A Subscription Economy Won’t Kill ERP

If you have ever streamed a movie from Netflix, you are part of the subscription economy. Tien Tzuo former chief strategy officer and chief marketing officer at Salesforce.com shared his views on the growing trend in a striking article called: “The death of the ERP.”

A Shifting Economy

“I’m referring to the shift we are experiencing away from a 20th century product-based, “buy once” economy to a 21st century services-based ‘Subscription Economy’ centered around recurring customer relationships,” Tzuo said.

Success is no longer gauged by counting how many units of your product you have sold. Instead, success is measuring how many customers are using your service on a recurring basis and how successful you are monetizing those recurring relationships.

Intangible Services Will Not Eliminate Tangible Goods

Individuals are opting more and more for subscription based options instead of owning and buying “real” tangible goods. While this works for songs and videos and shows that can be live streamed, in the B2B world companies are still selling and producing tangible goods. Manufacturers are producing equipment for companies who manufacture clothing, shoes or consumable goods.  They are manufacturing cars, hardware for phones and computers. These companies will need systems in place to track inventory, shipping and shop-floor updates. So the system may not be dead, but is an ERP the best system for your company?

Decisions, Decisions

Steve Phillips’s article, “A Dozen Reasons You Do Not Need a New ERP System,” called attention to a problem with companies jumping on the ERP bandwagon.  Yes, there are great reasons to implement an ERP system or upgrade to a new system, but this should be tempered in reality.

An ERP installation or upgrade is not best for your company if:

• The ERP project is not a top priority to senior management
• Functionality of an old system has not been fully explored or implemented
• A few customizations or enhancements can provide your needs for a fraction of the cost
• Support costs along with the cost of implementation will not yield the proper ROI
• Bad policies, procedures and management systems are the true cause of poor performance, not current software
• Your system is helping you meet and exceed your current and future business needs

Information Weekly puts IT projects at a failure rate of 37% on the low end and 75% on the higher end. So before jumping into an important software upgrade, do your research.