IT Leadership

Cloud Will Define the Future of Epicor Software

Stephen (Steve) Murphy, who took over as the CEO of Epicor Software – a privately held company producing over 70 application software products and services – in October 2017, was brimming with confidence during the recently held ‘Insights 2018’ – company’s annual user conference at Nashville Tennessee. Epicor, which serves the mid-market enterprises in the four key domains – manufacturing, distribution, retail and services – has over 20,000 customers in 150 countries.

At many occasions including his keynote and media briefings, Steve kept underlining the factors that will drive the company’s growth in the future.

Whether it was about Epicor’s expanded strategic partnership with Microsoft to deliver enterprise-class solutions globally on the latter’s Azure platform to standardise the cloud deployment of Epicor ERP and Epicor Prophet 21 ERP suites or about the Kinetic Design – its next-generation user interface (UI) that will drive Epicor solutions enabling customers and partners to embrace cloud, mobility predictive analytics, and other emerging technologies, Steve consistently emphasised on the fact that the company is making a lot of strategic investment in both product development and penetration into the right markets to fuel growth.

It was evident from his body language that Steve has an agenda to enable and equip Epicor to ride the wave of the new industrial and manufacturing renaissance, where the focus is on extreme automation and connected factories, analytics, AI and robotics. Wasting no time after he joined Epicor, he made some key appointments – the people who understand the industry well and share his aspiration of hyper growth. At many occasions Steve also underlined the fact that the company is spending more money (in percentage of its revenue) than in the past on building the right momentum for its cloud business and other key areas like product development, new releases etc. He strongly believes that the new culture of growth, investment and customer-centricity will make Epicor a valuable company.

In a multi-faceted conversation with, Steve spoke in detail about his strategic plans, key challenges and recipe for growth in future.

Here are the excerpts:

DynamicCIO (DC): Steve, in your keynote, you mentioned that 8 to 10% of Epicor total revenues comes from the Cloud business. Given your emphasis on Cloud, what’s the plan to grow this portfolio?

Steve Murphy (SM): Yes, it’s true that as far as booking of new business is concerned, cloud is growing at a very good pace, in the range of 50%. If our revenue from cloud business is 8% this year, I won’t be surprised to see it grow to 20% in the next couple of years. Indeed, we want to grow the cloud business aggressively but we aren’t going to take on the customers who are happy with an ‘on-premise’ solution. But in our conversations with the customers, they seem pretty open to the cloud solutions even if they decide not to buy them yet. After all, cloud may not be a cheaper solution for those who are already running a data center/on-premise software and have invested in it. But I am confident that with the announcement of our relationship with Microsoft Azure, our offerings will change and with the changed perception, the uptake will go up.

The fact is that currently even we don’t have all of our products ‘cloud ready’. Out of the 70 odd products that we go to market with, the top ones – Industry, ERP, Profit21, Eclipse and the Retail Cloud – have seen significant investment to modernize and have been put on the cloud. These are just 5 out of 72. For the next 68 products, some of them have a cloud version, and some of them don’t. But the five products I mentioned, which drive most of our business, are fully cloud enabled and we see a strong momentum of adoption from the customers.

DC: You also mentioned that companies that adopt AI/ML, robotics and automation, will see 2X growth. No doubt these technologies are delivering amazing results but how are you, at Epicor, exploiting and leveraging them? 

SM: Epicor recently did a survey in which we found that by the year 2020 nearly 80% of CTOs from leading organisations will facilitate the identification of emerging technologies to accomplish digital transformation. The new innovations highlight the unique strengths of Epicor industry-specific platforms, underpinned by a modern service fabric and topped with cross-platform applications that achieve digital transformation and raise the bar for automation, analytics, and customer experience.

As part of our conscious effort, we are getting better and better in collecting information from the IoT devices, drones, RFID tags and bring them into our products, give them some amount of scale and provide a better decision-making software to our customers. That’s the near-term investment for us. We already have a reasonably good integration of these technologies with our Manufacturing Execution Systems (MES). We will do the same for distribution and retail sectors too.

DC: Epicor is riding high on the new wave of manufacturing renaissance where automation is the driver for growth. How do you view the impact of automation in the sectors like manufacturing, services and retail? How is it disrupting the old, monolithic practices? 

