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Transcript of Paul Hamerman R "Ray" Wang
TeleconferenceNext-Generation ERP StrategiesPaul Hamerman R “Ray” Wang
Vice President Principal Analyst
Forrester Research
September 17, 2007. Call in at 12:55 p.m. Eastern Time
2Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
3Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Theme
Despite all the SOA hype, ERP strategies
should focus on business users and the processes they support
4Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
5Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Packaged applications remain a top IT priority in 2007
8%
6%
7%
11%
14%
11%
19%
17%
22%
24%
24%
27%
25%
31%
31%
33%
Redesigning / redeploying IT’sarchitecture (like implementing a
services-oriented architecture)
Mobility initiatives
Internet and eCommerceinitiatives
Replacing or upgrading serverhardware
Significantly upgrading disasterrecovery capabilities
Replacing or upgrading existingapplication systems
Significantly upgrading yoursecurity environment
Consolidating IT infrastructure
Critical priority Priority
Rank
2007 2006
1
2
3
4
5
6
7
8
2
1
4
3
N/A
5
N/A
6
“Which of the following initiatives are likely to be one of your ITorganization’s major IT themes for 2007?”
Base: 318 decision-makers at European enterprises
Source: Forrester’s Business Technographics® November 2006 European Enterprise IT Budgets And Spending Survey
6Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Packaged apps spending shows continuous growth
22%
24%
26%
36%
38%
42%
51%
53%
55%
39%
41%
42%
19%
16%
12%
18%
15%
7%
7%
7%
7%
6%
6%
8%
Platform software
Packaged applications
Collaborationapplications
Infrastructure software
Web applications
Security software
More About the same Less Don't know
“How does your company’s 2007 planned spendcompare with its actual spend in 2006?” Index
2007 2006
35%
23%
18%
14%
8%
3%
32%
20%
-1%
N/A
8%
-9%
Base: 218 decision-makers at European enterprises(percentages may not total 100 because of rounding)
Source: Forrester’s Business Technographics® November 2006 European Enterprise IT Budgets And Spending Survey
7Entire contents © 2007 Forrester Research, Inc. All rights reserved.
The state of software investments 2007 — North America: ERP upgrades are a major priority
“The volume of application software purchases will increase in 2007”“In 2007, will your company purchase any of the following?”
“In which vendor’s ERP software will you invest?”
2%
6%
13%
6%
6%
4%
4%4% 19%
8% 21%
10% 25%
5% 6% 28%
18% 25%
10% 27%
16% 31%
14% 45%
15%
25%
7%
22%
33%
22%
26%
27%
N/A†
41%
44%
56%
Percentage of enterprises last year
purchasing or upgrading*
Base: 227 application software decision-makers at North American enterprises that will make purchases of ERP software in 2007 (multiple responses accepted); Base: 471 application software decision-makers at North American enterprises*; Base: 379 application software decision-makers at North American enterprises; Source: Forrester’s Business Technographics® November 2006 European Enterprise IT Budgets And Spending Survey
First-time purchase Major upgrade Minor upgrade
Messaging, email, and collaborationsoftware
Customer service and support software
Business intelligence (BI) software
Enterprise resource planning (ERP)software
Sales force automation (SFA) software
Marketing automation software
Sell-side eCommerce software
Procurement or sourcing software
SAP
Microsoft
Oracle
Other
8Entire contents © 2007 Forrester Research, Inc. All rights reserved.
The state of software investments 2007: Europe“Procurement and sourcing software purchase volumes will grow most in 2007”
“In 2007, will your company purchase any of the following?”
“In which vendor’s ERP software will you invest?”
