IT Leadership

Customer Choice & Functionalities are Driving the ERP Market

Gone are the days when corporations boasted of running on one monolith software – a motherhood statement – called ERP. While ERP still remains the backbone of any company, with the passage of time, a lot of innovation has gone into it. In spite of availability of various best-of-breed software products serving diverse business needs, ERP’s evolution hasn’t halted. It has become holistic, intuitive, pervasive, homogenous, and covers a large gamut of functionalities into one core software. One such ERP is Epicor. Since its inception in 1972 the company has not only grown multifold to become an over billion-dollar software company serving the niche industries including manufacturing and retail, it has also come a long way in terms of product development.

As would be true for any software product, Epicor has also built in functionalities that are required to fulfil the demands of customers in the digital age. The product now incorporates more intuitiveness, more intelligence thanks to functionalities like Epicor Data Discovery and Epicor Data Analytics. As the company prepares for a big cloud push for its key products, it wants to harness more from the new technologies like IoT, and AI. That’s one reason why the company decided to forge a strategic partnership with Microsoft and put its products on Azure stack.

Recently, during the Insights 2018, Epicor’s annual user conference, I had a very nice, long conversation with Himanshu Palsule, Chief Product and Technology Officer, Epicor Software on a variety of issues like evolution of ERP as a product, company’s roadmap of product development, the market in India and how the future of enterprise software will look like.

I have tried to capture the essence of the conversation in an interview. The excerpts are given below:

DynamicCIO (DC): India is transitioning to a manufacturing-oriented economy. Digital transformation is helping Indian companies to be on par with some of the world’s best manufacturing companies. How does Epicor, a software product company, intend to increase its traction here?

Himanshu Palsule (HP): While I am not an expert on Indian economy, I travel there often. I’ve witnessed a transformational shift towards indigenous manufacturing, which now appears to be very real. Historically too, India has been a large manufacturing base but lately the access to large capital has made the sector look more lucrative. In last 18 months, what we’ve witnessed, can be rightly termed as “manufacturing renaissance.” As far as enterprise application software are concerned, there has always been two extremes. First, that addresses the upper-end of the market and second, the local products that address the lower-end of spectrum. There’s little that was offered for the mid-market. For us, that’s the sweet spot.

For a variety of reasons that market has been very fragmented. The key is to have a strong local presence to have business wins. Most of these indigenous companies are keen to procure technology locally. We’ve had satellite offices in Chennai and Delhi but we took a conscious decision to enhance our presence and set up our global back office – with over 400 people – in Bengaluru. It not only serves as the development center but also offers customer support, professional services, HR, legal services etc. That set us up well for accessing the growth. Secondly, the products have also come a long way. Since every country wants localisation, last year we decided to externalise our country-specific engines that enables necessary modifications. For example, one of our customers FLSmidth, a global engineering company based in Copenhagen, has offices/establishments in Chennai. Our local partner in India was able to make the GST changes in the product in a short timeframe. Coming together of those forces gives us great confidence and reason to penetrate into this market.

DC: An OEMs tries a great deal to make its product as holistic as possible with most functionalities built-in. Still there is scope left for a lot of localisation, specially in a country like India which is governed by many regulations and compliances. Is Epicor ready for it?

HP: Epicor offers something known as CSF – country-specific functionality. The easy part of CSF is stuff like currency, language etc. The next level is compliance changes. The big one for India was GST that happened last year. We had teams in India, which worked to make the Epicor ERP compliant to GST. The third level change, which might not be so relevant for India, is the workflow and approval process. For that we need local expertise to fulfil it. When we work with mid-sized manufacturing and distribution companies in specific geographies, we ensure that we consider all such requirements beforehand. From India’s point of view, apart from GST, things have been pretty stable legislatively and don’t mandate big changes. The tax law changes are frequent everywhere and that Epicor, as a company, is able to handle well because our engines’ capabilities.

DC: ERP, as we know it, is considered a monolith, must-have software in any mid-sized or large company to bring in a minimum amount of automation. But we now live in an Apps, and API world. Digital is the new core. How do you see these changes affecting the ERP software? How is Epicor addressing it with new innovations?   

