A short introduction to the market surrounding enterprise systems, and the current development and trends.

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Johan Magnusson
Centre for Business Solutions
School of Business, Economics and Law
University of Gothenburg
Market: Enterprise Systems
2013-08-29Centre for Business Solutions

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Agenda
After this lecture, the student will be able to:
1. Evaluate some of the drivers for changes in the ES market
2. Explain technological changes and their effects on the design of ESs
2013-08-29Centre for Business Solutions

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Learning Points: Current crisis
• Even though the IT Budget has been
slashed with 10% in many
companies, business has not been
affected
• CIOs have not sufficiently
communicated the cost of cost-cuts
• Application management is lagging
• IT Governance has received
increased attention
• Now is the time to plan for growth!
2013-08-29Centrum för Affärssystem

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Historical development: Recap
• Material Requirement Planning Systems
• Material Resource Planning Systems
• Enterprise Resource Planning Systems
• Enterprise Application Integration
• Service Oriented Architecture
• Software as a Service

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Centralized 1960
| Fiktiv beskrivning 1960
| Fiktiv beskrivning 1980
Decentralized1980
Centralized 1998
| Fiktiv beskrivning 1998
Decentralized with centralized integration 2002
Enterprise Application Integration / Enterprise Service Bus
| Fiktiv beskrivning 2002
Service Oriented Architecture
| Fiktiv beskrivning 2010
Decentralized 2010?? 2015

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Service Oriented Architecture (SOA)
• ”The Client/Server of the 21st century”
• Architectural guidelines for micro-integrations
• Used as guidelines for most new applications
• Applications are broken down into services
• Strong focus on ”re-use” as a measure of
success
• Modular, distributable, clearly defined,
interchangeable and shareable
• High risk of initial failures without clearly defined
governance
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Abrahms, G, & Schulte, R.W. 2008. Service-Oriented Architecture and guide to SOA
research. Gartner group.

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Services
Software as a Service
• Natural effect of SOA
• Software delivered as loosely coupled
services
• 10% of ERPs were SaaS-based 2009
(IDC, 2007)
• 40% of SMEs have moved to SaaS by
2011 (Gartner Group, 2008)
• Business models under construction
• Muddy waters between Application
Service Provider (ASP) and SaaS have
now turned into Cloud Computing…
2013-08-29Centrum för Affärssystem
ERP2002
Services
ERP2010

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Examples from ERP and CRM
• Ataio, Netsuite, 24SevenOffice, Fortnox &
Salesforce
• Business models built on high level of
standardization
• Low maintenance costs and ease of
use/access
• Issues concerning agility and ownership
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ERP Vendor strategies
• How do we relate to the new market?
• Leaders
– Building directly on new platform
– No legacy to take into account
– Quick adoption of new model
– Ex: Fortnox, 24/7 office, Ataio
• Laggers
– Re-configuring old versions
– Re-packaging of instance
– Slow adoption, milking previous market
– Ex: SAP, Microsoft, Oracle
• Brokers
– Taking over the customer-relationship
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Incumbents and Challengers
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Magnusson etl. 2012. “Incumbents and Challengers: Conflicting institutional logics in SaaS
ERP vendors business models. Journal of Service Science and Management, 5:2.

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Cloud Computing
• The use of disparate resources to
secure computational needs
• Elastic, off-premise sourcing
• Remember Watson…
• Federated ERP
• SaaS, IaaS and PaaS
• Issues concerning QoS (Quality of
Service), accountability and
responsibility
• ”I’m still confused, but on a higher
level…”
• Market bled €3B 2009-2011
• Paradigm shift
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Research in Progress: The emergence of ERP App Stores
• From: To:
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Partner SMErp CustomerSMErp Partner Customer
Magnusson and Nilsson. (fortcoming). “The ERP App Store: A cradle of Conflicting interests
in platform ecosystems“
0
1
2
3
4
5
Price
Revenue
Market
Responsibility
OwnershipControl
Accreditation
Platform
Scope
SMErp
Partner

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Growth
Profitability
New
Customers
Additional
sales
Decreased
cost
Increased
revenue
Increased
brand
awareness
Lower barriers
for
procurement
Externalizatio
n of
development
Courtage
• Full scope
• Medium price
• Full responsibility
• Small scope
• Low price
• Medium
responsibility
• Medium scope
• Medium price
• Low responsibility
• Small scope
• Low price
• Low responsibility
Strategic choice for ERP App Stores

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Software Ecosystems
• Multi-sourcing in the wake of SOA and
SaaS
• Strive for agility
• IT Relationship models are
unsophisticated, partnerships built on
opportunism
• Are your current vendors right for your
ecosystem?
• Evaluation of vendors
– Open source
– Web and consumerization
– SaaS
– SOA Governance and Strategies
– Master Data Management (MDM)
– Business Process Outsourcing (BPO)
– Sourcing innovation
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Genovese, Y. ete al. 2007. Evaluating Global-Class Software Ecosystems. Gartner Group |
Genovese, Y. 2007. Evaluating IBM, Microsoft, Oracle and SAP strategies in software
megatrends. Gartner Group

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Business Impacts of SOA and SaaS
• Agility & Alignment: Quick response to changes in
business processes
• Vendors and Customers have different intentions
– Vendors: Keep the customer close: Increase
dependence
– Customers: Keep the vendor at a distance:
Decrease dependence
• Vendors have used different approaches so far
• Customers have not yet seen the true possibilities
of SaaS
• 3rd party suppliers are closest to the customer
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Consumerization and ERP
• Consumerization is regarded as the most
influential mega-trend during the coming
decade
• Standardization and commoditization are
powerful drivers
• 50% of all Global 2000 companies have
deployed consumerized IT
• Web 2.0 and Social Computing comes with a
collection of new risks
• Transparency and Crowdsourcing
• How will this effect ERP?
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Contrasts: Process vs Emergence
• IF (erp IS process-based)
• AND (erp IS focused on de-crease in
lead-times)
• AND (erp IS based on standardized
processes)
• THEN (ERP is NOT agile)
• Enterprise 2.0 vs Enterprise 1.0
• Emergent design requires individualistic
processes, fully re-configurable
• Learning and experimentation as
standard
• McAffee, 2005; Hedberg &
Jönsson, 1987
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Web 2.0 and Enterprise 2.0
• W2.0 is the Read/Write Web
• High degree of dialogue and
transparency
• Companies need to adress the
change in access and exposure
• Impacts will ripple throughout the
entire enterprise
• First step will be passive market
intelligence
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Austin, T. 2009. Pattern based strategy and E2.0. Gartner Symposium, Cannes.

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Examples
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Analytics go Social
• Social Network Analysis
• Enterprise Internet Reputation Management
• Sentiment and Prediction analysis
• Prediction Markets
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Food for Thought: Prediction Markets
• Economic theory during the 1980’s
• Iowa Electronic Market and the
Hollywood Stock Exchange
• Will price reflect average belief?
• Wisdom of Crowds and Wikinomics
• HP, Google, GE, Dell, Pfizer…
• Could we predict our revenues?
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Regulation
• Three forms of isomorphism
(DiMaggio & Powell, 1983)
– Coercive (Regulation)
– Mimetic (Imitation)
– Normative (Norms)
• Regulations give rise to new
demands
• Continued regulative changes give
rise to agility
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Recapitulation
After this lecture, the student will be able to:
1. Evaluate some of the drivers for changes
in the ES market
2. Explain technological changes and their
effects on the design of ESs
2013-08-29Centre for Business Solutions