Why Software Product Categories Will Fall By The Wayside

Chief Product Officer at IFS with a passion for developing and adapting technology that adds differentiating value for businesses

The promise of core enterprise resource planning (ERP) software is that having essential functions of your business encompassed in a single set of software applications that share data — and hopefully metadata and data structures — makes business more efficient.

However, ERP is really just a product category in a time when digital transformation is making categories undesirable. In 2000, Gartner, Inc. coined the term “ERP II” and predicted that ERP would expand to include customer relationship management (CRM) as more companies opt to use CRM modules in ERP packages. In July, the market cap for CRM vendor Salesforce eclipsed that of Oracle. So much for ERP II. The customer didn’t want ERP II as badly as an improved customer experience, and that may require data to pass back and forth between ERP and an optimized CRM.

Similarly, enterprise asset management (EAM) software used to manage large capital assets and asset portfolios is seen as distinct from ERP. Yet my own company, which originated in the asset- and maintenance-intensive nuclear power industry, includes EAM as a core discipline. Other categories are at risk of disappearing altogether, including manufacturing execution systems (MES), which may be obsoleted as a middleman between production equipment and ERP by powerful internet of things (IoT) discovery in ERP software designed to speed digital transformation initiatives.

The Dissolution Of Categories

Analysts love to create new product categories for software vendors to compete in. When we think of a category like cola, we may see Coca-Cola and Pepsi-Cola as the market leaders. In order to also be leaders themselves, other companies need to create new categories: energy drinks, functional beverages, flavored water. That is how we wind up with a major analyst firm like Gartner tracking 109 different product categories with its Magic Quadrant reports.

Companies like SAP and Oracle top out on their respective percentages of market share and seek to expand into other categories — for instance, trying to pull CRM into the realm of ERP or even compete for the first or second spot in that new category while maxing out revenue from each customer.

My own company is not immune to this. We have conducted a series of targeted acquisitions within field service management and are now the category leader. However, the ideal strategy competes not for dominance in a category but around customer value. Companies in aerospace and defense, manufacturing, construction, energy and utilities, and services all have some unique problems but many problems in common. Companies like mine need to invest not in siloed solutions or categories but in broad application services that solve hard problems and cut across traditional software categories. In my own work, AI-driven advanced scheduling used in field service, for instance, is being exposed as an application service for production scheduling in manufacturing ERP and task scheduling in construction.

These capabilities must be able to work not just on data in a single proprietary system but on data sources externally to remain relevant even as the boundaries between ERP and everything else fade. In my role, we are opening parts of a product stack with application programming interfaces (APIs) to support external integration but also building our entire application on RESTful APIs. These interfaces include instructions for other systems on what is contained in each granular part of the application so integration with outside systems can happen just as seamlessly as between one part of our product suite and another. The future is not in building pipes between product category and vendor silos but in blowing up the silos through a controlled demolition so a company is free to solve problems more quickly and easily.

Servant Leadership

One customer we are working with uses a dominant player for ERP, but as part of a digital transformation initiative, they are moving their invoicing for service into their field service management solution so they can invoice their customer faster and improve the customer experience. Even if this functionality is normally provided by ERP, what really matters is not category dominance but supporting the transformation initiative.

ERP and its underlying database is still that central, canonical record. However, a company can only digitally transform if other systems can seamlessly and easily access and update that data. Those systems may include other software like CRM or supply chain management applications, IoT-connected devices or even cognitive services that access ERP data and apply artificial intelligence algorithms to make automated decisions. We used to say that ERP was the “data master” when other systems updated the underlying database instead of ERP looking to data in that external system.

Now, we realize that to lead, we must serve. The master-servant terminology and the concept of dominance are obsolete. Software buyers should ask pointed questions about how they can expose data and functionality in ways that complement and strengthen other systems they run. How many RESTful APIs will they have access to, and will those APIs work the same for external integrations as they do inside the product?

Problems Over Prominence

The enterprise software vendors that will lead in the future are the ones who subjugate themselves rather than dominate. Humility rather than hubris will lead. Those evaluating technology should ask questions about how that software or technology can serve as part of an ecosystem of “things,” helping them drive digital transformation and enabling them to win in their respective categories. A software vendor’s job is to help its customers win — so vendors need to demonstrate how they can work seamlessly with other participants in an ecosystem, regardless of which category label has traditionally been put on which software product.

Only when we focus on doing the right thing for our customers can our customers, in turn, focus maximum effort on doing the right thing for their customers and people, running effective operations that meet expectations for delivery, quality and efficiency.

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