Description
This is document about on ERP in India.
Index
1. Introduction.................................................................................. 3 2. ERP Vendors in the world............................................................ 3 3. ERP Software ............................................................................... 3 4. ERP status in India....................................................................... 5 5. Major players................................................................................ 9 6. ERP Market..................................................................................12 7. Failure........................................................................................... 13 8. Future............................................................................................ 14 9. References..................................................................................... 17 10.Appendix....................................................................................... 18
1
1. Introduction
Enterprise resource planning (ERP) software helps integrate management, staff, and equipment, combining all aspects of the business into one system in order to facilitate every element of the manufacturing process. ERP groups traditional company and management functions (such as accounting, human resources
, manufacturing management, and customer relationship management [CRM]) into a coherent whole. Manufacturing management also includes inventory, purchasing, and quality and sales management.
2. ERP Vendors in the world
All the key players in the ERP global market are practically present in India. This includes SAP with their flagship product R/3, BaaN Company with their BaaN IV product, Oracle with their Oracle Applications and the world-class ERP Product Marshall from the rising Indian star Ramco Systems. The other major player in the global ERP Market, namely, PeopleSoft has entered the Indian market only very recently. Yet another leading product MFG/ PRO from QAD has been present for a while (the two customers Hindustan Lever & Godrej have been using it for over two years). SAP has been exceptionally successful in India with nearly two-thirds of the Indian market share. The major industrial houses Tata, Reliance, Essar, Mahindra & Kirloskar have embraced SAP. BaaN has been very successful in major manufacturing companies such as TVS. Oracle has been a playing a dominant role in the telecom centre with a stronghold among all cellular phone companies. Ramco Marshall has a good client base among the process industry in the south and a few public sector undertakings..
3. ERP Software
SAP is the market leader in ERP and has almost one-third the market share. Interestingly SAP has captured two thirds of the market share in India though ERP business is less than two years old in India. {2/3rds of market share in terms of revenues but not number of sites/organizations}
Is there a segmentation of the ERP market? There is no easy way to segment the ERP market in a precise manner that can be readily 2
adopted by an organization as a thumb rule. However SAP R/3, Oracle Applications, BaaN Series, People Soft & Ramco Marshall represent the high-end of the ERP market. SSA BBCS & JD Edwards represent the medium-end market. Scala, Intentia Movex & QAD MFG / PRO represent the low-end of the market. This division is generally based on past installation, pricing and positioning of the products by the ERP vendors themselves. It does not necessarily mean that low end products lack features or high end products have all features. It may be instructive to note that a large company HLL uses QAD MFG/PRO (a low end ERP) and a small company Microland uses SAP R/3 (a high end ERP).
Is there a rating agency that constantly rates ERP software? A number of independent consulting firms have been providing white papers that document strengths and weakness of the leading software products both from technology and market perspectives. These include Gartner group, Yankee group, Meta group and AMS, to name a few leading consulting firms. Gartner group annual ERP market white paper is the most authoritative document describing the relative strengths of the leading edge ERP software products. This document gets updated once every quarter.
Where do you get ERP software market information? Once again Gartner group and IDC, Data Quest are the prime sources of ERP market related information. India specific information is made available by IDC India.
What R & D do ERP vendors attempt? The research and development by the ERP vendors is both in the technology and application perspective. The application groups continuously monitor improved business practices of the leading edge corporations, new business practices pioneered by innovative upcoming companies and re-engineer business process from process modelling consultants. At the technology level ERP vendors continue their support for promising and upcoming technologies such as object technologies distributed components messaging standards, multimedia support, multi processor support, next generation processors, operating systems, databases and networking technologies.
Is there a benchmarking tool to fine tune ERP performance? Every ERP vendor provides performance guidelines that can be used by system administrators to fine tune performance. Some of them are very comprehensive and address 3
fine-tuning at the application, database, operating system, processor and even the network level. Other ERP vendors provide tools that can leverage the leading edge database tuning, operating system tuning and network performance tuning tools.
4. ERP Status in India
Enterprise resource planning software market is expected to touch rs 507.5 crore by 2005-06 posting a compounded annual growth rate of 9.6 per cent from rs 321 crore in 2000-01, says the latest idc india report. the growth will be possible as erp vendors are fast transforming themselves into application providers for e-business enablement with an extended and integrated product range, it said in its report erp market in india in 2001. besides this, the report
forecasts
that five per cent mid-size enterprises are planning to
