The Beginning of ERP

ERP began with 5 IBM engineers from Manheim, Germany , working nights and weekends on the next big thing in software: ERP, Enterprise Resource Planning. The year was 1972, and the business software world was a spaghetti of systems, vendors and technologies. Departments could not communicate with each other because their software systems spoke different languages. Babel tower of custom applications. 


SAP was about to change everything.


They called the company Systemanalyse und Programmentwicklung(“System Analysis and Program Development”) and incorporated in April of 1972. They had their first customer that year (probably the shortest sales cycle for SAP ever!!), ICI, which is still an SAP customer, 35 years later.
At that time ,MRP software was becoming widely regarded as a key to success in efficient manufacturing operations. Accounting software was around for more than a decade, dominated by solutions from IBM. Integrating the two was (and still is) a nightmare.


In 1973, SAP was ahead of everyone else in the integrated business applications industry, releasing R/1. In 1979 it will release the R/2 ERP application.


Then Competition...

Meanwhile, across the Atlantic, 3 accounting firm employees – Jack Thompson, Dan Gregory, and Ed McVaney, realizing how appealing a complete business management software would be to their customers, started J.D. Edwards. The year was 1977, five years after SAP released R/1. JD Edwards initially targeted small and medium business, building their solution to run on IBM hardware.

Earlier, in 1975, Laswon software, founded by Richard Lawson, Bill Lawson, and John Cerullo, begins building their own ERP solution. 

Back in 1977, a young charismatic former Ampex employee, who wrote a database application for the CIA, by the name of Larry Ellison, started his own company – Software Development Laboratories (SDL). No-holds-bar Ellison would later change the competitive landscape of the entire ERP industry.
A year later , Jan Baan, a dutch carpenter and business consultant, starts a financial consulting company. One of his early customers pays him with a computer, and Baan starts building custom software for his customers. He would later hire several programmers and develop a comprehensive business application suite, targeted at small and medium businesses.

In 1987, Oracle, formerly SDL, starts building business management applications. Oracle was already selling its database software to a huge customer base, and providing business applications that would utilize its customer base and database technology, made a lot of sense. The exponential growth in demand for database software that can handle ever increasing amounts of data, made Oracle a rich company. A lot of that cash would later be used by Oracle to slowly digesting its competitors. That year, though, it acquired a small company that created project management software. In 1989, it sold its first manufacturing solution.

Another successful ERP vendor to start late, but still gain traction is Peoplesoft, founded in 1987 out of Walnut Creek, California. They initially focused on Hr solutions, gradually becoming a complete ERP solution.

The 80’s and 90’s were booming for ERP solutions. Market size grew  millions of dollars to Billions of dollars annualy . SAP wast best positioned as the clear leader, releasing the most successful ERP solution to date – SAP R3, generating 1.7B DM out of a total revenue of 2.7B DM. J.D. Edwards maintained an annual growth rate of 54% from 1977 to 1994, with revenue of 240M$ that year alone. By 1995,Baan has about 1,800 customers and 1,000 employees. Oracle continued to develop its own ERP solution, Oracle E-business suite, and strong sales of its database software allowed for rapid expansion through small acquisitions.

Challenges

But not everything was perfect for the ERP industry. ERP quickly began to be viewed as an expensive, complicated, requiring too many resources to maintain properly. ERP implementation took longer than expected and project budgets were never met. Many companies started questioning the whole concept of ERP. Several high profile failures made things worse for some of the smaller vendors.

The Consolidation And Transformation Of ERP

Year 2000 signals the beginning of a long consolidation process in the ERP industry. Oracle’s uncontrolled shopping spree (over 50 acquisitions) included its largest competitors (outside of SAP) J.D. Edwards and Peoplesoft. Microsoft entered the arena with equations of smaller ERP vendors Naivioins, Great Plains and others. Infor picks up the remaining of Baan and Mapics.
Later into the decade, two disruptive business and technology models are about to completely transform ERP:open source ERP solutions become an alternative to proprietary ERP, focusing on small medium business, and software as a service, offering complete ERP functionality over the Internet, is considered as the preferred model for business applications for the huge, yet untapped, SME business applications market.