Top 10 ERP Events for 2007
2007 demonstrated new technology releases, changed the scope of ERP software solutions and solidified the position of the enterprise software market share leaders. However, notwithstanding the significant advances of the year, the majority of key events are more so a prelude of what we can expect in 2008. Here are our Top 10 ERP Events for 2007.
Oracle Proves Growth Strategy.
Merger and acquisition (M&A) strategies are tough and actually integrating acquisitions is even tougher. Nonetheless, throughout 2007 Oracle made solid and consistent progress in demonstrating the predicted value of its M&A strategy. The forecasted mass customer exodus of Siebel Systems, PeopleSoft and JD Edwards customers predicted by several of the skeptics did not occur while very impressive quarter over quarter double digit revenue growth did occur. SAP's acquisition of TomorrowNow as an attempt to lure over Siebel, PeopleSoft and JD Edwards customers not only failed but landed SAP in the legal hot seat due to some alleged inappropriate (and illegal) theft of Oracle intellectual property by TomorrowNow/SAP staff. Oracle has made great strides in 2007 in closing the gap with its arch rival SAP. However, in the year ahead, Oracle's continued progress is heavily dependent upon the substantive release of Fusion. 2008 will be the year Oracle must actually demonstrate a technology solution which will merge disparate acquired products into a unified and cohesive Oracle solution backed by a clear long-term upgrade path.
SAP Goes SaaS.
2007 was the year SAP ceased chastising hosted business systems and introduced their own on-demand ERP system called Business ByDesign. In an apparent effort to kill two birds with one stone, SAP made their grand software as a service product and strategy announcement last September 19th - at the same time as the Salesforce.com Dreamforce user conference. The timing seemed to prove effective as much more of the media followed the SAP Business ByDesign announcement. While Business ByDesign is only an announcement at this time (the on-demand product is not yet commercially available), it demonstrates the clear dichotomy between SAP's overall growth strategy and product cannibalization. SAP was extremely slow to accept or endorse the software as a service movement; presumably as it represents a genuine threat to SAP's licensed software products. However the enterprise resource planning software giant recognized the SaaS movement is unstoppable and chose to be a part of it. To minimize the threat of Business ByDesign eroding or taking new business away from its flagship products, the company has significantly limited the on-demand products target market and capabilities. The company also chose not to provide an upgrade path from on-demand Business ByDesign to on-premise ERP 6.0. Nonetheless, Business ByDesign represents an impressive ERP software suite which includes accounting software, customer relationship management (CRM) software, human resource (HR) software, supply chain management (SCM), project management, supplier relationship management and compliance management.
Oracle and SAP Acquire Business Intelligence.
It would appear SAP took an M&A lesson from primary competitor Oracle when it announced its intent to acquire Business Objects. Or maybe after Oracle acquired Hyperion, SAP felt the need to possess a similar technology in house. Or perhaps when you're the size of SAP, you get to a point where organic growth must be supplemented with M&A to keep pace with analyst and shareholder expectations. Whatever the reason, SAP's planned acquisition of Business Objects follows a clear trend of making business intelligence (BI) solutions more integral to enterprise resource software applications. Now that Oracle and SAP have made BI an embedded part of ERP software systems, expect the midmarket software manufacturers to follow suite in 2008.
The Industry Shows Signs of SaaS.
The ERP software industry has clearly trailed the Customer Relationship Management (CRM) software industry with regard to software as a service (SaaS). Nonetheless, SAP's Business ByDesign announcement, NetSuite's IPO and Aplicor's year-end achievement of over 25,000 hosted ERP and CRM customers demonstrate the early successes which will undoubtedly show increased growth in 2008. Don't expect any clear on-demand ERP software leader in 2008, however, expect a rise in the number and quality of available hosted ERP systems.
Microsoft Project Green Officially Dead.
Microsoft's entry into the ERP software industry began with its acquisition of Great Plains Software in 2000 and accelerated with its follow-on acquisition of Navision in 2002. Several billion dollars of acquisitions later, Microsoft has become the custodian of a suite of disparate and unintegrated ERP products including Dynamics GP (formerly Great Plains), Dynamics NAV (formerly Navision), Dynamics AX (formerly Axapta) and Dynamics SL (formerly Solomon and clearly the red headed step child of the family). The original vision and plan, famously referred to as Project Green, was to merge the products into a common code base which would ultimately inherit the best of each particular solution and yield a super ERP solution. To be fair, while Project Green was touted as the vision and destiny for Microsoft ERP solutions, the plan's specifics were always vague and left much interpretation for VARs, business partners, customers and the public at large. After continued flip flops on this much hyped strategy, 2007 officially realized the death of Project Green. Kirill Tatarinov, the recently appointed head of Microsoft Business Solutions, initially stated that the company would migrate its four accounting packages to one code base. However, when later pushed for more specificity, he declared Project Green is dead, however, in an apparent effort to save some face he seemed to suggest some negligible value as the four systems may offer some integration points and share common tools such as SharePoint and Office. Oooh, stop the excitement. Needless to say, the upgrade path and longevity of Microsoft's accounting software systems remains less clear today than it ever has.
Sage Fires Everybody.
Well, not actually everybody, but pretty much the entire American executive team, including CEO Ron Verni, CTO Jim Foster, CFO Jim Eckstaedt and SVP Taylor Macdonald. Perhaps this exodus is a continuation of the prior departures of Andrew Corbin, CEO of the health care division and Julian Horn-Smith, Chairman, whose exits were referred to as "differences in culture and style". When the entire executive management team is removed in a single pass, there are clearly underlying issues lingering that may likely surface in 2008. Stand by for more news from Sage.
Web 2.0, Enterprise 2.0 and Social Media.
This is the 2007 event that didn't happen. While Web 2.0 and social media tools became mainstream in 2007, they were noticeably absent as an integral part of any ERP software application. Expect to see only the beginnings of change on this topic in 2008.
TomorrowNow Tarnishes SAP Reputation.
The acquisition of TomorrowNow by SAP was a not so subtle attempt to reach into Oracle's customer base and convert Siebel, PeopleSoft and JD Edwards customers to SAP. Well now, SAP is reaching into its own wallet to pay for legal defenses and soon to pay Oracle for damages as SAP's newest subsidiary inappropriately (and allegedly illegally) downloaded intellectual property from Oracle while posing as Oracle customers. This event has clearly been SAP's 2007 black cloud and unless SAP settles handsomely with Oracle, threatens to get even uglier in 2008.
Skeptics have been claiming that SaaS company valuations are inflated ever since Salesforce.com went public. Salesforce.com has proven the skeptics wrong year over year with a continually elevating stock price and company valuation and as of December NetSuite seems to offer additional support for the current SaaS valuation models. NetSuite (NYSE: N) went public on December 20 at double the investment bankers expected price ($26.00 instead of $13.00) and saw successive double digit daily increases in stock price after the IPO. At $42 a share (at the time of this writing), the company's market cap is roughly $2.6 billion. With only 5,400 customers at the time of the IPO, NetSuite has barely tapped the hosted ERP market and has plenty of upside. Expect Aplicor as the #2 hosted ERP player to also show major strides in 2008.
Enterprise ERP Software Industry Becomes an Oligopoly.
2007 clearly showed that SAP and Oracle not only dominate the enterprise software market, but are the only two recognized players.
Plausible competitors such as Infor, Lawson, QAD, Epicor, Microsoft and others failed to demonstrate themselves as suitable alternatives and lost ground to the two remaining software giants. For those of us who have been in the ERP software industry for a while, this gives strong resemblance of the MSA and McCormick & Dodge era of about twenty years ago. Remember how that ended?