Step 3: WHAT LIES AHEAD

That faith in synergy is the principle behind Project Fusion, Oracle's vision of the future of enterprise software. Fusion, according to Oracle, will rationalize the three enterprise code bases Oracle now owns (including PeopleSoft and JD Edwards) in one future platform, cantered on Oracle databases and application servers, but using a service-oriented architecture (SOA). To date, Oracle hasn't put much flesh on these marketing bones. SAP's promise of an SOA at the end of the ERP rainbow is called NetWeaver. Still, other third-party companies such as IBM will offer tools and services to help companies create their own SOA, so that option will be open even to those who choose to leave Uncle Oracle and Auntie SAP.

When Rick Beers convened the CIOs in Atlanta, he was thinking about SOA.

The idea behind SOA is simple: Technology should be expressed as a chunk of a business process; for example, "credit check", rather than as an arcane application like ERP. Services are just combinations of these different applications used together. They're built with complex, carefully designed interfaces that simplify integration with other services and applications.

In an SOA world, applications will follow business flow, and data won't get stuck when, say, an SAP financial system asks for something from a PeopleSoft HR system. SOA is the integration layer that would obviate the need for going to a single instance of ERP. For Beers, creating value from ERP instead of floundering in a money pit of maintenance, support and upgrade costs depends upon this integration layer. He manages many business units with many distinct supply chains, and says: "I want processes to flow across multiple instances and platforms."

The concept of SOA is a decade or more old, according to Stephanie Race, CEO of Innovation Enterprises, who's worked with many large companies (including Corning). The notion that it will replace ERP is only somewhat newer, but right now it's white-hot.

Still, it's not the only imagined future. Business process outsourcing (BPO) is another. For those who use ERP for commodity functions, BPO could get them off the "upgrade, support and maintenance" treadmill. Let IBM, Accenture or some other vendor manage commodity functions and deal with the software vendors. SAP and Oracle will ramp up outsourcing too. Phillips says right now only "hundreds" of customers subscribe to its on-demand business, but Oracle's goal is to get 15 percent of customers into an outsourcing model within five years.

And there's no reason these two futures couldn't overlap. Services companies can manage business processes using an SOA. Or customers could outsource some of the most basic ERP functions, such as payroll, while keeping other, more complex functions in-house. Bridgestone Europe's O'Neill is moving that way. "Certain areas of the app are standard and aren't going to change," he says. He'll be happy to pay someone else to manage them so that he can focus "on the areas we need innovation".

There are two major implications of these futures. First, big ERP is fracturing. Some functions (supply chain, CRM) probably have innovation left in them; others (payroll, tax reporting) do not. Massive projects to deploy both together are, therefore, inefficient.

Second, the maintenance-and-support pricing model is untenable. It means CIOs have to perform pointless upgrades on commodity processes so that they can get their hands on the innovative pieces. They have to buy the bathwater to get the baby, which they won't have to do in an outsourced or SOA-driven world.

"We're seriously challenging the vendors," says Zavada of Big Lots. "We say, If you come with a standard maintenance model, we're pretty much eliminating you right there. Enterprise packages are no longer assumed to have ongoing value that would justify maintenance."

But then what's the new pricing model? "Is it more based on services? Architecture?" asks Corning's Beers. "Where's the industry going? And how does it support innovation without the funding of maintenance contracts?"

Beers likes to push CIOs to think bigger picture. "Enough with Oracle versus PeopleSoft," he says. "And Oracle versus SAP. Please. That's business as usual. We CIOs are not victims [of these developments]. I don't feel victimized."

But now that the current ERP model is dying, Beers asks, "How do we sustain innovation? How do we create value?

"What does the next-generation enterprise architecture look like?"

Think about it.