By 2021, 70% of all new midmarket cloud ERP application projects for product-centric enterprises will be public cloud implementations. This information from Gartner, while shocking to some, is a long time coming—cloud ERP is the present and future, and based on the long lifecycles of these products represents the ongoing shift from on-premise servers to the cloud. Today, we would like to look at the current state of the market, as discussed in their latest Magic Quadrant: The 2018 Magic Quadrant for Cloud ERP for Product-Centric Midsize Enterprises.
Introducing the Newest Magic Quadrant
Introduced on a new Acumatica Blog, the newest Gartner Magic Quadrant is designed to help companies determine leaders, visionaries, niche players and followers based on “Ability to Execute” and “Completeness of Vision.”
Magic Quadrants are available for a wide range of products and services, and are used to determine the steps that a vendor takes to position themselves for success in the future. These differ from their alternative, Critical Capabilities reports, which look at the delivery of a product in terms of features.
Gartner Definition: ERP for Product-Centric Companies
For companies in manufacturing and distribution, unique needs create a demand for unique solutions, and many have found the cloud to be the ideal delivery method.
Who Constitutes a Product Centric Company?
As its name implies, product centric ERP is designed for product centric companies—companies who participate in the creation or distribution of products for their customers. According to Gartner, this includes the following:
- Manufacturing companies: These focus on developing, manufacturing, assembling and selling products, as well as delivering related services. This activity covers discrete products, ranging from small and simple consumer products to large and complex products (such as airplanes, power plants and major subassemblies, such as jet engines). It also includes products that are generated by process manufacturing, such as most products in the food and beverage, chemical and pharmaceutical industries. Product-centric manufacturing companies are also active in in the utilities, aerospace and defense sectors, among others.
- Distribution companies: These focus on buying, storing, moving, repackaging, selling and delivering products and related services. Depending on the structure of their sales channels and customers, companies in wholesale and distribution, as well as those in retail, fall into this category (unlike professional services companies, for example).
Components of ERP for Product-Centric Companies
As these companies have unique needs, they need specific ERP functionality that can handle such needs. Per Gartner, a leading ERP for product centric companies must be able to provide the following:
- Operational ERP functionality. Supply chain- and manufacturing-related functionality, such as demand management (order management and material requirements planning [MRP]), inventory management, supply chain/direct procurement, manufacturing control capabilities (shop floor), and distribution/logistics.
- Financial management functionality.
- Basic purchasing functionality.
- HCM functionality.
- Specialized industry-specific modules or applications. These include modules such as enterprise asset management (EAM), configure-to-order (CTO), make-to-order (MTO), product life cycle management (PLM) and field service management (FSM).
The Cloud Requirement
Further, based on the current state of the ERP market, the analyst firm only includes cloud companies on their report. “Cloud,” according to Gartner, only incorporates companies that deliver one of the four following architectures:
- “Born in the cloud” solutions. Architected from the outset only as cloud services, these typically have a multitenant application architecture.
- “New-generation” solutions. These are architected for multiple deployment models, typically public cloud, private cloud and on-premises. These solutions often support multitenancy at the database or operating system level, though sometimes not at the application level. They may use virtualization techniques.
- Existing solutions substantially rearchitected as cloud services. These are similar to new-generation solutions in that they also support multiple deployment models (public cloud, private cloud and on-premises). But rather than being built from scratch, their vendors have made substantial changes to the underlying architecture of existing applications to support public cloud deployment.
- Existing solutions delivered as public cloud SaaS. These are existing solutions for which the underlying architecture has not changed significantly, but for which the vendor has developed an infrastructure-provisioning layer in order to deliver them in public clouds. These solutions are also offered in private cloud, hosted or on-premises environments.
How Gartner Ranks Vendors
In comparing companies for each Magic Quadrant Report, Gartner uses the following metrics: Ability to Execute and Completeness of Vision:
Ability to Execute
- Product or Service
- Overall Visibility
- Sales Execution
- Market Responsiveness
- Marketing Execution
- Customer Experience
Completeness of Vision
Eight components go into the completeness of vision judgements.
- Market Understanding
- Marketing Strategy
- Sales Strategy
- Product Strategy
- Business Model
- Vertical/Industry Strategy
- Geographic Strategy
From here, companies are split into four groups, Leader, Challenger, Visionary, and Niche Player:
- Leader: Higher Completeness of Vision, Higher Ability to Execute
- Challenger: Higher Ability to Execute, Lower Completeness of Vision
- Visionary: Higher Completeness of Vision, Lower Ability to Execute
- Niche Player: Lower Ability to Execute, Lower Completeness of Vision
Acumatica Named Niche Player on Gartner Magic Quadrant
The newest report is built to ask the question, “can the vendor deliver?” As the report is new, more organizations fall into the niche player and visionary categories, representative of the current market. In 2018, Acumatica found itself at the top of the Niche Player market, with Gartner complimenting the company’s ability to meet the needs of customers, place a solid focus on midsized organizations, and provide fast, easy to use software.
In their blog, the company noted that this comparison was based on 2018 R1, noting,
“The enhancements to our Manufacturing Edition (which supplies integrated production planning, material purchasing, and shop floor scheduling with customer management, sales, inventory, purchasing, and accounting in real time) and our Distribution Edition (which helps users manage quotes/orders, track inventory, and automate business processes while integrating with CRM, Financials, Manufacturing, and Project Accounting) give us confidence that we’ll keep moving up in future MQs for product-centric midsize enterprise cloud ERPs.”
Ready to learn more? We invite you to download the report here and learn more about our work in provisioning, implementing, and supporting Acumatica Cloud ERP for companies like yours. Contact us for a free consultation.