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Follow UsCaught up in the dot-com boom and the e-commerce frenzy that followed, ERP
went out of favor in 2000. Many thought that ERP–the term that meant generic
integrated business management applications - had been laid to rest. Hardly... A
fresh wave of interest is seen in ERP: the Oracle-Peoplesoft-JD Edwards
buyout-cum-litigation tangles, ERP job-ads reappearing in recruitment columns
and an increasing variety of homegrown and small ERP vendors signing up a
modicum of deals in the past couple of months.
Take the case of SAP, the worldwide ERP leader on all counts. The 90s were a
roaring decade of business for SAP with its R/3 enterprise platform becoming the
de-facto backbone of large enterprises the world over. The company packed in
every evolution in enterprise functionality to its core product: supply chain
management, data warehousing, customer relationship management, enterprise
portal, e-business, business intelligence and the like. SAP co-chairman and
chief executive officer Henning Kagermann has acknowledged that, in recent
years, SAP had moved away from using the term ERP to describe its product,
preferring instead to call it an e-business suite. The truth is that in many
markets like India, China, Japan and others, customers want to buy "an ERP"
rather than an "e-business suite" - even if they mean the same or
different. So, this March, SAP decided to go back to "ERP" by calling
its new product mySAP ERP.
| Why ERP Survived... | ||
| n | A “REAL” need exists: Proof of business value and operational excellence. |
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| n | A “REAL” market opportunity exists: 85-88% of organizations in India. |
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| n | A “REAL” change in the economics of implementation: Shorter cycles, lesser total cost, faster RoI, modular pricing and new pricing schemes. |
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| n | A “REAL” information backbone: Facilitates data integrity, transaction processing and reporting. |
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| n | A “REAL” gateway to other enterprise applications: SCM, CRM, BI, PDM, PLM all ride on ERP. |
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Surely, ERP was not a passing fad. Because ERP offered robust business value
to organizations that implemented it the right way; value in terms of reducing
costs, acquiring discipline to manage business processes, and improving
bottomlines - at the least. And the impact is enduring. Says Hari Padmanabhan,
president- enterprise solutions, ICICI Infotech: "Organizations, large and
small, find ERP the best tool to move money from the cost-line to the bottomline."
| Case Study: Going Mid-market |
| Max Speciality Products (MSP) is Max India’s fully owned business unit that specializes in the manufacture of BOPP films, metallized BOPP films, thermal plastic films and leather transfer finishing foils. It has deployed EbizFrame from ESS for the functions of sales, purchase, inventory, finance, production, HR, payroll, equipment maintenance, transportation and scrap management. Being a manufacturing company, processes and functions are directly or indirectly related to production. To support this, there was a heavy and continuous flow of documents from one point to another. Most of the departments or sections were either partly or not at all computerized. |
| Installed applications were not integrated/interfaced with each other and this had almost limited the flow of information to a particular section/department only. |
| Due to manual processing and part computerization, most of the processes required extra effort and time. Also, there were cases of redundancy of information as most of the departments were maintaining manual records on the same piece of information. With ERP, there is a seamless flow of data from one section/department to another. The system is accurate and reliable, and there are minimum chances of data and effort being rendered redundant. |
The biggest reason why ERP has survived and is now on a rebound is that ERP
is not a technology in search of a problem.
Changing economics
Having said that ERP is a "must have" for organizations, the
choices are dual: develop an integrated system in-house or go in for a packaged
product. The latter is always preferred because it guarantees some best
practices and processes followed in the specific industry and easy
maintainability. Another reason is the generic availability of functionality
that helps migrate to a new statutory regime - be it VAT or other local taxes.
Many organizations, when they understood what a packaged ERP solution is and the
expertise required to implement it, decided to develop bespoke solutions. Says
Baan (India and Far East) chief executive officer Gopal Madnani: "Such
organizations are now coming back having realized their folly."
| Case Study: Toward Efficiency |
| Chennai-based Hydro S&S is a manufacturer of reinforced thermoplastic components that are used in the automotive, furniture and appliances sectors. A Rs 56-crore company with 135 employees, Hydro S&S is a key component supplier to Hyundai Motors, Tata Engineering, Toyota Kirloskar and Maruti in the automotive segment, Neelkamal and Supreme Industries in the plastic products segments, and Whirlpool, Panasonic and Indo-Matsushita in the appliances area. The company has two manufacturing units. |
| Hydro S&S has gone in for the Orion ERP from ICICI Infotech and is implementing all the modules. Says SK Subramanian, director (finance): |
| "Even while the implementation was on, we realized that there was an improvement in operational efficiencies, a better flow and control of information, the ability to identify and eliminate redundant processes." |
However, ERP has had its share of glorious failures too in its initial years
of hype. The total cost of an ERP project included costs for product evaluation,
business case analysis, pilots, licenses, rollouts, and consulting charges, not
to mention infrastructure costs like servers, storage, desktops and networking.
