Wrong ERP Demise Predictions Have (Only Partly) Created Skills Shortage

Event Summary

As reported on January 9 on VNUnet.com, a leading European IT news portal, e-business and customer relationship management (CRM) may be all the rage, but IT recruiting professionals say the demand for enterprise resource planning (ERP) professionals is hot as well. While the ERP market may still be recuperating from theY2K hangover, the predictions of its demise have been greatly exaggerated, according to organizations trying to conduct staff recruitment in the field.

Mary-Sue Rogers, who heads PriceWaterhouseCoopers' (PWC) UK technical solutions team for the consumer and industrial products sector, confirms: "We have been very busy since March. Post-Y2K, a lot of clients have kicked in with major ERP implementations." While many of these are driven by big business changes such as mergers or de-mergers, she claims that quite a few major corporations are starting their ERP projects from scratch. "A second driver is the e-thing. Everyone wants to be on the web, and we are doing quite a lot of e-enabling legacy systems for clients who do not want to do a complete upgrade." A lot of customers are also adding human resources (HR) and e-procurement modules to their existing systems and integrating them with customer relationship management (CRM)-based ones. "We are seeing it in all three sectors we focus on - SAP, Oracle and PeopleSoft," Rogers explains.

Many of the projects being undertaken by PWC are sizeable, she adds, requiring between 50 and 100 staff over an 18- to 24-month period. But she claims that PWC is not the only one bidding for such work, with the traditional ERP vendors themselves also closing big deals.

Mike Milner, a recruitment consultant with ERP specialist MJM Recruitment, adds: "ERP software alone no longer provides competitive advantage. The real advantage, as far as the user is concerned, derives from order fulfillment." While he still sees demand for pre- and post-sales staff among the traditional ERP installed base, he also believes that start-ups and pre-flotation companies focusing on the emerging market for order fulfillment applications, are interested in skilled people who can sell and implement them. Fulfillment systems sit on top of the conventional plumbing provided by ERP software. "Such companies are looking for people with a fundamental understanding of ERP and how to sell complex solutions into the enterprise - and explain the corporate benefits," Milner claims.

But Mike Kensington, an executive at recruiter Prism, confirms that ERP vendors and consultancies are chasing a finite population. "They are looking at ERP from a different angle now. They are looking to integrate it with the web, front-office applications and CRM. They want people with experience of using e-modules or integrating these products. Consultancies across the board want ERP skills, with some exposure to new products such as Broadvision, Vantive, Clarify, Siebel and Commerce One. And such people are as scarce as hens' teeth."

PWC's Rogers confirms that the company is looking for staff that can handle all aspects of ERP, but, like other big firms, it has struggled to recruit them over the last six months. "It's a more mature marketplace and we want people who have 'been there and done it'. We are not looking for foundations to build on, but implementation experience of any of the big packages. The market is very hot and it's not easy to find the right sort of people. In more traditional ERP areas we have significant chunks of work that I can't resource without hiring contractors," Rogers adds.

But one of the issues is that the ERP sector is no longer perceived as attractive. "The press and recruiters hyped e-business and tried to build an early grave for the ERP side, but ERP is alive and kicking. If you don't get the ERP right, e-anything is not going to work because it relies on having a solid data model and set of processes to put the next layer on," she claims. But it is quite difficult to find such people. In fact, some customers have delayed implementing systems, not because of a problem with the technology, but because they cannot find qualified, experienced personnel.

Market Impact

ERP's vitality is on the mend, which should be a relief for all involved parties: vendors, enterprises, and consultants/system integrators. This is by no means a surprise for TEC, since we have been noting this trend for awhile (for more information, see ERP Demand Being Re-heated, Will That Wretched ERP Finally Die? Possibly, But Only the Acronym!, ERP Getting a New Breath of Fresh Air in Europe, and Big ERP Players Courting Government Agencies) and have strongly opposed the theory of ERP obsolescence touted by many at that time.

With all the recent attention being paid to e-commerce and CRM, some may feel that ERP is a pass technology. ERP, however, remains as necessary as ever. Nonetheless it does need to evolve to thrive in the Internet age.

The fact remains that the majority of ERP vendors have been taken aback during the last two years by a combined effect of the following major factors:

• The Y2K-caused market slowdown
  
  
• The Fortune 500 market saturation
  
  
• A bad reputation for exorbitantly expensive and protracted implementations without producing touted benefits
  
  
• The market's attention shift to e-business, supply chain management (SCM), client relationship management (CRM), business intelligence (BI), and other extended-ERP applications

We feel that the majority of vendors tackled those difficulties with appropriate, time-and-money-consuming counteractions like:

• Developing more implementation-friendly and industry-tailored products attractive to the untapped small-to-medium market
  
  
• Expanding product functionality to cover the above-mentioned hot applications
  
  
• Face-lifting (web-enabling) or fundamentally revamping the product architecture to be Internet based
  
  
• And More

The recent upbeat quarterly and/or annual results from most of Tier 1 players including even once written off Baan, particularly in terms of license revenue increase despite the general economy slowdown, demonstrate the market is on its way back.

The basic functionality of ERP and the Internet (and its associated e-commerce technologies) are different. While ERP is an integrated transaction-processing system that handles major information within the four-walls of an enterprise, the Internet is primarily a distribution medium and does not entail a lot of processing. Although the information flow through the Internet is becoming more amenable to transaction-processing all the time, particularly with the advent of new technologies like Java and XML, it is still mostly processed by applications, ERP packages being the best example. The great benefit of ERP is integration- enabling all users to use the same information and business processes and obtain the same results when the system is queried.

