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Momentum Continues to Grow for Vertical Functionality in ERP

An article in CIO points to the strategic conundrum that is giving rise to increasing vertical functionality in ERP, for manufacturing as well as other business sectors:

If your enterprise has customized your mission-critical ERP systems over the years, your future upgrades will likely be more troublesome and terrifying because the changes can conflict with the patches. On the other hand, if you are running out-of-the-box ERP with little customization, maybe you're not getting all the important features your business needs. So what's a CIO to do? And how do you figure out what to do next if upgrades or replacement are looming in your future?
       
According to Rebecca Wettemann, VP of Research at Nucleus Research, an increasing number of CIOs are choosing the less customization path. A major driver of this development is that ERP vendors are building applications with greater industry-specific vertical functionality. “Part of the reason for this recent trend is that ERP vendors are now recognizing that if they build applications that include verticalization, they will be easier for more companies to adopt with fewer problems and far less customization,” says Wettemann.
       
CIO defines verticalized applications as those “built with specific industries in mind, so they are essentially designed to fit different kinds of businesses out of the box.” Typically, to help the applications better conform to a specific industry vertical, they include role-based views and components that users can easily configure so they more closely suit business and process needs, without requiring code writing and deep code customization.
       
Wettemann says that this approach—which she describes as install vanilla—is good for many companies using ERP. "I think it depends to a certain extent on the application that is chosen. If the application has vertical functionality with role-based sourcing and other possible configuring, then, yes, you're better off going vanilla," she says. "Clients see this as a less risky move, a more predictable way to deploy ERP and a way that is more likely to minimize disruptions and costs over time, which is even more important."
       
In fact, a survey cited in Industry Week showed that 96 percent of manufacturers “need or want” more specialized ERP. The single greatest need for more industry-specific functionality was cited among manufacturers who say managing return on assets is a core part of their business. The rationale is straightforward:

Manufacturing in North America has become more complex as long-run repetitive manufacturing has become less common. More and more manufacturing in the Western Hemisphere centers around demanding processes like engineer-to-order (ETO), product lifecycles are becoming shorter and manufacturers are focusing more on the specific needs of the vertical industries they serve.
       
As manufacturers themselves have become more sensitive to the vertical segments they serve, manufacturing companies are increasingly valuing ERP solutions that have been developed and maintain vertical functionality with their industry in mind.  This trend gained traction at the outset of the decade, and has been building momentum ever since.

Posted by Tom Muth, Senior Manager, Product Marketing at Epicor

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