Questions related to ERP

ERP will ultimately affect everyone in the organization. An ERP implementation represents a major organizational intervention. The process view of ERP would remove many of the "kingdoms" in the organization. This would lead to a shift in power centers; naturally ERP represents a major change. Managing change of such high order cannot be done without top management commitment. ERP exercise is also a major exercise and can cost anyway from several lakhs to several crores of rupees. Such large resource requirements also necessitate commitment from top management. Last, but not the least, ERP implementation is a long process, generally running into several months. Keeping an activity alive for such long duration would be nearly impossible without top management commitment.

The top management commitment in ERP is not limited to writing a big cheque, which is very much necessary. But it has to go much beyond that. ERP exercise in India represents a paradigm shift in the way many CEO's run their corporations. ERP software implementation vendors often make it mandatory for the chief executive and his / her team to spend a full one week listening to ERP consultants. Such an exercise is unheard of at least in the Indian corporate history. The core committee of ERP needs champions who are well respected, very knowledgeable and often impossible to spare for any organization.The success of ERP implementation needs the full-time attention of these champions who must be drawn from the key functions and detained for ERP project implementation for a long period of six to nine months. ERP project cannot be managed by people who "can be spared"; it must be managed by the "indispensable" personnel. Top Management commitment must ensure the release of such key people for the ERP core committee. The ERP software often brings the best practices from the industry. To benefit from such best practices, existing business practices may have to be altered. Top management commitment should include the political will to implement such changes.

Why is change management necessary for ERP?

ERP being a major initiative costing significant amount of money, lasting several months and ultimately affecting everyone in the organization, change management is the key for the success of any ERP project. ERP software brings along with them some of the best practices. Implementing such practices would need change. To profit from ERP such change must be managed. That is the reason ERP needs top management commitment.

Is ERP too expensive for Indian Companies?

It is a loaded question. The cost of ERP software should not be viewed as an expense. It is an investment towards an ability that provides better profitability, market share or customer service. Of course, the up-front cost of ERP software is very high. Most software pieces used by the corporations for commercial applications never had price tags of crores of rupees which ERP software carry. ERP decisions are a "high-risk high reward" decision. The view that ERP is expensive only looks at the risk but not the rewards.

The challenges of introduction of ERP in India are in general the same as in other countries. This includes change management, organizational intervention, shifting from function view to process view and faith in package software in the place of custom-built software. The special challenges in India arise from the existence of large IS shops inside many Indian corporations who may view ERP as a threat to their very existence. The Indian software companies also see a threat to their project-based software business in ERP.

Traditionally organizations in India depended more on IS professionals rather than business professionals for commercial software developments. ERP places more value on domain knowledge of the functions rather than IT skills. This calls for a mind-set change, which is a challenge. Last, but not the least, is the lack of communication infrastructure, which is often necessary to implement ERP. The IT infrastructure needed for ERP implementation is orders of magnitude more than the infrastructure needed for the legacy application. This again calls for a mindset change.

It is difficult to calculate return on investment for ERP decisions, though several successful installations of ERP had dramatic returns on investment. For example, Microsoft estimates that the investments in ERP will be paid back by way of better performance in flat two years. It must be realized that the ERP is an enabler. ERP gives agility to organization, which can be exploited to improve profitability, market share or customer service. Without ERP, the organization may not be in a position to handle larger business or provide faster response to customers.

The results from enlarged business or faster customer response should pay back for ERP investment. It is predicated on the fact that the organization would leverage the agility towards such corporate goals. ERP helps in pursuing such goals often successfully. But mere ERP implementation does not necessarily translate to benefits. Better health enables a human being to do things, which would have been difficult, if not impossible, without such sound health. But if the individual does not make use of his improved status towards the pursuit of any goal, he or she is not capitalizing on the improved health. ERP must also be viewed as a way of providing a better health to an organization.

