Planning the next wave

Vendors claim the dark ages of ERP implementations plagued by problems are well and truely in the past. With the current generation of software products being deployed organisations can focus much more on developing new functionalities

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By  Published  November 10, 2006

HISTORICALLY, enterprise resource planning (ERP) has a reputation for being one of the more complicated and expensive systems to implement. This is hardly surprising — by its nature an ERP system is going to be pervasive across wide areas of your organisation, so it can become a “betyour- business” project to rollout.

Integrating all departments and functions across a company onto a single, integrated software system is a tall order, yet that is just what ERP aspires to achieve.

Unsurprisingly, “horror stories” abound of ERP projects going wrong — both internationally and here in the region. For instance, a survey conducted by polling firm YouGov earlier this year in the GCC region found that 71% of senior business managers were not satisfied with their ERP systems.

Cleaning up ERP’s notorious past has become the vendors’ major challenge as they attempt to reinvent the wheel and address the issues that have plagued previous projects.

Thankfully, with the current generation of ERP software, there are fewer integration problems, allowing the vendors to focus more on developing new functionalities designed to help organisations better manage their various departments.

Today, some key trends are shaping ERP’s future. These trends reflect not only how well vendors have overcome previous challenges but also how ERP is adapting to developments in technology and the demands of the market.

“There are many trends that we have seen. Today, trends are business-oriented and industryfocused trends. There are three major trends happening in the Middle East. Most of the clients in the ERP space are looking at deep and adaptive global processes. The second trend is they are looking more at deep and adaptive industry processes that provide greater insight and control, and the third is superior ownership of the experience primarily related to technology and total cost of ownership,” says Joseph Chamseddine, director of applications, Oracle Middle East and Africa.

“Organisations are looking at deeper functionality in specific verticals and look at the way businesses have matured in the Middle East over the last five years. What you will find is that organisations have to become a lot more competitive and want to work with systems that have deep-end functionality around specific verticals rather than looking at generic capabilities of ERP systems,” comments Kalpesh Desai, chief operating officer at 3i Infotech.

Another trend that might be added to these is the increasing consolidation in the ERP software sector itself.

Oracle has been widely seen as leading the way on this with the software giant’s multi-billion dollar capture of firms such as PeopleSoft and Siebel, as well as a host of smaller deals.

However rival SAP has also made a number of acquisitions in this time frame, and we have also seen other firms consolidate.

Infor — formerly known as Agilisys — has built up a formidable stable of ERP players through a series of acquisitions, culminating in its capture of SSA Global for US$1.4 billion earlier this year. With SSA Global having itself been on a shopping spree of smaller ERP players for a number of years, the combined company is now the third largest firm in the sector, albeit a distant third behind SAP and Oracle.

Single instance

This increased consolidation in the market is helping to both serve and drive demand from enterprise users for tighter integration between their business applications.

The need for tighter integration of supply chains, along with the increasing demand from enterprise users for business processes to work seamlessly, is driving demand for ERP software that will work with other systems, such as customer relationship management (CRM) and business intelligence (BI).

Oracle’s capture of Siebel Systems, for instance, adds to the firm’s offerings in both the CRM and BI space; two areas where Siebel was particularly strong and Oracle was perceived to lack functionality.

Integration of various business processes with ERP, however, is not in itself new. The reality is that ERP and CRM have been quietly converging for some time now, with some ERP vendors staking claims in the CRM marketplace since the late 1990s.

The two disciplines share several common business applications, such as web-based product availability and delivery information, field configuration and onetouch inventory. Blending technologies from both ERP and CRM can provide users real-time links to customer information, such as finance, inventory, order status, billing and other business intelligence, in order to deliver a consistent customer experience.

“A lot of companies are investing in integrated applications.

They do not see ERP by itself anymore. They are looking at a suite of products, normally [a combination of] ERP, CRM and human resource (HR) modules.

In the past, we were struggling with selling the idea to companies when they were buying HR applications separately and then trying to integrate them with our ERP system. Nowadays, we are finding a lot of companies coming to us because they specifically want to have an integrated suite of products,” says Marc Van der Ven, managing director, Sage Software Middle East.

“Customers are looking for a single source of truth of information, meaning that they are moving away from so-called CRM or ERP into more e-business suite of applications that enable them to use single instance to store information and be able to standardise their business processes,” claims Oracle’s Chamseddine.

The same holds true with BI as well, Van der Ven claims. “There is always a big demand for business intelligence applications.

People are now implementing large, international ERP systems and they are finding that there is a lot of information available to them and they need to start analysing that information, instead of spending their time and effort in actually upgrading their system. They are spending their time now using this information that these systems are generating,” he explains.

