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Enterprise resource planning vendors in the next few years will begin to look more like systems integrators than software providers, a new report says.

3 min read
Enterprise resource planning vendors such as German giant SAP in the next few years will begin to look more like systems integrators than providers of all the software fit to implement, according to a new report by Forrester Research.

"They get involved in multivendor integration already," said Tom Gromley, an analyst at the Cambridge, Massachusetts-based research firm. "So the idea is to leverage that more. Oracle has a huge services organization, one of the top five in the world. SAP two or three years ago couldn't have done this, but they have put so much into their services business, they are now capable of doing it also."

Forrester predicts as the enterprise resource planning (ERP) vendors break up their tightly woven application packages into individual standalone components, customers will no longer be reliant on a single application package and will demand their vendor offer them choices of packages and provide the integration.

This is because users can buy, for example, just the financial application from SAP and hook it to PeopleSoft's human resources application. And as vendors such as SAP build more application programming interfaces to make it easier to hook third-party products on to R/3, customers will demand SAP or another systems integrator take responsibility for the entire package.

"Broad, one-size-fits-all suites are rapidly becoming ineffective," said Tom Gromley in his report. "Today, companies prefer suites to mixing lots of best-of-breed applications because they offer tight business process integration and single-supplier simplicity. Portfolio assembly, integrated, multivendor suites sold, implemented, and supported by a single provider will deliver these benefits with industry-specific, best-of-breed products."

As a result, Forrester analysts predict that by 2001, portfolio assembly will be a faster growing channel for applications and be the source of half the market's packaged applications.

Evidence is already starting to surface to support these ideas. To meet the needs of the consumer packaged goods industry, Oracle blended together its own financial and manufacturing applications with supply chain management, point-of-sale, and other best-of-breed applications.

"Oracle is doing it today because it needed to do something different, it needed a different strategy than SAP," Gromley said. "Clients said they liked the idea of Oracle stepping in front and taking responsibility."

Oracle CPG includes Oracle's financial and manufacturing management woven with supply chain software from Manugistics in Rockville, Maryland; demand chain management software fromIndustri-Matematik International in Tarrytown, New York; maintenance and asset management software from Indus International in San Francisco; and point-of-sale software from Information Resources in Chicago.

Customers, such as packaged foods giant Kellogg's, bit at the opportunity. Kellogg's is using the application package to manage its $6.8 billion business and keep its 40 percent market share of the breakfast foods industry. Executives at the cereal maker said the fact that they can turn to a single vendor--Oracle--to fix problems anywhere within the package was a big factor in buying the software.

Also supporting the trend is the increasingly lucrative services market, from systems integrators such as KPMG to software vendors themselves that increasingly are offering guarantees and single sources of contact for customers.

Gromley said it will likely be the services companies that will lead the market as the portfolio assemblers because they have the vast pool of consultants, software independence, and a customer base turning to them for help in this area already.

For example, KPMG recently unveiled its R2I program in which KPMG takes responsibility for implementation and configuration of application packages. MCI Systemhouse has a program in which it is integrating a manufacturing module for the process manufacturing industry from Marcam Solutions in Newton, Massachusetts, with SAP's R/3 system. And outsourcing giant EDS is already offering help desk support for users of Baan's ERP software.