4 Ways the Higher Education ERP Industry Must Change

• 04/25/19

Again, there is strength and security in numbers for both customers as well as solution providers. Companies looking to the future must start to think differently about how they approach new and existing customers. Through nonprofit organizations like E&I and the HESS Consortium, colleges and universities have been looking for new ways to come together in the cloud as cooperative groups to lower annual costs, share administrative resources and find new ways of providing technology operations more affordably. To retain existing customers and attract new ones, ERP companies must start looking at ways to offer a range of products and services to cooperative groups of institutions through cooperative contracts.

The approach that we have developed is a concept that I call a "referent network" strategy. By engaging these "cooperative cohort groups," companies can find increased revenues and marketing advantages while the institutions can see increasing savings by encouraging new customers to come on to their chosen software solution. Institutions will also gain the confidence that their ERP investment is one that is trusted by multiple institutions within a product contract cohort, sharing best practices and new product functionality with each other. These product contract cohorts can also help companies continue their direct relationships with institutions, retain their customer base and communicate better with them to make better software.

3) Give Clarity and Direction to "Cloud Convergence"

Even today, several years into the "cloud revolution," many companies still do not make their cloud strategy clear to their customers or their potential customers. The differences between "cloud-enabled" and "cloud-native" ERP systems are often ambiguous and sometimes subverted in the sales process. Of course, implementation of "cloud-enabled" systems is simply moving current software from campus datacenter(s) to a cloud hosting provider (possibly with some new software to make it work better in the cloud). A "cloud-native" ERP environment is software that is developed, most times from the ground up, to run in the cloud in a fully web-based environment — much like YouTube, Facebook or LinkedIn. With this paradigm, cloud-native applications use the same codebase in the cloud but can be implemented as either multi-tenant or multi-instance to use institutional data securely in the cloud. Generally, when upgrades are done, they are done for everyone on the same or similar schedules, so all customers use a single version of the software. You may have heard this described as applications "born in the cloud."

Many higher education ERP solution providers have a cloud strategy to migrate their "legacy" products to cloud-native products over a period of years. Some major companies are still using 20-plus-year-old legacy code in their solutions — and might have to do a full redesign and redevelopment of their software, which is resource intensive for their developers and internal support structures, not to mention their bottom line financials.

Make no mistake, "cloud-native" software is defined by nearly every industry leader today as a "born in the cloud" codebase that was developed from the ground up to operate in the cloud via a native and secure browser-based interface. While some will say there are deviations to this rule, know that a SaaS model can be either a cloud-native or a cloud-enabled solution — do not be confused by the syntax of the discussion. Cloud-native solutions are clearly different than cloud-enabled, but either can be good SaaS solutions depending on the long-term operational strategy of the institution. Also, do not forget, long-term cost is also a very important factor between those two development paths for customers.

Some companies that have multiple ERP product lines (mostly through acquisitions and mergers) are now planning to converge them into a new, single software offering, newly developed and designed as "cloud-native." While I do believe this is the most successful path for these companies, the question is, will they be able to sustain their customer base long enough to introduce a new product into the market, especially now that other affordable and fully cloud-native products are available? The bigger and more ominous question is, where will these companies get the additional capital to bankroll a completely new cloud-native product line? Will it be from their investors or on the backs of their existing customers?

4) Find Sustainability Amidst Disruption

Our operating environment in higher education is changing … quickly. With the national volatility of college-age student demographics, the national decline in family income and the ever-increasing cost of doing business, higher education is in a new era of cost cutting. The days of 5 to 7-plus percent annual increases for support and maintenance renewal costs have become unsustainable for most institutions. In colleges and universities where funding models and revenues are flat or declining, ERP providers must take a long look at their business models and decide how to make them more consistent, equitable and sustainable.

With cloud-native solution providers like Oracle, Workday and UNIT4 (formerly Agresso) as well as new competitors like Infor entering the U.S. higher education ERP market, I expect the coming years will be even more complex. Increased competition is a good thing for higher education, but it will definitely bring more disruption in the ERP industry. The coming 10 years will show that the most efficient and best software developers will survive in the race to create the latest next-gen cloud-native ERP systems. The companies that will be the most successful are the ones that can roll out a cloud-native solution with services and support in a way that is scalable as well as financially attainable and sustainable for higher education institutions of all sizes.

It's a tall order with some risk involved, but the ERP market is ready for a new vision and a new business model. I have a passion to see this happen and I fully believe that if an ERP company could address these basic but crucial points, it is possible that they could own the higher education ERP industry for decades to come.