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ERP Gloom & Doom

By J. Carlton Collins
June 2005

A decade ago, large enterprise organizations had little choice but to purchase Tier 1 products known as Enterprise Resource Planning (ERP) solutions to meet their accounting system needs. These ERP solutions typically cost millions of dollars and often took years to implement. Today there are many comparable solutions available that are just as powerful, yet easier to use and far less expensive to implement. This article describes the current trend towards these newer, less-expensive accounting solutions.  

ERP versus Mid-Market Accounting

For many years the accounting systems industry has commonly referred to accounting solutions as either “ERP Solutions” or “Mid-Market Accounting Systems”. What’s the difference? In much the same way that a vase becomes a väse after fifty bucks, an accounting system becomes an ERP system after about a million bucks. Today there are not many feature differences between these two classes of products, but that was not always the case. Ten years ago, there were eight distinct differences as follows:

Past Feature Differences Between ERP Solutions
& Mid-Market Accounting Systems

  1. Enterprise Reporting – Historically, only Tier 1 ERP solutions offered powerful consolidation capabilities including strong allocations, multi-currency and multi-language. Today many high end accounting systems such as Great Plains, Solomon, and Navision offer these same capabilities; both embedded in the products themselves and through add-on solutions such as FRx.
  1. High-end Databases – In years' past, only Tier 1 ERP solutions ran atop the world’s most powerful databases. This enabled these ERP products to meet the transaction volume needs of the largest of companies. Today most popular high-end accounting systems run atop high end databases such as Oracle and Microsoft SQL Server. Consider for example that in October 2001, a test conducted jointly by Compaq and Oracle established Microsoft Axapta as the fastest recorded accounting system of all time. In this test, Axapta set a new transaction processing record by processing more than 315,000 sales orders in just one hour for 3,600 simultaneous users.
  1. Logistics & Supply Chain Solutions – At one point in time, only Tier 1 ERP solutions offered robust supply chain solutions that enabled companies to link their accounting systems directly to the accounting systems of their suppliers in order to automate the reordering process. Today many top supply chain solutions such as Microsoft BizTalk Server works with virtually any accounting system. Today's newer supply chain solutions are easier to implement and are far more affordable as well.
  1. Human Resource (HR) Solutions – In the mid nineties, most mid-market accounting systems failed to offer strong HR solutions for managing the administration of employees. Today this is not the case. Many of today’s top accounting systems; such as Great Plains and MAS 500, now include a proven HR solution as a standard part of the product.
  1. E-Commerce Solutions – E-commerce solutions first emerged in 1994 and Tier 1 ERP solutions were among the first products to offer e-commerce capabilities. This featured allowed companies to create web stores that were fully integrated with the company’s accounting system. Today, virtually every accounting system now offers an e-commerce solution. Even low cost accounting software systems such as Peachtree Complete Accounting 2005 and Simply Accounting offer these solutions. There are numerous third party e-commence solutions available as well.
  1. Customer Relationship Management (CRM) Solutions – Tier 1 ERP solutions were among the first applications to offer strong CRM solutions to enable a company’s sales force to better manage customers and prospects. Today there are hundreds of CRM solutions available, and most of these can be easily integrated into many accounting systems.
  1. Industry Specific Solutions – Another feature that was historically unique to Tier 1 ERP solutions was the offering of high-end industry specific solutions for industries such as banking, pharmaceuticals, telecommunications, government, education, etc. Today most mid-market accounting systems now feature industry specific solutions to meet a wide array of industries, both as embedded modules or as add-on modules. For example, Great Plains and Navision offer not-for-profit solutions via the add-ons Encore and Serenic, respectively. Solomon offers a strong project module, and Axapta's built-in modules meets the needs of both process and discrete manufactures. For each of these products, there are dozens of such industry specific add-on solutions. 
  1. Workflow – The final feature difference between traditional ERP solutions and mid-market accounting systems pertains to accounting system workflow - the ability of an accounting system to automatically route documents based on criteria. For example, an order entry clerk may be authorized to enter orders up to $500 into the system without supervisor approval, but orders greater than $500 are automatically routed to the order clerk’s supervisor for approval. While some mid-market accounting systems such as ACCPAC, Great Plains and Axapta have added some workflow capabilities, this remains to be a feature difference that differentiates ERP solutions from most mid-market accounting systems.