implement erp which when translated into numbers mean volume business. the current requirement, according to the report, is to enhance the existing solutions to incorporate front office solutions like crm or supply chain management and having the solutions internet-enabled to move towards e-business. this has resulted in the need for new type of partnerships for erp vendors. with crm and scm markets expected to grow rapidly, erp vendors are going for product enhancements either in-house or through partnerships with other application vendors in line with the global market. on the local front, these companies are looking for partners to increase their market reach, the idc report said. key players in the erp application market are currently putting up a two-pronged strategy to serve both large and small and medium enterprises, it said. as per the idc india report, 33.5 per cent of large companies are planning or evaluating the option of adopting erp while 4.7 per cent of the mid-size companies and 2.7 per cent of the small companies are considering the same. but 81.5 per cent of the small companies are not considering seriously for going in for erp while 75.9 per cent of medium companies are doing the same. 28.8 per cent of the large companies are not considering seriously to adopt erp. at present 35.6 per cent of large companies have already implemented erp while 0.9 per cent of small companies and 6.5 per cent mid--size companies have done that, said the report. on the erp players, the report said in an effort to emerge as the major ebusiness solutions providers, they are catering to the large organisations and at the same time, easy-to-use and deploy functional solutions to woo the sme sector
4
ERP's Scope, penetration future opportunities and challenges in India India is a well known player in the ERP market. India occupies a promising position in the whole of IT market .The governments, educational institutions and companies are constantly working towards promoting and expanding the IT market. In this context ERP holds lot of promises both in terms of supply and demand. There are some issues to worry about and some others which deserve appreciation. India has also achieved significant economic growth in recent years. Its IT industry growth is quite admirable. India is the largest developing country base for global software outsourcing (Heeks, 1996). Moreover, global software outsourcing continues to grow rapidly, with over US$3.00 billion in contracts from developing countries in 2000 (and expected to be $15 billion by 2003). India also owns the best software engineers in the world. Because English is the official business language, its IT staff can communicate effectively with counterparts in the world. However, IT diffusion and implementation lags far behind, and ERP growth in India has been quite slow except in recent years (Erry, 1998). While the country boasts of decades of manufacturing, availability of skilled workers, English as the business language, and the first MRP-II/ERP systems introduced over a decade ago, yet the ERP penetration is estimated at a piddling 6 percent. Even this rate was achieved after a 75 percent growth in the last two years. According to one estimate, this market was expected to be only around US$10 million by year 2000 (Erry, 1998). The low ERP penetration is due to several reasons. The first reason is that the infrastructure is far below any organizational requirements. The country’s telephone density is quite low with 0.6 phones per 100 in 1990 (Dutta 1996), although it has increased some since then. The telecom industry is still a monopoly of the state government. In 1997, Asia Pacific Telecommunication Indicators pointed out that India would need to invest $14.43 billion over three years to achieve a telephone density of 2.34 per 100. The second reason, both for India and China, is that organizations lack a culture that regards computers as a pervasive way of doing business. Indian state excise authorities refuse to accept excise returns in a format other than manual registers. India’s PC penetration is only at 0.7 per 1,000 (Erry, 1998). IT maturity is quite low among local firms. Although the economy has been opened up, foreign investors face daunting procedures for governmental 5
approvals. Local corporations lack stiff competition; thus there is little stimulus to adopt technology. The third has to do with common perceptions about ERP. The common belief is ERP systems are only for larger companies because of the high costs of acquisition, implementation and maintenance. As a result, service and support are rudimentary. Most organizations are firsttime users and perceive a lack of expertise. Additionally, some companies did not have a very successful experience with ERP and do not see many benefits. The current extension of ERP is e-CRM. The ERP market has become saturated and is on the decline; and emerging from it is the market for small and medium scale enterprises. ERP, especially in India, is being offered by small-localized players to small and medium sized firms customizing it to the needs and their pockets. Taking this cue, the big ERP players have also started offering complete solutions to the small firms
5. Major Players
During the year 1998, the total ERP market was estimated to be around $17.5 billion with an annual growth rate of around 26 per cent. The ERP market is widely spread with the top ten players accounting for almost 48 per cent of the total market. The rest of the market is accounted for by the small and regional players. SAP, the market leader, accounts for nearly 17 per cent of the total market. Other major players include Baan, Oracle Applications, PeopleSoft and JD Edwards (Table II). In India, SAP R/3 and QAD's MFG/PRO are the market leaders accounting for almost 31 per cent of the market share. Some other ERP [1] products that have sought a foothold in the Indian market are JD Edwards, Baan, Ramco Marshal, Oracle Financials and Intentia Movers and Scala. Two lesser known home grown products, Mak ESS and Evolus are products in the offing (Sadagopan, 1999) (Table III). SAP R/3 Systems, applications and products in data processing (SAP) pioneered ERP. It is the world's fifth largest software company, and has the unique distinction of having developed a SAP 6
system that supports all areas of business on a global scale. Initiating operations in 1972 in Germany, SAP today has 28 subsidiaries maintaining offices in 40 countries. SAP has the lion's share of the Indian market (around 30 per cent). See Appendix (Tables AI, AII) for the list of companies that have implemented SAP in India. SAP system finds application in almost all industries. SAP's ERP package comes in two versions: the mainframe version (SAP R/2) and the client/server version (SAP R/3). SAP R/3 system tracks financial accounting data within an International framework of multiple companies, charts of accounts, languages and currencies and are in use in more than 107 countries. The complete suite of R/3 applications is available in 24 languages. While it complies with International accounting standards such as GAAP and IAS, it also caters to local requirements (Sadagopan, 1999). SAP has developed an extensive library of more than 800 predefined business processes, spanning each functional software requirement. These processes may be selected from the SAP library and included within installed SAP applications, after tailoring the application solution to suit the user's exact requirements (Leon, 1999). PeopleSoft solutions Established in 1987, PeopleSoft has the industry's only complete ERP solution that is built around Supply Chain Optimization. This company provides e-business and analytical applications for human resource management, financials, distribution, manufacturing and SCM along with a range of industry specific solutions. The portfolio of products includes PeopleSoft 7.5, PeopleSoft Materials Management, PeopleSoft Manufacturing, PeopleSoft HRMS, PeopleSoft SCM and People Tools. PeopeSoft also provides a complete commercial solution for service industries. The company also offers PeopleSoft Select, a complete packaged solution including software, hardware and services, to address the needs of medium-sized organizations. PeopleSoft has entered the Indian market through an alliance with PricewaterhouseCoopers. Oracle applications Founded in 1977, Oracle corporation, California, offers database tools and application products, consulting, education and support services. Oracle 8i, its latest version of the database is the database for Internet computing. Oracle Applications is the only suite of 7
