History of Manufacturing Software

by

ERP Analyst, Software Advice

1960′s: Accounting & Inventory Management on the Mainframe

In the 1960′s companies were aggressively adopting mainframe computers such as IBM’s 360 series (pictured at left). Manufacturers were finally able to move their financial accounting and inventory management functions off of paper and onto computers. However, limitations in processing power prevented production planning based on integrated accounting, inventory, and procurement information.

 

1970′s: Materials Requirements Planning Emerges

The advent of more powerful mainframes and minicomputers would enable Materials Requirements Planning (MRP). These manufacturing software systems integrated bill of material data, inventory data, and the master production schedule to calculate accurate materials requirements. While a giant step forward in planning effectiveness, these processes largely ran in isolation, without considering capacity constraints.

 

1970′s: Future ERP Leaders Are Founded

Four German engineers leave IBM in 1972 to found Systemanalyse und Programmentwicklung (“Systems Analysis and Program Development”), which would become today’s largest enterprise software vendor. Later in the decade, the 1970′s would see the founding of Lawson Software in 1975, Bann (now Infor) in 1978, Oracle Corporation in 1977 and JD Edwards (now Oracle) in 1977.

 

1980: Manufacturing Resource Planning Emerges

While MRP proved valuable, manufacturers found that frequent changes in sales forecasts were skewing their ability to plan efficiently. Production often failed to align with demand. A new class of software, Manufacturing Resource Planning (MRP II) emerged to incorporate capacity constraints by consolidating materials planning with capacity information related to finance, plant, and people.

 

1984: Concern About the Y2K Bug Begins

While MRP proved valuable, manufacturers found that frequent changes in sales forecasts were skewing their ability to plan efficiently. Production often failed to align with demand. A new class of software, Manufacturing Resource Planning (MRP II) emerged to incorporate capacity constraints by consolidating materials planning with capacity information related to finance, plant, and people.

 

Late 1980′s: Client / Server Computing Changes the Game

With broad adoption of personal computers (PCs), client/server computing emerges. By providing each employee with a PC and centralizing data storage on the server, applications could now extend far more computing power to end users. This dramatic advance in technology would lead to the creation of thousands of new software companies, including PeopleSoft in 1987. Meanwhile, mainframe growth would stall and eliminate many of the early vendors.

 

1990: Gartner Coins “Enterprise Resource Planning”

Research firm Gartner coins the term Enterprise Resource Planning (ERP), which envelops MRP and MRP II, as well as a range of other applications, including: product lifecycle management, supply chain management, logistics, customer management, order processing, financials, and human resources. Today, the ERP remains the broadest descriptor of enterprise software applications in manufacturing and beyond.

 

1992: SAP Introduces Client/Server Architecture (R/3)

In a sign that client/server computing had clearly taken hold, SAP releases R/3 – a radically re-written client/server version of its ERP suite. Legacy mainframe systems remain active in many companies today, but the market for new manufacutring software systems would become a primarily client/server opportunity. Of course, the advent of Web architectures was just around the corner…

 

1994: Advanced Planing & Scheduling Emerges

Research firm Gartner coins the term Enterprise Resource Planning (ERP), which envelops MRP and MRP II, as well as a range of other applications, including: product lifecycle management, supply chain management, logistics, customer management, order processing, financials, and human resources. Today, the ERP remains the broadest descriptor of enterprise software applications in manufacturing and beyond.

 

 

 

 

1999: Y2K Replacement Wave Ebbs

As the year 2000 drew closer, many businesses completed their Y2K-related implementations. Other firms “battened down the hatches” with regard to IT spending in anticipation of potential Y2K issues that would soon demand attention. At the same time, large enterprises began diverting IT budgets to invest feverishly in “dot com” era technologies like nascent e-commerce functionality. The result is a major reduction in spending that signals the end of ERP’s glory days.

