ERP Trends- Last year G2 Crowd introduced predictions for 2018’s major digital trends, but this year the focus is on trends in specific industries and how digital transformation will affect them in 2019.
Enterprise software has reached a level of maturity that leaves little room for innovation and growth outside of implementing early-stage technologies such as artificial intelligence (AI) or the internet of things (IoT).
Enterprise resource planning – or ERP systems – are the best example of this maturity, with few new players in the last decade (and none in the past couple of years). Instead, traditional vendors have either converted their on-premises offering to cloud versions (with relative success), or created new cloud products.
ERP Trends in 2019
After almost a decade of using cloud solutions, ERP buyers are starting to realize that this delivery model carries significant challenges. This also applies to companies that only need accounting software. When buyers need both ERP and accounting, they are sometimes faced with the challenge of not finding one product to cover both types of features. This will increase the adoption of a two-tier model, which combines two or more solutions, often from separate vendors.
Companies are also facing increasingly significant risks related to security, fraud, and even political instability. Since most business software products cannot help companies address these issues, businesses will rely more on governance, risk and compliance (GRC) software and services.
Finally, automation technology such as AI and robotic process automation (RPA) software will start to slowly replace jobs and the software used to manage them. Automation is also supposed to create new jobs and probably new types of software, but companies will start to reallocate their IT budgets from traditional spending (on software and hardware) to new technologies such as AI, RPA, IoT, or blockchain.
Trend 1 – Seventy-five percent of ERP buyers will prioritize functionality over ease of use or pricing
Functionality has always been a priority for ERP buyers, but many companies adopted the cloud delivery model for its ease of use, flexibility, and low costs. After using cloud ERP for years, ERP buyers started to understand that saving money isn’t very beneficial when the new system doesn’t provide robust features for their needs.
Cloud ERP buyers also realized that this delivery model isn’t much more affordable than on-premises. All this means that buyers will focus more on what differentiates ERP products: functionality.
Our data shows that the main reason why buyers replace ERP is functionality. While 48% of buyers switched ERP systems for better features, only 4.5% stated that the price was the main reason and 7% mentioned ease of use.
As the number of buyers replacing old and legacy systems declines, we expect the importance of functionality in ERP selection to increase to 75% from 48%. Of the 47.5% of buyers who switched ERP for reasons other than price and functionality, we expect that half will focus on features.
Trend 2 – Thirty percent of new ERP implementations will be a two-tier model
Traditionally, ERP vendors tried to provide both back office and industry-specific features through suites of products or separate offerings. This strategy wasn’t very successful, and new vendors like Salesforce now dominate markets underserved by ERP vendors, such as CRM software. Some vendors stopped developing new features for sales or CRM since their customers already use software to cover these needs.
At the same time, some ERP vendors also decided to specialize and not try to satisfy everyone. Furthermore, new and more affordable cloud accounting solutions have freed buyers from the obligation to buy an ERP solution that included accounting modules.
While it’s beneficial for buyers to have multiple options and avoid vendor lock-in, they are also faced with the challenges of managing various systems. Due to the cloud, even SMBs can afford to use two or three software systems, which can be relatively easy to integrate, at least at the data layer. When it comes to business processes, using multiple systems isn’t beneficial for companies, but they prefer this option to using one system that doesn’t cover their needs.
Since ERP buyers are looking for better functionality (as mentioned above), but they can’t usually find it in one system, we estimate that at least one in three buyers will choose the two-tier model to cover their needs.