A Manufacturer’s Guide to the Evolution of ERPs
Let’s start by declaring an interest. Most JAGGAER installations in the manufacturing industry specifically, and in product-centric businesses in general, involve integration with an enterprise resource planning (ERP) system of one sort or another. So, we have skin in this game! If you have an efficient ERP system, information can flow freely between your source-to-pay applications and the company’s central IT infrastructure.
Now let’s declare a disinterest. We are ERP-agnostic. That means we will integrate with whatever ERP system you have already installed, are in the process of installing, or plan to install in the future. In this article, we discuss most of the leading ERP systems. Some will not suit your organization, but if you choose wisely, you will gain tremendous competitive advantages from your ERP system.
Origins of ERP
ERP is a software system that helps organizations streamline their core business processes. ERP’s roots are most certainly in manufacturing. The term enterprise resource planning originated in the early 1990s and is credited to the research firm Gartner Group. It evolved from material requirements planning (MRP) and later manufacturing resource planning (MRP II), which were already being used in manufacturing industries to manage production and inventory. ERP expanded on MRP, first by improving manufacturing-related functions such as quality control, supplier collaboration, production planning, and scheduling, and providing real-time data access for analysis (though typically, this required business intelligence add-ons).
In addition to manufacturing or production, ERP then expanded to include finance, accounting, order management, supply chain management, payroll, and HR. These functions exist in all businesses, and you must consider whether to buy them all from your ERP vendor or a specialist. There are arguments for having everything under one roof, but equally, there are arguments for “best of breed” approaches, especially if you want to avoid vendor lock-in.
The first company to use the term ERP commercially was SAP, which was founded in 1972 by five former German employees of IBM after the IT giant had abandoned their pet project. They packaged their standard business software in the R/2 system in the 1980s and the more advanced R/3 system in the 1990s. The company expanded rapidly as manufacturers decommissioned in-house legacy systems.
While SAP set the standard for ERP in the early years, it faced stiff competition when relational database specialist Oracle entered the market. Baan, JD Edwards, and PeopleSoft also developed their own solutions at this time.
Organic Growth Versus Acquisition
Through the late nineties and early 2000s, the two ERP giants slugged it out through different strategies.
Oracle launched Oracle E-Business Suite (EBS) in 1998 as its flagship ERP offering and built out from this through acquisitions, leading critics to refer to its platform as a “smörgåsbord” of applications. Most notably, Oracle acquired PeopleSoft in 2005, gaining a significant foothold in HR and enterprise applications to compete directly with SAP. PeopleSoft itself had recently acquired JD Edwards, a mid-market ERP provider specializing in manufacturing and supply chain solutions. In 2006, Oracle strengthened its customer relationship management (CRM) portfolio by acquiring Siebel Systems, and in 2007, it boosted its financial planning and analytics capabilities with Hyperion.
Meanwhile, Oracle’s co-founder and Executive Chairman, Larry Ellison, had long invested in NetSuite, a pioneer in cloud ERP, which Oracle fully acquired in 2016, marking its major push into cloud-based enterprise solutions. Other key ERP-related acquisitions included Demantra (supply chain planning), Retek (retail ERP), and Taleo (talent management), further expanding Oracle’s footprint.
SAP, by contrast, relied primarily on organic growth and positioned this as a strength compared to Oracle’s attempt to integrate multiple disparate systems. For example, SAP launched SAP CRM as part of its ERP suite, later evolving it into SAP Customer Experience. It was not until 2007 that SAP made its first major acquisition, purchasing BusinessObjects to enhance its business intelligence (BI) capabilities. In 2010, it acquired Sybase, gaining database and mobile technologies that contributed to the development of SAP HANA, its in-memory database.
To counter Oracle’s PeopleSoft acquisition, SAP acquired SuccessFactors, a leader in human capital management (HCM), in 2011. It further strengthened its position in procurement and supplier networks with the 2012 acquisition of Ariba. SAP’s largest acquisition during this period came in 2014, when it purchased Concur, the market leader in travel and expense management software.
Enter the Cloud
By the mid-2010s, cloud computing had transformed the ERP landscape, pushing both Oracle and SAP to transition from their traditional on-premise systems to cloud-based solutions. Oracle was quicker to embrace the cloud and adopted an aggressive acquisition strategy to accelerate its transition, most notably NetSuite, which gave Oracle an immediate foothold in mid-market and small enterprise cloud ERP solutions. By the late 2010s, Oracle’s Fusion Cloud ERP became a fully-fledged SaaS-based enterprise solution aimed at large corporations.
In parallel with ERP, Oracle has aggressively integrated machine learning, predictive analytics, and automation into its cloud ERP, particularly in finance and supply chain management. Oracle today has strengths in the manufacturing sector across multiple functions in both the large enterprise and mid-sized enterprise segments. It offers a mature cloud platform with high levels of scalability and performance through the Oracle Cloud Infrastructure (OCI).
SAP was slower to transition fully to the cloud, initially favoring a hybrid model (emphasizing some customers’ data security concerns) before making a decisive move toward SaaS-based ERP. Thus, SAP developed HANA (High-performance ANalytic Application), an in-memory database, and S/4HANA, a next-generation ERP suite optimized for cloud deployment but still available on-premise. Rise with SAP (2021) then helped customers migrate legacy ERP systems to the cloud. Acquisitions such as SuccessFactors were already cloud-native.
SAP also offers SMB cloud ERP solutions, namely SAP Business ByDesign and Business One, though they have a smaller market share than NetSuite.
Other Leading ERP Players in Manufacturing
Although SAP and Oracle are the undisputed leaders globally, they still only account for around 41% of the ERP market overall (their market share in manufacturing is unknown but is likely to be slightly higher). So, what about the rest? There may be good reasons to look at some of the competitors, depending on the size of your operations, your technology focus, and other considerations such as geography.
Microsoft Dynamics 365 and Infor compete against NetSuite (Oracle) for mid-to-large enterprise manufacturing ERP. Infor CloudSuite Industrial (SyteLine) is focused on manufacturing and is especially strong in industrial equipment manufacturing. It has also made advances in AI-driven automation. Microsoft Dynamics 365, of course, offers the advantage of integration with the Microsoft ecosystem but is also strong in terms of IoT, AI, and automation.
Plex Systems (Rockwell Automation) and QAD are leaders in Industry 4.0 and smart factory solutions. Plex Systems was cloud-based from inception; it offers deep knowledge of the automotive and aerospace industries and has customers in food and beverage. QAD Adaptive ERP is also strong in automotive and has a large footprint in life sciences and consumer packaged goods.
Small-to-mid-size manufacturers needing flexible, cloud-first solutions should also consider vendors such as Acumatica and Epicor Kinetic. Acumatica Manufacturing Edition prides itself on its flexibility and usability, offering a modern, mobile-friendly user interface. Epicor Kinetic is likewise highly flexible and widely used in metal fabrication and electronics companies.
Non-ERP Alternatives
Sage Intacct and QuickBooks are not full ERP systems, but they can serve as viable alternatives for small manufacturers and startups, depending on their needs. However, once your company reaches a certain threshold, it will need real ERP features (for example, BOMs, MRP, shop floor control).
