The future of Epicor ERP is cloud

Epicor is a 50-year-old ERP vendor that in the past few years has invested in a movement to shed its legacy on-premises product focus to become a cloud-first company.

The vendor's cloud transformation included an overhaul of its venerable Epicor ERP product to become the multi-tenant SaaS product Kinetic earlier this year. Other Epicor ERP products -- including Prophet 21 for distributors, BisTrack Global for lumber and building industries, and CMS for the automotive industry -- also underwent modernizations to become cloud-first products.

The products that Epicor redeveloped for the cloud have helped the company better serve its target market of smaller to midmarket industry-specific enterprises, said Himanshu Palsule, president of Epicor, at the company's recent analyst day event in Boston. In particular, the cloud has enabled Epicor to introduce new functions that helped some customers deal with changes brought on by COVID-19.

In this Q&A, Palsule discusses the vendor's cloud modernization efforts and strategy for growth.

Himanshu Palsule

What has been Epicor's main focus when transitioning from an on-premises ERP vendor to a cloud-first vendor?

Himanshu Palsule: Epicor started our cloud journey a few years ago, starting with modernizing the products and making sure they work well in the cloud. Then you have to do the things that make the products truly cloud native, including the right level of provisioning, subscriptions, identity and development operations, how to do releases. The second part is doing it in the markets that we serve. That includes areas of manufacturing that are fairly complex, like make-to-order, which could be in medical devices, fabricated metals, industrial supply, aerospace and defense, and doing it at scale.

How did the disruptions last year due to COVID-19 affect Epicor's business?

Palsule: A couple of things happened last year. One is the fact that we serve essential businesses and these are the businesses that thrived through the pandemic, so we had to do work for them. We had to add curbside delivery, we had to add touchless payments, we had to add a low-end e-commerce capability. So we really benefited from the fact that these businesses are in retail or in lumber, and that manufacturing was coming in-house because they couldn't rely on their supply chain. The second thing was that the cloud gained momentum, which was perfect timing for us. We saw growth everywhere in the last year, other than maybe a slight dip in our auto after-market sector because vehicles were sitting in their parking lots.

What are the company's biggest weaknesses that need to be addressed?

Palsule: The first thing we need to address is that we should have a larger international footprint than we have today. We are predominantly still a North American company -- about three-quarters of our business comes from North America and one-quarter internationally. So we have to make sure we have the right channel for global distribution and [doing global] brand investment. The second is about new verticals that we're getting into that we haven't traditionally had a big footprint in before, like process manufacturing or new retail businesses like lawn and gardens. The third area is to broaden our ecosystem. We need a big tent. We have a few dozen ISVs [independent software vendors] that integrate with us today, but we need to be attractive to ISVs around the globe.

When Epicor wants to fill in the product gaps like with process manufacturing, is the strategy to build or acquire?

Palsule: When a product manager at Epicor builds a business case, they have to clearly have a rationale on whether it's to build, partner or buy. If it's a core technology, we want to either own it or build it. If it's an adjacent technology, we will either own it or partner in it. For example, with the KBMax acquisition, building the 3D configurator would not have been a core strength of ours, so we bought that. Process manufacturing is core, so we are going to build it. We're about 75% done and are hoping to release that next year. But there also may be other adjacencies that we look at in the future, maybe payroll or CRM, which will be more of a partnership or an acquisition.

With Epicor's push to become a cloud-first ERP vendor, will the company pursue upper midmarket and larger enterprise customers?

Palsule: We are not going to leave our sweet spot, that classic midmarket ERP, because there is a certain unfulfilled need in that market that is very unique. Time-to-value is essential, capital outlay is critical, ROI needs to be faster, so there are certain needs that these midmarket customers have that's a sweet spot [for us]. However, when you look at the economy that we've been in, these same companies are either buying divisions of other companies or getting acquired. They're very quickly getting into the enterprise space, and we don't want to be left behind. So we had to build a product, we had to build the internal infrastructure for scale with public cloud, and we've had to build a sales organization that has the ability to go in and sell up and sell across. We've also had to build a brand where enterprise customers will come to us and want to do business with us.

Epicor now has a significant cloud-first strategy, but some may still think of it as legacy on-premises company. How does Epicor compete against cloud-native ERP companies like Acumatica or NetSuite?

Palsule: I don't think in the last 18 months we've lost any significant deals to Acumatica. One reason for this is that our verticals are different -- we are pure manufacturing, so our market segments are a bit different. And people who come to us do so because they have an unresolved problem that they need a solution for, and these [problems] are becoming more and more critical as businesses are differentiating in the market. Technology has democratized the ability for customers to do that -- for example, by using IoT or RPA. So we come in when a customer meaningfully wants to solve a problem that I don't think our competitors can. Five or six years ago, there might have been a risk that we were considered not as modern, but I haven't seen that in the last 18 months.

Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.