Because large enterprise organizations have always needed the features mentioned above, they often wrote enormous checks well into the tens of millions of dollars to purchase and implement these traditional ERP solutions. In years past, they had few choices. Until mid-market solutions grew stronger, their only possible alternative was to develop their own in-house software solution. However this alternative was not realistic for the simple reason that a single company’s programming staff could never produce a solution better than today's top mid-market solutions such as Great Plains - a product built by hundreds of programmers over twenty years with more than 35,000 customers helping to debug and refine the system?

For many years, ERP solutions ruled the corporate world. During those “ERP Glory Days” large enterprises shelled out billions of dollars for these solutions. Tier 1 developers and consultants alike raked in the money like they were raking leaves after a hurricane on a maple tree plantation. Today these glory days are gone, and some say that only the uninformed are still selecting these so-called bloated, over-priced, complex ERP solutions.

Today’s New and Improved Accounting Systems

Not only do today’s accounting systems provide most of the features offered by traditional ERP solutions, but they are typically faster, easier, more customizable, and less-expensive as well. By comparison, the traditional ERP solutions have become bloated products that are slow, difficult, and too expensive. Most of today’s enterprise organizations have caught on to this fact as there is a clear trend over the past four years away from the traditional Tier 1 solutions. Consider the following example:

In 2002 I was engaged by a $40 billion company here in Atlanta that was using a Tier 1 ERP solution throughout the company, and company officials wanted to switch to another accounting system. After three months of evaluating the needs of this company, I advised them that it would be best to stick with their current ERP Solution because the product worked fine (after all, a cardinal rule of consulting is “don’t fix anything that’s not broken”). The company agreed that while this ERP solution met their needs well, they were not happy forking out $4.5 million a year to support this ERP solution in three separate divisions. Company officials did not agree with my recommendation and they stated that they were going to switch to a less-expensive solution regardless whether I helped them or not.


Therefore I provided a list of eight products which I had concluded would meet their needs. Ultimately, they selected Solomon Software to replace their expensive ERP system. Within 8 months Solomon was fully installed and the company officials sent me several unsolicited e-mails raving about how much they liked the Solomon solution. I had lunch with the CFO and several top managers in spring of 2004 and they reported that “the system was not only working fine, but it was actually faster, better and far easier to use than the ERP product they had been burdened with.” The total cost of the Solomon solution was less than $1 million; about 2.5 month’s worth of support fees for the bloated ERP solution they ditched.

Detailed analysis of product features also support the premise that mid-market solutions have arrived and are legitimate options. An analysis of the most important 350 ERP and accounting system features reveals that many of the new up and coming mid-market challengers offer nearly as many features as do the traditional ERP solutions. A summary of this review is available here: http://www.asaresearch.com/articles/350table.htm.

Growing Trend

Over the past few years, thousands of larger companies have ditched their Tier 1 ERP solutions in favor of the new and improved mid-market solutions. This massive shift away from the ERP solutions has had an enormous impact on the ERP industry. For example,

  1. Historically 40% of revenue generated by Accenture was derived from ERP consulting. However in 2000 Accenture reportedly re-trained their 17,000 ERP consultants to concentrate on e-commerce and other projects instead.
  1. Also in 2000 Price Waterhouse Coopers reportedly invested $3 billion to retrain their ERP consultants to focus more on e-commerce and other areas.
  1. Ernst and Young reportedly sold off their 18,000 ERP consultants division to France-based Cap Gemini. However in a unique twist of fate they then merged with Cap Gemini and got these consultants back, after which they retrained them for work in other areas.
  1. In June 2000, Baan was taken over by the Dutch company Invensys. One thousand jobs were cut and the Baan product was removed from the market. After lawsuits were threatened by Baan customers (such as Boeing Aircraft), Invensys re-released the Baan product after making some significant changes to the system.
  1. In 2003, JD Edwards was taken over by PeopleSoft and the JD Edwards name was quickly eliminated.
  1. In 2003, Oracle initiated a hostile takeover over PeopleSoft, this action was completed in early 2004.
  1. SAP has tried repeated to reinvent itself over the past five years. First that company’s Pandesic program which featured a $25,000 per year rental fee for the complete SAP product line was tried and then scrapped. The company then contrived its’ Accelerated Financials plan in which 19 different industry specific versions of SAP were preloaded on Compaq Proliants, offering guaranteed implementation within 30 days. This initiative also failed. Next SAP introduced mySAP and postponed delivery of the SAP R/4 product line, which to this day has never got off the ground. Most recently SAP has purchased an Israeli product and renamed it SAP Business One in an attempt to re-enter the market with a mid-market solution of their own. So far Business One has about 3,700 customers world-wide, 190 in the United States.

