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Chennai-An ERP Market?

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DQI Bureau
New Update

alt="Please wait for pix" align="left" hspace="0" width="250" height="241">Ramco

Systems was the first Indian company to get into product development, and an ERP package

at that! Two more players from Chennai, Pambban Software Systems and Maars Software

International Ltd, follow suit. Let''s find out what''s cooking down south.

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Circa 1993. The time the country was

getting into the digital revolution. The time when computerization had just started

picking up. The time when buzzwords were beginning to be understood. During this time, one

Indian company had the forethought and the confidence to get into a specialized area of

software and compete in the global market. Thanks to the vision of PR Venkatrama Raja, MD,

Ramco Systems-the youngest in the family line, and the grandson of PAC Ramasamy Raja who

founded the Ramco Group of Companies.

As S Ramachandran, CEO of Ramco Systems,

put it, "With young blood comes new managerial and operational changes and new

styles." And so it was. Raja''s inclination toward IT, saw the genesis of another

company-Ramco Systems, in addition to the existing chain of manufacturing companies such

as Madras Cements Ltd, Rajapalayam Mills Ltd, Rajapalayam Spintext, Ramco Industries Ltd,

The Ramaraju Surgical Cotton Mills Ltd, and Sri Ramco Spinners.

Companies with manufacturing strengths have

undergone the cyclic change from MRP to CLMRP to MRP II, before hitting upon ERP. Ramco

Marshal is an example of such a chain, wherein it took Ramco 1400 man-years to develop the

product, which is today hailed by Bill Gates as a "role model for the Indian software

industry."

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A Natural Evolution



Today, there are two more Chennai-based companies who are on the same threshold, of
breaking out of the manufacturing shell. The same courage and conviction is propelling the

duo to develop an ERP package for the international market. And for both Pambban and

Maars, the idea of getting into ERP is a natural evolution from their manufacturing

industry background.

Pambban, for instance, is in the business

of textile and hosiery for the last five years with two companies in the Group-Pambban

Apparel and Maneka Textiles. With the coming up of a huge factory in Madurai for hosiery

manufacturing, the three directors of the company-G Madhan, M Balasubramaniam, and Senthil

Kumar-decided to have the factory scheduling automated and integrate the operations. The

company looked at several options, took consultation, and realized that the entire process

was costly. Besides, huge investments had already been made in the setting up of the

factory. Moreover, during the same time the company was also looking at diversifying into

IT and undertaking projects for companies like Hindustan Lever and Malar Hospital.

"That''s when we hit upon ERP. It was part of the diversification itself. Better

still, it fitted in with our own requirements to have an ERP package for our internal

use," explains Balasubramaniam.

T Varadharajan, MD of Maars Software, also

has almost a similar experience. He started the company in 1995, after getting a hang of

the various aspects of the manufacturing industry in his previous employment that of

managing a consultancy and software development house offering total solutions to the

manufacturing industry. Evolving from various aspects of manufacturing industry, the

company succeeded in developing Maarsman-an integrated manufacturing solution (MRP) for

small and medium-scale manufacturing industries.

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Maars is in the business of providing

integrated solutions to manufacturing industries. The company has just completed its first

full year of operations, since it went public, with over Rs 70 million of revenue. It

currently employs about 100 professionals, some of them based in the US and Middle-East to

support overseas projects.

Taking A New Route



However, with more and more ERP products coming up, is the Indian market ready for the
boom? "Given the fact, that India is indeed a high-potential market in the long term,

we have in the recent past seen a few major players in the ERP market making forays into

this market," says Ramachandran. Industry sources put the figures for potential of

the ERP market in India between Rs 240 and Rs 500 crore (for the year 1997-98). And

presently, only about 15.06 percent of the total market has been utilized by Indian

companies. According to IDC India''s Directions''98 report, the total number of

installations in the country in the year 1996-97 is valued at Rs 75.3 crore-an indicator

that the market is not big enough for many companies to get into the ERP segment in the

country.

Therefore, all these companies are looking

at the global market in a big way, which is estimated at a phenomenal $ 6 billion,

translating to Rs 21,000 crore. Here again, the Indian companies are not competing in an

open market. "The market is not ripe for everyone to open shop here. But to start

developing the product here and implement it abroad, makes sense," says

Balasubramaniam.

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Clearly, the late entrants like Pambban and

Maars have realized that in order to succeed, they have to be more focused and concentrate

on a particular industry segment. "Since we have a clear understanding of the working

and the requirements of the textile industry, which is our background, we decided to

develop an ERP package for the textile and hosiery industry," says Balasubramaniam.

The company''s preliminary survey also indicated that there was no ERP product catering to

the textile industry. The realization that the world majors such as SAP did not have a

solution for this industry, also encouraged Pambban to go ahead with its plans.

With an investment of about Rs 2.5 crore

plowed in from the Pambban Group of companies, more than 15 professionals started

developing an ERP software in 1994. In two years, the company came out with TABS (Textiles

Apparel Business Solution), an ERP package specifically for the textile industry. After

the final testing and value additions the product was launched in Mauritius with its

parent company DCDM in 1997. Recently, the company bagged five orders for the software

implementation in the Mauritius market.

Looking Globally



Unlike Ramco, which has by now established its brand equity in the Malaysian and European
markets, in addition to being a market leader in India, Pambban and Maars still have a

long way to go. The low awareness about ERP in the domestic market, the cut-throat

competition, and the price-sensitivity factor have forced these companies to look at the

global market at large.