Percentage of enterprises last year
purchasing or upgrading*
Base: 99 application software decision-makers at European enterprises that will make purchases of ERP software in 2007 (multiple responses accepted); Base: 196 application software decision-makers at European enterprises *; Base: 204 application software decision-makers at European enterprises
First-time purchase Major upgrade Minor upgrade
Messaging, email, and collaborationsoftware
Customer service and support software
Business intelligence (BI) software
Enterprise resource planning (ERP)software
Sales force automation (SFA) software
Marketing automation software
Sell-side eCommerce software
Procurement or sourcing software
Oracle
Microsoft
SAP
Other
16%
11%
17%
41%
33%
18%
27%
30%
31%
43%
N/A†
50%5% 15% 33%
7% 17% 27%
8% 13% 26%
6% 15% 19%
7% 9% 22%
3%9% 20%
6% 9% 16%
4%3%
14%
43%
SAP leads bya wide margin
in Europe
Source: Forrester’s Business Technographics® November 2006 European Enterprise IT Budgets And Spending Survey
9Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
10Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Enterprise apps vendor and market trends
• Apps vendor consolidation continues
» Oracle and Infor are the biggest acquirers
• Saturation at the upper end
» Most enterprise deals are with existing customers
• Customer retention is the top vendor priority
• Architectural evolution
» SOA and middleware being used to drive customer lock-in
• Transition to recurring and variable revenue models
» Maintenance is driving industry growth
11Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Maintenance continues to drive market growth
$0
$10,000
$20,000
$30,000
$40,000
$50,000
2006 2007 2008 2009 2010 2011
Services
Maintenance
License
Base: Worldwide revenues
8.0
8.4
4.8
Source: Forrester
12Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Top 10 ERP vendors by total revenues ($ millions)$11,837
$6,304
$2,200
$1,873
$1,017
$664
$384
$327
$304
$298
SAP
Oracle
Infor
Sage Group
Microsoft (MBS)
Lawson
Epicor
IFS
Exact
Agresso
Source: Forrester Research. •These revenues are for the vendors’ fiscal quarters that most closely correspond to calendar year 2006. Vendor revenues calculated in currencies other than US dollars have been converted to US dollars using the average daily exchange rates. •*Infor revenues based on vendor estimate following SSA Global, Extensity and Workbrain acquisition announcements.•**Lawson annual revenues based on last four quarters as of Feb., 2007
**
*
13Entire contents © 2007 Forrester Research, Inc. All rights reserved.
ERP vendor competitive positioning
Largeenterprise
Midmarket
Smallbusiness
SAPmySAP
ERP
OracleEBS and
PeopleSoft
NetSuite
Lawson
SAPBusiness
One
MicrosoftDynamics
AX
MicrosoftDynamics
NAV, GP, SL
OracleJDE E1
Epicor
SageGroup
Infor
Exact
Agresso
SAPAll-In-One
SAPA1S
(future)
14Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
15Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Next-generation architecture strategies — the road to SOA
Batch
On-linemidrange
Client/server
Web client
Service-oriented
architectures
1970s 1980s 1990s 2000s 2010s
16Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Business drivers need to be linked to SOA
Business drivers
• Adapt system to processes, not vice versa
• Improve usability
• Deliver relevant analytics
• Connect to external data and services
• Leverage best practices and industry knowledge
Technology drivers
• Reduce custom coding through configuration
• Adopt open standards to reduce integration costs
• Enable end users self-sufficiency
• Provide more flexibility to use best-of-breed and composite apps
17Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Customer challenges with the SOA direction
• Expensive and disruptive upgrades required
• Lock-in to middleware platforms, fewer apps vendor choices
• Messaging doesn’t resonate with business users
• Unclear time frames
• Difficult to verify vendor success in achieving SOA milestones
18Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
19Entire contents © 2007 Forrester Research, Inc. All rights reserved.
SAP’s application strategy — overview
• SAP announced SOA strategy in 2004
• Leading vision in the industry on SOA transition, but marketing messages remain arcane
• SAP ERP 6.0 is on the critical upgrade path
» New incremental approach for future releases
» Sticking to 2007 completion of SOA enablement
» NetWeaver 2004 is critical for enhancement packages
• Considerable amounts of proprietary ABAP will be retained
• New midmarket product features model-based design
• IVN’s, xApps drive vertical development on NetWeaver
20Entire contents © 2007 Forrester Research, Inc. All rights reserved.