 SM: The industry is in a phase where it is getting a lot pressure to get appropriately skilled people for the jobs industries are offering. The manufacturing plants that are coming up today are extremely automated and robotic. The minimum skills required to manage those plants is quite high. I have no doubt that automation will be a key factor driving the growth in the future. However, there is a flip side to it as well. Automation shouldn’t result into complexity. We are constantly reminded by our customers that our products should be simple, and usable. Usability is key in future adoption of software in any industry. Software engineers today tend to ignore this fact. At Epicor, we have made big advances in ‘usability’. We are continuously working to make our software easier to use and more intuitive.

DC: Even after a lot of consolidation, ERP is still a fragmented market. There are many players – generic and niche. Do you think the industry should further consolidate?

SM: In a longer term, I do see further consolidation of this industry. Whether it will be good or bad, I don’t know yet. However, Epicor is a great example where we have remained autonomous for a long time and are still very valuable for the customers that use us and the industries we serve to. Certainly, we need to reach to a scale to stay where we are. A lot of times this question is thrown at me whether we’d be acquired or not. But I see a lot of smaller companies that have chartered the growth and developed detailed expertise in niche areas – be it discreet manufacturing or retail or distribution – thrive in this market. These companies are not going to get consumed or consolidate so long as they maintain the right set of skills and keep innovating. In my point of view, consolidation isn’t always good for customers. It has a danger of being monopolistic with fewer options to choose from.

DC: Traditionally, the perception of Epicor is that of a manufacturing ERP product company. While it also serves other industries with great line of products, but the perception is limited to manufacturing. How would it change?

SM: (Laughs) We probably do that out of habit than anything else. If you look at our business in distribution and logistics, we have a very healthy growing business and a great line up of products as well. I would blame it on the history and legacy of the company more than anything else. But if we look at the economy and its indicators, manufacturing is probably one of the healthiest sectors with ensured, sustained growth. It is this sector that people are talking about all over the world. Yes, we certainly need to think how to change this perception and market ourselves as not just a manufacturing ERP company and give equal weightage to other businesses like retail and distribution.

DC: Ever since you took over as the CEO your focus is on culture of growth, investment and customer-centricity. Most software companies, while selling, have a very misaligned expectation between them and the buyers resulting into horrible implementation and failures. What changes would you like to bring in this process so that there is a good understanding of customer expectations?

SM: In my opinion, customers appreciate honest conversations. I started my career as a process engineer in P&G and have done/seen many software implementations. I have felt the heart breaks when the implementations fail. Every time that happened, you’d go back to the company and tell there was a mistake and the blame game would begin. To avoid that, it is important to clearly define a mutually agreed set of requirements. My entire focus remains on a watertight cooperation and coordination between us and the customers. In many cases, there is a long list of requirements from the users in which there’d really be a few things they need and many that they won’t. That’s where a smart seller will play a key role. We tell our customers that the success of implementation will solely depend on not doing things below the line. I advise both sales personnel and our customers to be choosy on what what’s within scope of the well written set of requirements. In real life, many complexities arise due to the actual application, the scope of the database, the APIs, the data conversion etc. This broadens the scope of work and mismatched expectations resulting into crisis and failure. As I said in the beginning, customers appreciate honest conversations and that’s where a software vendor should focus. Occasionally, we may lose business because we’re too honest about it but that’s the risk I am ready to take for long term benefits.

DC: India is a burgeoning market. It’s a fit market where Epicor can make deeper strides. What are your plans for it?

SM: India is undoubtedly a huge market with a lot of untapped potential in all three major sectors namely manufacturing, distribution and retail that we operate in and not to mention that India produces its own goods in large quantities. There is a huge momentum towards “Made in India” and “Make in India”. If we look at the manufacturing economies of the world, India is going to be in top three or four. While we have made a decent investment in India, it is taking us longer than expected to penetrate well. It may be purely because we don’t understand the Indian market well enough. The challenge that we often grapple with is the realistic price point at which a mid-market Indian customer will buy Epicor software. For India, it’s all about the cost and we don’t blame the geography for it. Instead, we need to understand what should be our approach. Second very important point is to figure out the nuances to sell to the enterprise through right type of system integrators and value-added service providers. We make a great fit and I will make sure that we achieve success in this market, which currently isn’t visible.

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