enterprise business applications that follows the Internet computing model. Each of the modules for financials, human resources, manufacturing, supply chain and front office automation is Web enabled. The architecture enables companies to shift complex applications from the user's desktop onto centralized professionally managed severs. This drastically reduces the cost of deploying and administering software. This enables the applications to be deployed over Wide Area Networks more easily than in the client/server model. Oracle applications are used in over 76 countries and is available in 29 languages. It comprises of over 45 software modules falling into the following categories: Oracle financials; Oracle human resources; Oracle projects; Oracle manufacturing; Oracle supply chain and Oracle front office. JD Edwards oneworld In March 1977, at Denver, Colarado was established the company JD Edwards World Solutions. JD Edwards is a leader in providing Idea to Action enterprise applications that encompass software for finance, SCM, production and human resources. The products are ActivEra and JD Edwards OneWorld. No matter how good an application one has, it requires some customization to suit the business requirements. With OneWorld one has a powerful toolset to make these alterations. The different modules that are available from JD Edwards are: foundation suite; services suite; manufacturing suite; financial suite; energy and chemical suite; customer service management suite; government/education/not-for-profit solutions and utility and energy solutions. Baan IV The company Baan founded in 1978, in Netherlands, excels in the providing intra- and interenterprise business software solution. Baan IV provides a scalable architecture making it possible for large, mid-size or small-scale businesses to cost-effectively implement the Baan Software. It runs on most popular environments and is also Web enabled, giving enough flexibility to the companies to gain a competitive advantage through its implementation. In India it has focused extensively on the manufacturing sector and on small and medium enterprises (SMEs). The company's flagship product BAAN IV, is a suite of open-systemsbased software application for the management of enterprise information. The foundation for the product is Orgware. With Orgware, Baan is enabling a new paradigm called Dynamic Enterprise Modeling (BaanDEM), which ensures that enterprise applications are in close 8
alignment with an organization's changing processes and business model. BaanDEM provides a business view of the enterprise via a graphical process, tailored to the customer's needs. BaanERP, a successor to Baan IV consists of the manufacturing module, finance, project and distribution module. MFG/PRO MFG/PRO is the flagship of QAD, an ISO 9002 company that began operations in 1976. MFG/PRO, the company's ERP solution, is most suited for manufacturing processes entailing batch process, make-to-stock, configure-to-order, and respective manufacturing
environments. The other products developed by QAD are Qwizard, On/Q, decision support and service/support management. MFG/PRO is available in 26 languages with more than 3,600 installations over 82 countries. While MFG/PRO offers global SCM solution, On/Q manages the extended supply chain applications. BPCS Client/Server V6 Founded in December 1981 in Chicago, System Software Associates, Inc. has presence in more than 91 countries today. The company's product line is the BPCS Client/Server V6 that has successfully reduced time-to-benefit implementation cycles to 6-12 months in comparison to an industry average of 12-24 months. At the core of BPCS Client/Server is its object-based architecture – distributed object computing architecture (DOCA) that has been specifically designed for ERP in industrial sector companies. DOCA provides inherent flexibility that helps in rapid reconfiguration of BPCS Client/Server applications. These allows organizations to quickly and easily alter the responses of companies to change in market trends.
6. The ERP market
During the last few years, the ERP market witnessed considerable growth rates driven mainly by the Y2K crisis. Most ERP packages were Y2K compliant. ERP companies including SAP, PeopleSoft, Oracle, Baan, etc., recorded consistent growth in revenues, well above 20 per cent (Mraz, 2000). However, recent trends in the industry indicate a slowdown in the traditional ERP market. The slowdown can be attributed to the saturation in the upper-end market and the stagnant 9
world economy. Growth rates, which were as high as 40 per cent per annum, have considerably decreased to around 15-20 per cent (Table V). However, the market is also witnessing new avenues like the emergence of SMEs with a turnover of $50-500 million as a major ERP spender, with significant demand for module specific implementation. As the Fortune 500 market for product license revenue becomes saturated, larger ERP firms are shifting their focus to the middle market. However, the margins are going to be sparingly coupled with low transaction size. The other areas like SCM, customer relationship management (CRM), extended ERP, and Web enabled ERP are still evolving. The coming of multinational corporations on domestic soil has forced suppliers and distributors to automate business processes. The survival of 100,000 odd SMEs that dot the Indian business scene would depend on how quickly they are able to integrate their operations with one another and the Internet. ERP segment is especially gaining popularity in the SME segment because of the importance of CRM, SCM, and B2C in the business environment. The software and implementation cost of SAP, Oracle and Baan, normally run into crores of rupees. Sensing the presence of SMEs in India, some Indian software companies have come up with affordable branded solutions. Matrix ERP is one such software developed by a Calcutta based software company, Matrix Infosystems Ltd. The product has been priced at Rs 7-12 lakhs. Other brands like Maarsman Evolus and Ebizframe range between 8 and 12 lakhs. However, the big operators seem to have woken up to the potential market of the SME Sector[1]. They are now offering individual modules at prices that are not too steep for small companies (Chakraborty, 2000).
