How ERP is changing
Over the past several years, I’ve had the opportunity to review almost a dozen enterprise resource planning systems for several web sites. Though I haven’t updated these reviews in a year, there are a number of thoughts about ERP that I would like to share.
One is that the “E” in ERP doesn’t quite stand for the same thing it did ten or so years ago — or in other words, “Enterprise” might not have quite the same definition that it used to. I tend to define an enterprise-type business as one that needs capability, not necessarily capacity. With the emergence of the global economy, there are quite a number of small businesses that still need the capabilities of higher-end software such as multicurrency, supply chain management and other logistics, and quite possibly extensions such as distribution, warehousing, and shop floor management. If a business has some or most of these requirements, odds are that a more basic application, like QuickBooks or similar, probably won’t meet the business’ needs.
At the same time, ERP software is moving downward into the space of basic-level software, at least in affordability. Sure, not every ERP application is going to be affordable to a QuickBooks user. But vendors such as Acumatica and Oracle NetSuite are hard at work trying to make entry into their ecosystem affordable to a wider group of businesses that might be outgrowing their current vendor.
The cloud has a lot to do with this. ERP software has traditionally required a fairly large amount of computing power, expensive in-house equipment, and a built-out IT department to support the application and company. The cost of software aside, that adds up to big bucks. Move that application into the Cloud, and you free up a big chunk of change — money that can be used for other things. That’s one of the major attractions of the Cloud, whether you are running QuickBooks, Xero, Zoho or an ERP like Oracle NetSuite or Acumatica.
One of the repercussions of this movement is that what we used to think of as the mid-market in accounting software is now starting to disappear, morphing into entry-level ERP.
One of the vendors that we might think of as basic accounting looks poised to grow into something else — something that looks an awful lot like ERP, but at a very different price point and with somewhat different capabilities. That company is Zoho. Now, this is most definitely not a review; simply an observation. I have looked at Zoho’s accounting products, what they call “books,” “inventory” and “invoices,” as well as a number of their other offerings that are not immediately and directly focused on the typical G/L, inventory, A/R, and A/P. At the time this is written, Zoho is offering more than 40 different applications, including database management and office applications such as word processing, spreadsheeting, and PowerPoint-like slides. Add in customer relationship management (CRM) and a bunch of other apps, and you have an impressive collection of modules that can be assembled into a coherent system. Zoho is even introducing an AI capability called Zia into a growing number of its apps, and Zoho Flow can be used to create workflows through the app offerings. There’s also project management for those who need or want it. What’s glaringly missing from the mix at the moment is payroll, at least in the US.
What makes this interesting to me, beyond just the scope of the offerings, is that Zoho combines this abundant number of capabilities into a single integrated system that runs under its own operating environment called Zoho One. Please note that I used the term operating environment, not operating system. Zoho One is a utility of sorts that ties all of the Zoho modules you choose into a single point of access. It still requires Windows as the actual OS.
But looking at what Zoho is offering, and the direction it seems to be moving towards, it’s beginning to look like many of the capabilities of an ERP system are present. Besides payroll, also absent is supply chain management and logistics, as well as vertical capabilities like warehousing, production management and the like. And given the large number of customers Zoho has in numerous counties, supply chain management doesn’t really seem to me to be out of the question.
I’m going to be watching Zoho closely in the future to see if my observations are on track. And I’ll be looking at Zoho’s competitors as well — I have a strong suspicion that what we think of as “basic” accounting might just be undergoing a paradigm change besides the move to the Cloud.