ERP and the Corona crisis


How does the current Corona crisis affect the ERP market (demand) and industry (supply) and which changes should you expect to see on the other side?

At the beginning of the year, I worked on an article entitled ‘Why ERP will change but remain sexy in this decade also’. When the article was published on the RamBase website on 12 March, without a single mention of Corona crisis, Italy was already closing down. Two days later, Denmark, where I live, Norway and Poland had closed schools and their international borders and imposed a series of restrictions aimed at ensuring social distancing. Since then, the world around us has been turned upside down and continues to present us with new scenarios through which we have no experience navigating.

However, as an entrepreneur and business owner, you have no choice. You must face the brutal facts and take action. How do you keep your company alive during the crisis and survive the recession and how do you prepare for what’s on the other side?

The Corona crisis and the recession

No crisis lasts forever. May that give you some hope and peace of mind.

There is a world on the other side, and it will offer new opportunities if you read it right. However, before reaching the other side you have to survive the passage. And “reading it right” requires that you have time to think, prepare and test.

How long will the Corona crisis restrictions last?

I’m no epidemiologist, but according to the experts, most countries are beyond the point where you can contain the virus and make it go away. The strategy we are pursuing in Northern Europe is aimed at having us follow the blue curve. Most of us will get the virus, but not all of us will get ill at the same time and, hopefully, we can spare most of those for whom the consequences may be fatal.

Pursuing the blue strategy, the spread of Covid-19 will be controllable 4-6 weeks after you have effectively shut down society. The longer you wait and the softer you do it, the longer it takes to recover and the higher the price you pay in terms of casualties and short falls in the economy.

Based on my research for this article I expect most of Northern Europe to follow the same paths while the UK, Sweden and the USA will see different developments.

Great Britain, Sweden and the USA

Corona crisis

Northern Europe (except the UK and Sweden) will re-start again by the end of April. By then there will still be restrictions, but the economy will gradually open up. However, nothing will return to normal for a while. People will still be restrained from gathering in large crowds, congestions throughout rush-hours must be avoided, remote working and virtual meetings will continue and the elderly and people with pre-conditions have to stay at home.

I am uncertain about the UK, Sweden and the USA, where governments took much longer to react. They may not be back to normal before the autumn.

How deep will the recession be?

I am an economist, but predicting the impact of Covid-19 on the economy is not a simple mathematical exercise. We are way beyond the borders of what any macro-economic model can simulate. As the global economy was well balanced before Covid-19 took us down, my gut feeling says that we will take a draconian dive, but that it will only be temporary.

The dive comes from hitting supply and demand hard at the same time.

Nevertheless, the depth of the recession will vary substantially across industries. While government and much of the logistics and FMCG-industries are unaffected and e-commerce is booming, other parts of retail, the travel and experience industry (entertainment, tourism and hospitality) have come to a complete halt. Across the board we might experience a thirty per cent contraction of the economy from March to August. On a full-year basis, the contraction may reach ten per cent.

However, these are not numbers any of us can use for anything.

The situation of each individual company varies greatly and maybe your customer base is deviating from the average?

Some companies have to lay off people and stop all expenses and investments. Some will only survive if they are bailed out by our governments. Some will not survive.

But other companies are busier due to the Corona crisis. They are well consolidated and liquid or fit the rescue packages offered by the governments. They can afford to pay their bills, keep their key employees and use the time to do some housekeeping (such as consider better business models and processes). You will have to check on your customers and the prospects in the pipeline to find out how much it will affect you. Despite the grave situation, there will still be work to do in many companies.

How long will the recession last?

Apart from industry variations, we will be out of the recession by late autumn.

The Corona-recession is not caused by systemic unbalances in the global economy, which is why I am fairly optimistic that we will recover fast. The swift recovery comes from the gigantic rescue packages currently offered by our governments and from consumers and companies going out of their way to help each other.

How the world looks like

What your world looks like right now and until the situation normalises depends entirely on your solidity and your customers. Before Covid-19, there was a shortage of skilled ERP resources and that will also be the case afterwards. Hold on to your people and urge your customers to do the same. Be flexible with payments if you can. Keep the projects running.

I am convinced that many have already switched to working remotely and running virtual meetings and workshops. Refine these working and collaboration skills because they will become hot assets when the storm is over.

The post-Covid-19 world

It will be a different world on the other side of the Corona crisis. Not everything will change, but economically and politically we will see things from a different perspective.

The Corona crisis has once more demonstrated and highlighted how interdependent the world has become. A bat meets a pangolin and a virus jumps in China. Soon the European auto industry comes to a halt that causes layoffs in other countries. The impact of government restrictions ripples through the world economy at lightning speed.

Saving the economy

All nations will have paid an extremely high price for saving as many lives as possible and for relieving the pressure on their healthcare systems, avoiding the impact of collateral damage (maintaining the ability to also help people in urgent need due to non-corona related issues). Governments will have invested gigantic amounts of money in keeping their economy afloat. As we return to normality, they will open their fiscal policy toolboxes and invest further in accelerating the surge out of the recession.

These activities will happen at the same time all over the world and will pull the economy out of recession faster than we have ever seen before. By the beginning of 2021, we will all be busy again and the Corona crisis will become a vanishing memory. However, I am convinced that we will have changed our values, priorities and some behaviours, too.

Voices have spoken about the need for more autarky, but that will not happen.

