Market Perspectives

ISG Research is happy to share insights gleaned from our latest Buyers Guide, an assessment of how well software providers’ offerings meet buyers’ requirements. The ERP Manufacturing: ISG Research Buyers Guide is the distillation of a year of market and product research by ISG Research. Enterprise Resource Planning (ERP) systems are comprehensive software platforms designed to integrate and manage all the core processes of an enterprise while recording transactions and their financial consequences to support the accounting and finance functions. These systems streamline cross-functional operations using workflows and consolidate data created by various departments such as finance, human resources, supply chain and customer relationship management into a unified database. This integration facilitates the accessibility of real-time data, enhancing situational awareness for executives and managers while boosting overall efficiency and productivity. The market for ERP systems can be segmented by the nature of the business and the size of the enterprise. At a general level, ERP systems serve the needs of companies that deal in physical products such as manufacturing or goods distribution, and those that are services oriented, such as financial services, entertainment and intellectual property. However, software providers may also tailor their systems to serve the specific needs of an industry such as healthcare or even a specific niche subvertical in that industry such as hospitals or pharmaceuticals. Industry specialization can make ERP software more attractive to relevant buyers because of the deeper built-in functionality suited to their requirements with a potentially lower total cost of ownership while enhancing productivity. ISG Software Research defines large enterprises as those with 1,000 or more employees. Systems for these enterprises, often referred to as Tier I, are complex with deep functionality and are highly configurable to support even specialized and intricate business processes. They are designed to scale to support thousands of users at multiple global locations while managing large volumes of transactions and data. This flexibility and scalability can come at a cost because of the time and effort required to implement and maintain the system. We define “midsize” as enterprises with between 100 and 999 employees. Midsize ERP systems (Tier II) offer robust functionality but with less complexity, providing a practical balance of features and ease of use, often with industry-specific capabilities. While scalable, ERP systems for midsize companies are generally tailored to support fewer users and locations. They are suitable for growing businesses but may require upgrades as the company expands. They are typically faster to implement and can be more cost-effective. They often offer pre-configured solutions that reduce the need for extensive customization. Large enterprises may also use one or more Tier II applications in specific divisions or business units. ERP systems have served as the central nervous system of enterprises for over thirty years, managing essential business processes and recordkeeping. The software traces its origins to Material Requirements Planning (MRP) developed in the 1960s to help manufacturers manage inventories and production schedules. Manufacturing Resource Planning (MRP II) added related functions such as quality assurance and equipment maintenance. Meanwhile, accounting systems were evolving in the scope of their functionality while using technology to make such systems increasingly affordable to smaller enterprises. By the 1990s, the development of relational databases, the graphical user interface (GUI), more sophisticated event-driven programming languages and widespread adoption of personal computers brought about ERP systems that could bring together a wider set of functions and business processes while offering greater flexibility in how individual enterprises could design and manage their operations. The arrival of ERP systems coincided with management consultants’ focus on “business process reengineering,” which could be assisted with implementing an ERP system. The widespread adoption of ERP resulted in a general flattening of organizational structures as fewer middle managers were required to operate effectively. Cloud-based ERP systems began to emerge in the 2000s with the near-total adoption of the internet in most developed countries. Adoption of these systems was initially slow, partly because the cost, operational complexity and risks of changing ERP software means that enterprises replace them only when absolutely necessary. Our research has found that the average age of a system is seven years, suggesting a replacement cycle well over a decade. Services businesses have been faster to move their ERP system to the cloud because product-based companies typically need to more heavily customize their software to support their operations. However, the tide has turned as most companies look to replace their on-premises software. We assert that by 2027, over 80% of ERP systems purchased by non-product companies will be deployed in the cloud to promote continuity, improve performance and lower costs. While their fundamental organization remains largely unchanged, modern ERP systems now boast enhanced functional depth, usability, adaptability and manageability, particularly in cloud-based environments that are easier to maintain. Over the past two decades, continuous refinement and development tailored to specific industries have increased their utility and decreased overall ownership costs, particularly in implementation and maintenance. Foundational technologies and architecture have also evolved, allowing greater customization capabilities in shared (multi-tenant) computing environments while allowing ongoing development of the core software. Providers offer software development kits (SDKs) to allow third parties to apply their subject matter expertise to extend the capabilities of their system. Application programming interfaces (APIs) allow for easier and reliable integration of different software categories. Current technology trends will revolutionize ERP systems. Innovations such as artificial