7. Failure
The implementation of ERP has come with its share of failures too. Some of the classic “Disasters” has been that of Volkswagen, Whirlpool, Hershey Foods and Fox Meyer. Flawed implementation of a new ERP system at Volkswagen, resulted in significant delays in shipment of parts. This piled up semi-finished product inventories to costly levels (Jeffery and Morrison, 2000). Massive distribution problems in Hershey Foods resulted due to the flawed implementation of SAP's R/3 ERP system. It affected shipment to stores during peak sales period (Halloween and pre-Christmas) resulting in 16 per cent drop in earnings. Another example is that of Whirlpool, where an ERP implementation crippled the shipping system, leaving stock loaded on docks, and not delivered to customers for a full 8 weeks. A Texas 10
based pharmaceutical distributor, Fox Meyer Drug, actually collapsed following a faulty implementation of SAP R/3 implementation. The company's bankruptcy trustees filed a $500 million lawsuit each, against the German ERP giant and the co-implementor Andersen Consulting (Wheatley, 2000). But most of these failures have been reported in the first generation implementations that were internally focused with no specific business focus (Jeffery and Morrison, 2000). Increasingly it has been seen that poor training for the broad user community of managers and employees underlies ERP disasters. Companies often mistake ERP implementation to be a purely technical issue. In fact almost 50 per cent of all ERP disasters are not technical, but people and culture related. At A-dec, a private dental equipment manufacturer, situated at Newberg, Ore, Baan system was used for integration. The managers were taught how to key in data, but were not oriented to the process or to the importance of getting the data right. Orders were entered incorrectly not knowing that making changes would be a difficult process once the manufacturing had started. The instinctive reaction of the managers in such a situation is to circumvent the system and get the product delivered to the customer. This would further add to the problem. Not only is the unfulfilled order in the system, but the inventory logged in the system is also incorrect. Making a mid-way correction, the company spent close to $5,000 per head for training. This amounted to nearly 30 per cent of the total project cost while the average is around 8 per cent. A classical situation of high costs and low returns (Wheatley, 2000).
8. The future
All through the years, ERP vendors; SAP, Oracle, JD Edwards and Baan, helped companies wire their warehouse, manufacturing lines and finance departments. This was to aid the managers in their decision making by generating a series of reports that gave crossdepartmental information. The new challenge to these companies has been in the form of the Internet companies like Oracle (Oracle8i), Ariba, Commerce One and i2 Technologies that have developed software, to link a company to the Internet. This would bypass the requirement of ERP, as unlike the ERP software that is hosted on SAP's server, this Netbased software resides on a server on the Net. In other words, all departments, dealers of a company get wired at one go as they can access whatever information required from the Net
11
(Surendar, 2001). SAP, the leading software vendor unveiled mySAP.com, SAPHostings and SAPMarkets to counter this attack by providing an e-commerce solution (Glasgow, 2000). Again, recognizing the need to develop better products, vendors of ERP have been busy adding newer products to their portfolio. BAAN has already introduced concepts like intelligence resource planning (IRP) and money resources planning (MRP)-III; and has acquired companies for strategic technologies like Visual Product configuration, Product Data Management and Finite Scheduling, to counter the threat (Shankaranarayanan, 2000). As large enterprises become saturated, ERP vendors are now turning to small business clients. Some of the modifications being made for the new clientele are lowering of price; softwares with reduced functionality; increased speed of implementation and usage of userfriendly platforms like Microsoft Windows NT. ERP vendors are now focusing their effort on making the implementation process easier. Accelerated SAP (ASAP) and Fast Forward by Oracle, are some of the steps taken by the vendors in this direction. These help in speeding up implementation and reducing costs. Baan has offered a software called Orgware that helps automatically configure the software to suit specific operational needs, thus reducing implementation time. Most ERP vendors are now developing specialized variants of their applications for clients like the government; healthcare sector; financial service sector and retail environments. Customer relationship management (e-CRM) is another relatively new area that ERP vendors have ventured into, in a major way. e-CRM encompasses the steps that an organization has to take to build and maintain good customer relationships. The e-CRM activities are generally undertaken by the sales, marketing and service professionals. The whole process of e-CRM can be divided into three phases. 1. Sales force automation (SFA). This includes the prospecting of potential customers and general sales operations. 2. Enterprise marketing automation (EMA). The main objective here would be to optimize customer contacts; making sure that the right message gets out at the right time via the right channel.
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3. Customer service management (CSM). Here one would satisfy ones customers by responding to their requests for information, repairs, complaints, and/or any other questions within the shortest time possible (Log Metrix, 1999). The best example that one can quote is that of Ford, that has used e-CRM to its advantage. In the traditional processes, a fleet customer selected a specification, then a dealer took the specification and entered it into a complex order entry system. A problem arose when the order could not be built to the original specification, requiring changes to be made. Again, on the Internet, Ford could legally present only the manufacturer's suggested retail price, and not the price negotiated by the fleet buyer with the dealer. To streamline order configuration processes, Ford used a sales configuration application from Trilogy Software that enabled dealers and fleet buyers to work together over the Internet when specifying cars. It also enabled the dealers to maintain value-added content and pricing rules as negotiated. This new process enabled streamlined product configuration and “e-order” verification, which resulted in improved dealer relations and a reduction in the order-to-delivery cycle of between 1 and 14 days (Eisenfield and Close, 2000).
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9. References
i) http://erp.technologyevaluation.com/ ii) http://www.iiitb.ac.in/ss/erp-faq/main4pg1.htm#1 iii) http://images.google.co.in/imgres?imgurl=http://www.emeraldinsight.com/fig/029 1040706007.png&imgrefurl=http://www.emeraldinsight.com/Insight/ViewConten tServlet%3FFilename%3DPublished/EmeraldFullTextArticle/Articles/029104070 6.html&usg=__LgurE0DXimWd7xlVrWYWWqaxQu4=&h=606&w=1769&sz=6 8&hl=en&start=1&um=1&tbnid=v3TMhmumRJ1dyM:&tbnh=51&tbnw=150&pr ev=/images%3Fq%3DStatus%2Bof%2BERP%2Bin%2BIndia%26um%3D1%26h l%3Den
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10. Appendix
Table ITotal ERP revenue (actual and forecasted) – ($ Billions)
Table IIMajor ERP players and their world market share
15
Table IIIMajor ERP players and their Indian market share (per cent)
Table IVA comparison of four major ERP packages
16
Table VGrowth rate of ERP in India
17
18
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doc_692764803.docx
This is document about on ERP in India.