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Pambban, as part of its market strategy,

has its eyes set on the North Carolina market in the US, the hub of textile and hosiery

manufacturers. The company''s survey in this market has indicated that there are about 500

small-scale manufacturing units in this belt and it is targeting a strike rate of 10 to 15

percent in the first year of operations. Pambban has also signed up with the National

Association of Hosiery Manufacturers to give the product a push in the international

market. Maars, on the other hand, is looking at the low-and mid-end of the market segment

for manufacturing industries.

Ramco also agrees with the stratification

of the market for doing business. The company is giving a major push to promoting Marshal

in the US this year. Strategic tie-ups with players in the US market and building

awareness about Marshal, are some of the plans on the anvil.

Balasubramaniam says, "What is

essentially required today is right-sizing." According to him, ERP should befit the

size and nature of the organization. He further elaborates that core competency is the

order of the day, and therefore, ERP will also become increasingly industry-specific and

tailor-made. Price structure too will differ in the Indian and the international markets.

Pambban has priced TABS at anywhere between $ 75,000 to $ 100,000 for the international

market, and at $ 50,000 for the Indian market.

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However, Ramachandran of Ramco does not

agree on ''right-sizing'' or industry-specific ERP solutions. He substantiates it by saying

that the trend emerging internationally is ''open architecture and active component-based

ERP solution''. "One company cannot give the entire solutions for all industries.

Companies with core competency in each industry can join hands with large vendors and get

into specific-component development, which in turn can be plugged into open architecture

to make the software compatible to every industry," explains Ramachandran.

As things stand today, most of the

installations in India are driven by MNCs with offices or development centers here. The

parent MNCs which have implemented and realized benefits of ERP in their offices

worldwide, have pushed their subsidiaries in India to go for the same. Most of these

companies also insist on having the same ERP vendor and implementor, who has understood

the particular requirements of their business worldwide. This also ensures uniformity

across geographical locations.

"We had not opened an office here in

India till recently. But our global clients have forced us to open office here, as they

want us to be the implementors for their offices here as well," admits Amrit Chopra,

MD, Tetra Software, Middle-East India liaison office. Tetra is a part of UK-based Tetra

Ltd, which has about 3,000 installations worldwide of its flagship product Tetra CS/3.

Even before setting up the company, Tetra has got contracts for its Indian company from

its global clients such as Motorola and Nestle.

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As if these were not enough, the market is

also getting crowded with Indian companies who are tying up with global ERP players to tap

the Indian market. One such company is Complete Business Solutions India Pvt Ltd (CBSI)-a

wholly-owned subsidiary of CBS Inc., which plans to enter the domestic ERP market by

January 1998. According to VV Sundaram, CEO of CBSI, "This decision to enter the

niche segment of ERP is the result of the parent company, CBS Inc.''s expertise in the ERP

market worldwide." CBSI, in turn, is targeting the companies with revenues in the

range of Rs 300 and Rs 1000 crore, in the human resource, manufacturing, and finance

sectors.

There are also some Indian companies who

are exploring other possibilities to tap the market. Pentafour Software & Exports Ltd,

a DQ Top 20 company, has tied up with Software Systems Associates India (SSA) for

marketing, consultancy, and technology exchange of the company''s flagship product BPCS

(Business Planning and Control System). The alliance will look into key areas like

providing and implementing ERP solutions, training and education on BPCS, and setting up a

BPCS Competency Center for ERP-the first of its kind in the world. And this also means big

money. According to V Chandrasekar, MD, Pentafour, "This synergy will bring in about

$ 20 million in the next three years through implementation, services, and maintenance of

ERP, while the training program will add on about Rs 5 crore by the year 2000."

Innovating To Succeed



In such tough competition, the key word is ''innovation'' and Chennai-based Polaris Software
Labs Ltd is trying to bank on this. At a time, when ERP as a software is seen only for

manufacturing industries, Polaris has developed a new ERP package for the delivery

industry. "We have been very cautious in entering this ERP segment. There are more

than four or five world-renowned ERP products and it makes no sense to fight in the

existing markets. Besides, there is no such product for the software industry," says

Arun Jain, CEO, Polaris. This product, which is yet to be named, is a combination of

Polaris'' existing products-Super Store 2000, Entity, and Parsley.

However, ERP market is not confined to a

singular product. Implementation and support services form a separate market segment.

There are some players in the market who are trying to grab a portion of this market by

acting as implementors here. Polaris has signed up with Oracle as its implementation

partner and NIIT recently acquired a contract from SAP for product implementation and

support services. SRA Systems, on the other hand, has signed up with Ramco for

implementation and support solutions for Marshal.

If implementation and support form a major

part of the ERP segment, so does training. Maars Software offers SAP training as part of a

candidate''s induction program. Comp-U-Learn offers training in Oracle Applications.

Training contributed between 2-10 percent of the company''s total revenue in its first year

of operations.

While ERP has evolved from product

improvement to process engineering to logistics worldwide, the Chennai companies have

gained in terms of being able to technologically leap frog. Though the ERP market is still

in the nascent stage in the city, the country is trying to catch up with BPR (Business

Process Reengineering) and SCM (Supply Chain Management)-the next two stages in the

process. "We are trying to catch up with the past and the latest simultaneously. And

till this balance is achieved, and if it is achieved, will the players be able to survive

in the marketplace?" feels Varadharajan.

Even as the Indian market, especially

Chennai, is hotting up, ERP worldwide is heading for the next explosion. In the second

phase, ERP is becoming a configurable business process. As Balasubramaniam says, ERP is

moving to a phase where it is going to be hardware-software-and networking-independent and

more web enabled. These Indian companies stand to gain from the experience of other

nations and can soon adapt to the new changes happening in the field. And in case this

happens, will Indian companies succeed globally? The answer lies with Chennai.

AKILA S



in Chennai.

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