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Innovation at the Core

Posted By Jeff Moad, January 12, 2012 at 1:14 PM, in Category: The Adaptive Organization

For several years now, I’ve noticed a disconnect of sorts between manufacturers and the companies that provide the ERP and other software suites on which most businesses run. Increasingly, the software vendors like to talk about the innovations they are bringing to the edges of their applications. They are busy adding things like mobility, social networking, “big data”-capable analytics, and role-based user interfaces to their enterprise application suites.

The implication from the vendors is that there’s not much need to innovate on the core business functionality of these applications, that customer requirements at the core are static, and that those requirements have largely been met.

But the stories I hear from manufacturers paint a different picture. Manufacturers are still keenly interested in the core functionality of their enterprise software. They want applications that, out of the box, support the business processes that are essential and unique to their business and their vertical industry. And they want applications with core functionality that keeps up with what, in many vertical industries, is a very dynamic set of requirements.

Think about it. As pharmaceutical manufacturers embrace concepts like continuous manufacturing, and as automotive OEMs attempt to move toward mass customization, the way they do everything from sourcing materials to planning production is changing dramatically. They need their enterprise software to support those changes.

But that’s not the only reason manufacturers need the core to keep up. Another reason is that many manufacturers of all sizes no longer have the budgets or the IT staff to customize generic applications and to keep those customizations functional through generations of application upgrades. Manufacturers want their software vendors to provide within the core applications up-to-date functionality that is specific to their vertical industry.

This perennial disconnect came to mind earlier this week as I sat through a briefing provided by Infor Global Solutions, a provider of ERP, asset management, and other enterprise applications that are used by about 70,000 companies, many of them manufacturers. Infor went through a major management shakeup a year ago, with former Oracle co-president Charles Phillips taking over as CEO. Phillips and several members of his management team this week told us that a core part of his strategy is to invest in adding deep micro-vertical industry functionality to existing Infor applications such as SyteLine, LN, VISUAL, and now Lawson.

“We’ve shifted to being a product-driven company,” Phillips said.

Since taking over Infor, Phillips said he has slashed back-office costs and plowed much of the savings into extending the core functionality of existing applications, with an emphasis on enhancing functionality for 13 different vertical industries, from automotive to metal fabrication and paper manufacturing. Over the past year, Infor has added 500 software engineers and vertical-industry experts. The company has also restructured its sales organization around vertical industries.

Supporting this drive to innovate at the core is Infor’s ongoing ION middleware strategy. A simplified, event- and document-based integration platform, ION also includes a series of edge technologies such as business intelligence, an advanced graphical user interface, and mobile apps that are being added as standard features across Infor’s substantial product catalog. Before ION, each of Infor’s product groups had been independently developing its own BI, UI, and mobility products, creating wasteful duplication of effort. Now, with a more unified approach to developing such features, Infor can invest more of its resources in core, industry-specific functionality.

“The rest of the market is not focusing on core industry-specific function, but we’re focusing on the core ERP engine,” said Duncan Angove, Infor’s new president, who moved with Phillips from Oracle. “Forty-two percent of software customization is done to fill industry-specific gaps. The other guys are not doing much to solve that.”

Customers seem to be responding positively to the “innovate at the core” strategy. Infor recently reported that it enjoyed a 17% growth in license revenue for the 12 months ending November 2011. The company’s ERP revenues grew 25% in the quarter that ended in November.

Of course, the “new” Infor isn’t the first enterprise software company to tout its vertical-industry focus as a differentiator. The “old” Infor made vertical solutions a key part of its marketing message, as do other midsize vendors such as Epicor.

The big question for Infor will be whether it can attract and retain the vertical-industry experts who can help the company invest in the right functionality for the right industries. In the U.S., the strategy will also depend on Infor’s ability to transform its brand image from that of a sales-driven aggregator to a product-driven innovator.

If Infor is able to do those things, manufacturers could have a viable new enterprise software option.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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Posted on
I concur with your observations.

I am not IT but I am manufacturing and ERP savvy.

In my career I had the fortune to lead a team that just missed disaster before Y2K when the vendor we selected was selling "vapor-ware" (I won't mention them by name) and to come in a turnaround a disastrous ERP implementation for a client who was using the same ERP vendor we discarded before Y2K, but now with a working system.

At the time of the "vapor-ware" episode, they were not prepared to interface a well prepared team that was able to test their work so quickly. However, our lessons learned from this near miss were priceless!

A critical lesson relevant to this discussion was to understand that most, if not all, platforms have their origin in F&A, not operations or manufacturing. Reporting taxes and filing SEC was their initial reason to be. If the data or information flow happened to be useful to Operations and or Manufacturing, then some additional configuring was made. This, in my opinion, is how most MRP/ERP systems evolved and is why so much custom configuration is often required. Add to this mix that virtually all manufacturing business processes are evolved versus designed, especially in small cap businesses, and one has all the ingredients necessary to make the project difficult, lengthy, and expensive.

With our figures burnt and our nerves shattered, we switched to SAP's small cap offering, ASAP. Then I took the President (my boss), our CFO, and myself to meet with Michael Hammer. Mr. Hammer had it right: compare all of your business processes to best practices and modify your processes to fit the vanilla package; select your best people to be on the team. If it doesn't hurt to free them up, then you've picked the wrong person. Start cleaning p your data at the start. Require Presidential approval to write custom programming and always say "no". The challenge is finding a platform that allows one to follow Mr. Hammer's advice. I believe that this is central to the subject of this blog and the challenge/opportunity.
Posted on
Well put, Marvin.

You are absolutely correct about the financial origins of most ERP systems. And this financial orientation impacts how software developers and marketers think about how packaged software can and should support business processes. Because standard accounting practices and, increasingly, regulation apply, financial processes tend to be much more standard and, therefore, easier to support using vanilla, one-size-fits all packaged software. This is not the case for manufacturing processes that tend to be much more organic and variable. But software developers tend to want to support manufacturing processes in the same way they have been able to support financial processes. When that doesn't work, they expect their customers (and the consultants they hire) to fill the gaps. The result is often lots of expense and inflexibility.
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