ERP Upgrades: Love ‘Em or Leave ‘Em?

November 18, 2015 Alex Woodie

What is the value of an ERP system? At most companies that use them, the ERP suite is critical to daily functioning. Without a centralized place to run things like accounts payable and general ledger, the company simply couldn’t operate. But that line of reasoning does not appear to hold true when it comes to ERP upgrades, which companies are increasingly choosing not to perform.

A recent survey from Rimini Street shed some light on the situation surrounding ERP upgrades, specifically for Oracle customers. In its second-annual survey of Oracle customers around world, Rimini (which is a provider third-party maintenance and support for Oracle ERP and CRM customers) found that nearly half of Oracle licensees are running at least one version behind the latest application release.

A full 64 percent of the respondents said their existing on-premise Oracle apps meet their business needs, while 41 percent of them say upgrading would be too expensive, according to the study, which involved 443 current Oracle application customers. Rimini says 40 percent of the respondents were E-Business Suite users, 29 percent PeopleSoft users, 19 percent JD Edwards customers, 17 percent Siebel users.

To be sure, Rimini is no impartial observer here, as the company makes its living by selling maintenance and support services to Oracle customers that cost about half what Oracle charges. With the typical annual maintenance bill accounting for 22 percent of the initial ERP or CRM license, it’s safe to say that Rimini has taken tens of millions of dollars of support business away from Oracle. (The companies have also sued each other fairly extensively, but that’s another story.)

The study specifically calls out Fusion, Oracle’s next-generation ERP platform, as having a particularly rough row to hoe. According to Rimini, only 8 percent of the survey respondents were currently running Fusion, while 60 percent said they “see no strong business case” to migrate to Oracle’s Fusion or cloud applications. Slightly more, 62 percent, say high licensing and maintenance costs are the top reason why they’re not moving to Oracle Fusion or cloud. About 10 percent of the respondents are using one of Oracle’s cloud products.

David Rowe, senior VP and chief marketing officer for Rimini, says the survey results show that Oracle customers are happy with their existing ERP and CRM apps, and are looking elsewhere for apps that extend that core functionality. “IT decision makers no longer need to upgrade their ERP platforms to add new functionality such as mobility, analytics, social and digital capabilities,” he says.

This view meshes with the one held by Anthony Etzel, a solutions executive for Crossroads RMC, which provides manufacturing execution systems (MES) for customers running Infor MAPICS and BPCS environments. In Etzel’s view, the ERP innovation cycle has ebbed and flowed over the years, and is currently ebbing.

“I’ve been in this business before ERP packages even existed,” Etzel tells IT Jungle. “I was a programmer for manufacturing companies, and we wrote our own stuff. Then IBM created MAPICS and they were practically giving it away when you bought or leased a box, it was so cheap.”

ERP was the hot ticket to business automation in the mid to late 1990s, and it drove huge sales of servers and employed armies of implementation specialists. The ERP implementation cycle peaked around Y2K, and since then, as ERP matured, the amount of innovation has leveled off too.

“Over the past 30 years, ERP has improved,” Etzel says. “But there have been so many things added to it that there’s not much more you can do, except to modernize it, maybe tweak it here and there, or to make it more configurable based on the type of industry that you’re in.”

Much of the focus of ERP vendors like Oracle, Infor, and SAP historically has been on boosting front-office productivity, with snazzy iPhone interfaces and “social business” functions that let you track things in a Facebook-friendly way (“Where’s my #stapler?”).

That leaves room for companies like Crossroads RMC to innovate and improve back-office processes. “A lot of focus is given to financial software, all your accounting packages, your customer orders, your purchase order, your scheduling and planning–all those front-office people,” he says. “But when you talk about the shop floor, it’s become an orphan child in my opinion. How do we make it easier to deploy it to the floor and report back from the floor? That’s always been a neglected area, that’s why we’re successful with what we’ve done.”

ERP has had a great run, but it’s no longer the dominant force in the IT business that it once was. Much as the initial electrification of this country had a huge impact on daily life of Americans, ERP helped make American businesses more efficient. But ERP systems are stable today, business processes are automated, and businesses take ERP for granted. It’s become a cost center, not a profit center.

Instead, the game has shifted to the digitization of our lives, both business and personal, and that means businesses are competing to have the hottest website or mobile app, replete with big data-driven recommendations and personalization, all running in a super-scalable cloud fashion. In most cases, you can’t get that from an ERP upgrade.

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