between IFS and Acumatica is related to the ongoing SaaS momentum, according to Devault, because IFS has been "kind of a laggard" in its cloud deployment options, while Acumatica was built from the ground up as a SaaS ERP. Acumatica also has a well-developed sales channel that can help IFS build its customer base in North America.
"This helps [IFS] from a SaaS model development, and it gets them access to all those Acumatica channel partners. Those channel partners that are on Acumatica now have an option of a higher tier application for their clients," Devault said. "IFS is gaining a lot of market share here in the U.S.; it still suffers from not having a North American presence in all industries, but it is increasing its marketing and it is trying to increase its market penetration."
Some ERP vendors are also adding next-generation technologies to their systems, which grow market share and help customers with digital transformation efforts, according to Devault.
"Infor is a leader in the practical use of AI on the shop floor," he said. "They're really making it accessible, and they're giving tangible evidence of how to use AI with workflow automation and business intelligence."