This is a loaded question. Today, a large number of middle managers, supervisory staff etc, are busy chasing information, making queries, preparing reports and checking or verifying compliance to simple rules. It could be the preparation of the list of employees who are due for retirement next year or verifying whether an applicant for earned leave has enough leave to his credit. With a successful ERP in place, information will be freely available and any casual user can very easily generate any ad hoc queries or reports. The system will automatically check for the compliance for most of the standard rules. As such, a number of routine jobs will disappear.

However, with the information system in place, many of the middle level managers can be empowered to perform far more interesting analysis, develop insights and suggest innovative schemes for improvement. Often these are the real benefits are ERP. If an organization is not imaginative enough to empower people to perform such analysis, obviously ERP can be discredited with creating unemployment. The Computerized Railway Reservation System in India may serve as a good example. With the networked computer terminals, one can manage the issuing of the tickets with fewer staff. However, today we have more railway reservation clerks than what we had ten years back.

The average counter hours across the country have increased from 6 hours a day to 12 hours per day. We are able to cope with much larger number of passengers, thanks to the population growth. An average user is also able to make reservations from "any place to any place" from any one of the terminals, significantly improving service quality. In a way Railway Reservation System has taken away a few jobs but created many more jobs. In all such cases looking at the head count may be an incorrect way to approach the problem. The goal must be to provide better quality service and better quality of jobs.

What is the contribution to ERP from India?

The most valuable contribution to ERP has been the launch of the world class ERP Product Marshall from Ramco Systems. Developed in late 80's using the technology of the 80's (unlike many other ERP Products, which use 70's technology), Marshall is a visionary product and represents the first successful large-scale software product from India. Hopefully India will also contribute to courseware development and supply quality manpower to the world at large. BaaN has plans to do considerable product development from its Hyderabad Development Center. Over the years world-class ERP software development may happen right in the country.

The set of activities through which ERP is implemented in an organization constitutes the ERP life cycle. This can be compared to the well developed System Development Life Cycle (SDLC) in the traditional Structured System Analysis and Design (SSAD). Typical ERP project consists of the following steps:

Step 1: ERP readiness assessment
Step 2: Preparing the organization for ERP
Step 3: ERP Feasibility Study
Step 4: Process modelling and documenting the "AS IS" processes & "TO BE" processes (along with BPR)
Step 5: Detailed plan for ERP implementation (includes ERP software selection, selection of implementation partners, implementation methodology - "Big Bang" or Modular Implementation - and the final and precise extent of implementation)
Step 6: Detailed implementation including development, quality assurance and production system
Step 7: Preparing to "go live" including data migration
Step 8: Going live
Step 9: Performance assessment, documentation, training (continues in early stages also) and future plans.

Is there a good time to "go live"?

Yes. Most implementations of ERP include financial module. Every organization has a financial (fiscal) year both for internal use as well as far legal / governmental consolidation. Since the account books must be closed and financial reports prepared (including the balance sheet and the profit and loss statement) for the financial year, most ERP implementations try to synchronize their "go live" date with that of the financial year. (April 1 in India). If for some reason it cannot be on (April 1), many organizations "go live" on October 1 at the end of the half-year. Technically ERP software doesn't impose any restrictions. Any day is good enough to "go live" as long as it is not " tomorrow"!

Why do ERP consultants charge a high fee?

ERP consultants operate in the "high risk high reward" area. Contemporary ERP software are complex pieces which need years to master. ERP consultants invest significant amount of time and effort, which need to be rewarded. ERP Consultancy is also given to the highest levels of management often at the level of CEO. CEO level consulting cannot come cheap. A well-implemented ERP can translate to crores of rupees of saving for an organization justifying once again the high cost of ERP consultants. ERP consultants also combine a rare combination of communication skill, domain knowledge and software expertise, once again justifying the high cost. Last, but not the least, ERP sales are growing fast and the demand for ERP consultants is all time high. The gap in supply-demand also explains the unusually high cost of ERP consultants.

