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October - 2002 - issue > Cover Feature
Enterprise Software What next?
Tuesday, October 1, 2002
ENTERPRISE SOFTWARE. EARS PRICK UP, don’t they? What is enteprise software? Let us accept the simplest of definitions: they are application software products that form the spine on which a company’s businesses can run. The earliest known enterprise software was SAP, founded in Germany in 1972. Since then, there have been many others: Baan from the Netherlands, JD Edwards, PeopleSoft in HR, Ariba in procurement, i2 and Manugistics in supply chain, Oracle that moved from tools systems to financials, Informatica in business analytics. The verticals are many and the players numerous.


In the upheavals of last year, the playing field has changed. We now hear many different experiences, from clients and vendors. On one hand, we see a Nike missing a quarter’s targets. Nike blames i2’s products, which were found to be too complex and difficult to customize, resulting in wrong inventory numbers. On the other hand, we see enterprise applications help a company extend its enterprise boundaries. Cisco has built a virtual enterprise in real-time, with all its suppliers enabling it. So where is this space heading?


Supply chain is only one facet of the enterprise space. If we add up the other types, such as ERP, CRM, MES and so on, the market size spirals out. Yet, companies are putting off investment plans, as the last few years’ investments are yet to bear results. Enterprise software are seen as expensive products, and the cost-to-profit analysis doesn’t make sense. Yet, this is a very dynamic space.


Venture capitalists are watching this space mature. They are aware that this space demands heavy investments, and the returns take a long time to fruition. Recent reports show that U.S. corporations spend an annual $32-odd billion dollars on application customization.


Enterprise software has also managed to bring about changes in business processes. When companies rely on their established business processes to compete with each other, adapting to the software’s process needs levels out the playing field. In fact, some corporates like Wal-Mart and Dell have invested millions in building customized applications that are wrapped around their business processes. That said, what happens when the company invests in application development, and finds at the end of the development, its processes have changed?


Some keen space-watchers, like Vinod Khosla, believe that the future will be in real-time applications. This interest has been around for a while, but has taken centerstage recently. An interesting prediction is made by Navi Radjou of Forrester: enterprise applications will be designed to be leased out as a service product.


siliconindia maps this space in segments: we speak to a buyer—Samir Desai of Motorola, a venure capital team—Ashish Gupta and Tom Shields, an analyst—Navi Radjou of Forrester, and a start-up—Valdero. They bring up some very interesting questions, demands and perspectives. We will continue watching this space, with interest, in the future.

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