Gartner Magic Quadrant reveals a midmarket ERP industry that is stable, innovative despite recession

In a new report on midmarket ERP for product-centric companies, Gartner says SAP, Microsoft and Epicor rose to the top of an industry that remained remarkably stable through a tough economic year.

A new Gartner Magic Quadrant report for product-centric companies says midmarket ERP vendors have responded to demands for more user-friendly, agile applications, and that three vendors in particular -- SAP, Microsoft and Epicor -- have been the most successful at riding these trends.

“Companies are looking for ways to use the investment that they’ve made in those huge ERP suites by making those systems attractive to more types of users, away from the pure, heavy transactional users and actually making those systems interesting and attractive,” said Christian Hestermann, an analyst at the Stamford, Conn.-based research firm and co-author of the report.

The report notes a broader modernization trend away from complicated legacy systems to easier-to-use applications that work more like consumer websites and applications. For example, more ERP vendors are adding embedded analytics, search capabilities and interface designs that only allow users to see information related to their roles.

While the rate of innovation continues apace in product-centric ERP -- a category Hestermann said targets companies that manufacture or move goods -- the industry itself has not been drastically affected by the recession.  

“Unlike other years before, we haven’t seen any takeovers, any major acquisitions or anything, and none of those vendors have gone out of business,” Hestermann said. “That’s largely been because of the steady revenues from user maintenance fees,” he said, adding that the status quo will likely continue into the near future.

The top three midmarket ERP vendors

Epicor 9, which targets “midsize to large-scale make-to-order and mixed-mode” manufacturing companies, gets Gartner’s nod as the best application from the 14 vendors it evaluated. Close behind are Microsoft Dynamics AX and SAP’s All-in-One.

Epicor acquired a handful of companies and spent the time and money to re-implement their software’s functional concepts in Epicor 9, Hestermann said. “There are a couple of things that the approach of building a completely new architecture did allow Epicor to do,” he said. Besides having  a full range of analytical features, the newly engineered software allows business analysts and implementation partners to model processes at the business layer rather than the technical layer, an aspect of the software the report hails as “visionary.”

Epicor has also created a clear roadmap for the product, but it might find its resources in short supply, a side effect of the application’s success, Gartner said.

SAP’s All-in-One stands out because of its “global penetration, ability to scale, and market share,” the report stated, noting that the product is available and supported by more than a thousand partners worldwide.

The application offers “rich functionality and a wide number of industry-specific practices,” according to Gartner, which also praises recent changes made to the interface, including the embedding of Business Objects analytics and some Web 2.0 features. But the report dings All-in-One for not being as flexible as other applications in the category and for having a slightly higher total cost of ownership.

Microsoft Dynamics AX, on the other hand, gets the nod for having one of the most intuitive user interfaces, one that also mirrors that of Microsoft Office. The application’s functionality is a “healthy” mix of out-of-the-box capabilities for certain industries, in addition to pulling in customer-specific features built by and with Microsoft ‘s partners.

The application is focused on six core industries: discrete and process manufacturing, distribution, retail, services and the public sector (mostly for the U.S. markets), although Microsoft’s partners are working on expanding those areas. 

Like Epicor 9, Microsoft Dynamics AX uses a role-based interface, though customers in smaller companies reported that many of the roles were better suited for workers in larger enterprises, Gartner said.

Other midmarket ERP trends

Gartner also noted the following changes since the last Magic Quadrant, in 2009:

  •          Service-oriented architecture and business process management prove valuable in prepackaged, midmarket applications. Combining the two allows for an unprecedented level of flexibility and adaptability, something that Epicor 9 takes advantage of, according to the report.  The next step will be model-driven applications, where process models are separated from source code and can be modified without expert programming.
  •          Users say data formatting and retrieval are major problems. According to the report, many users said they were frustrated by the steps involved in making even small changes to documents and reports. While some have opted for using Crystal Reports (now part of SAP Business Objects but used by other vendors as well), several vendors are looking to embed analytics to make data more accessible. 
  •         Many companies are interested in on-demand ERP, but few are ready to act. Most companies still use traditional, on-premises ERP systems, the report found. If they run any software in the cloud, it’s typically for functions like CRM, collaborative decision making and human resources. But Gartner said on-demand software for core financials is growing in depth and sophistication.

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