You know ERP, CRM, HCM? Here comes BSM – Business Spend Management

By: Rob Bernshteyn

The business world seems to love acronyms, maybe nowhere more than in the technology industry, and maybe none so much as the TLA (three letter acronym).

Acronyms certainly enhance recall, and they save time, space and effort in communication. Of course, they are shorthand for the name of something and as such, they help define it, creating a common understanding such that people can connect mentally to the thing without having to describe all of it.

If you can give something a strong, meaningful name, and encode it into an acronym that stands the test of time, it’s a good indicator that you’ve done something powerful in your industry. That’s why, as I’ll explain in this three-part series, we at Coupa are laying claim to the acronym BSM, for Business Spend Management.

It’s time for our category of information technology, and the work of professionals in this field, to have a name and a TLA that can stand together with ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), and HCM (Human Capital Management). When you add BSM to the other three, these functions collectively and exhaustively address the core operating processes of every organization.

Not just BS software marketing

Is this just Bullsh*t Software Marketing? No, but one could argue that it used to be. BSM was previously claimed by vendors of Business Service Management:

A category of IT operations management software products that dynamically links the availability and performance events from underlying IT infrastructure and application components to the business-oriented IT services that enable business processes.

In March of 2016, Analyst firm Gartner pronounced business service management dead, stating that it:

… has not delivered on its promises of prioritizing, communicating and focusing I&O (Infrastructure and Operations) resources on the functions critical to the business.

I’m not here to dance on the grave of business service management, but there is a point to be made. The promise of business service management was unkeepable. No single solution could keep up with the pace of technology change and monitor and manage all the data and technology in the enterprise, and no TLA could change that.

But, TLAs such as ERP, CRM, and HCM have achieved lasting traction in the marketplace because they accurately represent marketplace needs and solutions that deliver real value. These names matter because they encourage companies to think bigger and more holistically about their processes, and practitioners to think bigger and more broadly about their roles within them.

In each case, the name and acronym represent the crystallization of an evolution. Each sector started with technologists building solutions to address various pain points in a process. As these point solutions succeeded in the marketplace, they extended and/or combined to tackle adjacent and ancillary processes, eventually creating an interoperable system that was greater than the sum of its parts. This new solution delivers lasting value because it increases process efficiency and offers new visibility into a single source of truth for an end to end process. When that happens, it then becomes worthy of its own name.

That is what happened in ERP, CRM and HCM, and what is happening now in BSM.

How did this all begin? Let’s take a brief journey back to the 1960s.

ERP – the granddaddy of them all

ERP is the granddaddy of all enterprise technology solutions. It has its roots in the inventory control (IC) systems of 1960s. Those morphed into the Material Requirements Planning (MRP) systems of the 1970s, which helped manufacturing companies integrate their inventory of parts and products into production schedules. In the 1980s, they evolved into MRP II systems that integrated additional data relevant to the manufacturing process, such as employee and financial requirements.

Gartner coined the term ERP in the early 90s when vendors such as SAP, Oracle and JD Edwards further extended MRP II by adding modules to connect more business processes, such as core financials, human resources and CRM. These were all integrated to a centralized database.

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This represented a new value proposition, and throughout the 90s and early 2000s, in a bid to own the total business systems topology within the customer organization, ERP vendors continued adding modules, creating mega suites that could connect virtually every known business process.

SAP R/2 screenshot
SAP R/2 screenshot

I experienced working with ERP first hand while at Andersen Consulting in the early 90s, first programming utilities in SAP R/2, an original mainframe version of ERP, and then deploying SAP R/3 client-server ERP modules for companies around the world.  SAP ERP had all the key modules needed to run a company, from FI (Financial Accounting), to CO (Controlling), to SD (Sales and Distribution), and beyond. The software was very complicated, but once deployed; my sense was that it was going to be around for the long term.

Fast forward a couple of decades, and in 2013, Gartner coined the term Postmodern ERP, basically saying that while ERP systems will continue to the be the technology backbone and system of record for most organizations for the foreseeable future, cloud-based best-of-breeds could add more flexibility and business value in many areas. While they didn’t pronounce ERP dead, or even close to it, adding the adjective ‘postmodern’ is a tacit acknowledgement that the promise of the ERP mega suite for all business processes has become, if not unkeepable, less strategically desirable.