 

2000: Microsoft Enters the ERP Market

Industry watchers had long wondered when Microsoft would move beyond desktop applications into more sophisticated applications. In a move that upset Microsoft’s ERP partnerships, Microsoft acquired accounting systems vendor Great Plains Software in December 2000. While Great Plains was targeted at small and medium size companies, Microsoft would soon move up market by acquiring another vendor, Navision. Today, Microsoft is a major player in manufacturing through its rebranded Dynamics product line.

 

2000: Web Architectures Emerge and the Game Changes, Again

The introduction of the web browser and the dramatic growth of the Internet led to “Web-Based Computing.” In this model, both the data and the software code are hosted in a data center, while end users access applications through their web browsers. The dramatic improvement in accessibility, cost of ownership, and ease-of-use forced software companies to rethink, and often redevelop, their products, much like they had to when client/server replaced mainframes as the computing model of choice.

 

2000: Front-Office Applications Take Priority

The introduction of the web browser and the dramatic growth of the Internet led to “Web-Based Computing.” In this model, both the data and the software code are hosted in a data center, while end users access applications through their web browsers. The dramatic improvement in accessibility, cost of ownership, and ease-of-use forced software companies to rethink, and often redevelop, their products, much like they had to when client/server replaced mainframes as the computing model of choice.

 

 

 

 

2004: Merger Mania Arrives in the ERP Market

In a clear sign of market maturity, industry consolidation accelerated between 2003 and 2007. The first major deal was PeopleSoft’s friendly acquisition of JD Edwards in 2003. Shortly thereafter, Oracle made a hostile bid to acquire PeopleSoft (and JD Edwards). The deal closed in 2005 and Oracle has since acquired roughly 30 other companies. Private equity firms also entered the market, “rolling up” scores of vendors – Infor emerging as the dominant example of this strategy. Sage Software also acquired roughly 40 products and companies.

 

2005: Vendors Begin Massive Integration Projects

The frenetic pace of expansion – new applications, new architectures, mergers – left most manufacturing software vendors with a case of indigestion. Most vendors now own numerous application “code bases” – different programming languages, data models, and user interfaces. Most of the major vendors are now engaged in multi-year engineering efforts to merge their acquired products into seamless, manageable code bases. Microsoft has Project Green. Oracle has Fusion. Even relatively inacquisitive SAP is evolving its own “service-oriented architecture.”

 

2007: SAP Acquires Business Objects

In a departure from its traditional aversion to large acquisitions, SAP acquired Business Objects, the market leader in Business Intelligence (BI) software, for $6.8 billion. Business Objects’ reporting and analysis tools allow companies to analyze the data they collect and manage in their transactional enterprise systems. Substantially all manufacturing software companies now offer some form of BI. Some are combining BI with operational strategic planning functionality to create a new category of application referred to as Enterprise Performance Management (EPM).

 

2009: Cloud Computing Threatens to Storm ERP

“Cloud Computing” has emerged as the next architectural shift in the manufacturing software market. Building on the tenets of a web-based architecture, cloud computing refers to the increasingly straightforward means of integrating and managing software across powerful data centers. The resulting integration and cost of ownership advantages are forcing vendors to rethink their deployment models. In a sign of cloud computing’s potential, web-based CRM vendor Salesforce.com crossed the >$1 billion revenue mark in 2009.

 

Future: Trends to Watch in ERP

Where will the market head next? The good news for customers is that the frenetic growth has subsided and most vendors are now laser focused on satisfying their existing customers. Toward that end, we see companies focused on making their systems easier to use and less expensive to implement and maintain. As for new growth opportunities, vendors will continue to push downmarket to serve small and medium enterprises. Finally, environmental imperatives will create a new category of application to monitor and mitigate businesses’ carbon footprint.

Image for IBM 360 was created by Marcin Wichary.

 
  • Blogs by Market:
  • Subscribe to the Software Advice Manufacturing Blog

Popular Blog Posts