A1S is a departure from SAP’s traditional licensed strategy
Source: February 12, 2007, “SAP Bolsters Midmarket Focus With Two New Offerings”
SAPAll-in-One(A1N) A1S
mySAP ERP 2005code base withSAP EnhancementPackages
Redesigned ERP based on a subsetof SAP functions
Simplified UI based onProjectMuse initiative
Unknownat this time
“By evolution”: serviceenablement of themy SAP ERP2005 suiteover time
“By design”: delivery ofcomponentservices with guidedconfigurationtools
On premise, licensed SaaS (hosted, subscription)
Midmarket businesses withrelativecomplexity and maturity
Midmarket businesses needinggreater flexibilityfor change
SAP NetWeaver SAP NetWeaver
ERP functionality
User interface
SOA strategy
Deployment
Middleware
Target market
21Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Oracle’s application strategy — overview
• Project Fusion announced in January 2005, clarified a year later
• Transition to Fusion Middleware starts with upcoming releases of current products
» Existing products are being enhanced and supported indefinitely via Applications Unlimited
» Acquisitions now focus on industry-specific apps
» Products will adopt Fusion Middleware over time
• Fusion Apps will be largely based on the EBS schema and design concepts
• Legacy apps will assume more middleware components
• AIA provides a framework for partnership in verticals
22Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Microsoft Dynamics strategy — overview
• Backed away from its commitment to deliver a converged product line
» Promoting UI and technology consistency across existing products with Microsoft standards
» AX and NAV products will receive more development effort
• Likely to move up market aggressively, starting with business performance/analytics and CRM
• SaaS beginning to factor into development plans
• Partner strategy delivers key micro-vertical last mile solutions
• Usability and user experience remains the industry standard for enterprise software
23Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Infor’s application strategy• Infor continues to be an aggressive aggregator of overlapping and
complementary solutions
» Acquisitions focused on AS/400 (System-I) and .Net based vendors
» Undervalued players acquired for economies of scale
• Huge ERP product portfolio must be rationalized
» Legacy products continue to generate maintenance revenues
» New development offered as extended solutions
» Promise to never sunset a customer may be hard to keep
• SOA development efforts enable cross-application
» Future capabilities centered around a non-proprietary SOA platform
» SOA strategy may lead to overall lower TCO
• Acquisitions will continue
» Horizontal holes (e.g., Workbrain)
» Vertical expansion
24Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
25Entire contents © 2007 Forrester Research, Inc. All rights reserved.
2007-2009: Technology convergence creates dynamic applications
Portals,collaboration,
andcontent
Businessprocess
management
Service-oriented
architectures
Businessintelligence
Dynamicapplications
26Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Dynamic applications will provide new levels of flexibility and user relevance
» User-centric — accessible and role-specific
» Process-oriented — targets a business goal
» Flexible — driven by changeable models and rules
» Collaborative — enables work across space and time
» Context-driven — responds to business events
» Dynamic — changes in business time, without programmers
» Information-rich — all the information needed to make decisions and take actions, assembled in context in one place
» Built for SaaS — can be deployed quickly and supported as hosted services
27Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Solutions-focused software and services ecosystemA hypothetical software vendor’s digital business networked ecosystem
Customer
Hardware platformsDell, EMC,
HP, IBM, and Sun
Middleware platform BEA, IBM, Microsoft,
Oracle, SAP, Sonic, Tibco
Analytics and reporting platform
BOBJ Cognos, Hyperion, and SAS
Office productivity/ information
management IBM and Microsoft
DatabaseIBM DB2, Microsoft,
Oracle, and Sybase
Storage technologies EMC and
IBM
Managed application
services provider
Business process
