Unit4 CEO Mike Ettling on the stale, the bad and the agile in midmarket ERP
- In the run-up to the vendor's X4U annual event, I asked Mike Ettling, Unit4 CEO, why he believes midmarket organizations need a different kind of ERP
An intriguing divide has been opening up in the business software market between midmarket companies and large enterprises, which we've been tracking at diginomica. Among larger organizations, ERP is getting 'ring-fenced', as technologies including Robotic Process Automation (RPA), API-centric integration and others bring sorely-needed automation to the processes that surround these core transaction systems. Midmarket companies are taking a different route, seeking integrated platforms that bundle up all of these capabilities built into the core ERP. Why this difference? "Bad ERP," says Mike Ettling, CEO of midmarket ERP vendor Unit4. He explains:
When you look at the enterprise space, I have sympathy for the existence of Master Data Management and RPA and all the workflow and digitization ... because when you're stuck with bad ERP at that scale, it's faster to solve the problem that way. ERP at that scale is not going to solve the problem — they just don't have the agility to do that.
He contends that large enterprises have no choice but to add these solutions around existing ERP systems that are too hard to change, and whose huge scale makes it too complex to incorporate these new capabilities. He explains:
The volume and the scale going through it becomes a really hard problem to solve. It's not necessarily a complex problem, it's a scale problem. And I think that's the big thing. The degree of complexity, combined with the scale in enterprise, makes it really hard to solve and makes it easier to bring in a layer of RPA, a layer of Master Data Management, a layer of [workflow automation].
The stale and the bad
In the midmarket, the issue is more a case of ERP systems that have become stale. Companies of this size, by and large, have always had a preference for integrated platforms. But the workhorse systems that have served them well historically are now reaching end-of-life. Midmarket CIOs should not be looking to emulate their brethren at larger enterprises when seeking to modernize. Ettling warns:
Midmarket CIOs keep attending breakfasts with presentations being run by enterprise CIOs ... Why do you want to listen to what that Fortune 100 company's done? Because it's not what you should do, it's a very different landscape. It's a very different world.
The "bad" ERP vendors serving the large enterprise market simply don't have it in their roadmap to include those other capabilities, he argues, leaving their customers no choice but to surround the core ERP system with a plethora of other tools. But midmarket buyers don't want to string together 10-15 different solutions — they "want to get something which does as much as possible," he says. At midmarket scale, he believes it is possible with the right architecture to offer those capabilities as part of the platform. He elaborates:
Part of the value proposition is, if you buy our ERP, you don't have to buy all this other stuff. You're going to be able to build automated workflows, you're going to be able to digitize, you're going to be able to talk to Salesforce and to Slack and to other applications, from the ERP, out of the box ...
Stale ERP is too slow. I think the issue is around pace to do that, and to address it, which is why you've seen the emergence of all these different categories in software. My fundamental belief is, in the midmarket, we have to do it, that it's incumbent on us to do it. We have to drive the product in that direction — which we are. We have to have the value proposition to customers that you can do all of these things in the core ERP.
Characteristics of agile midmarket ERP
I was speaking to Ettling in the run-up to the vendor's annual Experience 4U digital event next month, at which the vendor is expected to extend the capabilities of its ERPx platform. I asked him what he believes are the key characteristics of this new generation of more agile midmarket ERP platforms. Here they are:
- Extensibility — "The ability to create bite-size extensible applications, which co-exist in harmony without dragging down the core application."
- Core functionality — "You can't have all this sexy stuff and compromise on, the trial balance doesn't balance ... no one wants to go backwards on the core functionality."
- User experience — "Having the ability to create very quick-to-use, easy-to-consume user experiences, employee experiences, particularly for the occasional users."
- Smart automation — "You need to be able to quickly configure workflows, you need to be able to alternate between mobile, chatbots, different means of interaction, on the fly."
- Pervasive access — "It's not the thing you've got to go and log into all the time. You can be on Slack, you can be on Teams, you can be wherever, and you can do something and you're interacting with the ERP."
- Open architecture — "The customer might say, 'Well I've already invested in [say] ServiceNow and it's doing X' and we can say, 'Fine .. here's the integration'."
The other factor to be aware of in the midmarket is the need to cater for industry specializations. An ERP platform must accommodate each vertical's separate requirements. Ettling explains:
They don't have the scale problem. So you can be more agile and nimble. But you do have different complexity requirements, from vertical to vertical, and even within [each] vertical. And that's why again, architecture is important to allow that sort of configuration [and] build some workflow on the fly.
Best-of-breed or integrated platform? It's a debate that has gripped business IT buyers for decades, ever since the advent of integrated ERP suites in the 1990s. Today, increasing digitalization of processes across the enterprise and out to customers has tilted the balance towards a best-of-breed strategy for many companies. At its extreme, there are high-growth midmarket technology companies that juggle hundreds of different SaaS applications and the interconnections between them. But for the majority of companies of this size, the IT skills and resources simply aren't there to manage such a complex landscape — even though they're equally keen to have all the benefits and competitive advantage of a modern digital IT infrastructure.
The solution to this quandary is, as Ettling describes, an integrated platform from a single vendor that incorporates much of the necessary engineering out of the box, and is tailored to vertical needs at the same time. My diginomica colleague Jon Reed recently summed up his vision for cloud ERP thus:
In the large enterprise, I see the future of ERP as modular, platform-based, perhaps microservices-based — where companies can build, extend, and plug and play with whatever best-of-breed apps their users need. ERP vendors without a great data platform and apps marketplace/user community story can look forward to being ring-fenced. The mid-market will resemble the large enterprise, but with more out-of-the-box expectations for industry functionality mid-market companies don't have the resources to build.
The underlying architecture is crucial — it needs to have many of the same Tierless Architecture ingredients that enable modern best-of-breed landscapes, including microservices, API-first integration, and the flexibility to plug into messaging platforms and mobile apps. This is not your father's standalone ERP platform, but one that connects seamlessly into the digital fabric of modern commerce.
Unit4 is among a growing band of ERP vendors that we see offering this kind of integrated yet extensible platform to midmarket buyers, responding to strong demand from the sector. Buyers must still do their own due diligence, but the good news is that there are solutions out there that allow midmarket companies to keep pace with digital transformation without having to stitch it all together from dozens of different components.
To read diginomica stories from Unit4's X4U digital experience visit our Experience4U 2021 event hub. The virtual event runs from November 16-17th and sessions will be available afterwards to view on-demand. Click here to see the agenda and register now.