The Big Six Consulting houses are Anderson consulting, Ernst & Young, Price Waterhouse, Coopers & Lybrand, KPMG and Delolite & Touche. With the recent merger of Price Water House and C & L into PWC the big six will become big five from July 15th 1998. All of them are actively engaged in ERP consulting. PWC's ERP business will be the largest in the world with over 9,800 consultants.

Over the years, the big six consultants have accumulated probably the richest ERP implementation experiences through thousands of ERP installations worldwide. Almost all of them have developed their own methodologies of implementation that add significant value to the ERP software. Many of them have full-fledged development centers, labs, proof of concept centers and competency centers in many countries around the world. These centers offer environments for potential clients to test run, fine tune and simulate their implementations. The consultants also have developed excellent course-ware and training materials of immense value in the ERP area. In short the big six consultants are the "bells and whistles" of ERP industry.

What is the role of process-modeling tools ERP implementation?

Process Modelling provides a means to map the organization processes and visualize it in a graphical manner. This helps in communication, clarification and documentation of the "AS IS" and "TO BE" processes. Process modelling can be used to reinforce the central theme of ERP, namely, a shift from function orientation to process orientation.

There is no precise algorithm that can measure the fit for an organization to particular ERP software. One generally goes by experiences of similar organizations that have implemented ERP. In general, every ERP software has exceptional strengths in some area. It is better to stay with that ERP software which has special strengths for your area. For example, BaaN & Oracle have outstanding manufacturing modules; People Soft and Marshall have outstanding HR modules.

If your core business centers around one of these modules your choice becomes easier. An academic way to evaluate the fit is to carefully study all the business processes that characterize your business and to look for matching business processes that are supported by particular ERP software. Often such an exercise would call for several man-years of effort. The skill set needed for such an exercise may not be easily available within the organization. Getting an outside consulting group to do this exercise may be very expensive. Often most organizations decide the ERP software vendor based on the broad needs of the industry in which they operate and the support offered by particular ERP software for that industry.

Are ERP products only for the "big guys"?

Today the cost of ERP software, the resources needed to run the ERP software and the fee charged by consultants to implement the complex ERP software together make ERP only for the big corporations. Recently all the large ERP software vendors through their industry solution focus have started addressing the medium companies as well. Small enterprises (small in global terms typically imply less than 50 crores business) cannot afford to go for ERP solutions using leading edge product. The situation will change very soon but estimation of times scale is difficult.

Do ERP software provides generic report writing software?

Yes. Every ERP software product can be customized to generate large list off reports needed by an organization. In fact the ERP software goes one step further by providing an ability to generate fairly complex reports "on the fly" even by end users with very limited exposure to IT.

What is the size of the Indian ERP market?

The Indian ERP market is around 100 crores and growing at the healthy thirty percent annual growth. All the leading industrial houses are getting their act of ERP implementation together. There will be a major ERP implementation exercise by the public sector corporations in the next two years.

What is the expected ERP market scenario in the next five years?

The Global ERP Market is expected to grow to about 20 billion USD by the turn of the century from its present level of about 7 billion dollars. The leading players such as SAP, Oracle, BaaN, People Soft, Ramco Systems are likely to continue to dominate the ERP market. In future, more and more of the installations in future are likely to use industry specific solutions rather than the generic "plain vanilla" ERP solutions. The low end of the market is likely to experience a shake out in the market.

Who is the market leader in ERP?

Undoubtedly 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}

There is no easy way to segment the ERP market in a precise manner that can be readily 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.

Is ERP too expensive for Indian Companies?

It is a loaded question. The cost of ERP software should not be viewed as an expense. It is an investment towards an ability that provides better profitability, market share or customer service. Of course, the up-front cost of ERP software is very high. Most software pieces used by the corporations for commercial applications never had price tags of crores of rupees which ERP software carry. ERP decisions are a "high-risk high reward" decision. The view that ERP is expensive only looks at the risk but not the rewards.

The challenges of introduction of ERP in India are in general the same as in other countries. This includes change management, organizational intervention, shifting from function view to process view and faith in package software in the place of custom-built software. The special challenges in India arise from the existence of large IS shops inside many Indian corporations who may view ERP as a threat to their very existence. The Indian software companies also see a threat to their project-based software business in ERP.