CRM – meanwhile, on the customer side . . .

Whereas ERP systems rose out of a focus on operational efficiency and productivity and later added other functionality, a different evolution was taking place with customer facing systems.

Decades before there was a CRM industry, sales people kept their customer information on paper cards in Rolodexes. As technology improved the 1980s, Robert and Kate Kestenbaum pioneered the discipline of database marketing — the analysis of customer and prospect lists for the purpose of targeting customer communications.

The mid-80s saw the rise of contact management software — essentially, electronic Rolodexes. In the early ‘90s, sales force automation (SFA) systems applied information technology to many of the functions of database marketing and combined them with contact management to connect pre-sales activities such as telemarketing, lead gen, preparing quotes and orders.

Around the same time, customer service and support (CSS) software was being developed to handle post sales activities, but the information stored in that database wasn’t linked to any other system.

In 1993, after failing to convince Oracle CEO Larry Ellison to sell their sales application as a standalone product, Tom Siebel and Patricia House left the company to create Siebel Systems. Within a couple of years, Siebel and some other vendors had developed a product that was commonly called enterprise customer management (ECM) or customer information systems (CIS).

Siebel later acquired customer service technology company Scopus, bringing together all key customer touchpoints to manage the whole customer relationship lifecycle, calling it CRM. This accurately represented the new value proposition — a unified process and a single source of the truth for customer data.

I joined Siebel in product management in 2001. I remember the slide from training that explained what CRM was. What I loved about it is that it was grounded in a strategy that made sense for the market, and was told in terms of what Siebel was uniquely positioned to deliver. I was all in.

At the time, it was the best-in-class CRM technology, delivered in a client/server, on-premise model. But Siebel began facing heavy competition from SAP and Oracle, and while it was attempting to defend its turf in the enterprise, a new competitor called Salesforce emerged. Its cloud-based Software-as-a-Service addressed that same marketplace need, but for SMBs that couldn’t afford big enterprise class software. Eventually Salesforce pushed upmarket and came to dominate the enterprise CRM market in the years following Siebel’s 2006 acquisition by Oracle.

Siebel was an important company because until they brought it all together, there was no holistic way to use information technology to create and manage a relationship over the entire customer lifecycle. They defined customer relationship management as we now understand it and demonstrated that best-of-breeds could do a better job of handling a particular end to end process than ERP add-ons. Even today, it remains a winning value proposition.

Re-applying the model with HCM

SuccessFactors Employee Live Profile screenshot
SuccessFactors Employee Live Profile screenshot

After I left Siebel, I joined the early team at SuccessFactors to see if we could apply the Software-as-a-Service model and the same functional unification approach to another set of key use cases – managing how companies engage with employees.

The idea of applying information technology to human resources functions also had its roots in the 1970s, but was limited to systems that performed basic tasks such as tracking hours or administering payroll. With the rise of ERP systems, some HR functionality began to be offered in add-on modules, but it wasn’t until Dave Duffield and Ken Morris founded PeopleSoft in 1987 that HCM began to emerge as a category in its own right.

Though PeopleSoft started with HR and offered it on a standalone basis, eventually they added modules that allowed it to function as an ERP system, placing them in competition with SAP, JD Edwards, (which they merged with in 2003), and Oracle, who acquired them in 2005.

Meanwhile, in the late 1990s and early 2000s, cloud technology unleashed a new round of innovation in the category, making HR technology accessible to smaller companies that didn’t have ERP systems and opening it up for users outside of HR so that managers and employees could perform many tasks on a self-service basis.

The cloud also spawned a host of best-of-breed startups for various functions such as recruiting, applicant tracking, benefits administration, performance management and more.

At SuccessFactors, which began as an employee performance management company, we introduced a product called Employee Live Profile, a cloud HR system of record that could have served as the entry point to a company’s core HR system. We planned to work our way toward offering a fully integrated HCM solution from a single cloud vendor.

But the big ERP vendors began snapping up the best-of-breeds to create their own end-to-end cloud-based solutions. SuccessFactors was bought by SAP in 2012 and now leads the market with Employee Central (an evolution of Employee Live Profile), but Workday has become a fierce competitor and arguably has ultimately done the best job by building out a cloud-native and complete end to end system.