An interview with industry expert & Microsoft speaker and trainer, Edward Paice, Managing Partner, Harness IT and SubZero Solutions, a specialist provider in delivering Baan and BPCS software support, IT Infrastructure, training and business consultancy to organisations across UK and Europe...

Anyone who has ever worked in the enterprise resource planning (ERP) software arena will know that during the last 10 years there has been a significant amount of consolidation in the business applications market in general, and the ERP market in particular.

It began with the Oracle Corporation’s purchase of Siebel Systems, Inc, which was followed by PeopleSoft, Inc.’s acquisition of JD Edwards; and then Oracle’s purchase of PeopleSoft.

This captured most of the attention in the tier one market place and it was SSA Global Technologies and Infor Global Solution that next followed suit. SSA, founded in 1981, developed BPCS and in 2001 began a series of acquisitions, including PRMS, MANMAN, Elevon, Baan, and PRISM, among others. By the end of its acquisition stream, SSA’s portfolio consisted of more than 15 different products and an install base of more than 13,000 customers.

At about the same time, another software firm, Infor (itself a product of acquisitions) executed a similar strategy. Between 2003 and 2005, Infor acquired NXTrend, Lilly, Mapics, GEAC, and others. Then, in 2006, Infor acquired SSA and all of its products.

Before we look at the implications of this consolidation we should firstly understand two drivers behind this market shift:-

1. The market dynamics for ERP

2. The logic that has driven the funding of this rash of acquisitions.

The Market Dynamics for ERP

During the 1990’s the received wisdom amongst the good and the great of the ERP industry was that ERP systems were replaced (replaced, not upgraded!) by a company about every 7 years. So if you had bought BPCS in say 1996, it was expected that you would stay with BPCS until 2003 or so, and then possibly come back to the market. However, due to several reasons, this has proved to be inaccurate, and during the period 2000 to 2010 the majority of companies who had acquired an ERP solution in the 90’s remained with that solution without going back to the market. So the lifespan of an ERP solution in an organisation has increased way beyond the original 7 years…to 10, 15 and maybe we will see companies still running ERP systems 20 or even 25 years after they were first installed (albeit having been upgraded).

One powerful reason behind this is that the pain and disruption of deploying an ERP solution was so great that most executives balk against it unless it is absolutely necessary. The second is to do with payback. The original justification for the purchase of the system was based upon two factors; firstly that the system would provide improvements to the business, by supporting joined up processes with a single store of transactional information; and secondly that the process of actually implementing the ERP system would provide the focus to consider the business processes and optimise them. The ERP systems of 2012 are perceived as fundamentally providing exactly the same benefits (i.e little delta) – so companies have refrained from changing (we will look at some of the differences shortly).

The Acquisition Logic

The only real question here is….”What’s in it for the investors?” Some of these “consolidators”, for example Oracle, are publicly quoted companies – whose strategic direction comes from the executive board. Others are private equity owned, and as such develop strategy in a closer relationship with their shareholders. However in both cases, the acquisition strategy is based upon the recognition that the “whole life” value of an ERP customer has increased dramatically in line with the realisation that customers do not replace every seven years. It is not unrealistic, when comparing customer spend over a 7 year life span to the real situation where customers hold on to their ERP systems for 15 to 20 years that the value of a customer is doubled, trebled or even quadrupled when one considers maintenance & support streams, consulting, extra licenses, new products and upgrades. The acquisition strategies that emerged amongst these consolidators recognises this increase in the value of a customer. Some of these consolidators now have revenue models in which existing customers represent >95% of their total revenue. Whilst this sounds very impressive the corollary is that they are becoming unsuccessful in winning new business – with all the implications!

So, after all this consolidation, where does that leave BPCS users?

To answer this question and others, SubZero for BPCS interviewed ERP industry expert and speaker at Microsoft HQ – Edward Paice to gain an industry perspective on the roadmap for Infor ERP LX to answer the question, is it best to continue with our current version, upgrade or go back to the market?

Mr. Paice: As we all know, Infor now markets ERP LX (the successor in name to BPCS) as one of its flagship products. This sounds very impressive, and there is lots to consider about LX, but first of all any company must firstly consider the question “can we afford to stay on our current version of BPCS? If you phrase the question this way it actually forces you to ask some difficult questions, such as “how are our competitors approaching our customers?”, and “are our suppliers able to go direct to our customers?”

SubZero for BPCS: So do you think the “Stay Where We Are” option, i.e. remain on the version of BPCS that we have already is ever an option for companies in the second decade of the 21st century?

Mr. Paice: Fundamentally…NO! Whilst of course the debate has to be one about benefits and ROI on the business case, we need to consider in it the light of what’s going on in the world, together with the development path of the ERP products such as BPCS. Consider the world through the eyes of a consumer, with eBay, Amazon and yes, Facebook, driving our expectations of immediacy, personalisation and customer intimacy. Our business customers are having their expectations set through their personal lives – how they interact with technology – and our ERP systems have to give them that. Secondly, look at the ERP systems that are winning new business today in the mid-market, Dynamics, Netsuite etc – they are providing their customers with the very latest capabilities to connect supply chains (or even value chains) flexibly and adroitly. Does your old version of BPCS give you this? No. So staying where you are means that you are losing competitiveness.