Traditionally organizations in India depended more on IS professionals rather than business professionals for commercial software developments. ERP places more value on domain knowledge of the functions rather than IT skills. This calls for a mind-set change, which is a challenge. Last, but not the least, is the lack of communication infrastructure, which is often necessary to implement ERP. The IT infrastructure needed for ERP implementation is ord

This is a loaded question. Today, a large number of middle managers, supervisory staff etc, are busy chasing information, making queries, preparing reports and checking or verifying compliance to simple rules. It could be the preparation of the list of employees who are due for retirement next year or verifying whether an applicant for earned leave has enough leave to his credit. With a successful ERP in place, information will be freely available and any casual user can very easily generate any ad hoc queries or reports. The system will automatically check for the compliance for most of the standard rules.

As such, a number of routine jobs will disappear. However, with the information system in place, many of the middle level managers can be empowered to perform far more interesting analysis, develop insights and suggest innovative schemes for improvement. Often these are the real benefits are ERP. If an organization is not imaginative enough to empower people to perform such analysis, obviously ERP can be discredited with creating unemployment. The Computerized Railway Reservation System in India may serve as a good example. With the networked computer terminals, one can manage the issuing of the tickets with fewer staff. However, today we have more railway reservation clerks than what we had ten years back.

The average counter hours across the country have increased from 6 hours a day to 12 hours per day. We are able to cope with much larger number of passengers, thanks to the population growth. An average user is also able to make reservations from "any place to any place" from any one of the terminals, significantly improving service quality. In a way Railway Reservation System has taken away a few jobs but created many more jobs. In all such cases looking at the head count may be an incorrect way to approach the problem. The goal must be to provide better quality service and better quality of jobs.

What is the contribution to ERP from India?

The most valuable contribution to ERP has been the launch of the world class ERP Product Marshall from Ramco Systems. Developed in late 80's using the technology of the 80's (unlike many other ERP Products, which use 70's technology), Marshall is a visionary product and represents the first successful large-scale software product from India. Hopefully India will also contribute to courseware development and supply quality manpower to the world at large. BaaN has plans to do considerable product development from its Hyderabad Development Center. Over the years world-class ERP software development may happen right in the country.

{By 80's technology does it mean technology created in research labs in the80's or technology commercially available in the 80's. If it means commercially available, Ramco Marshall is on 90's technology currently}

How to prepare an organization for ERP implementation?

There is no easy magic through which one can prepare an organization for ERP implementation. Exposing the top management to the benefits of ERP through the real world case studies, sharing of experience by other corporations that have successfully implemented ERP and creation of awareness is the first step. Convincing the top management to use a high risk, high reward scheme such as ERP is a major challenge. Almost all the members of the organization should get the excitement about ERP project implementation. Communicating and sharing of the ERP vision is the most important organizational preparation for a successful ERP implementation.

What is an ERP Project team?

ERP project team would be charged with the responsibility of implementing the ERP for the specific organization. A champion, who is skilled in communication and understands the organization well should head the ERP team. The leader must be well accepted by the most employees of the organization. The leader also must be a person who can keep the motivation level of the implementation team at fairly high levels throughout the several months of implementation. The implementation team would consist of dozens of people. There will be a number of teams for each of the functional area with every team consisting of key users and IT personnel to provide technology support.

roject champions (for the crore processes that are taken up for implementation) would be those individuals who would take the ownership of implementation. They are expected to provide the leadership so as to sustain the trials and tribulations of ERP implementation.

ERP speaks the end user language more than any other software piece. ERP implementation had been successful whenever it was driven by business goals and not IT goals. ERP vendors have been successful in convincing the end users to take ERP decisions. Rarely IT departments take the decision to go far ERP. The ERP training and skills to use ERP can be developed by end users quite easily. All these together have generated substantial user acceptance of ERP.