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Best of Breed is Coming Back to Retail, but....

Is craving for best of breed applications coming back? It appears so, at least increasingly more, in the retail industry that I am part of for the last 15 years. Users and increasingly IT managers have started to ask for BoB applications replacing either their legacy ERPs or so called State of the Art ERPs. As a context, there was a time, may be 15 - 20 years back, when the IT landscape in a retail company used to consist of predominantly heterogeneous group of homegrown or purchased applications that met or exceeded retailers needs and were cobbled together with manual or point-to-point interfaces that worked in fits and starts but users and SMEs clung to such system because it appeared to have tailor made for their requirements - a so called best of breed application for them. Retailers maintained them at great cost with huge manpower locked in IT that was not their core competency. Then came the wave to enterprise ERP vendors like Retek (now Oracle Retail) and SAP, who started to sell their wares to retailers and pretty soon retailers - at least the top ones who could afford such costly systems - started to jump on the bandwagon to reduce their IT manpower. Pretty soon, such enterprise ERP were the norm, at least among the top retailers.

Well the wheel seems to have turned a full circle, and retailers have started to clamor for best of breed applications again, but for entirely different reasons.

There are many reason why retailers moved to ERP in the first place earlier. Some of the key reasons are:

  1. ERP allowed retailers to focus more on their core competency of selling the product and customer service instead of having the headache of developing and maintaining enterprise applications. With rapid change in technology of software development and newer languages and paradigm it was increasing becoming difficult for retailers to retain top software talent in a market which was dominated by huge software companies. In addition to resource retention, maintaining the skills for software development was again a huge ongoing headache that was better done by software companies.
  2. ERP allowed them to reduce total cost of ownership, whereby you pay cost upfront to license the product, and thereafter maintenance fee to stay on an upgrade path provided by the vendor
  3. ERP provide them 80-90% of the features they needed, sometimes even less, with workaround or customization to take care of the rest. This was not the ideal whereby every whims and fancies of the user group will be satisfied but was a good workable solution. Well, in some cases retailers also got features that they didn't need, but that's was ok as they were getting more than what they bargained for!
  4. ERP brought in, or at least the perception created by the vendors was that they brought in best practices of the industry and therefore retailer could stay on the "bleeding edge" by leveraging experiences of other retailers built into the ERP system by the vendor on an ongoing basis.
  5. ERP allowed them the convenience of well integrated suite of applications that was the bane of the earlier era having point to point interface paradigm.
  6. ERP also allowed retailers to scale as the backend servers and middleware constantly being developed by the vendors allowed them to ride the wave of growth without having to worry about technology innovation.

However the retail industry, and more importantly customers have changed quite a lot almost leapfrogging to an era of mobile commerce in less than a decade. However, as anachronistic as it might seem, even today many brick and mortar retailers don't have a robust web commerce presence let alone mobile commerce. While web commerce is just about 15 years old, mobile commerce is already upon us for over 3 years. This is forcing not only a change in retailer's business processes, but also waking them up to the fact that they need to equip themselves to be extremely nimble footed and agile to be able to effectively serve the customers of future. This is forcing increasing clamor for best of breed again as currently available ERP solutions seem to have missed the bus. Here are the reasons:

  1. Though ERP works at the enterprise level, it was and still is architected primarily for the brick and mortar era and is increasingly not able to change fast enough to provide functionality that the retail industry needs for web and mobile commerce. 
  2. ERP suite applications talk to each other well but don't provide hooks for applications from other vendors to talk to them. This was a boon in ERP but is increasingly becoming bane. Now an ERP not only requires to speak to one another of its own kind but also to another kind from another vendor that provides the functionality that the industry needs. That means building additional interfaces that the earlier era did not need. However, newer middleware technologies such as SOAP and web services are increasingly making it possible to build generic interfaces that only need to talk the language of the function and not the language of the application. For example, a Product Information Management (PIM) application could talk to a merchandising application exchanging product information with the SOA based connector sitting in the middle and translating the PIM speak to Merchandising System speak and vice versa. PIM could now also talk to other downstream systems such as Store POS or Warehouse Management system directly facilitated by this SOA layer.
  3. Now retailer could go and buy a best of breed solutions and interface it to its ERP if the latter doesn't provide the functionality it needs with the middleware taking care of the translation thereby enabling business processes and protecting investment.In the long run, they might not even want or need an ERP and let multiple BoB applications talk to each other facilitated by the middleware layer.

That said, ERPs are still in place and probably will continue to be in place to tie everything together at the enterprise level until either retailers or BoB application vendors could think enterprise and put in standardized retail processes and technology in place to integrate various applications seamlessly including with the financial accounting system.

ERP vendors need to heed that fact that best of breed applications are nibbling away from them individual functionality that the ERPs earlier provided. Unless they shun the rigidity and become more agile - in time to market with new releases and functionality that the retailers need - more best of breeds applications will be brought in lessening the need for ERPs completely. Coming out with one major release in 3 years is a call for the death knell in long run.

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