How IBM i Fits Into the Evolving ERP Market
November 30, 2020 Alex Woodie
IBM i remains a solid platform on which to run an ERP system. But with the shift to the cloud, not to mention a surge in homegrown application development on IBM i, the platform’s future for packaged ERP deployments is uncertain.
The IBM midrange platform has a rich history of packaged ERP applications for a range of business types. From discrete manufacturing and trucking to banking and healthcare management, software vendors have targeted the IBM i platform and its predecessors to run integrated ERP systems and other similar types of business applications for over decades.
But the go-go ERP deployments of the 1990s and 2000s are now a distant memory, and the overall market has changed dramatically. While there is still a relatively stable group of vendors supporting the IBM i with general-purpose and industry-specific ERP packages, it has been years since a top-tier ISV has announced new plans to support the IBM i platform with its software. Indeed, the notion of deploying “software” to a “server” is increasingly becoming an anachronism in the cloud-first world.
However, there is good news. In terms of the overall ERP market, it’s still on a growth trajectory. (In other words, nobody has figured out how to replace ERP with AI yet.) According to Gartner, the global ERP market grew 9 percent last year to reach $39 billion. The ERP market is worth $10 billion in North America, but it’s growing the fastest in the Asia Pacific region, with a CAGR of 13.2 percent through 2026, compared to 10.2 percent globally, according to a February report by Allied Market Research.
The IBM i platform’s share of that overall market is anybody’s guess. But in terms of top ERP vendors on IBM i, we see a consistent mix of ERP products from big-name vendors.
IBM i business application market share for 2019 and 2020. (Source: HelpSystems IBM i Marketplace Surveys)
According to HelpSystems’ 2020 IBM i Marketplace Survey, Oracle was the top ERP vendor, as 16 percent of the respondents to its survey said they were running either JD Edwards World or EnterpriseOne packages (or the older OneWorld system) on the platform. That was up from 11 percent in 2019.
In the number two slot with a 14 percent market share was Infor, which has done more to consolidate the ERP market on IBM i than anybody. The company still supports IBM i-centric ERP systems like XA (MAPICS), LX (BPCS), M3 (Movex), Infinium, and System21, not to mention a gaggle of older IBM i-based systems that have not been updated in a while (PRMS, PRISM, KBM, BRAIN). Infor was flat year-to-year according to HelpSystems survey.
Rounding out the top three general-purpose ERP systems on IBM i was SAP, which claims a surprising 9 percent of the IBM i installed base with its Business Suite offering, up from 7 percent in 2019, according to the HelpSystems survey (which isn’t exactly a randomly selected sample but is the best measure we have of the IBM i electorate we have).
Beyond these general-purpose ERP systems, HelpSystems tracked a variety of industry-specific business applications, including the ever-popular warehouse management system from Manhattan Associates; the core banking systems from Fiserv and Jack Henry; the TMW truck dispatching software now owned by Trimble; and healthcare management systems from MEDHOST and McKesson.
These applications may continue to be widely deployed and trusted by the companies that use them, but these are not fast-growing sectors of the software industry. In many cases, you’d be hard-pressed to even know that these business-critical applications are even running on the IBM i platform.
Many of these software vendors would like to move these applications to the cloud and sell access to them via the software as a service (SaaS) method. But by virtue of the fact that these applications run on the IBM i operating system–and not an X86 OS like Linux or Windows–that journey to the cloud is not a straightforward affair. It also provides a barrier for IBM i-based ERP systems to ride the growth in cloud-based ERP services.
Gartner Magic Quadrant for Cloud ERP for Product-Centric Enterprises.
According to Gartner, the future of ERP exists in the cloud. But the pace of migration to the cloud depends on the type of ERP system you’re talking about. For instance, the shift to cloud for “administrative ERP,” by which it means accounting, financials, and HR/HCM functions, is faster than it is for manufacturing-oriented ERP.
“Large and global enterprises are now standardizing supply chain/manufacturing, moving from a hybrid multicloud/on-premises approach to running on a single cloud ERP suite,” the company says in its June 2020 Magic Quadrant for Cloud ERP for Product-Centric Enterprises report.
“This is occurring at a slower rate than the adoption of administrative ERP. We expect the adoption of manufacturing and operations in the cloud to accelerate in the future, but the market is still adolescent for these domains,” it continues.
It shouldn’t come as a surprise that cloud ERP deployments are growing faster than the overall market. In 2018, the “enterprise application growth rate” for ERP systems deployed in the public cloud was 20.7 percent, according to the IDC. Looking forward, ERP systems will support digital transformation initiatives, according to Mickey North Rizza, IDC’s program vice president for enterprise applications and digital commerce.
“Cloud, AI/cognitive, and big data/analytics, has molded many ERP solutions into innovative technology foundations, reshaping the enterprise view, experience, and use of ERP solutions,” Rizza said in 2019.
IBM is doing a lot to push the development of AI and cognitive applications on its Power Systems server, if not IBM i itself. To the extent that companies with established ERP systems on the IBM i platform can figure out how to use AI and big data analytics running on other platforms to fortify and grow their businesses, it could help to cement those core transactional systems on IBM i. After all, we know how risky it can be to move off established transactional systems like IBM i and z/OS.
This brings up another interesting factor in the future of ERP on IBM i: a surge of homegrown development. What is perhaps most interesting from the 2020 Marketplace survey was the rate of in-house development. According to HelpSystems, 73 percent of respondents reported developing in-house systems, a 9 percent increase from the year before.
“Homegrown programs represent many years of diligence in creating and improving the application in order to deliver unique and ongoing value to the organization,” HelpSystems says in its report. “These applications play a huge role in making sure IBM i sticks around in many organizations.”
So while packaged ERP systems on IBM i may not be the growth market it once was, and while IBM i-based SaaS offerings on the public cloud are a non-starter, companies around the midrange are figuring out how to leverage the platform and its many benefits in other ways, which is good news for the health of IBM i.
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