Published on the 14/04/2016 | Written by Clare Coulson
ERP vendors are not selling anything, and nimble cloud-based transaction engines are going to eat their lunch…
That’s according to Andrew Dailey, MD and leading analyst at business software research firm MGI talking to iStart about its just published report on the subscription economy.
It’s a sweeping statement, but Dailey defended his position, saying “look at the results of SAP, Oracle; business is flat to negative”. The reason, he said, is that these legacy systems lack the speed and agility needed to perform well in a cloud-based, subscription economy. He likened it to businesses using a Palm Pilot – the height of sophistication in 1999 – to compete in the era of the iPhone 6 and Tesla (Tesla, of course, being a vital piece of system architecture in any business).
“Our view is that people are going to have to look at their core systems and end up replacing those because ‘speed is the new black’.”
As for the two big names in the ERP space, he thinks SAP is going to reinvigorate its growth through acquisition, but that Oracle might need a more radical shake-up. “I think Oracle is a company that needs to reinvent itself and it will probably take a change of the leadership to make that happen.”
If you’ve never heard of MGI, it’s a US-based research firm specialising in monetisation and billing software systems, established in 2008.
The MGI report, which forecasts the uptake of ‘Agile Monetization Platforms’ [sic], or AMPs, estimates the global market for such tools will be more than US$100 billion through to 2020. MGI expects that by that time 20 percent of Fortune 1000 companies will have adopted these solutions.
AMP is a new concept (and associated TLA), coined by MGI, which includes nine categories: agile billing, financials, order management, e-commerce, customer support, CPQ (Configure-Price-Quote), contract management, revenue recognition, and mediation. In essence, MGI have classified existing cloud-based transaction engines, including ERP solutions such as SAP and Oracle, by category, and then forecast the rate of businesses migrating on to these solutions.
Asked by iStart about the new acronym, Dailey admitted that the firm didn’t want to come up with one “because the world has enough TLAs” but in the end it was necessary. MGI claims to have come up with the term ERP back in 1991 and Dailey said the company is used to being laughed at to begin with: “Everybody laughed at the concept of ERP for the first three years.” As an aside, Gartner also claims coining the term in 1990, although MGI’s other two managing directors have strong ties with Gartner, so make of that what you will.
In terms of local adoption of AMP tools, Australia and New Zealand are ahead of the curve, growing from US $88 million in 2016 to US $413 million in 2020 – a CAGR of almost 50 percent. As reported recently, we also know there has been a rapid increase in ERP vendors releasing full cloud-based versions.
Dailey noted the reason for this was that the region has very good cloud infrastructure when compared to Asia and Western Europe and expects us to remain ahead of Western Europe until they upgrade their network infrastructure. Companies using cloud computing and agile tools can do in weeks or months what it takes a traditional company months or years to do. But you don’t only need speed in the way you develop products, you also have to have speed in how you monetise them. Dailey, highlighted Atlassian as an excellent local example of this.
John Kearney, managing director of Asia Pacific for Zuora, another of the companies featured in the report, said that for him, the MGI report validated what his firm believe and was a “reassertion that we were on the right track”.
Zuora is a relationship business management solution, which sits in the Agile billing section of AMP, and was mentioned as a leader that is driving the major share shift away from legacy systems vendors.
He said that locally he has seen some of the more traditional industries such as telcos and energy utilities choosing to shift to the Zuora platform and offer subscription services.
“We even had one tender recently which used the ‘agile biller’ term, so it’s good to see them using the same terminology as us now,” he said.
It’s a good bet, though, that those Zuora transactions are still being shunted through to an ERP system.