 HP: No doubt, industry has gone through a great deal of changes. When ERP came first, its promise was to give an end-to-end product. A decade ago, people started looking at best-of-breed, point solutions for functions like HR-payroll, CRM, SCM etc. Driven by what we call “manufacturing renaissance”, it is now about choice. A lot of customers want a full ERP stack because they want to stay away from the hassles of managing multiple software. From Epicor’s standpoint, most of the things required from an ERP are there in our product with a small exception of payroll. However, when we get into large accounts, we don’t dictate them. The company may already be using a Salesforce.com, or a Tableau, or something for payroll. Our strategy is to first complete the core and address the key issues. For adjacencies, we plug it with the products that we own like BI, Document Management and CRM but also have the APIs to integrate anything else the customer is already running in its environment.

As we move into the cloud, it will start becoming the new norm. While Epicor is going to standardize on the Azure stack, we also understand there are more clouds and there will be apps running on those clouds. The highly federated, loosely coupled API structure will allow us to plug everything together.

No doubt, we will have a full solution for a customer to run its end-to-end job but we are always open to conversations where the customers want to stay with its legacy.

DC: We have ushered in the era of Industry 4.0 that talks of Industrial Internet of Things (IIoT), connected factories, automated shop floors, robotics etc. All of these generate humongous amount of data. How can Epicor help CIOs in channelizing this data through its built-in intelligence which throws back actionable insights?

HP: ERP, in older days, was synonymous with database. If there is something to equate it with, an ERP application was as basic as the dial tone of 1990s. But with evolution, the product has come a long way. Today data has become the new oil. Tools like EDD (Epicor Data Discovery), an inherent tool built into the product, helps in making intrinsic decisions based on data discovery. We intent to get more aggressive on our EDD roadmap. EDA (Epicor Data Analytics) bolts on top of it. It pulls data out, analyses it, and move it back into the system. The third stage of this will be the predictability and learning from the data. One of the reasons Epicor is moving to Azure is because it has that fabric of intelligence built in. Microsoft Azure, which is a rich stack, has their own idea of connected factory, which gels well with our product.

I will site an interesting example here. When we talk about intelligence, it may mean different to a technology vendor on one hand and customer on the other. We started implementing telemetry starting with the version 10.2. We get triggers from customer systems around the world when any screen starts running slow. We inform our customers about their applications/processes running slow. Customers welcome this type of intelligence input. More of such innovations are expected from Epicor in the future.

DC: That leads me to ask a related question. How much more AI will be built into an ERP?  

HP: Significant! If I were to place bets on how much AI will go into an ERP, it’s going to be very high. ERP has always been the ‘single record of truth’ for an organisation. The CFO of a company trusts blindly the numbers that an ERP system shows. It is also the most structured, and normalized form of data. Keeping pace with current times, we have to give customer information in an Omni-channel way. Information doesn’t just reside in the ERP; it resides outside too. For example, our retail product Epicor Eagle. Retailers want to look at seasonality and patterns so that they can order products in time. How wonderful would it be for a customer who can refer to the 5-year historical data on various aspects, including the weather data, that can help it procure the rights goods at the right time. Artificial Intelligence is greatly helping in channelizing these data streams from various sources and help companies make intelligent decisions.

Retail is a space where a lot of AI is being used. We don’t see Epicor making a lot of noise in this space?  

 HP: We generally don’t talk about this business but Epicor Eagle, our retail ERP, has over 5000 customers. In the US, one of the largest hardware retail chains, ACE uses Eagle. All these years we have managed it as an ERP including the POS, and inventory solutions. We are moving Eagle to the cloud. We also have a payments and mobile platforms. In the next one year there a phenomenal intelligence will be put into this product. Once we start getting more into the cloud, we will roll it out globally.

DC: Forrester Research says that ERP will have an accelerated transition to SaaS model in next few years. You think corporation are willing to buy ERP on a SaaS model?

HP: In January this year, we spent a lot of time understanding the market data around cloud. That gave us some vital learnings. Firstly, cloud has to be looked at more granularly. When a CIO says he’s going for cloud, it could mean many things. It could mean cloud for digital marketing, for security, and so on. It doesn’t automatically mean that the CIO will move the ERP there. Secondly, cloud adoption varies from industry to industry. Services-based companies are early movers as compared to product-based companies. Third key is infrastructure. There has to be a robust broadband infrastructure, which is a fundamental requirement to run apps from a cloud. Countries, where the fiber optic network isn’t robust, won’t have a higher cloud adoption. So, in my opinion, Cloud isn’t a homogeneous entity. It is also not an event that happens. It changes with the situations that I just mentioned. 75% of our customers, who bought an Epicor product in the last six months, wanted an assurance that we have a cloud product too. Why? Because, today they may be happy with an on-premise ERP but in future they may decide to go on cloud for multiple reasons.

 

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