outsourcing
OEM:solutions provider
Third-party financing
Key Financing and Siemens
ISV partner or resellers
Applications from ISVs
Agresso, Deltek, Epicor, Exact, Infor, Lawson, Microsoft,
Oracle, SAP
Last mile solutions
Accenture, IBM, Infosys, Satyam, TCS and Wipro
Implementation partnerships
Accenture, BearingPoint,
Capgemini, Deloitte, EDS, Fujitsu, Hitachi,
Infosys, Satyam, TCS and Wipro
Sup
plie
rs
Dis
trib
utor
s
28Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Emerging ERP vendor landscape
Innovators
• Workday
• SAP
• NetSuite
• Microsoft
• Epicor Software Corporation
Consolidators
• Oracle
• Infor
• Sage Group
• Private equity firms
29Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Application software selection process
*Optional tasks
Decide
• Develop project charter
• Assemble project team
• Define high level requirements
• Identify candidate vendors
• Refine requirements
• Narrow choices
• Determine selection criteria
• Configure Forrester Wave™*
• Develop demonstration scenarios
• Orchestrate scripted demos
• Analyze vendor offers
• Score vendors
• Conduct contract negotiations
• Choose vendor
• Validate choice via proof-of-concept (POC)*
• Transition to implementation
Evaluate RefineOrganize
30Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Recommendations to business and IT apps professionals
Business process professionals
• Choose applications that are designed for process flexibility
» Acquire proficiency in apps configuration and reporting tools
• Use SaaS for point solutions that can be managed by the business
• Collaborate with IT to optimize use of ERP packages
IT apps professionals
• Stay current on releases to keep migration options open
• Base upgrade decisions on business needs and IT risk
• Consolidate disparate ERP applications
• Reduce maintenance fees and support costs
31Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Agenda
• Market trends and survey data
• Overview of the ERP market
• The on-going technology evolution
• Key vendors and product strategies
• The future of ERP
• Questions and answers
32Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Paul Hamerman
Ray Wang
www.forrester.com
Thank you
33Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Selected Bibliography for Paul Hamerman
• (In process) October 2007: Forrester Wave, Business Performance Solutions, Q4 2007
• July 20, 2007, Application Vendor Selection: Making The Process Work For You
• June 8, 2007, ERP Applications 2007: Innovation Rekindles
• March 30, 2007, “Learning and Talent Management Join Forces:
• March 20, 2007, “Segregation Of Duties: A Building Block For Enterprise IT Controls”
• February 7, 2007, “Business Performance Solutions: The Competition Heats Up”
• December 18, 2006, “Application Upgrades: When And Why”
• September 28, 2006, “The Forrester Wave™: Human Resource Management Systems, Q3 2006”
• June 29, 2006, “ERP Applications — Market Outlook Improves Ahead Of The Architectural Battle”
• March 31, 2006, “Oracle Versus SAP In Enterprise Applications: Let The Battle Of Architectures Begin!”
• January 23, 2006, Market Overview “HR/HCM Applications: Strategic Processes Move To The Forefront”
34Entire contents © 2007 Forrester Research, Inc. All rights reserved.
Selected Bibliography for R “Ray” Wang
• August 13, 2007, “Competition Intensifies For The SMB ERP Customer”
• May 31, 2007, “The Order Management Missing Link: A Single Process Owner”
• May 7, 2007, “Solutions-Centric Ecosystems Disrupt The Enterprise Software World Order”
• March 15, 2007, “Enterprise Applications Software Licensing and Pricing Quarterly Update”
• March 2, 2007, “ERP Software Upgrades in SMB and Enterprises”
• February 12, 2007, “SAP Bolsters Mid-market Focus With Two New Offerings:,
• February 7, 2007, “Be Not Afraid of ERP Instance Consolidation”
• December 18, 2006, “An Enterprise Software Licensee’s Bill of Rights”
• November 2, 2006, “The State Of Enterprise Software Adoption”
• October 30, 2006, “ Enterprise Applications Vendor Selection”
• September 20, 2006, “Comparing The ROI Of SaaS Versus On-Premise Using Forrester's TEI™ Approach”
• September 19, 2006, Quick Take “SAP Revamps Its Release Strategy”
• August 29, 2006, “Assessing New Vendor Financing Options”