The Evolution of Enterprise Resource Planning Includes Service Industries

December 6, 2006 from Technology Evaluation Centre – “Since the late nineties, the enterprise resource planning (ERP) vendors that originally targeted the needs of manufacturing organizations have slowly extended their functionality to service the needs of non-manufacturing industries as well. By 2000, when many of the major ERP implementations for the manufacturing industry had tapered off, tier one ERP vendors such as SAP and Oracle had refocused efforts to market their integrated solutions in the greener pastures of service-oriented vertical markets, including health care, government, higher education, banking, insurance, and other service-based businesses.

Today, ERP vendors are aggressively marketing industry-specific and project-oriented functionality to service industries. Unlike best-of breed solutions, these systems provide a fully integrated mature back-office system originally developed for manufacturing industries. Consequently, this raises the question: Is ERP for services a new category? Or is it “ERP less manufacturing?”

From a vendor’s point of view, the answer to those questions varies according to which side of the ERP fence you stand on. On one hand, ERP vendors claim that ERP for services is a well-developed software category customized for the service industries they serve. On the other hand, best-of-breed vendors for service verticals (such as professional services, health care, government, and financial services) push their industry expertise and vertical solutions built from the ground up for those respective service industries. Consequently, organizations in service industries are faced with the challenge of determining which vendors best fit their functional requirements.

The main difference in functionality between best-of breed service applications and ERP for services is the back-office component. ERP for services applications provide complete functionality for both the transactional (or operational) components, and the project-oriented components of service organizations. However, best-of breed service applications typically refer only to industry-specific functionality. Some vendors may include a back-office piece, and others may only deliver vertical functionality that communicates with other ERP systems or financial packages. As a result, there are two categories of vendors for service organizations:

Best-of-breed service vendors: Vendor solutions such as Compuware’s Changepoint and OpenAir PSA focus primarily on professional services organizations, and are typically marketed to the small to medium business (SMB) market. These offerings vary in breadth and depth, and the vendors tend to target a few key vertical markets. Depending on the vendor, their business models are diverse and can deliver software as a service (SaaS) and license models to their clients.

ERP for services: These vendors are typically traditional ERP vendors that provide a fully integrated solution with complete back-office functionality. Since they provide their clients with complete operational and transactional functionality, their offerings tend to be broader in application. In addition to project-oriented functionality that vendors such as Epicor and Deltek deliver for professional services organizations, ERP for services vendors provide fully integrated operational functionality for non-project organizations, such as Lawson in the health care sector, and Unit 4 Agresso for the public sector.

180 View – We recommend that both ERP and Best-of-breed service vendors be considered in system selection projects. ERP’s advantages include integration, infrastructure/platform consistency, user interface consistency, scalable, one number to call – no finger pointing. Best of Breed’s advantages includes cost, point solution is usually less complex to implement and maintain, focus on one industry with knowledgeable resources and best practices for industry.