Program Vice President, Enterprise Applications and Digital Commerce, IDC
Today, survival of the fittest is not linked to size or strength but to the ability to change — to move -quickly, adapt, seize opportunities, and be agile. Capturing a piece of the digital transformation (DX) opportunity is at the center of business strategies today. Across all industries, this amounts to an opportunity for an increased annual economic value of $18.5 trillion, or nearly 25% of global GDP. For the manufacturing industry, the opportunity is higher than most, representing $4.5 trillion of the $18.5 trillion opportunity. Digital transformation must be an enterprisewide, board-level strategic reality for companies wishing to remain relevant or maintain or enhance their leadership position in the digital economy. Digitally transformed businesses have a repeatable set of practices and disciplines used to leverage new businesses, 3rd Platform technologies, and operating models to disrupt businesses, customers, and markets in pursuit of business performance and growth. DX is driving businesses to rethink their technology strategy, and that includes moving beyond their legacy enterprise resource planning (ERP) and back-office systems.
While many manufacturers still invest in antiquated on-premises systems, the most mature DX businesses have turned their focus to SaaS and cloud-enabled software. This focus has been driven by the need for flexible and agile business applications that are relatively easy to implement, configure, and update. Demand for cloud-based manufacturing ERP applications continues to grow because of the ability to access and analyze massive amounts of data in near real time. With speed and agility being essential for DX, businesses want and need more from their enterprise systems than ever before, and that includes using the most up-to-date and advanced systems found in SaaS and cloud-enabled systems. SaaS and cloud-enabled software enable growing businesses to quickly expand into new regions around the globe without making major investments into their technology infrastructure because they are extremely adaptive to accelerated rates of change. SaaS and cloud-enabled systems are adaptive to dynamic operations environments, which is why this IDC MarketScape for SaaS and cloud-enabled manufacturing ERP applications is extremely important as a technology vendor guide for today’s COO, CFO, CIO, and IT buyer.
Manufacturing ERP includes product-centric organizations across four distinct value chains:
There are unique industries challenges and business processes within different segments of manufacturing, and it is critical to understand these differences. However, while there are many variables across value chains, segments, enterprises, and even individual locations within a company, all manufacturers utilize ERP systems as the backbone to run their business. Manufacturing ERP systems incorporate operational modules, including order management, finance, procurement, enterprise asset management (EAM), production, and supply chain, to maximize operational efficiencies. Manufacturers see benefits from the integration between core finance and operational capabilities, so that operational transactions with a financial impact are reflected directly in financial modules.
In today's fast-paced global business environment, successfully managing the operation's processes to meet the organization's financial obligations is essential. Moreover, as the digital economy continues to develop the organization, the finance, manufacturing, supply chain, sales, and asset management functions will play a larger forward-facing role — interacting with clients and customers.
The operations of an organization can be complex and fraught with inefficiencies for companies of all sizes. During our interactions with manufacturing professionals, the following issues were top of mind:
Manufacturing workflows are quickly changing as part of digital transformation initiatives. This shift brings forth a new chapter in the evolving story of manufacturing ERP applications. The new chapter within manufacturing ERP software applications will be characterized by the following:
The goal of this document is to provide potential software customers with a list of manufacturing ERP software companies that have taken great strides to address the challenges listed previously. We have profiled and assessed their capabilities to support the complicated area of manufacturing ERP.
SaaS and cloud-enabled manufacturing ERP technology is evolving with functionality improvements occurring as often as daily. From the addition of the 3rd Platform with big data and analytics, social, and mobile to the innovation accelerators of AI, 3D printing, robotics, IoT, and advanced security, the systems continue to advance and improve rapidly.
Speed is the critical factor as in the digital economy, enabling businesses to significantly improve in terms of market share, revenue, and profitability. It is recommended manufacturers understand the current capabilities of their technology choices, along with the strategic direction and investment their ERP software provider is making now and in the next three to five years. A guiding factor in our vendor research was the 3rd Platform and innovation accelerators’ current capabilities and their strategic and investment direction. Also ensuring that your vendor can support the unique industry challenges you face on a day-to-day basis. It is critical that buyers look for a technology partner they can trust and that can take them well into the future.
As SaaS and cloud-enabled manufacturing ERP systems have increased in popularity, so too has the requirement for companies to utilize an ERP system regardless of their business size. Large enterprises find manufacturing ERP systems enable visibility across the entire organization from customers through suppliers. But just as important are small and midsize (SMB) organizations using manufacturing ERP systems. Many large enterprise CFOs and CIOs move to small and medium-sized manufacturers and need a holistic ERP package they are accustomed to but at a fraction of the cost. The executives of small and midsize organizations want to move beyond spreadsheets and databases to SaaS and cloud-enabled manufacturing ERP software because it is an integrated, real-time business system that is always accessible and grows with the business.
Last, organizations vary in products and require innovation to move beyond the current state into the intelligent enterprise world. SaaS and cloud-enabled manufacturing ERP systems are the critical core to build intelligent systems, which use machine learning and natural language processing on curated data sets, with advanced analytics and an assistive user interface (UI) across the resources of people, process, and technology. These intelligent ERP (i-ERP) systems forecast, track, learn, route, analyze, predict, report, and manage business decisions and outcomes. Many of the vendors in this IDC MarketScape have already invested in the 3rd Platform and innovation accelerators, utilizing these innovation areas to deliver higher value to their customers, while others are just beginning this investment journey.