Index
1. Introduction.................................................................................. 3 2. ERP Vendors in the world............................................................ 3 3. ERP Software ............................................................................... 3 4. ERP status in India....................................................................... 5 5. Major players................................................................................ 9 6. ERP Market..................................................................................12 7. Failure........................................................................................... 13 8. Future............................................................................................ 14 9. References..................................................................................... 17 10.Appendix....................................................................................... 18
1
1. Introduction
Enterprise resource planning (ERP) software helps integrate management, staff, and equipment, combining all aspects of the business into one system in order to facilitate every element of the manufacturing process. ERP groups traditional company and management functions (such as accounting, human resources
, manufacturing management, and customer relationship management [CRM]) into a coherent whole. Manufacturing management also includes inventory, purchasing, and quality and sales management.
2. ERP Vendors in the world
All the key players in the ERP global market are practically present in India. This includes SAP with their flagship product R/3, BaaN Company with their BaaN IV product, Oracle with their Oracle Applications and the world-class ERP Product Marshall from the rising Indian star Ramco Systems. The other major player in the global ERP Market, namely, PeopleSoft has entered the Indian market only very recently. Yet another leading product MFG/ PRO from QAD has been present for a while (the two customers Hindustan Lever & Godrej have been using it for over two years). SAP has been exceptionally successful in India with nearly two-thirds of the Indian market share. The major industrial houses Tata, Reliance, Essar, Mahindra & Kirloskar have embraced SAP. BaaN has been very successful in major manufacturing companies such as TVS. Oracle has been a playing a dominant role in the telecom centre with a stronghold among all cellular phone companies. Ramco Marshall has a good client base among the process industry in the south and a few public sector undertakings..
3. ERP Software
SAP is the market leader in ERP and has almost one-third the market share. Interestingly SAP has captured two thirds of the market share in India though ERP business is less than two years old in India. {2/3rds of market share in terms of revenues but not number of sites/organizations}
Is there a segmentation of the ERP market? There is no easy way to segment the ERP market in a precise manner that can be readily 2
adopted by an organization as a thumb rule. However SAP R/3, Oracle Applications, BaaN Series, People Soft & Ramco Marshall represent the high-end of the ERP market. SSA BBCS & JD Edwards represent the medium-end market. Scala, Intentia Movex & QAD MFG / PRO represent the low-end of the market. This division is generally based on past installation, pricing and positioning of the products by the ERP vendors themselves. It does not necessarily mean that low end products lack features or high end products have all features. It may be instructive to note that a large company HLL uses QAD MFG/PRO (a low end ERP) and a small company Microland uses SAP R/3 (a high end ERP).
Is there a rating agency that constantly rates ERP software? A number of independent consulting firms have been providing white papers that document strengths and weakness of the leading software products both from technology and market perspectives. These include Gartner group, Yankee group, Meta group and AMS, to name a few leading consulting firms. Gartner group annual ERP market white paper is the most authoritative document describing the relative strengths of the leading edge ERP software products. This document gets updated once every quarter.
Where do you get ERP software market information? Once again Gartner group and IDC, Data Quest are the prime sources of ERP market related information. India specific information is made available by IDC India.
What R & D do ERP vendors attempt? The research and development by the ERP vendors is both in the technology and application perspective. The application groups continuously monitor improved business practices of the leading edge corporations, new business practices pioneered by innovative upcoming companies and re-engineer business process from process modelling consultants. At the technology level ERP vendors continue their support for promising and upcoming technologies such as object technologies distributed components messaging standards, multimedia support, multi processor support, next generation processors, operating systems, databases and networking technologies.
Is there a benchmarking tool to fine tune ERP performance? Every ERP vendor provides performance guidelines that can be used by system administrators to fine tune performance. Some of them are very comprehensive and address 3
fine-tuning at the application, database, operating system, processor and even the network level. Other ERP vendors provide tools that can leverage the leading edge database tuning, operating system tuning and network performance tuning tools.
