On the Come Back Trail

Enterprise resource planning (ERP) is on a comeback trail. Demand is

sizzling, supply is aplenty, prices are hurtling down and awareness is rising

fast. Like the silver lining in every cloud and the ray of hope in every winter

of despair, the current IT downturn holds in it the promise that speed to

market, adaptability to customer needs and flexibility in market situations will

differentiate the winners from the laggards in the new knowledge-led economy.

Hence, companies hitherto indifferent to the value of software solutions as a

tool to improve organizational effectiveness are now hitching on to the software

bandwagon. And vendors of software solutions are shifting their gaze from large

corporations to small outfits in search of growth. In the bargain, ERP is

breathing again.

In India, the ERP market is estimated to reach Rs 507.5 crore by the year

2005-06 showing a compound growth rate of 9.6 per cent, a major part of which

will be fuelled by the small sector, according to an IDC report. The report goes

on to say that while 45,029 small enterprises with employees under 50 were aware

of ERP across top eight cities in India, only 0.9 per cent had implemented it;

2.7 per cent were evaluating an ERP solution; and an overwhelming 81.5 per cent

were not even considering it. In medium-sized organizations, while the awareness

was there, only 11.2 per cent had either implemented or were planning to

implement, and an overwhelming 75.9 per cent were not even considering it. That

speaks volumes about the untapped potential of this market.

A word of caution here. It is important to realize that the needs of the SME

sector are quite different from those of large corporations and in many ways

unique to them. For one, SMEs are unlikely to be swayed by the "automation

sizzle". They neither have overflowing coffers of the large organizations

nor are they bristling in combat gear, ready for the game of one-upmanship.

Second, sometimes when excessive technology is ingested into an organization,

cultural limitations constipate the organizations.

Unless adequate training and preparation is undertaken, techno-phobia

paralyses an organization. More so in the SME sector where the needs are simple,

any imposition of elaborate and complex parameters may not really be the

"best fit" for their cultural and business environment.

Third, SMEs do not lay store by "best business practices". Their

needs are diverse. A small garment company may have a more complex need for an

SCM solution than a CRM solution vis-à-vis a small financial services firm

where the CRM solution need might be more complex. This has led many SMEs to go

in for a "best of breed" approach. Under the "best of breed"

approach, an organization chooses different modules for its different needs, at

times from different vendors instead of an integrated package. The purported

advantages:

n The initial cost is lower.



n The time taken to go live is
shorter.



n The return on investment is
faster.

Sure a lower initial price is a great draw, but at what cost? Many

enterprises have ended up with rigid packages at low cost from garage vendors.

These packages do not provide an exact functional fit; they may not be scalable

and may be developed on obsolete technology. The advantages with an integrated

ERP package tailor-made for SMEs is that analytics from an integrated data

source enables the end-user to quickly convert transactional data — whether in

manufacturing or inventory or sales - into useful information and business

intelligence. The development roadmaps of products from the same vendor are

usually consistent, which ensures easy upgrades with least effort and

disruption.

Sure, a tailor-made package specially customized for the SME segment is

priced higher than those from smaller vendors, but it is important to remember

that price doesn’t make for value and the two should not be confused for one

another. This appreciation of value-proposition against price-proposition

requires a change of mindset - a cultural shift so to speak. But if there is one

single factor that can make our aspiring nation a global player, it is this and

this alone.

Yash Nagpal



The author is MD of Navision India