CIOs should expect to see nimbler, more flexible, more open ERP systems in 2022.
Industry experts also expect ERP trends to include more best-of-breed applications and less monolithic ERP systems, with customers having more ability to pick and choose the applications in the ERP landscape.
Major ERP vendors -- SAP, Oracle, Microsoft, Infor and IFS -- will continue to dominate the market for large enterprises, but smaller, nimbler ERP vendors, particularly those that are cloud-native, will offer innovation and industry-specific applications.
Open systems and industry focus will gain
Traditional vendors will likely to struggle to maintain traction with the current customer landscape, while vendors that offer flexible and with open architectures are poised to excel in 2022, according to Eric Kimberling, CEO and founder of Third Stage Consulting, an independent ERP industry consulting firm in Lone Tree, Colo.
Open source systems like Odoo, which offer flexible customization at a lower cost than ERP giants, best-of-breed applications like Workday and Salesforce, and open cloud architectures like Oracle and Microsoft are going to thrive, Kimberling said.
"Bigger and more cumbersome [systems] like SAP S/4HANA may find it difficult to resonate in this new reality, while vendors focused on the SMB space, like [Oracle] NetSuite, will likely benefit in the post-pandemic world," he said.
Industry specificity is an ERP trend that will continue into 2022, driven by industry heavyweights like SAP, Oracle, Infor and IFS, as well as smaller vendors like Acumatica and Unit4, according to Joshua Greenbaum, principal at Enterprise Applications Consulting, an ERP industry analysis firm in Berkeley, Calif.
All ERP vendors are facing the complex task of threading the needle between the fit-to-standard characteristics of SaaS ERP systems and simultaneously providing deep functionality for specific industries, Greenbaum said.
"This is something that customers really want and that's why all these vendors have their industry clouds and companies like Unit4 are focusing on their core customer offerings in their core industries," he said. "It's becoming a real important part of the maturation of enterprise software in the cloud."
Multi-tenant SaaS ERP vendors with strong industry vertical focus will do well in 2022, said Predrag Jakovljevic, principal industry analyst at Technology Evaluation Centers, an enterprise computing analysis firm in Longueuil, Quebec.
That list includes both cloud-native ERP vendors like Oracle NetSuite, Acumatica and Rootstock, as well as vendors that have redeployed their legacy systems for the cloud, like Microsoft with Microsoft Dynamics, Epicor, IFS, QAD, Unit4, Syspro and Sage Intacct.
Eric KimberlingThird Stage Consulting
ERP vendors that have specialized functionality should do well, Jakovljevic said. He pointed to IFS with its asset and field service management and QAD, which added sourcing and e-commerce functionality into its manufacturing-oriented ERP systems.
"The ones who will struggle are those with no vertical savvy and no easy migrations from legacy to the cloud," he said.
Moving away from monolithic ERP
ERP systems will also continue to move away from a monolithic structure to one where customers can pick and choose what they want to include, according to Greenbaum.
Sometimes referred to as composable ERP, the plug-and-play approach includes elements of edge computing. It is attractive to customers caught between wanting to accelerate a digital transformation of their ERP core and needing to upgrade the on-premises back-end ERP, Greenbaum said.
"More customers are demanding -- and more vendors are providing -- a blending of the two, so you can actually [modernize] pieces of the ERP… and use that to provide better user experiences on the front end," he said. "Composability is absolutely breaking these big monoliths down a little bit, so you can get the things you want without having to upgrade the entire supertanker."
Composable ERP and industry specificity are two markers of an increasing trend toward the cloud and digital transformation, said Mickey North Rizza, program vice president for enterprise applications and digital commerce at IDC.
Most large enterprises with monolithic ERP systems are slowly untangling the web of customizations to understand what they need from more modern and intelligent ERP systems, Rizza said.
These organizations are looking to future-proof their enterprise systems by bringing in more insights to processes across finance, HR, procurement, manufacturing and supply chain, she said.
"These organizations understand they need simple, easy-to-use standardized products that can be configured to meet their needs," Rizza said. "They know they need their employees to be able use the systems anywhere, anytime and in any place. "
Market consolidation will continue
The sheer number of ERP applications available today combined with the high availability of investment capital will likely lead to more consolidation of the ERP market, said Shawn Windle, founder and managing principal of ERP Advisors Group, an enterprise industry consulting firm in Lakewood, Colo.
Although it's difficult to say which ERP vendors will be buyers and which will be targets, Windle expects that small to midsize vendors with good name recognition and growing market share will be likely targets for acquisition.
"There are simply too many competitors for the same dollars," Windle said. "And with work-from-home in place for the foreseeable future, employees can easily be transitioned."
Jakovljevic agreed that ERP acquisitions will be a 2022 trend; the bigger question is how. For example, Infor may continue to be active after divesting its enterprise asset management (EAM) business to Hexagon and acquiring management execution systems (MES) vendor Lighthouse Systems in 2021. Other vendors have hinted that they will be active in the acquisition game.
"Epicor and Unit4 said that they plan to acquire more [companies], and ECi Software Solutions and Aptean keep on buying niche ERP players," he said.
ERP vendors will continue to compete fiercely for business with small to midsize companies, he said, both from ERP heavyweights and newer cloud-first competitors who specifically target that market.
"We expect Acumatica to continue to win more deals, as its pricing and features continue to be very attractive," Windle said. Large-scale ERP vendors such as SAP continue to gain traction and close more deals with SMBs.
However, the ERP vendor sprint to the cloud may result in "a major reckoning for enterprise application cybersecurity attacks," Windle said.
"With so many vendors moving their solutions to the cloud as quickly as they could, there will be vulnerabilities that vendors must proactively handle before they experience major outages," he said, adding that he expects all major ERP vendors will take measures to address security issues.
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.