Several vendors outlined in this research study have more manufacturing depth and breadth than others. And some are still moving from on-premises to single tenancy and just beginning their journey toward multitenancy. Before making purchasing decisions on SaaS and cloud-enabled manufacturing ERP software, businesses should consider:
This IDC MarketScape vendor assessment assists in answering these questions and others. Some of the references that participated in this study noted the current state of the SaaS and cloud-enabled manufacturing ERP software market is evolving. In addition, many of the references were impressed there are now more vendor choices within the manufacturing ERP market. IDC expects some consolidation and specialization by niche may occur as the market matures and as manufacturing ERP software vendors look to add additional capabilities to their portfolio of products. The point being, there are a lot of options when it comes to manufacturing ERP, selecting the best vendor for your requirements is a challenging task but one critical to long-term success.
This section briefly explains IDC’s key observations resulting in a vendor’s position in the IDC MarketScape. While every vendor is evaluated against each of the criteria outlined in the Appendix, the description here provides a summary of the vendor’s strengths and challenges.
After a thorough evaluation of SAP’s strategies and capabilities, IDC has positioned the company in the Leaders category within this 2019 IDC MarketScape for worldwide SaaS and cloud-enabled manufacturing ERP applications.
SAP S/4HANA Cloud is an intelligent ERP that enables business processes including idea to design, procure to pay, plan to production, order to cash, offer to project, and core finance. From a line-of-business perspective, this includes finance, procurement and sourcing, research and development, sales, revenue, supply chain, and manufacturing.
Quick facts about SAP:
Consider SAP if you are a manufacturing company looking for a well-established and widely adopted manufacturing ERP system focused on utilizing artificial intelligence to optimize business processes.
The vendor inclusion list for this IDC MarketScape is intended to include the most prominent ERP vendors focused on the manufacturing industry. To be included in this IDC MarketScape, vendors had to meet three criteria:
Ultimately, all manufacturing ERP solutions included in this document met these criteria.
For the purposes of this analysis, IDC divided potential key measures for success into two primary categories: capabilities and strategies.
Positioning on the y-axis reflects the vendor’s current capabilities and menu of services and how well aligned the vendor is to customer needs. The capabilities category focuses on the capabilities of the company and product today, here and now. Under this category, IDC analysts will look at how well a vendor is building/delivering capabilities that enable it to execute its chosen strategy in the market.
Positioning on the x-axis, or strategies axis, indicates how well the vendor’s future strategy aligns with what customers will require in three to five years. The strategies category focuses on high-level decisions and underlying assumptions about offerings, customer segments, and business and go-to-market plans for the next three to five years.
The size of the individual vendor markers in the IDC MarketScape represents the market share of each individual vendor within the specific market segment being assessed.
IDC MarketScape criteria selection, weightings, and vendor scores represent well-researched IDC judgment about the market and specific vendors. IDC analysts tailor the range of standard characteristics by which vendors are measured through structured discussions, surveys, and interviews with market leaders, participants, and end users. Market weightings are based on user interviews, buyer surveys, and the input of IDC experts in each market. IDC analysts base individual vendor scores, and ultimately vendor positions on the IDC MarketScape, on detailed surveys and interviews with the vendors, publicly available information, and end-user experiences in an effort to provide an accurate and consistent assessment of each vendor’s characteristics, behavior, and capability.
After an initial evaluation of software vendors serving this market, which included each vendor’s high-level application capabilities and existing manufacturing ERP client base, IDC’s Enterprise Applications team extended formal invitations to software vendors to participate in our study.
All vendors actively participated in the research with a total of 42 references contacted and interviewed. Discussions with references included the systems utilized and their perception of the vendor and software in terms of technical support, account management, marketing message, level of value delivered versus price paid, ease of integration, user interface, innovation, intelligent workflows, and ROI. In addition, references also provided areas of improvement, their future business requirements, and top 3 metrics.
This IDC MarketScape evaluation focuses on SaaS and cloud-enabled manufacturing ERP solutions. ERP is a packaged integrated suite of technology business applications with common data and process models that digitally support the administrative, financial, and operational business processes across the manufacturing industry. These processes manage resources including some or all the following: people, finances, capital, materials, suppliers, production, supply chains, customers, products, projects, contracts, orders, and facilities.
Manufacturing ERP includes product-centric organizations across four distinct value chains:
Manufacturing ERP systems incorporate operational modules, including order management, finance, procurement, enterprise asset management (EAM), production, and supply chain, to maximize operational efficiencies. Manufacturers see benefits from the integration between core finance and operational capabilities so that operational transactions with a financial impact are reflected directly in financial modules. Typically, ERP solutions are architected with an integrated set of business rules and metadata, accessing a common data set (logical or physical) from a single, consistent user interface. Manufacturing ERP solutions are available as on-premises, hybrid and, increasingly, cloud SaaS deployments.
i-ERP (Intelligent ERP): The New Backbone for Digital Transformation (IDC #US41732516, September 2016)
This IDC study provides an assessment of the leading SaaS and cloud-enabled manufacturing ERP software solutions and discusses what criteria are most important for manufacturers to consider when selecting a system. This IDC MarketScape Excerpt features SAP.