intelligence (AI), generative AI (GenAI), natural language processing (NLP), agents and agentic devices promise to transform how individuals and enterprises work with the software. Change is already underway. Some straightforward, low risk features such as anomaly detection to flag potential errors are already in place. Technology will make even complex processes faster and easier to execute, and some tasks will be largely or completely automated by agents. AI will condense highly repetitive accounting and other tasks through automation to address the need for greater administrative staff productivity and enable enterprises to attract and retain the best talent. We assert that by 2027, almost all providers of ERP software will have incorporated AI to reduce workloads, speed processes and reduce errors. When considering modernization or replacement of existing ERP software, it is crucial to understand how a new system can complement current capabilities and how to effectively manage the resulting organizational changes. The decision to replace a core ERP system is challenging due to associated costs and potential disruptions. Yet, executives—especially the CFO—must also recognize how outdated systems pose risks to the continued smooth operation of the enterprise. It is also essential to recognize that the capabilities and supporting technology of these systems have evolved slowly but significantly over time. The shift from on-premises to cloud-based ERP continues to accelerate, driven by improved configurability and customization options for specific industries. Terms like “configuration” and “customization” define how systems can adapt to user needs without altering the core code. Moreover, executives must recognize the need for a strategic approach to assessing the software rather than a simple like-for-like replacement. This is especially true in assessing the AI direction of providers. The ISG Buyers Guide™ for ERP Manufacturing assesses offerings from providers that meet our inclusion criteria and focuses on how these applications address the needs of product-centric and manufacturing operations of these enterprises. The guide assesses the software’s ability to support manufacturing operations, advanced planning and scheduling, demand planning, manufacturing execution, shop floor management, material flow optimization, multi-site operations, quality management, facilities and equipment maintenance, warranty management, environmental, smart manufacturing and distribution. AI-enabled features and functions are also part of the evaluation. This research evaluates the following software providers that offer products that address key elements of manufacturing ERP as we define it: Abas, Acumatica, Aptean, Epicor, Exact, IFS, Infor, Microsoft, Oracle, Oracle NetSuite, QAD, Ramco, Rockwell Automation, Sage X3, SAP S/4HANA and SAP Business One. This research-based index evaluates the full business and information technology value of ERP manufacturing software offerings. We encourage you to learn more about our Buyers Guide and its effectiveness as a provider selection and RFI/RFP tool. We urge organizations to do a thorough job of evaluating ERP manufacturing offerings in this Buyers Guide as both the results of our in-depth analysis of these software providers and as an evaluation methodology. The Buyers Guide can be used to evaluate existing suppliers, plus provides evaluation criteria for new projects. Using it can shorten the cycle time for an RFP and the definition of an RFI. The Buyers Guide for ERP Manufacturing in 2024 finds SAP S/4HANA first on the list, followed by Oracle and Infor. Software providers that rated in the top three of any category ﹘ including the product and customer experience dimensions ﹘ earn the designation of Leader. The Leaders in Product Experience are: SAP S/4 HANA. Oracle. Infor. The Leaders in Customer Experience are: Oracle. SAP S/4 HANA. Oracle NetSuite. The Leaders across any of the seven categories are: Oracle and SAP S/4HANA, which has achieved this rating in seven of the seven categories. Infor in three categories. IFS in two categories. Oracle Netsuite and SAP Business One in one category. The overall performance chart provides a visual representation of how providers rate across product and customer experience. Software providers with products scoring higher in a weighted rating of the five product experience categories place farther to the right. The combination of ratings for the two customer experience categories determines their placement on the vertical axis. As a result, providers that place closer to the upper-right are “exemplary” and rated higher than those closer to the lower-left and identified as providers of “merit.” Software providers that excelled at customer experience over product experience have an “assurance” rating, and those excelling instead in product experience have an “innovative” rating. Note that close provider scores should not be taken to imply that the packages evaluated are functionally identical or equally well-suited for use by every enterprise or process. Although there is a high degree of commonality in how organizations handle ERP manufacturing, there are many idiosyncrasies and differences that can make one provider’s offering a better fit than another. ISG Research has made every effort to encompass in this Buyers Guide the overall product and customer experience from our ERP manufacturing blueprint, which we believe reflects what a well-crafted RFP should contain. Even so, there may be additional areas that affect which software provider and products best fit an enterprise’s particular requirements. Therefore, while this research is complete as it stands, utilizing it in your own organizational context is critical to ensure that products deliver the highest level of support for your projects. You can find more details on our community as well as on our expertise in the research for this Buyers Guide.

Market Perspectives

ISG Buyers Guide for ERP Manufacturing Classifies and Rates Software Providers

ISG Buyers Guide for ERP Financial Management Classifies and Rates Software Providers

ISG Buyers Guide for ERP Classifies and Rates Software Providers

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