Business Central vs Industry-Specific ERP Systems | The end of Single Purpose Vertical ERP?
I was recently speaking to a prospect who was interested in Business Central as an ERP solution for their business but had doubts. They told me they had considered several products for their niche manufacturing sub-vertical (print product manufacturing). I happen to know a bit about print MIS systems (the product category that’s industry specific for their business). Most of the products for that industry are highly tailored to print. I also know an AppSource extension that is a great “Fit” for print.
AppSource is Microsoft’s “app store” for Business Central. I like to describe it as the “Google Play Store” for for Microsoft ERP systems.
As the customer explored Business Central and the AppSource extensions available, they changed their mind about Dynamics 365 Business Central. They stopped looking at the small scale, industry-specific ERP solutions and focused on Business Central.
Could Business Central be the end of vertical ERP systems?
One of the challenges with the custom-built ERP systems (that were very popular in the 1990s and 2000s) is that they suffer from a technology gap. These industry-specific solutions are usually offered by smaller ERP vendors with relatively limited markets. The print manufacturing industry is a good example. The typical small print MIS vendor cannot match the technology investment that a huge company like Microsoft can make. Microsoft needs a partner who understands print to create an addon (for example, PrintVIS as an ERP for printing industry use ) and then the technology gap disappears.
Print manufacturing has traditionally used a set of very specialized ERP systems, often called print MIS systems.
These print MIS systems tend to rely on older technology platforms. Very few of them are cloud-based, most of them were developed in the 1990s, and still use a “client server architecture”. Even if they intend to introduce AI into their solutions, it will require a lot of work for them. They are simply not big enough or have the depth of talent that a tier 1 ERP vendor like Microsoft has.
In these niche vertical manufacturing industries the benefit of the vertical-specific capabilities is huge. Generic ERP systems like older versions of Dynamics lacked the easy-to-deploy vertical industry specifics that were needed to make it feasible. Customers looked at a product like Dynamics NAV for manufacturing in their specific sub-vertical and immediately noticed industry capabilities were missing.
Now, Business Central has a huge advantage against these kinds of industry vertical solutions. Microsoft is maintaining the core technology platform, which means Business Central manufacturing solution for a vertical will add CoPilot, AI, Power BI, Power Apps etc. Microsoft has a modern platform and the resources to invest big time in R&D.
Microsoft partners bring the vertical solution, designed by a someone with a deep expertise in a vertical. Therefore the customer creates the solution that they need as Business Central plus an addon vendor is “closer” to their needs than Microsoft ever could be.
In the past, prospects would just skip the more horizontal “generic manufacturing” ERP and move on. A product like NAV wouldn’t have been seen as a viable option. It lacked those special capabilities that were required and most important, easy to deploy.
When you introduce AppSource to D365 Business Central, the extension capabilities allow the product to quickly and easily work in a niche. In the case of PrintVis, the customer can literally watch someone install the extension in real time and “voila,” they have an industry vertical print ERP solution … you now have a killer app.
This ability to do a trial on your own, along with the reputation of Microsoft and the technology investment they are clearly making creates a sense of trust and interest. This is changing the way businesses buy ERP systems for specialized vertical industries.
In the past it has been very hard for generic ERP systems to penetrate these vertical markets. The ecosystem of vertical specific solutions existed because the generic ERP systems lacked the tools and capabilities to easily adapt. Those verticals represent too small a market for the large ERP vendor to try and build vertical capabilities into their product.
A good example of this would be Epicor. Epicor has great ERP system and they’ve developed a lot of add-on capabilities for it. However, Epicor has a closed architecture. They don’t make it easy for third party companies to create add-ons for the Epicor ERP and certify them.
What this means is Epicor is really good at the areas and industries that Epicor the software vendor has decided to be good at. Companies that buy it for the modern platform need to compromise on having vertical capabilities out of the box. Instead they end up having to customize an ERP system, which creates its own problems.
This wouldn’t be as much of a problem if it wasn’t for the fact that #1 customization is expensive, and # 2 it often makes upgrades hard to do. In the past a company looking at Epicor and making a decision about buying an ERP system faced with a lot of customization would pass on it.
This brings us back to printers MIS systems. They are avoiding customization by purchasing a system that is out of the box ready to go for print manufacturing. But it is behind in technology and capabilities. They have to choose the lesser of two evils.
This decision process for the customer created the market for industry specific ERP systems. The result are a lot of small, industry specific ERP solutions, built on old platforms that haven’t been updated.
Until recently this wasn’t a big problem. Even if you were a big fan of cloud it really didn’t matter that much if your ERP system was somewhat older and ran on a server. You could use Azure cloud infrastructure to run those servers, you could tech technically eliminate the need to have on premise equipment.
However we’re heading into a new Technology Revolution. Cloud was a technology revolution that changed the way we hosted, managed, and worked with our software.
AI is about to change the way we interface with the software. Cloud didn’t change the user interface in any substantial way. We still used a monitor, mouse and a keyboard.
But AI is making all of this change. AI is going to change the way we interact with software and as time goes on it will become a competitive disadvantage for the business running technology that lacks AI.
AI is also very costly to invest in and very difficult to incorporate in older technology platforms.
All of this likely means the end of the vertical specific ERP systems as businesses look for AI technology.
If you find this article interesting and informative, you should read my guide on Dynamics 365 Costs. It will give you a better understanding of the kind of investment you can expect to make in Microsoft Dynamics 365 Business Central.