Travelling to the states, I have been fascinated by the Infor (remember when Baan defined ERP and the acronym was an accurate description of what ERP did) advertizing campaign: “Big ERP”. Images of SAP / Oracle salesman dressed up as Daddy Warbucks, images of business trampled by – you guessed it – SAP / Oracle giants – the campaign clearly addresses CIOs unease with the market power concentrated in just two vendors. I would add though that painting SAP with the Oracle brush is somewhat unfair. Oracle’s ambitions on owning end to end business process automation - including the business models themselves – is unique.
I come from the billing – an extraordinarily verticalized industry – so I find the fact that ERP is on the one hand very horizontal, and on the other hand very concentrated, fascinating. In theory, ERP covers an area where business models and processes differ as much or more as those associated with billing when you go from industry to industry. Resource management (human or physical) and supply chain management can’t be more different from business line to business line. You would have expected that – like billing – many specialized players would have coded solutions that specialize in automating business processes for particular industries.
So how did we end up with Oracle and SAP in such dominant positions across so many industries? It is more than Oracle buying market share via acquisition of big 1990’s vertical players only leaving until only recently SAP in its way. (Microsoft
and Infor do provide real alternatives now). Paradoxically, SAP set the pattern. ERP practices are so diversified – often times from company to company – that vertical solution did not make sense. The enterprise software industry practice of using one customer to learn the ropes for one vertical and reselling it as a product does not work in ERP. A solution designed for one customer is too off the mark for even its competitors.
A solution to to build solutions is the only good approach in ERP – and this required in the 1990’s a sophisticated and services centric product. SAP delivered this – especially in building the army of SAP analysts (independent and within integrators). The scale to pull this off effectively made sure that small players were at a great disadvantage, Ergo: the situation we are in today.
Oracle is a Johnny come lately – with a very different approach based on acquired vertical solutions jammed into pre-integrated suites that go beyond ERP. The sales approach is “who cares if the fit is not right” as long as you have one vendor to beat over the head and a largely cynical pitch that the database and SOA magically pre-integrate the diverse products they purchased. At least, SAP has always been very deliberate in making sure that the software it purchases fits into its framework.
A strange paradox is that I hear CIO are asking that SAP be left un-customized in transformation projects – putting the burden on other systems to take customizations – including (!) billing. SAP took its foot off the gas when it let Agazzi go. They had a sales problem – but the renewal of their technology beyond SOA will ultimately determine how they win or lose. I think Microsoft with a much newer stack and a strategy that allows small players to leverage / customize their ERP into any company is a real threat.
So why didn’t billing follow ERP’s evolution – and remained so verticalized? I see two key reasons. First, billing, by having less company to company diversity than ERP, allowed almost anyone to write a solution for one company and then have a reasonable chance of reselling it to another. The amount of customization, though great, was nowhere near what was required for ERP. There was no real need for scale in services that pushed out the small players in ERP. Second, within any one vertical, hardcoded business processes were viable – no need for the complex lifecycles and workflows that really require a more horizontal approach. In other words, billing is verticalized because the barriers to entry are low. I hate to say it – anyone can write a billing solution. (I have replaced a number of Telco billing systems in the past 20 years that were written by an IT team made up of one programmer). Where vertical solutions have not thrived – companies or their SI have been able to write custom solutions with ease.
Vertical solutions – with all their flaws of being unable to evolve or incorporate new business models from other industries – dominate billing just because they can. The value of horizontal billing – like ERP – is indisputable… it is a key component in the convergence (I use the word reluctantly) of business models we are seeing between almost every industry - if for no other reason than addressing the huge number of custom solutions that have never been addressable by product solutions.
From my point of view – as an aficionado of unique business models – the end of the tyranny of hard coded verticalized enterprise software could not come soon enough.