“Companies today are becoming international. They are no longer bound by geography. International companies are required to consolidate their organisation and to be able to provide daily performance measurements,” adds Chamseddine.

“This is becoming a key issue for them, especially in the Middle East where we are seeing that companies are spinning off outside their country of origin, meaning that they operate in the UAE but they have business in Saudi Arabia and Kuwait. They want to be able to provide instant key performance indicators on their operation side to know their revenue, their expenses, how they operate, and what problems they need to interact with immediately.”

The need for a consolidated system, according to Dwight Mitchell, president and owner of Mitchell & Associates, an ERP consultancy specialist, also stems from the fact that many local companies have diversified business interests.

“There are a lot of acquisitions and consolidations [in the region].

Companies form diversified groups. They will start out in one space, and the next thing you know they have ten different companies doing ten different things. What many organisations are doing as far as ERP is concerned is that they have several different groups so what they do is consolidate them using one ERP solution to manage all of their companies. That is a major trend in the Middle East,” Mitchell explains.

There are some compelling reasons for carrying out such a project now. For one, compliance regulations, such as the Sarbanes- Oxley Act and Basel II, require organisations to submit financial reports with clear and reliable audit trails. Having a single source of data will enable companies to store their financial data in one application and be generated from one source, which will eliminate consolidation errors and greatly reduce the time it takes to close the books.

“To be able to adapt to the latest and most efficient business processes that are available today, such as Sarbanes-Oxley, internal auditing, workflow business driven, and all of these have to be out-of-the-box built-in business processes. They do not need to go and implement, customise, reconfigure and all of that. They want to be able to adapt to out-of-the-box business processes,” notes Chamseddine.

“Companies are looking to apply international standards more, both from an ERP and HR perspective because there have never been any real standards implemented in this region, especially for HR. Now that the market is opening up and becoming more competitive, they need to have best practices at all levels of their company and that includes HR, too,” Van der Ven adds.

Having a single data source could also create new revenue opportunities and minimise costs. Companies would be able to run reports that show crosspromotion opportunities, places where they could reuse equipment or leverage purchasing power. Analyst firm AMR estimates that for a single-instance order management module, companies need to set aside a budget of US$4.3million as opposed to the US$7.1million they will need for multiple instances.

More importantly, a single instance is now more realistic than it was in the past. For one, storage solutions are much cheaper than five years ago and, thanks to the evolution of the internet, connecting, even across oceans, is no longer a significant problem.

While implementing a singlesource scenario will still take time and money — AMR believes that moving to a single instance will cost companies US$7million to US$12million for every billion dollars of revenue, and that projects will still take from one to three years — experts, analysts, consultants and IT managers agree that single instance is finally possible.cost companies US$7million to US$12million for every billion dollars of revenue, and that projects will still take from one to three years — experts, analysts, consultants and IT managers agree that single instance is finally possible.

Broader reach

Modern supply chains dictate the need for companies to expand access of their ERP systems to new groups of users. After all, business processes usually extend beyond the confines of a single company, and in the quest to improve supply chain efficiencies; it is inevitable for an enterprise to share information more openly with third-party organisations.

“Today, we have seen as a requirement the multi-channel interactions, where they are bridging the suppliers, the customers and the employees under one ebusiness suite to provide access to the business process, to contribute to the decision process and to provide up-to-date information,” says Chamseddine.

“Organisations have started to focus on what they do best, and have moved away from looking at managing their own warehouses and have moved into looking to outsourcing their warehousing and logistic facilities to third parties. The deepend functionality that they will require from an ERP system is essentially to look at allowing some parts of their traditional organisation to be chunked away to third party logistics companies for example,” adds Desai.

ERP vendors are capitalising on other technologies to improve their offerings on this front. Various web, wireless, and mobile features are now being ingrained within the latest ERP versions, allowing companies to open up their ERP systems to new sets of users, such as business partners and mobile users.

“The internet has changed the whole game in many ways.

Once you can make your applications available through the web, either through hosted applications or just through your own internal deployment, it

“A lot of companies are investing in integrated applications.


makes your whole deployment a lot more effective and cost efficient.

It also starts to show the difference between international vendors and small developers who develop homegrown systems for their clients. The internet gives you a lot of flexibility, gives you web services, and gives you all kinds of things that you can utilise,” comments Van der Ven.

Intense competition is pressuring companies to be able to deliver real-time access to information to clients and suppliers.

