As consumers, we tend to like to buy products and services that are the sum of their parts. The history of industrialisation has been one of businesses providing bundles of things together in ways that makes the end product or service much more valuable than if we bought the individual elements in isolation.
Take, for example, the common toaster. Today on the high street you can buy a bread toaster for less than a fiver. If you are so minded, you can spend many times that for a premium brand device that offers all sorts of bells and whistles to enhance your breakfast experience.
In essence all of the devices are the same: a metal or plastic box containing some heating elements and mechanics that will heat a piece of bread.
If you wanted to build one from scratch, it would take significant time, energy, effort and ingenuity. Something that Thomas Thwaites did a few years ago, an experiment that resulted in many things, but not very good toast. Ultimately what Thwaites showed was that the bundle of things and industrial processes that delivers an average toaster provides remarkable value to an end customer.
The value proposition for some things, however, which we have traditionally bought in bundles, might not necessarily provide that value today to the end customer that they once did. Take, for example, enterprise software.
In the days before Cloud computing, putting all of your eggs in one basket when purchasing something like Enterprise Resource and Planning (ERP) software made a great deal of sense. If you had to manage the underlying infrastructure to deliver the software, and had to manage the different elements that made up the tools needed to manage a business – from finance and HR to supply chain and logistics – having one software platform from one vendor could lead to significant savings in data centre, server, staff and integration costs.
Today, however, the bundle that is the average ERP suite might not offer the same value it once did. Without having to worry about the servers on which the software sits, and with much greater interoperability between Cloud services as a result of the rise of the Application Programming Interface (API) the value proposition for a single suite of software from a single supplier might not be what it once was. Being able to procure services from multiple vendors might offer the ability for an organisation to pick more appropriate modules to their and their users’ needs, and also might provide more ongoing competition within their vendors to keep service prices lower.
Cloud computing, and Software as a Service (Saas) in particular has also raised the bar in terms of the exit strategies that vendors must provide. In the days when data resided on servers in clients’ own data centres, people seemed to be less concerned about how you might extract yourself from a product in the future. When the data shifted into shared data centres owned and managed by the service provider, valid questions about the ownership of that data meant that vendors had to provide clear instruction for how to migrate away before any significant deals would be signed.
This isn’t to say that single platforms for providing enterprise software can’t provide better value for money. It does mean, though, that the assumptions that existed about the efficiency and effectiveness of buying everything from one place have been broken.
ERP Suites exist because that is what for many years most organisations have bought. When looking to move to more modern platforms, a new set of criteria for defining needs will need to be applied. After all, today enterprise software suites don’t necessarily offer the same sort of value that can be gained by buying a toaster.
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