Noted technology author and lecturer, Geoffrey Moore recently delivered a presentation entitled “The Future of Enterprise IT 2010 – 2020: From Systems of Record to Systems of Engagement” at Emptoris’ User Conference which we discussed here and here. Moore is best known as the author of “Crossing the Chasm,” which looks at how new disruptive technologies are adopted in the market.

As you may recall, Moore believes that that enterprise IT needs will soon shift to “Systems of Engagement” and away from the “Systems of Record” which have driven IT investment for the past 30 years. As you’d expect from any noted author on the national speaker circuit Moore’s presentation was very well-delivered and presented a very interesting and entertaining story (primary goals of any keynote) and it certainly got us thinking; so much so, that we’ll spend this week looking at the practical application of his ideas in the realm of supply management.

First, let’s look again at Moore’s basic argument which can be restated as – in the decade ahead, transactional systems will be surpassed by collaborative systems as the primary driver of enterprise IT investment. Moore’s corollary to this idea is that as part of this new technology adoption cycle, consumer technology capabilities and functionality will become core to enterprise IT.

In our view, the applicability of Moore’s vision to the supply management marketplace depends on what is included in his definition of “Systems of Record.” In broader enterprise IT terms, “Systems of Record” would  typically mean “back-end” systems like ERP, Financials, and HR. While it is possible that Moore was also referring to eProcurement and ePayables as Systems of Record (technically they are), we think that is unlikely given (1) the timeframe of his analysis (the last thirty years) (2) the fact that the market has not “gotten its fill” of P2P and (3) his market position as more of a generalist. Since eProcurement and ePayables are also communication systems for external partners, we consider them to be “Systems of Engagement” by Moore’s definition. In any case, as we think about it, this assumption is not so important because while we agree with Moore – functionality that improves collaboration and communication will drive the market, we don’t think that the market really cares where (as in what system) the functionality will be developed.

So, while we believe that systems of record will take (have taken?) a back seat to other technology areas, we’re not suggesting that ERP is dead; no, don’t sell all of your SAP, Oracle, Microsoft, Epicor, and Infor stock just yet. Enterprises large and small must have a system of record. Improvements in these systems and a host of external factors (regulatory environments, M&A, etc.) will continue to drive demand. But, where the market will be more active and has been more active will be in the business process areas like CRM, PLM, and Supply Management (or SRM).

When you stop and consider it, the reason why the supply management marketplace and other markets (aka the “Systems of Engagement”) were able to develop in the first place is that while ERPs do some things well; managing supply management (or CRM or PLM) transactions and records for use by functional and business departments is not one of them.

Some companies saw this opportunity earlier than others and hold an advantage today because of it; of course, newer upstarts are regularly appearing in the market and making an impact. All told more than 350 companies compete, at some level, in the supply management marketplace. The ERP companies understand the gaps in their Systems of Record; it is why they have invested so heavily in complementary “Systems of Engagement”-  it is why, for example, SAP invested $500 million in Commerce One and acquired both Frictionless Commerce and Analytics Inc. and why Oracle has continued to invest in the development of its Procurement suite.

The supply management market in our view is an exciting one, and yet, still in its nascent stages. As such, we think a deeper look at the implications of Moore’s thesis in this world and what the future of supply management IT holds is warranted. We’ll also look at both the potential drivers of growth in the P2P and Strategic Sourcing markets and how we think consumer IT functionality could manifest itself in these solution areas.

Tagged in: Innovation, Predictions, Solution Providers, Source-to-Settle, Technology