The global division of labour, the opening of international markets and the improvement in global logistics have been the main contributors to economic growth and wealth for all of us. In addition, the solution to challenges (climate, poverty and wars) the world is facing must be of a global nature. If anything, the Corona crisis will stimulate further global collaboration, growth and competition.

Not the opposite.

The gig economy

Corona crisis

The Corona crisis has forced most of us to work remotely and to run virtual meetings and workshops. I can only recommend refining these working and collaboration habits because they will become valuable assets when the storm is over.

In a post-Covid-19 world, the demand for skilled and experienced manpower will increase. Not only do we have to catch up with the backlog from the recession, we will also have to face the pressure for faster digital transformation.

If the business software industry saw a shortage of people with technical skills, vertical industry experience and business acumen before, then post-Covid-19 will make it even more obvious. We want to utilise such resources effectively and cut out all non-productive activities. Physical face-to-face meetings and workshops will not go away, but we will rely much more on virtual interactions. They are often more effective and cost much less.

Remote work

Giving more people the chance to work remotely will stimulate the gig and freelance economy.  This trend has been going on for a while and will now accelerate among professionals in high demand. Especially in Europe, where our social contract provides free education, healthcare and a social security safety-net, more and more professionals prefer a project-driven lifestyle, where they have flexibility in where and when they work and where they get their social stimuli outside of the job context.

The market for business software is very well suited for the gig economy.

It is project-driven and pays well for the right skill mix. Both sides of the market will have to learn how to work with the gig-people and those that master the discipline can have long-lasting relationships with some of the best people in the industry. While people quit their jobs for numerous reasons, few drop their clients as long as they pay well and on time.

Resilience becomes king

Having learned how fast a crisis can hit us, we will all pay attention to our solidity and cash positions. We want a buffer, just in case, and we want a business model where we can make money while we sleep. How will this affect the behaviour of the suppliers and customers in the ERP market?

The supply-side

The ERP industry (the suppliers) will have learned that recurring revenue is much more attractive than selling hours on time & material. Selling hours can be profitable, but such revenue is exposed in times of trouble. It may go away from one day to the next, and an hour you do not sell today cannot be sold tomorrow. Selling hours is a very vulnerable business.

Post corona crisis world

In a post-corona world, VARs and SIs will want to become ISVs. Because ISVs make money while they sleep. Making such a transition requires re-engineering the business models. All nine building blocks will have to be revisited and refined. The change from VAR and SI to ISV changes the DNA of your value proposition fundamentally. You go from being customer-centric to becoming product-centric and your go-to-market approach must allow for winning and managing many more customers.

From VAR and SI to ISV

The move from VAR and SI to ISV means developing add-ons to the platforms (such as RamBase) with which you are already familiar. It requires investments in R&D and adding product management and product marketing to your key resources and activities. However, moving to a value proposition where your split between software and services becomes fifty-fifty will match perfectly with what I expect post-Corona customers will look for. And if the base of recurring revenue from software subscriptions can cover the OPEX (software companies have little CAPEX), then your chances of riding through another storm improves dramatically.

The demand side

In the post-Covid-19 world your customers will return to investing in the future. Expansion of production and distribution capacity across borders will pick up again, and digital transformation will become more urgent than ever. Business executives will now recognise the possibility of a contagious and deadly virus as part of the potential business model environment in which they have to operate. They will consider how they can build more resilient business models and how they can improve the business cases for investments in terms of faster and higher RoI as well as reduced risk.

There are only two ways you can reduce the cost of an ERP project:

  1. Choose a software solution that is as close to your requirements as possible;
  2. Adjust your business processes to the software.

It is fortunate that what the customers want matches elegantly with what suppliers want, too. Customers want more software and to pay for fewer hours.

Reducing the risk requires reducing customisation, shortening the implementation time and moving cost items from the CAPEX to the OPEX-budget. That speaks in favour of best-of-breed cloud-based solutions. The transition to such platforms was already well underway before Covid-19. After Covid-19 it will transition even faster.

The hunt for a virtual business model

As the Corona crisis started chewing off big chunks of the global economy, Amazon announced the need to hire an additional 100,000 people to keep up with demand. Although many of the new-hires will be working in warehouses fulfilling customer orders, it does illustrate the advantage of a business model where the customer relationship is completely virtual.

Other side of the Corona-recession

Corona crisis

On the other side of the Corona-recession, the executive boards in all sizes of companies will have the virtual business opportunity at the top of the agenda. The frequently asked question will be how to virtualise elements of the supply chain as well as the customer relationship. The exercise will be combined with the crusade against CAPEX. Consider for a second how AirBnB was hit by the Corona-recession and then compare with Hilton Hotels & Resorts. Vertically integrated and CAPEX-heavy businesses are very vulnerable during recessions.

More software

The good news for us in the business software industry is that both the hunt for virtualisation and the crusade against CAPEX requires more software. The more you split the activities across independent operators the more software you need to bring down the transaction cost and maintain control. Although the final consumption may be physical (a vacation or a new car) the customer experience in the purchasing, as well as the consumption phase, is highly affected by digital elements.


Although the times may seem tough just now (and I know they are for most of us), the post-Covid-19 world will soon be here, and it will offer more opportunities than ever before. If you have some idle-time you may want to invest some of it talking to your customers about what they would like to do differently on the other side. The sooner you start such conversations, the better prepared you will be when we start meeting again.

Stay safe.

    Any questions? Contact us!

    Hans Peter Bech, M.Sc.(econ.), TBKconsult