The economics have vastly changed now. ERP projects are faster to implement
and simpler too. Newer ways of pricing based on specific modules, number of
seats, subscription-based pricing and annual pricing - have all helped customers
get closer to ERP. Product licenses are cheaper and consultants too extract
lesser fees. Moreover, now there are a number of Indian vendors in the fray,
which helps in terms of product choices.
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Good market opportunity
"Post the Internet meltdown and the economic slowdown in last year,
many organizations have realized the need to put their houses in order and
operational efficiency has become critical for survival," reasons IDC
(India) senior analyst Dinesh Jindal on why there is indeed a market
opportunity.
| Case Study: Up the Value Chain |
| Godavari Sugars, a Rs 311-crore company of the Somaiya Group, has gone in for SAP. The company, which commenced operations in the late 30s, has always been very tech-savvy and has developed a host of in-house software based on legacy platforms. In 1999, the company realized the need for a radical shift to an enterprise-wide information backbone. |
| One of the critical industry-specific solutions that Godavari Sugar has developed in-house is the Cane Management System, which manages relationships with farmers who supply cane, the vital input for the sugar industry. This system has now been interfaced with SAP. The company has about 800 real-time transactions every day on the system. According to Ranjana Singh, head (IT), Godavari Sugars: "We have felt the greatest impact in the area of visibility across the value chain and in the transparency of transactions. This helps as there is improved control, more delegation and a reduction in the duplication of work." The company is looking at reducing the external cycle time by implementing improved versions of the system. |
Some of the key trends gauged from a study of 200 organizations conducted
by IDC (India) are:
n Large organizations are trying
to extend the reach of their ERP systems to cover the supply chain as well as
automate some of the interfaces with their customers.
n Small and medium organizations are
also actively trying to automate business processes.
n Organizations are trying to
explore the use of the Internet to manage some business processes.
n Mid-tier vendors are aggressively
expanding the market through extended offerings and adding functionalities to
existing products.
| Case Study: End-to-end Solution |
| Chamundeswari Sugars, a company belonging to Sakthi Group in south India, has gone in for an industry-specific solution, called Orion@Sugars, from ICICI Infotech. Orion@Sugars, an end-to-end ERP solution, is a part of the Orion suite of enterprise solutions and enables a factory to handle the entire spectrum of sugar cane manufacturing, right from purchase and process control to sales, including cogeneration and distillery management. |
| The deployment of Orion@Sugars is a part of Chamundeswari Sugars’ initiative to automate the entire gamut of processes of its factory. Says managing director M. Srinivaasan: "At Chamundeswari, we felt the need to invest in an enterprise solution that would provide us operational efficiencies, accountability, automated reporting, effective management of systems enabling top management decision making. After rigorous functional evaluation, we found that Orion@Sugars met our criteria. It is a solution that is flexible and looks after a number of functions of a sugar factory." |
| Orion@Sugars integrates the best business practices within the sugar industry and has a short implementation period of about four months. Additionally, Orion@Sugars uses completely localised terminology, making the adoption of the technology easier. |
The existence of a vast number of medium and small enterprises that do not
run efficient business processes is a huge opportunity that even a vendor like
SAP is not ignoring. ERP adoption by Indian mid-market companies is now a
phenomenon. Explaining the adoption of ERP by mid-market companies, Padmanabhan
says: "These organizations have the required global mindset, the linkages
are well understood, the appreciation is there at the top level, the suffering
under a silo-based approach — all are understood. Therefore, a suitable
product that is easy to acquire and deploy helps."
ICICI Infotech and Eastern Software Systems (ESS) are part of
a new breed of vendors that offer mid-market ERP products for the domestic
market. And they’re experiencing galloping growth.
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LUCKY |
| Source: Gartner Dataquest (February, 2003) |
ERP and beyond
Business benefits aside, ERP gives an information system three important
capabilities: consistency and reliability of data across the organization,
streamlined transaction processing, and provides operations-level reporting.
These capabilities, basic and important as they are, ensure that companies are
ready for specific solutions that enhance performance. These might be in areas
like supply chain management, customer relationship management, business
intelligence, product data management, complete product lifecycle management and
the like. For these applications, ERP becomes the substratum - a kind of gateway
to specialist functions. That is, ERP is a sine qua non for other applications.
In fact, the trend is that with basic enterprise resource
planning being a given, ERP vendors are rushing to integrate most of these
additional capabilities. Says Jindal: "Convergence of ERP, CRM and SCM
modules is the order of the day. Also, SCM and CRM vendors are also expanding
functionalities, encroaching on the area traditionally inhabited by ERP
vendors."
Even with these blurring distinctions, ERP packages are
surely back in the reckoning.