These events are clear signals that the traditional ERP solutions and their delivery models have changed dramatically in recent years. In my opinion, the ERP industry as we knew it ten years ago is dead. Today any company purchasing a traditional Tier 1 ERP solution for millions of dollars is probably doing so out of ignorance. Consider the following analogy that is similar to today's ERP dilemma - in 1989 we saw the less-expensive local area network (LAN) solutions emerge to challenge and eventually over take mainframe and mini-computer solutions. At that time, many consultants and customers alike were denied the benefits of LANs and they referred to them as “mere toys - not real solutions for serious companies”. Eventually, LAN solutions significantly eroded the market for mainframe and mini-computer solutions. And why not, after all LANs were less expensive and more versatile. Today, most companies in the world now rely on LAN solutions, while mainframe and mini-computer solutions have been largely relegated to mere back office servers which support LAN architecture. I believe that the same type of transition is happening today as less expensive and more versatile accounting systems are displacing traditional Tier 1 ERP solutions. Many ERP consultants deny this just like those consultants of fifteen years ago denied the emergence of LANs – but their denials only make them look like dinosaurs. There is too much clear evidence suggesting that the ERP market is changing, and changing in the direction of powerful new mid-market solutions..

ERP Complexity

A key reason for the decline of ERP solutions has to do with the complexity of these systems. Because these systems traditionally sold for millions of dollars, developers of these systems were justified in adding any and all desired features to the system in order to win each sale. For example, XYZ Enterprise often promised ERP developers a closed deal, but only if specific features were added to the product. Because the dollars were high, the ERP developer was happy to oblige. Over the years hundreds of such features were added in the name of closing the deal. Over time this approach to closing deals had serious repercussions. Eventually these Tier 1 ERP solutions became bloatware solutions – hindered by hundreds, if not thousands of useless features that most companies do not use. The result is complexity that is unparalleled.

Today’s newer accounting systems have taken a different approach by including only core accounting system features in the product, along with an easy set of customization tools that allow the users to customize the product to meet their own unique needs. This approach has allowed these newer mid-market products to offer cleaner solutions that are easier to implement, and easier to use.

The Future of ERP Solutions

Most likely, traditional ERP solutions won’t disappear completely. Just as mainframe and mini-computer solutions found a niche where they could play despite being overrun by leaner, meaner LAN solutions, Tier 1 ERP Solutions will likely continue to carve out niches as well. Pharmaceuticals, manufacturing, banking, and telecommunications are all examples where ERP systems will likely continue to flourish for years to come. However any company evaluating an ERP solution today would be well advised to compare that ERP solution to the new generation of ERP killers such as Great Plains, SYSPRO, Axapta, Navision, and others. To be fair, a small gap still exists between Tier 1 products and the high-end challengers – mostly in the area of employee workflow and certain industry solutions – but this gap is closing fast, and it is now too small to justify spending millions of additional dollars on a Tier 1 solution.


The points set forth in this article suggest that the ERP industry is in turmoil as a wide array of new mid-market accounting systems have stepped up to the plate to challenge the traditionally dominant ERP products. Even history suggests that these events are to be expected. For several decades, it has been a common axiom in the computer industry that product pricing falls while at the same time those products offer more power and greater features. Computer prices have fallen dramatically even though they are more powerful than ever. Printer prices have plunged, yet printers perform much faster and with far better resolutions. Monitors, routers, network cards, microchips, cell phones, handhelds, cameras, and many other technological devices are more affordable today than ever before. As discussed in this article, the same axiom applies to the mid-market accounting software arena as well. Some of today’s less-expensive mid-market accounting systems now rival traditional ERP solutions, and thus the cycle continues. 

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