While there is a myriad of exciting point-specific applications with a strong Internet orientation, these applications do not currently provide strong information integration among companies. Integration with ERP has never been easily achievable, although it is generally worth the trouble. The integration allows firms to offer services such as available-to-promise (ATP) inventory, which means that customers do not order 'pies in the sky'. If procurement systems are not integrated with sales, manufacturing and logistical systems, ATP is just a teasing hallucination. A lot of e-commerce vendors cannot provide it at this stage, despite their highly Web-enabled applications. Therefore, the merits of ERP will prevail for a long time to come.

Problems Persist

Our belief is that the current shortage of quality ERP consultants is only partly attributable to wrong ERP demise predictions and subsequent (in)voluntary defections of disconcerted ERP consultants into more promising areas like CRM. Some attrition should also be written off to the severe travel requirements and consequent burnout and personal life sacrifices. For that reason, some have opted for internal consulting within a particular enterprise. Others have found a sweet spot as pre-sales consultants for ERP vendors and their channel; it involves much less traveling, while it requires extensive experience and creativity to tackle prospective users' issues on the fly.

The main reason for the skills shortage, however, lies in the higher market awareness and self-education of users before jumping on an ERP implementation journey. Early ERP implementations often proved to be costly and time-consuming, if not with disastrous consequences. Several years ago, one of the main drivers for ERP use was Y2K-compliance. Now clients' focus has shifted to achieving apparent business benefits. Many companies have become disillusioned with multiple-year implementation schedules, budget-breaking costs and promised benefits that never do occur.

A consequent shift in the market is the demand for so-called "ERP plus" projects, as companies are now trying to integrate ERP software with other applications that focus on superior internal coordination, with links both up and down the supply chain. An enterprise which has already implemented an ERP system, may now want information transparency for everybody - its suppliers and/or customers, in sales and/or production planning, product lifecycle management or shared design and research and development departments.

Companies are hoping to resurrect that missing return on investment (ROI) through integrating existing ERP software with other business applications. Finally, a number of companies that grow by acquisitions will have to install ERP systems in newly acquired businesses. ERP systems are being extended to a variety of areas: facilitating supply chain wide employee and business partners self-service, clarifying the details of business changes like mergers and moving beyond corporate headquarters to other business units.

Therefore, while there is still a wealth of opportunities in the ERP space, they require much more comprehensive individual skill sets rather than being an "expert" in a particular application or a narrow field. Those who will succeed will know how to interface/integrate ERP with supply-chain, CRM and e-commerce components - or even how to integrate different ERP modules - both on a program level and at the business process architecture level. Hence, jobs in ERP consulting are increasingly demanding more experience and business sophistication than ever, as the market matures and morphs. Consultants who have particular functional expertise in areas like warehouse management, quality management and procurement, will still fare well. Such knowledge is critical because much of an ERP implementation involves aligning business processes with the software's capabilities.

Consulting and recruiting firms will see a mature but ongoing market for experienced ERP professionals who can work in Web-based environments. Business experience in specific industries and business areas such as finance and human resources (HR) should vouch for even more opportunities. Knowing the fine points of accounting and inventory control or the particular needs of for example, banking or automotive industries, contributes to a well-rounded skill set for IT recruiters in ERP positions as applications developers, software architects, project managers, engineers and marketing specialists. ERP specialists, who possess a variety of strengths, including strong communications and interpersonal skills, will continue to be valuable to their organizations. Given all the above-mentioned profile requirements, it doesn't take a genius to figure out the reasons for existing ERP skills shortage.

User Recommendations

ERP seems to be getting back in shape. This does not however imply that applications vendors, their affiliate system integrators and consultants will not have to seriously put their current business models and practices under a magnifying glass. ERP has long moved from the realm of IT to business. The 'gravy train' days of multi-year implementations, with over $2000 per day charges for (inexperienced) consultants, without producing any obvious results are past. Jobs in ERP are indisputably demanding more experience and business sophistication than before.

Users have, for some time, been in the driver's seat and have increasingly been aware of the fact that they need a reliable back-office system in place in order to conduct their e-business or client relationship management. Therefore, we encourage them to aggressively inform themselves about vendors' latest product offerings and vigorously negotiate contract terms. Pay close attention to vendors' extended ERP applications and discern hype from reality. The 64,000-dollar question is how functionality rich those new components are, and how seamlessly they have been integrated with the back-office. Alternatively, how feasible would the integration with third-party products be? Put vendors' software through its paces during "scripted scenario" demonstrations (detailed sequences of near real-life business processes), in order to further distinguish between the vendors who made the short list.

A piece of advice to consultants: be agile and alert! Make every effort to maintain your skills according to market demands. A magic formula lies in the balance of both business skills and basic technical understanding of what happens "underneath the hood". Knowledge of, for example, XML, Java, C++, and/or Visual Basic can never hurt. Inform yourselves about the company you wish to join. Do they really treat their staff as an asset, which they probably claim during their recruiting effort? Are they a 'hire-and-fire' place or a company who continuously invests in its people's skill sets and attempts to cross-train them before laying them off in droves? Are they making any efforts to provide "virtual consulting' model that requires only a reasonable amount of traveling? Needless to say, informal networking skills are needed to find the answer to these questions.