4. ERP Status in India
Enterprise resource planning software market is expected to touch rs 507.5 crore by 2005-06 posting a compounded annual growth rate of 9.6 per cent from rs 321 crore in 2000-01, says the latest idc india report. the growth will be possible as erp vendors are fast transforming themselves into application providers for e-business enablement with an extended and integrated product range, it said in its report erp market in india in 2001. besides this, the report
forecasts
that five per cent mid-size enterprises are planning to
implement erp which when translated into numbers mean volume business. the current requirement, according to the report, is to enhance the existing solutions to incorporate front office solutions like crm or supply chain management and having the solutions internet-enabled to move towards e-business. this has resulted in the need for new type of partnerships for erp vendors. with crm and scm markets expected to grow rapidly, erp vendors are going for product enhancements either in-house or through partnerships with other application vendors in line with the global market. on the local front, these companies are looking for partners to increase their market reach, the idc report said. key players in the erp application market are currently putting up a two-pronged strategy to serve both large and small and medium enterprises, it said. as per the idc india report, 33.5 per cent of large companies are planning or evaluating the option of adopting erp while 4.7 per cent of the mid-size companies and 2.7 per cent of the small companies are considering the same. but 81.5 per cent of the small companies are not considering seriously for going in for erp while 75.9 per cent of medium companies are doing the same. 28.8 per cent of the large companies are not considering seriously to adopt erp. at present 35.6 per cent of large companies have already implemented erp while 0.9 per cent of small companies and 6.5 per cent mid--size companies have done that, said the report. on the erp players, the report said in an effort to emerge as the major ebusiness solutions providers, they are catering to the large organisations and at the same time, easy-to-use and deploy functional solutions to woo the sme sector
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ERP's Scope, penetration future opportunities and challenges in India India is a well known player in the ERP market. India occupies a promising position in the whole of IT market .The governments, educational institutions and companies are constantly working towards promoting and expanding the IT market. In this context ERP holds lot of promises both in terms of supply and demand. There are some issues to worry about and some others which deserve appreciation. India has also achieved significant economic growth in recent years. Its IT industry growth is quite admirable. India is the largest developing country base for global software outsourcing (Heeks, 1996). Moreover, global software outsourcing continues to grow rapidly, with over US$3.00 billion in contracts from developing countries in 2000 (and expected to be $15 billion by 2003). India also owns the best software engineers in the world. Because English is the official business language, its IT staff can communicate effectively with counterparts in the world. However, IT diffusion and implementation lags far behind, and ERP growth in India has been quite slow except in recent years (Erry, 1998). While the country boasts of decades of manufacturing, availability of skilled workers, English as the business language, and the first MRP-II/ERP systems introduced over a decade ago, yet the ERP penetration is estimated at a piddling 6 percent. Even this rate was achieved after a 75 percent growth in the last two years. According to one estimate, this market was expected to be only around US$10 million by year 2000 (Erry, 1998). The low ERP penetration is due to several reasons. The first reason is that the infrastructure is far below any organizational requirements. The country’s telephone density is quite low with 0.6 phones per 100 in 1990 (Dutta 1996), although it has increased some since then. The telecom industry is still a monopoly of the state government. In 1997, Asia Pacific Telecommunication Indicators pointed out that India would need to invest $14.43 billion over three years to achieve a telephone density of 2.34 per 100. The second reason, both for India and China, is that organizations lack a culture that regards computers as a pervasive way of doing business. Indian state excise authorities refuse to accept excise returns in a format other than manual registers. India’s PC penetration is only at 0.7 per 1,000 (Erry, 1998). IT maturity is quite low among local firms. Although the economy has been opened up, foreign investors face daunting procedures for governmental 5
approvals. Local corporations lack stiff competition; thus there is little stimulus to adopt technology. The third has to do with common perceptions about ERP. The common belief is ERP systems are only for larger companies because of the high costs of acquisition, implementation and maintenance. As a result, service and support are rudimentary. Most organizations are firsttime users and perceive a lack of expertise. Additionally, some companies did not have a very successful experience with ERP and do not see many benefits. The current extension of ERP is e-CRM. The ERP market has become saturated and is on the decline; and emerging from it is the market for small and medium scale enterprises. ERP, especially in India, is being offered by small-localized players to small and medium sized firms customizing it to the needs and their pockets. Taking this cue, the big ERP players have also started offering complete solutions to the small firms
5. Major Players
During the year 1998, the total ERP market was estimated to be around $17.5 billion with an annual growth rate of around 26 per cent. The ERP market is widely spread with the top ten players accounting for almost 48 per cent of the total market. The rest of the market is accounted for by the small and regional players. SAP, the market leader, accounts for nearly 17 per cent of the total market. Other major players include Baan, Oracle Applications, PeopleSoft and JD Edwards (Table II). In India, SAP R/3 and QAD's MFG/PRO are the market leaders accounting for almost 31 per cent of the market share. Some other ERP [1] products that have sought a foothold in the Indian market are JD Edwards, Baan, Ramco Marshal, Oracle Financials and Intentia Movers and Scala. Two lesser known home grown products, Mak ESS and Evolus are products in the offing (Sadagopan, 1999) (Table III). SAP R/3 Systems, applications and products in data processing (SAP) pioneered ERP. It is the world's fifth largest software company, and has the unique distinction of having developed a SAP 6
