Wait for the Next Gen? Yes!

March 26, 2010

Is it time to wait? If it isn’t now, then when?

Wait, that is, for the next gen of applications–Workday HR and Financials, SAP Business by Design, or Oracle Fusion Application Suite–rather than go with what’s out there now: PeopleSoft 9, Oracle EBS 11, or SAP Business Suite–all quite good products, but limited in many ways.

My gut says, “Wait.”

Of course, unless you happen to be my gastroenterologist, you shouldn’t care much about what my gut says. So here’s the reasoning behind it, which I think you can adapt to your own purposes.

PeopleSoft, EBS, and BS were all designed in the early ’90s and are now mature. (There will be no fundamental improvements made to any of them.) So they’re roughly 20 years old. Let’s assume that this takes them halfway through their useful life.

Now let’s do some algebra. Assume that the new products have a similar useful life and offer a 30% improvement in overall effectiveness.
Say the net benefit of buying a this-gen system is 1. In that case, the net benefit of a system that’s 30% better and lasts twice as long is 2.6. Now assume that the net cost of not replacing your old system -.1/yr, which makes it very, very expensive to keep your old system. Even if you have to wait four years for the next-gen system, you’re twice as well off (2.2 vs. 1) waiting. Even if the next-gen system costs significantly more than the old one (fairly likely, depending on the vendor), it’s still a big win.

If you e-mail me, I can give you a spreadsheet, and you can run the numbers yourself.

You don’t need the spreadsheet, though, to see that the argument is a function of four factors: the relative benefit of adopting next-gen apps (over the life of both apps), the cost of implementing them, the risk of implementing them, and the cost of waiting.

A friend who reviewing this argument offered the following analogy. Let’s say you live in an older house whose roof is leaking, pipes are rusty, electrical way out of date. Sure, it’s time to move. But what if there were a big tax break coming fairly soon which would allow you to buy a much better house. As long as the break was big enough, my friend says, the best bet for most people is to wait, because it’s a house, houses last a long time, and being in the better house makes a big difference for a long time.

Even if things are pretty bad in the old house, he goes on to say, your best bet is just to fix the immediate problems: repair the roof, add some new wiring, etc.

Clearly, the biggest and most important factor is how much better that house will be. For a conservative company, this may seem to be a big unknown. But really, it’s not. If you look at any of the new-gen apps, the improvements they’re offering are fairly clear. None of them are killer or transformational; they won’t let you fly when you had been walking. They’re just the sort of things that anybody would add now that they have 20 years of perspective on the old designs.

What are those things? Well, better and faster access to data, what the other pundits call “embedded analytics.” The ability to do some level of search, without having to print out reports and trek down hierarchical menus to get to a record. The ability to bring other people into a discussion of a record, by e-mailing it or asking them to approve it or whatever. All of these things can be done in the old system. But it takes longer, is often a pain in the you-know, and is often not done. Systems that will have all these things built in will be systems where each of your employees wastes somewhat less time each day wrestling with a system that was never designed to have the flexibility and accessibility that the web era has taught us to expect from any application we deal with.

None of these is earth-shattering; indeed, I usually call the next-gen apps Version 1.3 because they’re really not that big an advance over the 20-year-old ERP applications that are Version 1.0. (Is a 2.0 coming? I think so.)

But taken in aggregate, I think they’ll make a material difference in your operational efficiency. Enough of a difference to be worth waiting for.

Does this really apply to your situation? What about that risk? What are the chances that you will get the gains that would justify waiting? What about the fact that your company is ready to move now and for you, such a move comes at the right time in your career? All good questions. And in some cases, it may be right to jump. But for most people, the best thing to do is to take steps to reduce the risk and time to benefit.


3 Responses to “Wait for the Next Gen? Yes!”

  1. Naomi Bloom Says:

    Frankly, unless your current software is croaking absolutely, e.g. it’s unsupported in highly regulated areas or totally unable to deliver essential self service etc., no one in their right mind would want to be the last implementor of the last generation of any of these products. I might add that the core designs of several of the mentioned products, in terms of their object (really data) models and process concepts, date not from the early 90’s but from their mainframe precursors (e.g. Integral for PeopleSoft, R/2 for R/3 etc.). And we could add several other aging brands to that list. Perfectly usable by those who have already sunk a ton of money into them, but perhaps not the right foundation for a major, multi-year roll-out commencing in 2010.

  2. Tom Wailgum Says:

    Unless the “house” is almost ready to fall down, David, I think that for most companies it will be a much better and more valuable proposition to wait and see. We know, of course, that companies have poured so much money in building their software foundations already. Given the state of the economy and tight technology budgets, I think it would be a hard sell for any CIO or line-of-business exec to invest even more money in the enterprise software systems they already have. What’s interesting, however, is to acknowledge that the big vendors, who have been talking up their next-gen software packages, have been, over the years, less than crystal clear on delivery dates, what the software will look like and how it will play with other software. Oracle Fusion Apps, and its six-plus years of hype and delay, springs to mind. In not providing a clear roadmap and mysterious delivery dates, those vendors haven’t made it any easier on their customers. In this instance, CIOs and other business decision-makers sharing governance over IT purchases won’t get fired for waiting. But they could get fired if they make a rash decision on further investment on an application (or application set) that is heading toward the sunset.

  3. Gavin Says:

    I agree with your assesment of waiting however if you are currently using Oracle solutions there is a lot to be gained by upgrading to the latest release.

    Some of the concepts used in Fusion Apps such as embedded analytics are slowly being added to the latest releases, although not with a complete architectural change as Fusion will bring. The latest Oracle eBusiness Suite release is R12.1 with a R12.2 coming fairly soon. This move will also assist greatly with the migration to Fusion Apps by adopting existing functionality in the place of custom enhancements. The underlying infrastructure for Fusion Apps is Fusion Middleware. There is also a lot that can be leveraged from implementing these solutions such as the SOA suite, identity management etc and the bonus is that you dont need to be running Oracle apps to use most of these.

    I expect the first iteration of Fusion Apps to be relatively light in certain areas and missing certain modules (e.g. Manufacturing) and for this reason Oracle are restriciting the first customers very carefully to ensure a succesful launch.

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