The enterprise systems market

www.handels.gu.se

2023-04-13Centre for Business Solutions

Johan MagnussonCentre for Business Solutions

School of Business, Economics and Law

University of Gothenburg

Market: Enterprise Systems

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Agenda

After this lecture, the student will be able to:

1. Evaluate some of the drivers for changes in the ES market

2. Explain technological changes and their effects on the design of ESs

www.handels.gu.se

2023-04-13Centrum för Affärssystem

Learning Points: Current crisis

• Even though the IT Budget has been slashed with 10% in many companies, business has not been affected

• CIOs have not sufficiently communicated the cost of cost-cuts

• Application management is lagging• IT Governance has received

increased attention• Now is the time to plan for growth!

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Historical development: Recap

• Material Requirement Planning Systems• Material Resource Planning Systems• Enterprise Resource Planning Systems• Enterprise Application Integration• Service Oriented Architecture• Software as a Service

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Centralized 1960

| Fiktiv beskrivning 1960| Fiktiv beskrivning 1980

Decentralized1980

Centralized 1998

| Fiktiv beskrivning 1998

Decentralized with centralized integration 2002

Enterprise Application Integration / Enterprise Service Bus


Service Oriented Architecture


Decentralized 2010?? 2015

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Service Oriented Architecture (SOA)

• ”The Client/Server of the 21st century”• Architectural guidelines for micro-integrations• Used as guidelines for most new applications• Applications are broken down into services• Strong focus on ”re-use” as a measure of

success• Modular, distributable, clearly defined,

interchangeable and shareable• High risk of initial failures without clearly defined

governance

Abrahms, G, & Schulte, R.W. 2008. Service-Oriented Architecture and guide to SOA research. Gartner group.

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Services

Software as a Service

• Natural effect of SOA• Software delivered as loosely coupled

services• 10% of ERPs were SaaS-based 2009

(IDC, 2007)• 40% of SMEs have moved to SaaS by

2011 (Gartner Group, 2008)• Business models under construction• Muddy waters between Application

Service Provider (ASP) and SaaS have now turned into Cloud Computing…

ERP2002

Services

ERP2010

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Examples from ERP and CRM

• Ataio, Netsuite, 24SevenOffice, Fortnox & Salesforce

• Business models built on high level of standardization

• Low maintenance costs and ease of use/access

• Issues concerning agility and ownership

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ERP Vendor strategies

• How do we relate to the new market? • Leaders– Building directly on new platform– No legacy to take into account– Quick adoption of new model– Ex: Fortnox, 24/7 office, Ataio• Laggers– Re-configuring old versions– Re-packaging of instance– Slow adoption, milking previous market– Ex: SAP, Microsoft, Oracle• Brokers– Taking over the customer-relationship

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Incumbents and Challengers

Magnusson etl. 2012. “Incumbents and Challengers: Conflicting institutional logics in SaaS ERP vendors business models. Journal of Service Science and Management, 5:2.

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Cloud Computing

• The use of disparate resources to secure computational needs

• Elastic, off-premise sourcing • Remember Watson…• Federated ERP• SaaS, IaaS and PaaS• Issues concerning QoS (Quality of

Service), accountability and responsibility

• ”I’m still confused, but on a higher level…”

• Market bled €3B 2009-2011 • Paradigm shift

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Research in Progress: The emergence of ERP App Stores

• From:To:

Partner SMErp CustomerSMErp Partner Customer

Magnusson and Nilsson. (fortcoming). “The ERP App Store: A cradle of Conflicting interests in platform ecosystems“

Price

Revenue

Market

Responsibility

OwnershipControl

Accreditation

Platform

Scope

0

5

SMErpPartner

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Growth

Profitability

New Customers

Additional sales

Decreased cost

Increased revenue

Increased brand

awareness

Lower barriers for

procurement

Externalization of

development

Courtage

• Full scope• Medium price• Full responsibility

• Small scope• Low price• Medium

responsibility

• Medium scope• Medium price• Low responsibility

• Small scope• Low price• Low responsibility

Strategic choice for ERP App Stores

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Software Ecosystems• Multi-sourcing in the wake of SOA and

SaaS• Strive for agility• IT Relationship models are

unsophisticated, partnerships built on opportunism

• Are your current vendors right for your ecosystem?

• Evaluation of vendors– Open source– Web and consumerization– SaaS– SOA Governance and Strategies– Master Data Management (MDM)– Business Process Outsourcing (BPO)– Sourcing innovation

Genovese, Y. ete al. 2007. Evaluating Global-Class Software Ecosystems. Gartner Group | Genovese, Y. 2007. Evaluating IBM, Microsoft, Oracle and SAP strategies in software megatrends. Gartner Group

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Business Impacts of SOA and SaaS

• Agility & Alignment: Quick response to changes in business processes

• Vendors and Customers have different intentions– Vendors: Keep the customer close: Increase

dependence– Customers: Keep the vendor at a distance:

Decrease dependence• Vendors have used different approaches so far• Customers have not yet seen the true possibilities

of SaaS• 3rd party suppliers are closest to the customer

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Consumerization and ERP

• Consumerization is regarded as the most influential mega-trend during the coming decade

• Standardization and commoditization are powerful drivers

• 50% of all Global 2000 companies have deployed consumerized IT

• Web 2.0 and Social Computing comes with a collection of new risks

• Transparency and Crowdsourcing• How will this effect ERP?

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Contrasts: Process vs Emergence

• IF (erp IS process-based)• AND (erp IS focused on de-crease in

lead-times)• AND (erp IS based on standardized

processes)• THEN (ERP is NOT agile)

• Enterprise 2.0 vs Enterprise 1.0• Emergent design requires individualistic

processes, fully re-configurable• Learning and experimentation as

standard• McAffee, 2005; Hedberg & Jönsson,

1987

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Web 2.0 and Enterprise 2.0

• W2.0 is the Read/Write Web• High degree of dialogue and

transparency• Companies need to adress the

change in access and exposure• Impacts will ripple throughout the

entire enterprise• First step will be passive market

intelligence

Austin, T. 2009. Pattern based strategy and E2.0. Gartner Symposium, Cannes.

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Examples

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Analytics go Social

• Social Network Analysis• Enterprise Internet Reputation Management• Sentiment and Prediction analysis• Prediction Markets

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Food for Thought: Prediction Markets

• Economic theory during the 1980’s• Iowa Electronic Market and the

Hollywood Stock Exchange• Will price reflect average belief? • Wisdom of Crowds and Wikinomics• HP, Google, GE, Dell, Pfizer…

• Could we predict our revenues?

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Regulation

• Three forms of isomorphism (DiMaggio & Powell, 1983)

– Coercive (Regulation)– Mimetic (Imitation)– Normative (Norms)• Regulations give rise to new

demands• Continued regulative changes give

rise to agility

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Recapitulation

After this lecture, the student will be able to:

1. Evaluate some of the drivers for changes in the ES market

2. Explain technological changes and their effects on the design of ESs

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