The problem with the purpose built ERP system (which was really common in the 1990s and 2000s) is one of technology deficit. These vertical industry specific solutions are usually published by smaller ERP vendors with relatively small markets. The print manufacturing industry vertical is a great example. The typical small ERP vendor just can't keep up with the technology investment Microsoft can make.  Microsoft needs a partner who knows print to create an addon (for example, PrintVIS as an ERP for printing industry use) and suddenly the technology deficit goes away.

Print manufacturing has traditionally been handled by a group of really specific ERP systems, commonly called print MIS systems. 

These print MIS Systems tend to be built on older technology platforms. Very few of them are cloud, most of them were built in the 1990s, and are still using a “client server architecture“. Even if they plan to introduce AI into their solutions, it is going to take a lot of work for them.  They are simply not big enough nor have the depth of talent that a tier 1 ERP vendor like Microsoft has.

 

In these unusual vertical industries (often manufacturing companies) the benefit of the vertical specific capabilities is huge. Generic ERP systems like older versions of Dynamics lacked the easy to deploy vertical industry specifics that were required to make it viable. Customers took a look at a product like Dynamics NAV for manufacturing in their specific sub-vertical and immediately saw industry capabilities were missing. 

 

Now, Business Central has a massive advantage against these type of industry vertical solutions. Microsoft is maintaining the core technology platform, which means Business Central manufacturing solution for a vertical will add CoPilot, AI, integrations with other cloud solutions (such as Shopify) etc.  Microsoft is able to bring the best of both worlds. We have a modern platform maintained by a major software vendor who has the resources to invest in R&D. We also have the vertical solution, designed by a smaller partner business with a deep specialization within that vertical.  We are therefore able to create the solution that the customer needs as a Business Central addon vendor is "closer" to the customer than Microsoft ever could be.

 

In the past, prospects would just pass on the more horizontal "generic manufacturing" ERP and move on. A product like NAV wouldn’t have been seen as a viable option. It lacked those special capabilities that were required and most important, easy to deploy. When you introduce AppSource to D365 Business Central, the extension capabilities allow the product to quickly and easily be "verticalized."  In the case of PrintVis, the customer can literally see someone install the extension in real time and "ta-da," they have an industry vertical print ERP manufacturing space, you now have a killer app.

 

There are other industries where business central extensions have penetrated a vertical market.

 

A good example is steel processing. Our friends at Walcott Group have created REAL STEEL, a solution for Business Central and the steel processing industry. This type of solution is another great example of a vertical expansion.  There is an existing market of highly specialized steel processing ERP systems, but they are built on old technology and they are very expensive.  In order to maintain a full solution stack, the vendor needs to have programmers to work on every aspect of an ERP system.  Walcott group can write REAL STEEL and not worry (much) about inventory management, accounting, order processing etc.

Yet another great example are the food manufacturing add-ons. There are almost too many of these to call any one out.  There are many industry vertical food solutions with highly specialized capabilities that date all the way back to Dynamics NAV and before.  These solutions are specific to the food manufacturing sector, and of all the vertical solutions have the deepest penetration into the market (at least in my opinion).

These vertical solutions built for food manufacturing, print manufacturing, steel processing, are often more attractive in the modern Business Central model than they used to be in the NAV model. NAV suffered from very complex upgrades that gave it a reputation for being difficult to work with.  

Business Central is solved this problem with AppSource and extensions.

 

 

By having the industry vertical solutions in AppSource they appear to the customer to be easier and simpler.  The underlying code that runs them could be virtually unchanged, but the process to install and patch them is way better.  This is a big advantage in explaining how the systems work to anyone new to Business Central and Dynamics 365. Customers can download Business Central and start a trial, and then download an industry specific solution themselves. We frequently have clients who are interested in the print manufacturing vertical solutions, have looked at alternatives (printers MIS systems)  but are curious about the PrintVis AppSource addon.  The fact that they can start up a trial of Business Central and PrintVis themselves is game changing.

This ability to do a trial on your own, combined with the reputation of Microsoft and the technology investment in Business Central creates a sense of trust and interest.  This is changing the way businesses buy ERP systems for specialized vertical industries.

 

In the past it has been very difficult for generic ERP systems to penetrate these vertical markets. The ecosystem of vertical specific solutions existed because the generic ERP systems lacked the tools and capabilities to easily adapt.  Those verticals represent too small a market the large ERP vendor to try and build vertical capabilities into their product.

A good example of this would be Epicor. Epicor has great ERP system and they've developed a lot of add-on capabilities for it.  However,  Epicor has a closed architecture. They don't make it easy for third party companies to create add-ons for the Epicor ERP and certify them.

 

What this means is Epicor is really good at the areas and industries that Epicor the software vendor has decided to be good at. Companies that buy it for the modern platform need to compromise on having vertical capabilities out of the box.  Instead they end up having to customize an ERP system, which creates its own problems.

 

This wouldn't be as much of a problem if it wasn't for the fact that #1 customization is expensive, and # 2 it often makes upgrades hard to do.

In the past a company looking at Epicor and making a decision about buying an ERP system faced with a lot of customization would pass on it. This created the market for ERP systems that are less well maintained and older technology but are industry specific. This resulted in a lot of small, industry specific ERP solutions, built on old platforms that haven't been updated.

 

Until recently this wasn't a big problem. Even if you were a big fan of cloud it really didn't matter that much if your ERP system was somewhat older and ran on a server. You could use Azure cloud infrastructure to run those servers, you could tech technically eliminate the need to have on premise equipment.

 

However we're heading into a new Technology Revolution. Cloud was a technology revolution that changed the way we hosted, managed, and worked with our software.

 

AI is about to change the way we INTERFACE with the software. Cloud didn't change the user interface in any substantial way. We still used a monitor, mouse and a keyboard.

 

But AI is making all of this change. AI is going to change the way we interact with software and as time goes on it will become a competitive disadvantage for the business running technology that lacks AI.

 

AI is also very costly to invest in and very difficult to incorporate in older technology platforms.

 

All of this likely means the end of the vertical specific ERP systems as businesses look for AI technology.