Wireless networks and handheld devices are making it possible to connect users, such as field-sales representatives, remote employees and travelling executives to their corporate ERP systems to obtain whatever information they require.

“With wireless and mobile technologies, users will have a number of different ways of viewing the application. It is the delivery mechanism that has changed, rather than the fundamental ERP business processes.

A user will be able to post a purchase order on their mobile phone or WAP phone or wireless connection just as easy as they would be doing it on a PC. Users are being empowered more because they can use the application wherever they want to rather than having to go back to a PC to do it,” says Ian Johnson, sales manager at IFS Middle East.

The infusion of such technologies has also led to a new breed of users as well, according to Desai. Self-service usage is another wave influencing ERP design, with the public sector as one of its main adopters. For example, selfservice functionalities enable both government employees and the public to get information and make requests easily, wherever they may be.

Along with web portals, vendors are marketing wireless ERP access as affordable gateways to public access as it allows citizens to utilise self-service features through their mobile phones and other web-enabled handheld devices.

Self-service is also a trend that is making grounds in the distribution arena, adds Desai.

“The other major shift in the distribution business is selfservice functionalities. Because of the kind of volumes that we are now facing, you might want to consider self-service capabilities to be brought in to the ERP space, which are concerted shift that most distribution organisations are bringing about, where they are allowing their customers and their principals to self-serve all content, whether it is self-serve on service or calls or availability of stocks,” Desai goes on to explain.

SOA ERP

Another key technology transformation that will have a large effect on reshaping the ERP market is the move towards service-oriented architecture (SOA). While the technology behind

“People are starting to move across to a pure web architecture.


behind SOA is complex, it promises to make life simpler for enterprise users, as it essentially consists of reusable software modules, making it easier to deploy and manage software applications.

Further, with SOA the user can focus on the type of service that needs to be delivered, rather than on the underlying technology.

According to analysts, SOA will change software from being an inhibitor to an enabler of business change. The introduction of SOA, they claim, will mark the shift from packaged software to subscription services and from monolithic suites to composite applications.

“There is a move towards a service-oriented architecture,” confirms Johnson. “This is a great ERP trend, where you effectively can plug and play components from different software providers, and it has moved towards making technology pay for you rather than you being governed by an ERP or an IT system,” he continues.

“People are starting to move across to a pure web architecture.

We are trying to get our customers in the region to adopt the web architecture format.

And it is not just us; SAP is doing it, as well as Oracle. Everyone is trying to become completely web-enabled. It’s just getting the users on it,” adds Mitchell.

A typical SOA-based ERP system consists of a multitude of software components that send messages to one another constantly.

These components, called “services”, can be distributed across geography, across enterprise, and can be reconfigured into new business process as needed.

The services are “loosely coupled” allowing for much more flexibility than older technologies with respect to re-using and re-combining the services to create new business functions both within and across organisation.

Introducing SOA to ERP systems means that future ERP applications will be easier to deploy and integrate with third-party applications.

For IT departments, that is good news because it will enable them to quickly provide new functionalities to business units requiring such service.

Organisations that are looking at adding features to their core applications will be able to do so in a breeze and select the components they want from a richer menu, contrary to installing the whole application even if it meant that most of them would be idle except for the core function.

“What you tend to find is that we now tend to drive solutions that are vertical specific so there would be an oil and gas solution, an aerospace solution or a defence solution. IFS is certainly going that route and we tend to provide industry-specific solutions based on our ERP,” comments Johnson.

“We find that having a component- based ERP, where companies only select the ERP components they wish to have, we can offer a very broad solution to a vertical industry but we can also add additional modules on top of that if they require,” he adds. One of the most heralded advantages of SOA is its capability to rehash existing IT resources to complete other tasks. The tasks may be brought about by many factors including efforts to make existing processes more efficient, remove internal duplication of data or processing, meet regulatory compliance, extend IT functionality and offer new services to customers — or a vast array of other drivers.

For ERP, it is likely that there are specific sets of rules and policies about how enterprise resources can be used and tasked.

If some of these rules are based on the technological limitations for use of enterprise resources, adopting some form of SOA such as web services may remove those technical constraints.

ERP calls for constant modifications and upgrades. While vendors have successfully overcome the problems of the past, their work is far from complete.

The encompassing nature of ERP requires that it should be able to cope with the changing market trends as quickly as possible. After all, ERP is the engine that powers an organisation, and like any other machines, it needs to be consistently well oiled and and fine-tuned in order to ensure that business processes are running smoothly and that you are always ahead of the competition.fine-tuned in order to ensure that business processes are running smoothly and that you are always ahead of the competition.

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