Covid-19 has created a clash of market drivers. Which will out?…
Market predictions in any vertical are tricky at the best of times, and the ERP market is no exception. This year, Covid-19 brings an overdose of risk and uncertainty as the pandemic’s tumultuous impacts roll out across global markets and society. Will the ERP market be a winner or loser in the fallout? Instinctively, the answer is that for modern ERP systems, it will be a positive.
Technology buyers were already seeking the benefits of modern cloud-based architecture to support digital channels and provide access from- anywhere tools. Covid has underlined that as an imperative and starkly highlighted the advantages of remote access for system owners and users alike. Buyers should be lining up to get themselves some of that digital juice. But are they? In short, no.
Feedback from the trenches does not present a conclusive picture. While there is no doubt that the sector has been lucky to be cushioned in relation to others’ brutal realities, it is not all beer and skittles out there. It’s more like a barn dance, with Billy Bob Covid knocking a few casualties off the floor.
Business from afar
The first and most obvious driver is the work-from-home phenomenon where businesses and managers who could were suddenly forced to operate remotely. For most in the tech sector this was business as usual, so customers getting more comfortable and confident working via screen rather than in-person has benefitted both parties. This had, and will continue to have, far-reaching implications across business, and particularly the tech sector.
Importantly, remote working provided a means to continue with projects and in fact probably improved engagement and productivity.
Nick Mulcahy, CEO at A/NZ SAP partner Zag said the changes were by and large positive for work in progress.
Mulcahy’s team had just signed off go-live on a major S/4HANA upgrade at Hydro Tasmania which was delivered almost entirely remotely, bringing a degree of veracity to his comments.
It (Covid-19) forced business to step up on IT matters, which was something of a win for longer term relations between the two.
“Interactions via online meetings tend to be much more efficient than in-person. Design workshops do sometimes break down into several conversations at once, but when they are online people keep to the point more, they don’t want to be seen as dominating the conversation and so tend to say what they need to and hand the floor over.”
Zag’s experience was repeated across ERP vendors and partners. “Projects that were in progress continued and provided a welcome focus on productive work while physical operations were closed or severely curtailed due to lockdowns. They were an opportunity to put to good use resources that would otherwise have been idle,” observed Mulcahy.
From an IT perspective, WFH created a big challenge to get laptops for staff who had previously operated using desktop machines. With these being unsuitable for shifting to home office environments, hardware procurement became a high priority and with Covid-restricted supply chains, took time to put in place.
Another major challenge arose for IT managers in businesses that relied on internal networks to access on-premise systems. There was blowtorch intensity applied to deliver VPN access so that users could maintain operations.
While most of the IT impacts tended to be on day-to-day operations, they created disruption for IT staff involved with ERP and digital transformation projects. It forced business to step up on IT matters, which was something of a win for longer term relations between the two.
The overall sentiment was that the immediate impact of lockdown was relatively minor and often positive.
Pulse of business
David Reece, head of go-to-market for enterprise systems at MYOB, was in a unique position to understand the impact of Covid lockdowns.
Telemetry from MYOB’s cloud-based SME accounting and mid-tier ERP systems provided a rich source of empirical data.
It informed not only MYOB’s response but was shared with the Australian Government’s epidemic response team to quickly reveal how sectors were being affected. The impact was immediate on hospitality and tourism, but pain was also felt across any businesses unable to quickly substitute open doors with open browsers.
The information allowed MYOB to target an outreach programme to phone customers and offer relief through alternative licensing plans or rescheduling of upcoming renewals.
Customer outreach was also an important part of the response for Gary Patterson, sales director A/NZ for Infor gold partner EMDA. “We made a concentrated effort to check in on clients and offer relief where we could. Often it wasn’t about any specific financial discussion but being seen to be doing the right thing.
“The conversations were humbling, and the appreciation expressed by many made it a rewarding exercise,” Patterson reflected.
Of course, vendors and partners themselves were in uncharted territory and many scrambled to get contingency plans in place. EMDA’s senior team modelled from a baseline of ‘lose no staff’ to map scenarios as to how the business would respond should business conditions collapse.
The same sentiments were common across many discussions reflecting a sense of community around ‘we’re all in this together’ that has been created and may indeed prove to be another long-term benefit of the pandemic.
Essential work, essential systems
Jane Mattsen, executive director at Abel Software, highlighted ERP’s essentiality as another aspect that cushioned the ERP market from the immediate effects of lockdown.
“Companies that are serious users of ERP tend to be skewed toward the essential industries as they in particular need the robust transactional integrity that ERP provides.”
When lockdown exceptions were made for providers of essential services such as food and beverage and suppliers into the FMCG sector, ERP support partners were but one of the many downstream businesses handed an ‘essential’ exemption to keep operating.
Implementing new ERP solutions or upgrades are major strategic projects and in times of uncertainty conservative boards avoid committing to such projects in favour of the status quo.
Patterson added another factor that cushioned partners from immediate impacts. “The move to more subscription-based licensing models has created a mind shift in how software licenses are perceived.
“Subscription fees are now budgeted as part of core expenses and not seen as discretionary, which has not always been the case when support and maintenance fees fell due.”
While delivering a new ERP system itself may not have been classified as essential, supporting the systems of essential businesses was, and kept many ERP support teams busy.
The crux
It might be concluded that ERP providers, cushioned from the brutal impacts in some sectors, have continued their happy dance with sales prospects.
Not so.
Why? Because implementing new ERP solutions or upgrades are major strategic projects and in times of uncertainty conservative boards avoid committing to such projects in favour of the status quo.
Whilst projects in progress and minor support initiatives have continued successfully, sales pipelines have thinned and conversions to sale have slowed.
Businesses have been given a lesson in the benefits of migrating off systems that do not support remote work and anywhere/anytime access for staff.
With that mode of operation now entrenched, it is confidence that needs to return before the rates of conversion from opportunity to implementation will be back to their ‘new normal’.
The consensus is that pent-up demand will drive a strong recovery once confidence returns to the wider consumer and business markets.
The big question is when?
