Twenty 20 ERP

The Indian SMB (Small & Medium Business) market is huge and
is eagerly looking at integrating its internal processes for greater efficiency.
ERP vendors have taken note of this and are making their products commercially
attractive for SMBs to lap them up like candies. However, this candy takes
longer to digest than is desired!

Much of the bane of any ERP purchase is in its two basic
components: a scalable license fee, which means that organizations are able to
increase or reduce licences, and therefore the license fee, based on business
needs. With mergers and acquisitions being the order of the day, getting saddled
with more licences than required is a criminal waste of resource. Also, a larger
organization that needs to buy licences for a smaller sub-contracting unit,
should find the licence fee attractive for the sub-contracting units business
too. This is not a reality, as yet.

The other component is the implementation time. Even with some
discounting on the licence fee, ERP implementations still take months. This is
quite a significant time for business heads to focus on internal activities. For
SMBs to implement ERP applications should be akin to children taking to
attractively packaged candies. ERP vendors and implementers need to make their
wrappers a lot more attractive.

Great Packaging

Lets look at another candy thats getting very popularThe T20 (read
as Twenty-Twenty) World Cup Cricket. For the uninitiated, this format was
started to make cricket a popular sport in the European countries, which was not
happening on account of time taken by the conventional test and one-day games.
Step in T20. A new format of cricket, where rules have been tweaked to make the
game more interesting for the paying spectators. The game is action packed,
result oriented, with added frills (read cheerleaders) along the boundary line.
The gentlemans game has transformed into a jamboree. But the crowds are
loving it, and the coffers are ringing. T20 is here to stay.

T20 is not a conventional players cup of tea. The rules favor
batsmen and the game is a battle between the batsman and fielders, as compared
to a contest between bat and ball. Innovation is very essential, and the
copy-book-style (read good practices) is getting redefined everytime the ball
and bat meet.

Although the game is still played 11 a side (organization), two
neutral umpires (supply chain), and a battery of cameras snooping around
(regulators), the players (users) see the game very differently. They are
expected to make split-second decisions, which matter. Strategies are only for
now. Pressure to perform everytime is very high as the crowds (investors) are
there for the entertainmentthe core purpose of T20. In three hours, the fate
of the team is decided.

Aint this like todays business? Operating rules, decided
by the paying community, are: higher revenues, year-on-year growth, and great
returns on investments. The regulators peer into processes and seek
transparency. The operating heads need to maintain customer delight while
working on cost reductions, sustained vendor management, etc. Innovation is the
key to success. CEOs need to take split-second decisions that matter, for a
quarterly achievement as well as y-o-y profits. Speed is of essence.

Just like T20 excites the crowds and keeps the turnstile moving,
quarterly and annual corporate performances keep investors exalted to get the
coffers filled up when required.

Just like T20 sees bravado replacing technique, CEOs need to
take bold and informed decisions. ERP does help in this regard. But the
parameters to arriving at decisions are fast changing:

• It is not critical how deep the Bill of Material in the ERP
  package is or what all parameters the MRP covers, but how soon can a plan
  get revised and executed

• It is not of any consequence how expansive the process
  definitions are, but how flexible and easy it is to change a defined process

• Not how well-versed the employees are with the application
  to be able to exploit its richness, but how quickly can the employees adapt
  to newer features in an application.

A typical mid-sized organization is one thats operating in a
completely stretched-out mode. The staffing is normally slightly below the
required ideal number and, therefore, employees need to multi-task. The CEO,
invariably the founder, also multi-tasks and on almost a daily basis needs to:

• Handle sales and provide inputs to the sales team for
  managing growth

• Resolve cash-flow issues with the finance department

• Meet up with strategic customers and suppliers and maintain
  good relations

• Negotiate credit-terms and other financing options with
  bankers and lenders

• Do HR management to keep the team motivated

• Present a good picture of the organization for customers and
  investors to explore long term relationships.

The profile of the CEO is one who is reasonably gadget-savvy,
understands finance and technology, communicates well, and is driven by passion.
Whereas the profile of the organization is a workforce thats multi-tasking,
not the best-in-class in skills, but works with great dedication and loyalty.
They would be acquainted with computers but not beyond an equivalent of MS
Office. Imagine such an organization getting an ERP implemented.

Do You Need ERP?

The fundamental question: is ERP suitable for any size of operation? The
technical answer is yes, while the commercial answer is may be, as
packaged products do have a base minimum number of users. But this trend is also
changing with the Software as a Service (SaaS) concept wherein the minimum
number of users is getting closer to one.

Can the organization not do with an accounting and inventory
system? The question is self-answered when we understand that the purpose of ERP
is to integrate information from different parts of an organization for speedy
decision-making. In todays context, theres no debating the fact that a
company does want to be able to take quick decisions. So this justifies ERP for
almost all organizations that want it.

Should the company implement all modules that a typical ERP
application provides? The answer is a clear no. It should implement only what it
needs. But seldom does it work in that manner. Modular implementation, meaning,
implementing modules like Finance, Sales, Purchase, etc, are seldom relevant to
SMB, as the needs of fewer and multi-tasking work force is more process based
likeorder to cash, procure to pay, plan to produce, produce to profit, etc.
These encompass all activities that fall in the process irrespective of the
function. For eg, order to cash includes order acquisition (sales function),
order processing (commercial function), inventory management (stores function),
customer data and receivables (accounts function). This is just fine for a
trading organization, where a single person could be working almost on the
complete process. In a large organization, there are many people to do these
functions and, hence, a modular approach is suitable.

A procure to pay process encompasses MRP, vendor management,
inventory management, production scheduling, quality and vendor payments. This
is ideal for contract manufacturing and sub-contracted companies. To these
processes, individual companies can add further requirements specific to their
individual needs to complete their information needs. This will make ERP really
attractive.

SMBs, as profiled earlier, are more demanding users of digital
dash-board than large organizations. Digital dash-boards are informative and
attractive ways of compiling information in real-time, from diverse sources, for
decision making. The CEO of an SMB would have more need to look at her
dash-boards on her mobile phone while meeting with customers, investors, etc,
than her counter-parts in larger organizations as they would have more people to
provide information. Unfortunately, dash-boards are so highly perched on big
cost trees, that they are still futuristic for SMBs. But one strong wind is all
it takes to bend the tree

It is to be realized here that infrastructure and information
are two key drivers of Indian businesses. Manufacturing companies can scale up
to become distribution companies too when infrastructure improves.
Infrastructure is totally dependent on the governments political will to
complete. Whereas information is dependent on who provides the most efficient
and flexible system that scales with needs.

Such choices will compel product vendors to look at building
process frame-works that can be quickly tweaked. The best-business-practices are
also rapidly changing, implying that process oriented implementations that can
be scaled up or down, will become relevant than module based implementations,
where some of the features never get implemented.

A Catalyst for Change

The SMB market is large and no vendor can afford to ignore this space. It is
important to remember that T20 got initiated because non-playing countries
showed interest in the concept, but didnt accept the formats that cricket
playing nations did. Today, countries like Ireland, Holland, Scotland and even
USA have a growing cricket following in their respective nations. The world cup
is just a catalyst to this change. It is equally important to recognize that
just like the flamboyant Australia got eliminated at the hands of minnows,
Zimbabwe and an inexperienced team led by Dhoni lifted the Cup, in T20 World
Cup, a new level playing ERP field is fast emerging. The championship is wide
open.

Shekar Y

The author is director, Adhishtaa
Consulting, an ERP consulting firm