Enterprise resource planning vendors are climbing the corporate ladder, all the way to the top.
The business indicator applications take the transactional data stored in ERP systems and turn it into information that can be used to gauge such executive level issues as profitability of a venture, worth of corporate assets, and performance of a particular product line. With the information at hand, the managers can make quick changes to the business to meet ever-changing market demands.
Jim Shepherd, analyst at AMR Research in Boston, said these analytical applications are starting to surface for a number of reasons. One reason is that a new generation of senior managers are demanding tools that allow them to put to use the mass of information loaded into ERP systems.
"The demographics of senior managers are changing," Shepherd said. "As they get younger, these are people brought up with computer systems and with the expectation that they can use information systems and touch that stuff directly as opposed to having a secretary pull up some numbers for them."
These are senior managers who learned in business school how to format spreadsheets to calculate similar performance issues. They also most likely had such a corporate function at one time in their career.
"These are people who are really comfortable using computers, but not so comfortable as to write programs in their leisure time that handle these functions," Shepherd said. "But they are comfortable enough to use information systems to make decisions and are uncomfortable making decisions without information systems."
SAP started its assent into the arena last year with the announcement it was building its own data warehouse called the Business Information Warehouse. It is now taking that initiative once step further with new strategic enterprise management applications now in development. The new software will allow senior managers to take data stored in R/3 and peripheral systems and use it to decide such things as where best to market a specific product, if a new product or venture will be profitable, and what will future supply needs to be.
PeopleSoft launched earlier this year a new application suite called Performance Measurement which is a bundle of applications that let managers keep tabs on strategic corporate business indicators like stock price levels, and profitability and costs comparisons. PeopleSoft is expected to announce even more products in this arena at its November user group conference in San Francisco.
Baan hooked up with Hyperion Software last year to gain such the capability for its products. And Oracle, at the direction of its CEO Larry Ellison, is linking its vast array of data analysis tools to its applications. Until now, Oracle operated the two divisions independently. When Ellison recently took a more active role in the operations of the applications division, one of his first directives was for the application division to take more advantage of Oracle's other offerings, such as analysis tools and its databases.
These moves make sense for the ERP vendors not only because the users demand the functionality, but because it creates a new revenue stream for the vendors in the form of their existing installed base.
"The ERP vendors are now looking for new things to sell to their install base," Shepherd added. "The vendors have also always been looking for things they can sell to senior management who rarely, if ever, used ERP systems. If senior managers are using the system, then it makes it easier for vendors to sell more of it and it makes it less likely that companies will replace the system. It also means better implementations."