Considering the short life cycles of many things we experience these days, enterprise resource planning (ERP) has a long history, if we trace it back to the advent of inventory management and control systems in the 1960s. After forty years of development, ERP has grown to an industry with over $30 billion (USD) in application revenue (AMR Research, 2007), with an ecosystem that has grown to a mature level allowing every party within to function together, with all other factors of the economic environment.
A Three-party Game
The ERP ecosystem is comprised of three major parties: software vendors, consulting services (including both consulting firms and independent consultants), and adopting organizations. In the ERP game, these parties work closely to achieve a common goal—to improve operation performance for the adopting party, through the establishment of ERP systems.
The vendor is the main source of software technologies. Without the software (behind which are methodologies, system designs, programming and testing, and all other efforts that make the delivery of a software package possible), the adopting organization would have to build its own system from scratch at much greater cost.
The adopting organization is the financial source for the whole ecosystem. Without this party, the whole ERP industry would not exist.
Consulting services are the bridge between the other two parties. The existence of consulting is the result of a division of labor, which allows every party to focus on what it does the best.
If we look at this three-party game from a short-term perspective, or on the level of a single case, it is possible to see that only one or two parties win the game at the cost of the rest. For example, we have seen certain cases in which vendors made good money, but the systems they provided didn't work well. However, taking a long-term perspective, this game is able to reach a triple-win situation in which every party receives what it deserves.
"Triple-win" Success Factors
As there are already many articles talking about key factors for successful ERP projects, it would be interesting to take a different view of success. And so I'll begin by zooming in on the main factors each party requires to be successful in this ecosystem, based on observations and perceptions formed as a result of recent visits to different parties within the ERP ecosystem. To the vendors, the most important factors are development capability, market leadership, and the ability to maintain the balance of the ERP food chain. To the consulting services, knowledge capital, human capital, and creativity are critical, while to the adopting organizations, winning factors are in-house expertise, financial capacity, and independency.
Success Factors for Vendors
1) Development capability
Development capability can be divided into two parts—the technology side and the business side. First of all, as application system developers, vendors need to have sufficient technology inventory. Generally speaking, all the technologies that are involved in a software package for commercial purposes should be mature. However, due to the fast pace of the IT industry, application system developers should always work with the latest mature technologies. For example, the evolution from SAP R2 to R3 and then to mySAP is in tune with improvements to the architecture of information systems.
Secondly, development capability on the business side is also critical since the value of ERP software is to help businesses run better. Some exemplary approaches include: building solutions and best practices on an industry level; maintaining a certain proportion of employees as an in-house consulting team in order to insure direct and tight connections with customers' businesses; and having a group of industry experts who keep the development in line with business processes, to accommodate real business needs.
A Three-party Game
The ERP ecosystem is comprised of three major parties: software vendors, consulting services (including both consulting firms and independent consultants), and adopting organizations. In the ERP game, these parties work closely to achieve a common goal—to improve operation performance for the adopting party, through the establishment of ERP systems.
The vendor is the main source of software technologies. Without the software (behind which are methodologies, system designs, programming and testing, and all other efforts that make the delivery of a software package possible), the adopting organization would have to build its own system from scratch at much greater cost.
The adopting organization is the financial source for the whole ecosystem. Without this party, the whole ERP industry would not exist.
Consulting services are the bridge between the other two parties. The existence of consulting is the result of a division of labor, which allows every party to focus on what it does the best.
If we look at this three-party game from a short-term perspective, or on the level of a single case, it is possible to see that only one or two parties win the game at the cost of the rest. For example, we have seen certain cases in which vendors made good money, but the systems they provided didn't work well. However, taking a long-term perspective, this game is able to reach a triple-win situation in which every party receives what it deserves.
"Triple-win" Success Factors
As there are already many articles talking about key factors for successful ERP projects, it would be interesting to take a different view of success. And so I'll begin by zooming in on the main factors each party requires to be successful in this ecosystem, based on observations and perceptions formed as a result of recent visits to different parties within the ERP ecosystem. To the vendors, the most important factors are development capability, market leadership, and the ability to maintain the balance of the ERP food chain. To the consulting services, knowledge capital, human capital, and creativity are critical, while to the adopting organizations, winning factors are in-house expertise, financial capacity, and independency.
Success Factors for Vendors
1) Development capability
Development capability can be divided into two parts—the technology side and the business side. First of all, as application system developers, vendors need to have sufficient technology inventory. Generally speaking, all the technologies that are involved in a software package for commercial purposes should be mature. However, due to the fast pace of the IT industry, application system developers should always work with the latest mature technologies. For example, the evolution from SAP R2 to R3 and then to mySAP is in tune with improvements to the architecture of information systems.
Secondly, development capability on the business side is also critical since the value of ERP software is to help businesses run better. Some exemplary approaches include: building solutions and best practices on an industry level; maintaining a certain proportion of employees as an in-house consulting team in order to insure direct and tight connections with customers' businesses; and having a group of industry experts who keep the development in line with business processes, to accommodate real business needs.
ranjini
Said
Hi, thank you very much for help. I am going to test that in the near future. Cheers
ERP Consulting
Unknown
Said
My cousin recommended this blog and she was totally right keep up the fantastic work!
ERP Consulting