Case Scenario 2: ERP Inc

question 122

Essay

Case Scenario 2: ERP Inc.
ERP Inc. is a leading provider of enterprise integration software (EIS). EIS allows a firm to connect and integrate processes across all aspects of its business, regardless of where they are located around the world. ERPI is a product-focused company, whereas most competitors in its market space, such as Oracle, operate as "solutions companies." Oracle and Microsoft have begun to devote considerable resources to the development of and acquisition of products to compete in the EIS space. Despite these recent threats, one benefit of its product-focused strategy is that ERPI's proprietary product is generally recognized as being 200 percent to 300 percent better than competitors' software. ERPI estimates it will take two to three years for competitors to develop the capabilities needed to bring a competing product to market. ERPI invests a considerable percentage of its profits in basic R&D to support its core products. As evidence of this, among its competitors the firm maintains the largest in-house programming staff dedicated solely to the development of advanced enterprise integration software. Installation and related consulting for EIS typically cost between $100 million and $200 million, with the ERPI software component accounting for about 20 percent of the installed cost (the remaining 80 percent is spent on the actual installation, not counting the value of the customer's time). ERPI's target market consists of the world's largest manufacturing and industrial firms, and it currently enjoys a 60 percent market share.
-(Refer to Case Scenario 2). How sustainable is ERPI's competitive advantage?