In 1999 at Gartner I wrote a paper titled “ERP’s vertical voyage”. I said then “Non-manufacturing markets will get a lot of attention — and hype — from enterprise resource planning (ERP) vendors during the next few years. However, history shows that robust vertical extensions, like good wine, take years to develop and mature”
In 2002, an insurance executive said a PeopleSoft exec had told him insurance companies would not be seeing claims processing functionality any time soon since they were too “cheap” with IT budgets. Chicken or egg? ERP vendors did not have the functionality, and clients were not about to give up their lifeblood transaction processing engines.
Even though manufacturing and industrial markets make up less than 30% of US and European economy, ERP vendors have continued to primarily focus there (and offer horizontal functionality like accounting, HR etc to the service sector). Retail merchandising, trading systems, mortgage processing, utility billing – even today major ERP vendors do not have robust functionality.
Hence Oracle’s desire not to lose Retek to SAP. And there will be growing interest in players like Cerner (healthcare), pieces of SunGard (financial services – recently taken private) and other vertical specialists.
Which brings me to these questions: Should Oracle have saved $ 10+ billion it spent on PeopleSoft for instead buying non-manufacturing vertical extensions? Does SAP, relatively unencumbered, have a head start in this continuing vertical voyage? Or will insurance companies like the one above and other neglected verticals continue to get offshore vendors to maintain legacy vertical applications? Or will they skip packaged software and go straight to BPO offerings emerging around many vertical niches (see my note on BPO earlier in month)?
What is clear is the major apps vendors missed a significant opportunity in the last few years, and are now having to catch up in a hurry..