system that supports all areas of business on a global scale. Initiating operations in 1972 in Germany, SAP today has 28 subsidiaries maintaining offices in 40 countries. SAP has the lion's share of the Indian market (around 30 per cent). See Appendix (Tables AI, AII) for the list of companies that have implemented SAP in India. SAP system finds application in almost all industries. SAP's ERP package comes in two versions: the mainframe version (SAP R/2) and the client/server version (SAP R/3). SAP R/3 system tracks financial accounting data within an International framework of multiple companies, charts of accounts, languages and currencies and are in use in more than 107 countries. The complete suite of R/3 applications is available in 24 languages. While it complies with International accounting standards such as GAAP and IAS, it also caters to local requirements (Sadagopan, 1999). SAP has developed an extensive library of more than 800 predefined business processes, spanning each functional software requirement. These processes may be selected from the SAP library and included within installed SAP applications, after tailoring the application solution to suit the user's exact requirements (Leon, 1999). PeopleSoft solutions Established in 1987, PeopleSoft has the industry's only complete ERP solution that is built around Supply Chain Optimization. This company provides e-business and analytical applications for human resource management, financials, distribution, manufacturing and SCM along with a range of industry specific solutions. The portfolio of products includes PeopleSoft 7.5, PeopleSoft Materials Management, PeopleSoft Manufacturing, PeopleSoft HRMS, PeopleSoft SCM and People Tools. PeopeSoft also provides a complete commercial solution for service industries. The company also offers PeopleSoft Select, a complete packaged solution including software, hardware and services, to address the needs of medium-sized organizations. PeopleSoft has entered the Indian market through an alliance with PricewaterhouseCoopers. Oracle applications Founded in 1977, Oracle corporation, California, offers database tools and application products, consulting, education and support services. Oracle 8i, its latest version of the database is the database for Internet computing. Oracle Applications is the only suite of 7
enterprise business applications that follows the Internet computing model. Each of the modules for financials, human resources, manufacturing, supply chain and front office automation is Web enabled. The architecture enables companies to shift complex applications from the user's desktop onto centralized professionally managed severs. This drastically reduces the cost of deploying and administering software. This enables the applications to be deployed over Wide Area Networks more easily than in the client/server model. Oracle applications are used in over 76 countries and is available in 29 languages. It comprises of over 45 software modules falling into the following categories: Oracle financials; Oracle human resources; Oracle projects; Oracle manufacturing; Oracle supply chain and Oracle front office. JD Edwards oneworld In March 1977, at Denver, Colarado was established the company JD Edwards World Solutions. JD Edwards is a leader in providing Idea to Action enterprise applications that encompass software for finance, SCM, production and human resources. The products are ActivEra and JD Edwards OneWorld. No matter how good an application one has, it requires some customization to suit the business requirements. With OneWorld one has a powerful toolset to make these alterations. The different modules that are available from JD Edwards are: foundation suite; services suite; manufacturing suite; financial suite; energy and chemical suite; customer service management suite; government/education/not-for-profit solutions and utility and energy solutions. Baan IV The company Baan founded in 1978, in Netherlands, excels in the providing intra- and interenterprise business software solution. Baan IV provides a scalable architecture making it possible for large, mid-size or small-scale businesses to cost-effectively implement the Baan Software. It runs on most popular environments and is also Web enabled, giving enough flexibility to the companies to gain a competitive advantage through its implementation. In India it has focused extensively on the manufacturing sector and on small and medium enterprises (SMEs). The company's flagship product BAAN IV, is a suite of open-systemsbased software application for the management of enterprise information. The foundation for the product is Orgware. With Orgware, Baan is enabling a new paradigm called Dynamic Enterprise Modeling (BaanDEM), which ensures that enterprise applications are in close 8
alignment with an organization's changing processes and business model. BaanDEM provides a business view of the enterprise via a graphical process, tailored to the customer's needs. BaanERP, a successor to Baan IV consists of the manufacturing module, finance, project and distribution module. MFG/PRO MFG/PRO is the flagship of QAD, an ISO 9002 company that began operations in 1976. MFG/PRO, the company's ERP solution, is most suited for manufacturing processes entailing batch process, make-to-stock, configure-to-order, and respective manufacturing
environments. The other products developed by QAD are Qwizard, On/Q, decision support and service/support management. MFG/PRO is available in 26 languages with more than 3,600 installations over 82 countries. While MFG/PRO offers global SCM solution, On/Q manages the extended supply chain applications. BPCS Client/Server V6 Founded in December 1981 in Chicago, System Software Associates, Inc. has presence in more than 91 countries today. The company's product line is the BPCS Client/Server V6 that has successfully reduced time-to-benefit implementation cycles to 6-12 months in comparison to an industry average of 12-24 months. At the core of BPCS Client/Server is its object-based architecture – distributed object computing architecture (DOCA) that has been specifically designed for ERP in industrial sector companies. DOCA provides inherent flexibility that helps in rapid reconfiguration of BPCS Client/Server applications. These allows organizations to quickly and easily alter the responses of companies to change in market trends.
6. The ERP market
During the last few years, the ERP market witnessed considerable growth rates driven mainly by the Y2K crisis. Most ERP packages were Y2K compliant. ERP companies including SAP, PeopleSoft, Oracle, Baan, etc., recorded consistent growth in revenues, well above 20 per cent (Mraz, 2000). However, recent trends in the industry indicate a slowdown in the traditional ERP market. The slowdown can be attributed to the saturation in the upper-end market and the stagnant 9
world economy. Growth rates, which were as high as 40 per cent per annum, have considerably decreased to around 15-20 per cent (Table V). However, the market is also witnessing new avenues like the emergence of SMEs with a turnover of $50-500 million as a major ERP spender, with significant demand for module specific implementation. As the Fortune 500 market for product license revenue becomes saturated, larger ERP firms are shifting their focus to the middle market. However, the margins are going to be sparingly coupled with low transaction size. The other areas like SCM, customer relationship management (CRM), extended ERP, and Web enabled ERP are still evolving. The coming of multinational corporations on domestic soil has forced suppliers and distributors to automate business processes. The survival of 100,000 odd SMEs that dot the Indian business scene would depend on how quickly they are able to integrate their operations with one another and the Internet. ERP segment is especially gaining popularity in the SME segment because of the importance of CRM, SCM, and B2C in the business environment. The software and implementation cost of SAP, Oracle and Baan, normally run into crores of rupees. Sensing the presence of SMEs in India, some Indian software companies have come up with affordable branded solutions. Matrix ERP is one such software developed by a Calcutta based software company, Matrix Infosystems Ltd. The product has been priced at Rs 7-12 lakhs. Other brands like Maarsman Evolus and Ebizframe range between 8 and 12 lakhs. However, the big operators seem to have woken up to the potential market of the SME Sector[1]. They are now offering individual modules at prices that are not too steep for small companies (Chakraborty, 2000).
