Capabilities vs ERP

4 Jun

Just picked up on a post by Clive Keyte (here) that discusses the selling of SAP as a set of services.  The post was in response to one by Jeff Kaplan, where Jeff argues that SAP needs to learn some lessons about service enablement and the fostering of an ecosystem from more agile companies – more specifically (here).

There were two points that I found interesting in the ensuing discussion – 1) that Jeff believes that the value lies in services that can be leveraged to build better end propositions rather than in monolithic applications with outdated licensing models (my emphasis given my biases ;-)) and 2) (and perhaps more interesting) Clive’s response about TDS building a set of services that ‘enwrap’ SAP.  I was initially quite excited about this as I thought that this scenario might mirror some of my comments a couple of weeks ago (here) where I was considering how the ability to buy services from specialised providers impacts companies like SAP who attempt to sell applications that are a) tightly integrated (and thus do not promote process agility) and b) representative of the commodity processes that people don’t focus on.  I thought that TDS had taken SAP and were selling commodity services (i.e. complete propositions) whilst using SAP as the backend to enable them to deliver.  Turns out, however, that TDS are essentially selling an ASP proposition into the mid-market based on a set of applications that they have created that use SAP as the backend.  Nothing wrong with that but it isn’t the big deal I initially thought.

On idly looking at the SAP website for BPO propositions, however, I did discover a list of providers who use SAP within their offerings rather than sell SAP into end organisations.  This is much more like the shift I had in mind and effectively changes the whole consumption model from many-installation to single-installation.  Essentially SAP disappears behind people who provide commodity services and is no longer needed in the end enterprise.  To me this makes much more sense than attempting to sell applications into end organisations (whether on a SaaS or on-premise basis) since as I’ve argued before such applications represent commoditised capability that I may as well buy from someone else if it’s not an area of concern for me.  Currently these services are mostly based around the usual BPO suspects like Human Resources – which have a broad horizontal appeal – but I believe that we’re rapidly going to see a shift towards the outsourcing of much more specialised (and potentially differentiating) capabilities, with complex value chains spanning multiple providers.

If this model proliferates – as I believe it will – then how long will it be before specialised providers decide that they too need more flexibility in how they deliver?  Which other modules – beyond HR – are good candidates as a starting point for the creation of specialised services?  Are ERP packages – given the breadth of their function and the difficulty of breaking them up – too expensive and inflexible to play within a specialised service provider market?  How will a shift towards service provision affect the revenue streams of ERP providers given a consolidation of the supporting applications into fewer end organisations?  All interesting stuff I guess – any ideas would be gratefully received 🙂


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