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Advice and Information for Finance Professionals

The Last VCR and the Future of ERP

Rudolph Lukez
Director, ERP Product Marketing, Oracle

A few days ago, the last VCR came off a Japanese firm’s assembly line in China. The technology, first introduced globally in 1977—coincidently the year Oracle was founded—was a major breakthrough. For the first time, it let consumers watch and record video—including Hollywood movies and sporting events—when and where they desired. 

Arguably, VCRs introduced the biggest disruption ever in the distribution of movies and related media. These electronic boxes, with paperback-book size magnetic tape cassettes stored in paperboard containers, laid the technical, legal and business foundation for later innovators to eventually offer on-demand video services.

What’s fascinating about this demise is not just the falling demand—the manufacturer reported sales of just 750,000 units in 2015, down from an annual peak of 15 million—but the inability of their supply chains to gather enough parts for production, along with the discontinuance of blank VHS tape.

The end of on-premises accounting software?

The demise of VCR manufacturing is not just an interesting historical note. Many of today’s business technologies trace their roots to the same 1970s era, and these systems—especially finance systems, which have lagged behind other lines of business in investment—are following a similar trajectory with predictable outcomes. 

Consider the parallel to today’s home entertainment markets. Both VCRs and on-line streaming services let you watch movies in your home. Yet, compared to the on-demand, streaming, high definition, and rich sound experience you get with any internet service offering, movies delivered on VHS tape are not nearly as attractive. They have poorer picture quality and less sound fidelity.  Each time a VHS tape runs over the VCR’s mechanical heads, the quality is degraded. Plus, getting a current movie on VHS tape is impossible, unless one acquires a pirated copy that has probably been recorded over another film.

Meanwhile, with digital delivery, the picture and sound is always perfect; plus, you can record any TV show and get access to all the most popular movies. 

No one ever forced the market to abandon VCRs. The marketplace saw the problems with VHS, and when new technologies emerged, most moved rapidly to the then-better choice of DVDs without looking back. Now the market has moved again, this time to streaming services, including virtual libraries similar to local brick-and-mortar structures in your neighborhood.

It is just like today’s rapid and disruptive movement from on-premise ERP 1.0 to cloud ERP 2.0.

Consider how the “parts” needed to run on premise systems are declining. Next-generation employees are entering jobs and starting companies; they expect social, mobile and analytic capabilities, all available in the cloud so that they can access them anywhere. They are not interested in using or deploying last-century technology. Simultaneously, the current practitioners of on-premise ERP are declining in numbers, just like the population of RPG, COBOL and FORTRAN programmers is rapidly approaching zero. Like the lack of tape production for VCRs, schools stopped teaching last-century skills and associated professionals are retiring without being replaced.

Technology for a New Generation

Last night I asked my two children, ages 9 and 14, if they had ever seen a VCR. After a long set of blank stares, my 9 year old son got excited and asked if VCR stood for Virtual Car Racer. I realized it was time for another technology talk from Dad, similar to our in-house TED-like conversations regarding how in the last century we used 35 mm film, 3.5 inch diskettes, punch cards and slide rulers.

In the not-too-distant future there will be a similar set of articles noting the end of on-premise software, when the last line of production code is written. The product run of ERP 1.0 from the last century will be noted as an important period in the history of corporate finance and operations management. The same commentators will also praise the contributions that on-premise systems made to cloud ERP 2.0—and some will even wax nostalgic for a different era.

All of this commentary will feel oddly familiar, just like people who admire the automotive advances delivered by a 1919 Ford Model T, a 1957 Chevrolet with chrome tail fins or what I think is one of the strangest production cars ever made, the 1960 BMW Isetta 300. Today, they are all interesting historical artifacts, not capable of meeting today’s requirements but certainly fun for car shows and museums that rightfully note their contributions to modern vehicle engineering.

The last production on-prem systems will eventually be noted in the long list of expired ERP products with roots in the last century. Just like the automotive aftermarket has found a way to keep Model T cars running, a few remaining hardy folks will keep these post-OEM code systems alive—while modern cloud users will wonder how things were once done with complex hardware and staff infrastructures unable to adequately support social, mobile or analytical needs.

And, because all your favorite movies are now in the cloud, you never have to worry about broken or worn VHS tape in cracked plastic cassettes that coincidently skip over your favorite scenes which then leaves you pondering one of the 20th century’s most common questions: “How do I program that mysterious flashing blue 12:00?”

I can’t answer that question anymore. But I can answer most of your questions about ERP 2.0 in this handbook, “Your Complete Guide to Modern ERP.”

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