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ERP (Enterprise Resource Planning) is the biggest software field
that Microsoft does not directly play in. So it is natural to speculate how long such
abstinence from a substantial feeding trough can continue. Ask Microsoft spokespeople
directly and the response is unequivocal: "We don’t have any plans to be in the
ERP business ourselves, other than through partners, software houses and systems
integrators," said Microsoft’s industry marketing manager for ERP and
manufacturing systems, Rod Blackwell. So that’s it then. Well not quite. Microsoft
can hardly admit to any plans while it still has intimate relationships with most of the
existing major ERP vendors, with the exception of Oracle. In fact several ERP vendors
themselves anticipate an entry from Microsoft sooner rather than later, although this may
be by stealth, entering just one or two sectors, rather than a big bang. And the move has
a certain logic, because Microsoft used its dominant position in the PC operating system
market to launch into desktop applications. So why not attempt a repeat performance at the
enterprise level now that NT is becoming a serious contender there?
But Blackwell argues that enterprise level ERP systems cannot be compared with
shrink-wrapped desktop applications that sell in high volume. ERP involves project
management, systems integration and considerable after sales support which Microsoft does
not have expertise in and is usually provided by partners.
Purchasing power
However this argument is dismissed by Steve Curtis, a technical consultant at PeopleSoft,
the world’s third largest ERP vendor. "We wouldn’t be surprised if
Microsoft go after one of the ERP vendors and actually buy them," said Curtis. SAP,
the largest ERP vendor would be too big and hard to digest even for Microsoft, as is the
number two, Oracle. So the two likeliest candidates according to Curtis are PeopleSoft,
and Baan, which ranks four or five among global ERP vendors. PeopleSoft’s share price
has tumbled of late, reducing the potential purchase price, and the company has been
working closely with Microsoft recently. More of that later.
But first it is worth tracing the essentials of the ERP story, which began in the days of
mainframes when companies developed their own software for critical back office functions
such as human resources, payroll, and financials. Systems for manufacturing and
distribution to help control the flow of materials or products and the marshalling of
resources were also developed and these all came to be known as ERP applications. Software
vendors then started offering packages for these functions, although no single vendor
covered the whole field and the software still ran on large dedicated hosts. It was
difficult for large organisations to integrate the mixture of packages and bespoke
software so that they could co-operate and make information more widely available to all
users.
But then SAP re-engineered its ERP applications for operation in client/server networks
accessed via Windows PCs and other clients, while also extending its coverage to just
about all the major application sectors. The proposition was that you could buy a complete
suite of ERP applications from a single vendor, avoiding the integration and reliability
issues created by a multi-vendor solution, and access them all through the familiar GUI.
Other vendors followed this strategy, with Oracle being most successful in covering the
whole spectrum, but others like Baan, PeopleSoft and JD Edwards embracing a fair
proportion of it.
A blot on the landscape
There are, though, some blemishes in this rosy picture. Firstly, not all organisations
like to depend on just one vendor for all their ERP requirements, partly because it
reduces their bargaining position and partly because that vendor may not be best in all
ERP sectors. And even when companies have gone for a single vendor, their plans are often
thwarted by mergers with other companies that have taken a different ERP route. So given
these factors coupled with the growing use of business intelligence applications that
require seamless access to data controlled by all ERP systems, the need for integration is
growing rather than diminishing. This is where the Microsoft factor comes in.
To access ERP data and applications, the commonest approach so far has been relatively
basic, or Neanderthal according to a leading director of one ERP vendor who preferred not
to be named, involving ODBC and OLE for straightforward links. The other key point of
integration between Microsoft technology and ERP applications has been at the database
level. UNIX based databases such as Oracle’s own have been the most popular for ERP,
but recently there has been huge growth in SQL Server. Most of the ERP vendors, except
Oracle, have been beta test sites for SQL Server 7.0 as it is vital for them to be ready
to deliver their software on this as soon as possible.
