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What's the Value of ERP Software?

Welcome.  I am Erik Johnson, Sr. Director, Product Research at Epicor.  My team is responsible for working out if, when, and how Epicor should bring new technologies into our products and services.  We also define many features of the software architecture and tools.  It is an obviously technical job and requires lots interaction with others in the industry.  In that vein, we started this blog to connect with others about technology surrounding ERP (and the inevitable accompanying hype). 

ERP is an interesting software sector because the functionality is broad, users have diverse roles, and every enterprise is unique.  Building large systems to suite these issues is certainly complex.  When I started in ERP application development in the 1980s, many companies were buying enterprise systems for the first time.  Those systems were valued mainly on gained efficiency, especially around reducing inventory costs. 

Today, however, companies also use ERP systems to improve competitiveness.  This has affected large companies differently than small companies.  Large companies use their IT investment to change their business processes and then replicate them across establishments.  This lets large companies adapt to market changes and offer new products more quickly.  Smaller companies compete by differentiating themselves, exploiting market niches, and shortening time to market.  Small companies use their IT resources to out-maneuver competitors and maintain high-touch relationships with customers and partners. 

Small companies are not just mini versions of big companies, meaning fewer users and less sophisticated requirements.  Small companies need often tier-1 specific features like PLM, product configuration, and logistics.  Nevertheless, small companies also need to quickly switch off features that are not needed immediately.  Being a big company means more than having more users and implementing exotic functions.  Large companies use business process management as a competitive tactic.  ERP systems must inexpensively adapt to the data, operational, and integration scenarios managers envision.

These basic IT strategies – no matter what the company size – boil down to achieving two objectives: efficiency and agility.  Efficiency means lowering transaction costs and automating more operations.  Agility means quickly designing and deploying new business processes across many locations.  Every enterprise creates a unique mix of the two.  Relying completely on one starves the ability to do the other.  In addition, Epicor serves a wide enterprise market ranging from 50-3000 employees.  That market diversity was one reason Epicor uses two independent engineering teams.

One team builds the application forms and processes.  Another team builds the underlying platform and tools.  The original thinking was to separate development of business functions like order processing from technology like data access and security.  Technology generally changes much faster than, say, how debits and credits work.  When, for example, a new security standard emerges, Epicor can change the product’s architecture without having to retrofit each individual form.  Developing an independent platform also ensured consistency across all forms and functions.  This pleased users while lowering development costs over time. 

That approach now echoes the two basic objectives of efficiency and agility.  Epicor’s applications team continues to add new functions and improve overall performance.  That helps all customers improve efficiency.  The platform team spends much of its time building components that execute the applications according to the unique requirements of each enterprise.  That minimizes the effort needed to change how the application runs and interacts with other systems. 

The upshot is that ERP systems are no longer just a (huge) business application.  They have shifted roles from improving efficiency to driving competitiveness.  Their value is much more than just automating and optimizing operations.  The resulting data itself – category information, business transactions, audit tracking, and summarized metrics – is a strategic resource.  The application itself is a toolbox utility grinding transactions into information.  Having a reasonably complete set of reports built into the product is an obvious need.  But users often need to circumvent the application and get information however is best for them.

Going forward, I would like to use this blog to drill into the technical aspects of enterprise systems.  It would be great to get ideas about what areas are important to cover, so please give feedback.  In addition, our group is always looking for ways to improve things like usability, administration, integration, security, customization, and partnership automation.  So again, this is a place to start some deep discussion.  I promise to say (constructively) what I really think.  I also look forward to hearing from anyone who would like to do the same.  

Posted by Erik Johnson, Senior Director of Product Research, Epicor

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