Human Dynamics

One interesting observation of the ERP ecosystem is that, although the three parties are very different from each other and there are clear organizational boundaries between one another, the barriers for ERP professionals to switch from one party to another are not that significant. An employee at an adopting organization may move to a consulting firm after accumulating enough experience working on the company's ERP project. A seasoned ERP consultant may be invited by an adopting organization to fill the chief information officer (CIO) position. Consultants may also have a choice between being hired by a firm and working as an independent consultant. In addition, migrating between vendors and consulting firms is also not unusual.

There are several benefits of this mobility. For one, the whole ERP industry benefits, as this human dynamic improves knowledge exchange and transfer. Also, this provides a bigger human resource pool for specific needs of each party in the game. And of course, to the individual professionals, mobility helps them to be better rounded, which aids them in reaching higher achievements in their careers. Each time they switch, it might be an opportunity for them to improve their professional status.

The Commoditization of ERP and External Challenges

In his famous article IT Doesn't Matter, Nicholas G. Carr "examine[s] the evolution of information technology in business and show[s] that it follows a pattern strikingly similar to that of earlier technologies like railroads and electric power"[2] . It is true that IT is commoditized and becoming a necessity for today's companies. ERP is not an exception. A decade ago, limited knowledge of SAP might not have hindered a person from starting a career in ERP consulting, but nowadays, the bar has been raised to a much higher level. The massive adoption of ERP makes it an indispensable part in the business environment—and ERP knowledge is no longer limited to a small pool of professionals.

Following the commoditization of IT and standardization of business processes, the halo of ERP may fade out if the industry can't add new elements to it. The prosperity of business intelligence (BI) is a recent example that ERP is moving with market needs. Generally speaking, as long as the industry can always stay on the edge of using IT for better business operation and performance, this ecosystem will exist; but one has to be aware that everything has a life span and that commoditization implies it has reached a stage of maturity.

There are also external factors that threaten the traditional ERP business model. The first is open source ERP. Developers such as ComPiere and Openbravo represent a new business model in which collecting license fees might no longer be developers' strongest approach towards profitability. This new model may impose significant impact on the technology source in the ERP ecosystem: the vendors.

Another threat comes from the prosperity of web applications. When business processes become more standardized, browser applications will be able to move to more sophisticated areas. For example, founded in 1999 by former Oracle executive Marc Benioff, SalesForce.com (an on-demand CRM solution vendor) went public on the New York Stock Exchange (NYSE) in June 2004. The company, according to its web site, has its services translated into 15 different languages and currently has over 43,600 customers and 1,000,000 subscribers. Within the web application model, to what extent consulting services can be involved becomes a question.

Exposed to these challenges, the landscape of the ERP ecosystem may change. Either the vendors or the consulting services may experience significant consequences, and conflict between players may arise if the trends keep growing stronger.

Success Factors for Adopting Organizations

1) In-house expertise
Very often, adopting organizations overestimate their capability on the business processes side and underestimate their need to become stronger on the IT side. Although there are consultants that help enterprises build ERP systems, adopting organizations should not limit themselves to being passive adopters of the technology.

If companies can have or develop their own expertise in areas such as project management, information integration, and other technological aspects during ERP implementation, they will have better control of their ERP initiatives, and thus lower risks. I had a chance to listen to GSK Canada's ERP project leader Diane Connolly describe her experiences in integration, and discovered how these experiences not only helped the business unit achieve its project objectives, but also how they became an asset for ERP implementation across the whole corporation.

2) Financial capability
The investment in an ERP system is usually comprised of two major parts: software licenses and implementation services. When project scope and scale are determined and a software vendor is selected, the license investment is relatively stable, but the implementation part is associated with more uncertainties (consulting fees are more likely to change, compared with license fees). It is not rare to see an ERP project go over the initial budget due to unexpected issues or changes that come up during implementation. As soon as it is realized that things aren't going as planned, the adopting organization needs a strong contingency plan to address the uncertainties.

Another reason that the adopting organization needs financial capability is that the implementation may: 1) require the business to go into a period of downtime; and 2) cause the business to performs below its pre-implementation level for a period of time. These two factors both place additional financial pressure on the organization and should be foreseen and planned for.