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Bright future for enterprise app market

Pass the Ray-Bans and hold on to your SAP stock--the future of business applications looks bright if vendors stay on their current course.

BOSTON--Pass the Ray-Bans and hold on to your SAP stock--the future of business applications looks bright if vendors stay on their current course.

"This market has a lot of leg to it," said Tony Friscia, president and chief executive of AMR Research in Boston, despite his and other analysts' firms' predictions that the market in general is slowing down as it matures.

"Consolidation is a natural occurrence, but it is not an end," Friscia added. "New market opportunities are opening up everyday."

Friscia made the comments at his firm's fall executive conference here today. Users and analysts alike agreed that too much is invested in enterprise resource planning (ERP) systems, like SAP's R/3, for the market to come to a halt and that the systems need to do more than act as transaction caretakers. The systems need to actually run vast parts of a corporation without human assistance and that means innovation and more market for all.

Companies only began installing these applications a few years ago and are just now reaching the point where the software systems are running.

The software was initially bought to manage the majority of corporate processes like customer ordering, human resources, or materials management. It was needed to simply act as an electronic version of shuffling hard copy paper invoices and work orders between in and out boxes. But soon the software will need to actually perform the processes contained in the invoices itself instead of the current systems where someone needs to be there to load the information in and drive the process that it handles.

This will become easier as vendors like SAP, Baan, and Oracle break up their tightly integrated software suites and rebuild them as independent but closely linked components. Only then will companies be able to put the software to real use.

AMR calls this next generation of business applications "business process automation"--that is applications that automate the actual business processes and eliminate the need for people to take care of many menial tasks.

"There is no need for people to be involved in these transactions," explained AMR vice president Jim Shepherd to the crowd of about 900 corporate information system and vendor executives. "What we see is that applications are slowing down for humans. So that two systems that are perfectly capable of performing a transaction are stopping and displaying, printing, and waiting for input from a human."

Shepherd predicts that data entry clerks and order takers and others performing the transactions will become similar to the assembly line worker in the 1970s and 80s. No longer are these plant workers tightening lug nuts, they are now programming and managing the robot and systems that perform the duty instead.

Those in the back office with duties like material sourcing, purchasing, order entry, product configuration, plant scheduling, accounts payable, and accounts receivable, among others, will be in charge of the process but not actually performing the tasks.

"Users will need to develop an organization that owns the business processes, that cares for, feeds, manipulates, and documents the business processes," Shepherd said. "These organizations will become synonymous with current IT organizations because in many cases that is what IT organizations are for."

Users will also have to persuade their employees that "business process automation" isn't the new millennium buzz term for downsizing.

"You need to move employees away from the idea of performing business processes to taking responsibility for the business process and designing it," Shepherd said. "Think about an airline pilot. There is not a one up there flapping. They are sitting up there monitoring hundreds of advanced operation control systems. I wouldn't want to be up there without a pilot, but I know they aren't doing most of the flying."

The idea is to set up a computerized chain reaction with each application setting off a task in the next. For example, in an assembly plant one application will request a part, another will respond that it has a part, another will take responsibility for shipping the part, another will see that the part is delivered, a fifth will log reception of the part, another application will pay for the part, while the last acknowledges the payment and updates the general ledger, with all of the applications communicating to each other across the Internet.

The result is that basic business processes currently handled by humans will be handled by computers and will more closely resemble today's plant floor systems, with control knobs, alarms, and other features that allow someone to manage rather than perform the duties.

"What is required to make this happen is ERP suites have to become suites of business process components," Shepherd said. "They have to become a vehicle where a user can redesign and reorganize the business processes by moving the various processes around."

Most of the technology already exists for this to take place but the work to make it actually function properly is very complex. SAP and Baan have had a tough time breaking apart their tightly integrated and highly complex software systems so that each piece functions as an individual component while still working in conjunction with all the other pieces. In fact, the difficulty and expense in pulling off this work is partly to blame for Baan's current financial problems.

Despite the headaches, all of the vendors are deeply committed to developing this technology but they also need acknowledge that their product is not the lone software system in the corporate computing environment.

"Business application vendors have to understand that they have to facilitate this heterogeneous process integration and understand that their individual software systems will have to work together," Shepherd said. "It is not a threat to their account control. It is an absolute necessity to how companies are going to need to run their business."

That said, AMR predicts users will start seeing the fruits of this trend within the next five years.