SubZero for BPCS: Can you help us visualise this?

Mr. Paice: Sure…a simple example…an item is on back order with a supplier. When it is received we need to expedite shipping it directly to our customer, plus get our sales team to call him and let him know it is on its way. Systems developed in the 90’s used standard transactional processing to do this. Systems from around 2003 onwards used Workflow to speed up the process by putting an item in someone’s work queue. Systems being delivered today combine Workflow with Presence, completely removing queue time and increasing customer satisfaction. One company I know of used these technologies to increase the performance of a department by a factor of 21! You just cannot compete against a company with those capabilities if you are stuck on 1990’s technology.

SubZero for BPCS: So what choices do we have?

Mr. Paice: Simple…you have three choices…

1. Consider upgrading to LX

2. Look at the Market

3. Stay where you are and die…slowly. Think of a poison working on your body…that’s the effect an old ERP system has on your business capabilities.

SubZero for BPCS: What should a company consider when looking at an LX upgrade?

Mr. Paice: First-off we have to recognise that there is no “one-size-fits-all” answer to this question. I recommend you think of it as “re-platforming” the business for the future. It may be appropriate for certain companies in certain business environments to think of an upgrade as a “temporary fix” – but for the majority of businesses it should be viewed as a strategic new platform.

SubZero for BPCS: OK, so how does a company decide if LX is a viable long term solution for their business?

Mr. Paice: Again, it is straightforward when you get down to the brass tacks…and there are multiple elements that need to be looked at when you are considering if LX is “future-proof” for your business. I think the easiest way of doing this is to look at it from the perspective of one of your competitors.

Imagine you are running a brand new organisation, operating in the same space as you do now, and competing against you. If you were selecting a new ERP system, where would LX be in your assessment of possible solutions? The long list would contain SAP, Oracle, Dynamics, plus all the cloud based players, plus the other legacy systems such as CDC Ross, Mfg/Pro, as well as the continuing stand alone vendors such as IFS.

But the trends are for very significant technological progression, choice in how you deploy, and verticalisation of solution for specific markets. Once you consider these factors then the long list becomes short quite quickly.

SubZero for BPCS: How so?

Mr. Paice: Because fundamentally only the very largest players who focus on a few products are winning the “new business” battle – and software companies that don’t constantly win new business are by definition on a downward trail.

SubZero for BPCS: What does that mean for Infor and BPCS?

Mr. Paice: Well, LX hasn’t been winning new business recently which is a worry, but the latest developments and the announcements regarding Infor10 give significant hope for the future. But the question you have to ask is…”Is LX going to continue to deliver strategic competitive advantage to your business over the next 10 years? If it can then wonderful, but if you only see it as a “stop-gap” then you should consider the wider market.

SubZero for BPCS: Okay that broadly covers alternative ERP solutions. What about the effort involved in configuring packages?

Mr. Paice: That’s where I think that the LX solution may have the edge over alternative ERP solutions, particularly if you are already running BPCS. Your team will already understand all the ways in which the system hangs together, so reducing your training bill and it will be quick to get users up to speed on the new system.

SubZero for BPCS: I would imagine that the effort involved in configuring SAP for example versus upgrading BPCS is the main reason a BPCS customer would decide not to consider SAP?

Mr.Paice: Well, there are a number of technical costs and time investment for both software products. If CIOs have done their research, they will know that from a technical architecture standpoint, the upgrade of BPCS to LX is more of a re-implementation, than an upgrade, which means that it will take more time for a consultant to do the upgrade than usual. Also, other technical factor to consider are that v6 to v8 requires separate instance migration and there are significant database changes, which will mean an investment in hardware. But, a good provider should be able to outline the costs for the upgrade and explain what to anticipate. From a time perspective, it will still require less training and disruption to the business than investing in a new ERP solution.

SubZero for BPCS: So, what is your opinion on the longevity of BPCS versus alternative ERP solutions?

Mr. Paice: As I intimated earlier, the jury is still out. The LX product will be around for years to come. That is without doubt. But will Infor invest the gazillions of dollars necessary to keep it competitive with Dynamics, Oracle and SAP? That’s anyone’s guess. If they do then we can expect a resurgence of new business wins for Infor. If not, then it will continue to fall behind in functionality and advancement – hindering those companies still using it.

SubZero for BPCS: Final Question…If you were CIO of a company running BPCS today, what would you do?

Mr. Paice: I would take a two pronged attack. Firstly at a tactical level I would look at what we are doing today, how we can do more with what we have, how we can reskill our staff etc.

Secondly, and over a longer timeframe, and assuming I had a clear understanding of the business direction, challenges etc., I would…

1. Draw up a 5 year IT strategy

2. Get external validation of it

3. Invite Infor, Microsoft, SAP and any specific vertical vendors to present against a specific “presentation specification” that I would draw up that would reflect today's requirements and tomorrow's vision. But we would get a lot of benefit from that tactical element – improvements that would impact today’s business performance, customer satisfaction and profitability.

Thank you for your insight, Mr.Paice. IT Directors are charged with advising senior management on infrastructure investments and the ability of those investments to meet strategic business objectives. Given the changing ERP landscape today, investing in the right platform for long term business success is more important than ever. Both SubZero forBaan and SubZero for BPCS are committed to helping our clients work through these kinds of decisions.