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Thursday, June 08, 2017

Manufacturing Is a Huge Opportunity for Cloud ERP

In many markets for enterprise software, the battle between cloud and on-premises (or hosted) systems is over. Salesforce, the market leader in CRM, will soon pass the $10 billion mark in annual revenue. Workday, with its cloud HCM offering and growing financial management applications, expects to hit the $2 billion mark in 2018. Traditional Tier I providers, SAP and Oracle, are certainly not out of the race. But the only way they have been able to compete is by building, or buying, their own cloud services for CRM and HCM. Cloud has won.

Why Is Manufacturing Cloud ERP Lagging Behind?

Nevertheless, there is no cloud ERP provider the size of Salesforce or Workday, and there is certainly no cloud ERP provider for the manufacturing industry with that scale. NetSuite was founded in 1998, around the same time as Salesforce. But it only reached the $741 million revenue mark in 2015, before being acquired by Oracle. Claiming more than 30,000 companies, organizations, and subsidiaries in more than 100 countries as customers, it is by far the largest cloud ERP provider. Although it has done very well with professional services firms, software companies, and other services-related businesses, manufacturing companies form only a small part of that number. Plex Systems has a pure cloud ERP system for manufacturers dating from 2000 and has been rapidly growing over the past four or five years. But its customer count is under 600. After NetSuite and Plex, the number falls significantly: Cloud-only systems such as SAP’s Business ByDesign, Rootstock, and Kenandy,  each have even fewer manufacturing customers.

To understand how great the market opportunity is for cloud ERP in manufacturing, consider that, according to the U.S. Census, there were about 63,000 manufacturing firms in the United States in 2014 with 20 or more employees, as shown in Figure 1. Considering that the estimated customer counts by vendor in the preceding paragraph include customers outside of the U.S.,  it is safe to say that manufacturing cloud ERP probably has less than 2% market share in the U.S. The market opportunity going forward, therefore, is enormous.

Read the rest of this post on the Strativa blog: Manufacturing Is a Huge Opportunity for Cloud ERP

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by Frank Scavo, 6/08/2017 08:56:00 AM | permalink | e-mail this!

 Reader Comments:

Frank,

An additional data point for Mary Meeker's 2017 slide 190. Has serious security & compliance implications...94% of all cloud apps used are not “enterprise-ready” https://twitter.com/iC/status/870434099273490433

I'd hazard guess only 6% of manufacturing cloud ERP software has been rewritten from the ground up over the last 10 years.

By happenstance I commented on a recent retrospective blog post about Windows Vista, and how WinFS the new Windows file system Project Green was to have provided ISVs with a new client architecture for ERP client side business applications. Steve Sinofsky liked it. https://medium.com/@ic/winfs-was-foundational-for-project-green-and-the-rich-client-to-provide-a-new-platform-for-6800c6454fb3

Alas the Browser transformed the desktop away from Windows for TMT, ecommerce and social applications. Android and iOS superseded Windows for single use business applications.

But no one. Not Microsoft. Not even Salesforce has replaced Windows on the desktop for ISVs with a composite of web widgets that can deal with deep trees of aggregates such as Order Bills and compose information from both trusted (ERP back office) and untrusted data over the internet (IoT counting widgets at subcontractor). What we have today is quilt of web components that do not talk to each other (as they actually could).

I am pretty sure, vendors have missed the security model needs to change to agoric based -- Mark S Miller's work on at Google. Whomever pick up his work will spur ISVs to rewrite the 94% insecure applications including Manufacturing Cloud ERP.

-Clive


 
Clive, thanks for the meaty comment. A lot to digest there.
 
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(c) 2002-2017, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

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