Oracle is in a different position because of its antipathy to Microsoft and because it is
still, to a large extent, a database company. Oracle concedes of course that NT is a major
operating system platform for ERP, but only supports its own database on top. So while
other ERP vendors offer a choice between SQL Server, Oracle and indeed other databases,
notably IBM’s DB2, as the database engine for their ERP applications, Oracle itself
offers just its own database. This places it at some competitive disadvantage from the
point of view of greenfield ERP sales, although the company’s UK applications
director Dave Anderson argued that it was also better placed to poach other ERP
vendors’ customers in the many cases when the actual applications ran on an Oracle
database.
Universal access
Meanwhile, Microsoft is becoming more heavily involved in the ERP field. One can glean an
indication of why Microsoft might be tempted to seek a more direct interest by considering
a recent initiative by PeopleSoft which relies heavily on Microsoft’s BackOffice.
PeopleSoft reasoned that because ERP applications in effect control access to a lot of
critical data, with the underlying database being merely the engine that administers and
serves it, there was an opportunity to provide universal access to a wider range of
information services. The company has coined the term PeopleSoft Business Network (PSBN)
to describe an initiative aimed at giving users links through a common browser interface
and a single signon procedure to all sorts of services such as e-commerce and news
information, as well as business intelligence via the ERP applications. Microsoft’s
BackOffice will be the focal point for the access to the enterprise wide and external
applications, said PeopleSoft’s Curtis. "This is heavily tied in to Back Office,
largely because the desktop is where these enterprise portals to access these systems will
operate, and Microsoft rules the roost there," he continued. Given that ERP
applications do control access to corporate data, it seems likely that Microsoft will want
to be more heavily involved and not just quietly notch up sales of SQL Server.
Furthermore, with many larger corporates already saturated with ERP systems, the biggest
growth is likely to come from SMEs (small and medium sized enterprises), many of which
still have piecemeal and bespoke systems. Microsoft is already laying into the SME market
with the help of partners, and an ERP portfolio would surely provide an additional revenue
stream.
Interoperability
But there is another dimension to the story given the need for integration between
different ERP systems. The fact is that each ERP vendor has its own way of defining
business documents, such as invoices, generated within the systems. A possible criticism
of the PeopleSoft PSBN initiative, at least in its initial conception therefore, is that
it would not by itself allow users to access documents from say business partners or even
some of their own departments if they were on a different vendor’s ERP system.
However, Microsoft and SAP announced in March 1999 that they were working together to
tackle this problem of interoperability at the business forms level by developing new
specifications for the Extensible Markup Language (XML). XML is a universal Internet
standard for tagging data in such a way that it can be interpreted by applications such as
ERP modules unambiguously. It is a companion to HTML. While HTML is all about presentation
of information, XML is about the representation of the content of a form. In the case of
an invoice it means defining fields such as the various amounts and details like the date
so that any XML enabled application can process it.
SAP and Microsoft believe that XML needs enhancing to develop a kind of common business
language for exchanging documents between their respective applications. Such a language
would facilitate interchange based on SAP’s Business Application Programming
Interface (BAPI), by which it exposes its proprietary processes to external access, and
Microsoft’s COM. However a key feature of the SAP/Microsoft forms conversion would be
tight integration into Microsoft’s recently announced BiZTalk server. This enables
rivals such as Oracle to claim that this is an attempt to lock users into SAP and
Microsoft, but SAP itself has a rather different spin. The company’s UK head of
technology Mike Ellis pointed out that SAP’s strategy is to follow the software
component line which will actually make it easier for its products to interoperate with
those of other vendors. "So what you’re finding now is that SAP and the other
ERP vendors are moving towards some kind of nirvana, where customers can choose at a
component level which bits they want," said Ellis.
If this nirvana comes about then the ERP market will become more competitive, and it would
make even more sense for Microsoft to be there. After all, the idea is that individual
components should be almost shrink-wrapped and can be bolted together (which would fit
Microsoft’s model), with partners still on hand to provide additional integration
services. |