7. Failure
The implementation of ERP has come with its share of failures too. Some of the classic “Disasters” has been that of Volkswagen, Whirlpool, Hershey Foods and Fox Meyer. Flawed implementation of a new ERP system at Volkswagen, resulted in significant delays in shipment of parts. This piled up semi-finished product inventories to costly levels (Jeffery and Morrison, 2000). Massive distribution problems in Hershey Foods resulted due to the flawed implementation of SAP's R/3 ERP system. It affected shipment to stores during peak sales period (Halloween and pre-Christmas) resulting in 16 per cent drop in earnings. Another example is that of Whirlpool, where an ERP implementation crippled the shipping system, leaving stock loaded on docks, and not delivered to customers for a full 8 weeks. A Texas 10
based pharmaceutical distributor, Fox Meyer Drug, actually collapsed following a faulty implementation of SAP R/3 implementation. The company's bankruptcy trustees filed a $500 million lawsuit each, against the German ERP giant and the co-implementor Andersen Consulting (Wheatley, 2000). But most of these failures have been reported in the first generation implementations that were internally focused with no specific business focus (Jeffery and Morrison, 2000). Increasingly it has been seen that poor training for the broad user community of managers and employees underlies ERP disasters. Companies often mistake ERP implementation to be a purely technical issue. In fact almost 50 per cent of all ERP disasters are not technical, but people and culture related. At A-dec, a private dental equipment manufacturer, situated at Newberg, Ore, Baan system was used for integration. The managers were taught how to key in data, but were not oriented to the process or to the importance of getting the data right. Orders were entered incorrectly not knowing that making changes would be a difficult process once the manufacturing had started. The instinctive reaction of the managers in such a situation is to circumvent the system and get the product delivered to the customer. This would further add to the problem. Not only is the unfulfilled order in the system, but the inventory logged in the system is also incorrect. Making a mid-way correction, the company spent close to $5,000 per head for training. This amounted to nearly 30 per cent of the total project cost while the average is around 8 per cent. A classical situation of high costs and low returns (Wheatley, 2000).
8. The future
All through the years, ERP vendors; SAP, Oracle, JD Edwards and Baan, helped companies wire their warehouse, manufacturing lines and finance departments. This was to aid the managers in their decision making by generating a series of reports that gave crossdepartmental information. The new challenge to these companies has been in the form of the Internet companies like Oracle (Oracle8i), Ariba, Commerce One and i2 Technologies that have developed software, to link a company to the Internet. This would bypass the requirement of ERP, as unlike the ERP software that is hosted on SAP's server, this Netbased software resides on a server on the Net. In other words, all departments, dealers of a company get wired at one go as they can access whatever information required from the Net
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(Surendar, 2001). SAP, the leading software vendor unveiled mySAP.com, SAPHostings and SAPMarkets to counter this attack by providing an e-commerce solution (Glasgow, 2000). Again, recognizing the need to develop better products, vendors of ERP have been busy adding newer products to their portfolio. BAAN has already introduced concepts like intelligence resource planning (IRP) and money resources planning (MRP)-III; and has acquired companies for strategic technologies like Visual Product configuration, Product Data Management and Finite Scheduling, to counter the threat (Shankaranarayanan, 2000). As large enterprises become saturated, ERP vendors are now turning to small business clients. Some of the modifications being made for the new clientele are lowering of price; softwares with reduced functionality; increased speed of implementation and usage of userfriendly platforms like Microsoft Windows NT. ERP vendors are now focusing their effort on making the implementation process easier. Accelerated SAP (ASAP) and Fast Forward by Oracle, are some of the steps taken by the vendors in this direction. These help in speeding up implementation and reducing costs. Baan has offered a software called Orgware that helps automatically configure the software to suit specific operational needs, thus reducing implementation time. Most ERP vendors are now developing specialized variants of their applications for clients like the government; healthcare sector; financial service sector and retail environments. Customer relationship management (e-CRM) is another relatively new area that ERP vendors have ventured into, in a major way. e-CRM encompasses the steps that an organization has to take to build and maintain good customer relationships. The e-CRM activities are generally undertaken by the sales, marketing and service professionals. The whole process of e-CRM can be divided into three phases. 1. Sales force automation (SFA). This includes the prospecting of potential customers and general sales operations. 2. Enterprise marketing automation (EMA). The main objective here would be to optimize customer contacts; making sure that the right message gets out at the right time via the right channel.
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3. Customer service management (CSM). Here one would satisfy ones customers by responding to their requests for information, repairs, complaints, and/or any other questions within the shortest time possible (Log Metrix, 1999). The best example that one can quote is that of Ford, that has used e-CRM to its advantage. In the traditional processes, a fleet customer selected a specification, then a dealer took the specification and entered it into a complex order entry system. A problem arose when the order could not be built to the original specification, requiring changes to be made. Again, on the Internet, Ford could legally present only the manufacturer's suggested retail price, and not the price negotiated by the fleet buyer with the dealer. To streamline order configuration processes, Ford used a sales configuration application from Trilogy Software that enabled dealers and fleet buyers to work together over the Internet when specifying cars. It also enabled the dealers to maintain value-added content and pricing rules as negotiated. This new process enabled streamlined product configuration and “e-order” verification, which resulted in improved dealer relations and a reduction in the order-to-delivery cycle of between 1 and 14 days (Eisenfield and Close, 2000).
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9. References
i) http://erp.technologyevaluation.com/ ii) http://www.iiitb.ac.in/ss/erp-faq/main4pg1.htm#1 iii) http://images.google.co.in/imgres?imgurl=http://www.emeraldinsight.com/fig/029 1040706007.png&imgrefurl=http://www.emeraldinsight.com/Insight/ViewConten tServlet%3FFilename%3DPublished/EmeraldFullTextArticle/Articles/029104070 6.html&usg=__LgurE0DXimWd7xlVrWYWWqaxQu4=&h=606&w=1769&sz=6 8&hl=en&start=1&um=1&tbnid=v3TMhmumRJ1dyM:&tbnh=51&tbnw=150&pr ev=/images%3Fq%3DStatus%2Bof%2BERP%2Bin%2BIndia%26um%3D1%26h l%3Den
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10. Appendix
Table ITotal ERP revenue (actual and forecasted) – ($ Billions)
Table IIMajor ERP players and their world market share
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Table IIIMajor ERP players and their Indian market share (per cent)
Table IVA comparison of four major ERP packages
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Table VGrowth rate of ERP in India
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