ERP versus SOA

At InfoWorld‘s Executive Forum on SOA in March more than one speaker voiced the opinion that ERP vendors had better watch out because SOA would soon be a major challenge.  What these SOA evangelists are saying is not that ERP functionality is going away, but that the current generation of monolithic systems is being replaced with a more modular/componentized approach.  Next-generation ERP systems will carve up functionality into smaller easier-to-maintain interoperable services that are orchestrated by SOA tools.

The concept of ERP was that a single system could house all corporate data.  Whether you were in finance, HR or manufacturing, given appropriate access rights, you could see any piece of corporate data from anywhere in the company.  Prior to ERP, data would flow from one departmental system into another, and tasks like tracking the location and status of an order could be time-consuming.  ERP tried to solve that problem by aggregating data into a single unified system.  The selling point of ERP was that a single system could be bought that required no service work to integrate many smaller component systems.

But while ERP eliminated the integration of multiple systems, successful ERP implementations usually required extensive customizations.  Out-of-the-box ERP software seldom exactly matched the desired business processes, and getting the system to work the way that you wanted it to required significant amounts of customization.

Implementing and supporting ERP is expensive and time consuming because:

• Costs to implement and customize are very high
• Costs for the annual license renewal are high
• Costs to upgrade or switch to a different vendor are very high
• The average time to implement an ERP system is one to three years

Many companies have paid huge amounts of money to create custom ERP implementations. Technology changes rapidly and those companies now find that to upgrade their customizations to newer versions of the software will be very expensive.  In an article this week, Oracle estimates that 94% of SAP customers have not yet migrated from the legacy R/3 system. 

Because of ERP’s high cost in terms of time and money, the IT budget of many organizations often has little room left for pursuing any other initiatives outside of ERP.  To top that off, individual modules within an ERP system tend to be mediocre in quality and capabilities.  Rather than to focus on a specific application category, the ERP vendor needs to spread development resources across all modules needed in an ERP system.  These can include manufacturing, finance/accounting, warehousing, logistics, HR, marketing and strategic management functionality.

There is an ongoing debate about the advantages of using a single vendor’s ERP solution or whether integration of Best Of Breed (BoB) solutions is a better approach.  An integrated BoB approach usually provides much richer solutions.  EWeek found that users prefer the BoB approach, but often because of politics, the company will select a single-vendor ERP solution. 

ERP based on SOA will promote the BoB approach.  Customers will have more choices and be able to pick and choose services from any vendor.  Modern IT architectures will be based on SOA and it is inevitable that components of today’s ERP systems will become services within this infrastructure.

Formtek has seen the migration towards SOA as being inevitable.  That’s why we’re prepared to work in that environment.  We’ve written our document and content web services from the ground up to play well in an SOA environment.

The storage of and management of unstructured data is an essential component for almost every business process.  Offered up as a service, unstructured data management could easily be exposed and utilized company-wide.  In the past document solutions tended to be departmental and often one company had many different solutions across the company.  Plugging in the Formtek unstructured data management service into the SOA infrastructure can provide a consistent consolidated approach that can make the data available enterprise-wide.