What is ERP?

ERP is an acronym that stands for Enterprise Resource Planning. ERP is package software solution that addresses the enterprise needs of an organization by tightly integrating the various functions of an organization using a process view of the organization. It is a package software and not a custom made software for a specific firm. It understands the needs of any organization within a specific industry segment. Many of the processes implemented in an ERP software are core processes such as order processing, order fulfillment, shipping, invoicing, BOM processing, purchase order processing, preparation of Balance Sheet, Profit and Loss statement etc., that are common to all industry segments. That is the reason why the package software solution works so well. The firm specific needs are met through a process of customization. ERP addresses not merely the needs of a single function such as finance, marketing, production or HR. Rather it addresses the entire needs of an enterprise that cuts across these functions to meaningfully execute any of the core processes. ERP integrates the functional modules tightly. It is not merely the import and export of data across the functional modules. The integration ensures that the logic of a process that cuts across the function is captured genuinely. This in turn implies that data once entered in any of the functional modules (whichever of the module owns the data) is made available to every other module that needs this data. This leads to significant improvements by way of improved consistency and integrity of data. ERP users the process view of the organization in the place of function view which dominated the enterprise software before the advent of ERP. The process view provides a much better insight into the organizational systems and procedures and also breaks the "kingdoms" that work at cross-purposes in many organizations. To implement such a demanding software one needs high performance computing, high availability systems, large, high speed high availability on line storage and high speed, high reliable net works, all at affordable cost. Though many ERP software vendors have been around for more than two decades, ERP software started to make major inroads into the corporate world only in the last couple of years. Interestingly Indian corporate houses are taking the ERP route exceptionally fast, even by world standards in the past two years. The investments on a complete ERP implementation for a Rs. 100+ core corporation would easily run into Rs 10+ crores. ERP is the only software whose deployment decisions are made in the corporate boardrooms and not by EDP / MIS departments. ERP software today represents possibly the single most expensive piece of general-purpose software.

Why ERP?

Corporations go for ERP either to solve the existing problems or to explore new opportunities. I call these two approaches as negative & positive approach respectively. One aspect of the negative approach forces some corporations to go for ERP to solve their Y2K problem. This is particularly true of those corporations that are heavily dependent on legacy systems running on old main frames. The second aspect of the negative approach is to get over the problems of islands of heterogeneous and incompatible information systems that were developed over the past several years in many organizations. Functional IS modules representing areas such as Finance, Marketing, HR, and Production in these organizations would be running on diverse hardware and software platforms leading to nearly insurmountable problems of reconciling data locked up among the diverse systems. From a positive perspective many organization look at the great opportunity provided by ERP software that lead to almost instant access of transactional information across the corporation. Such an information rich scenario permits organization to reduce inventory across multiple units/ departments/ plants; reduce cycle times from weeks to hours; and improve customer satisfaction by orders of magnitude. All these translate to increased profitability or increase in market share and in turn much larger market capitalization. However ERP is only means and not an end by itself. ERP provides an opportunity for a corporation to operate as an agile entity to improve production / operation, customer service and customer satisfaction. The creative ingenuity of an organization to drive towards these corporate goals determines the extent of success an ERP implementation can deliver.

Does can packaged software fit business needs well?

Many IS professionals perceive ERP as a paradox. "How can a software company located in Germany, Netherlands or U.S.A understand the needs of my organization operating in Bangalore?" is the question they generally ask. Many of them feel that custom software should work far better than packaged software. For many of them holding this view, the success of ERP is a paradox. What they miss out is the point that the core processes of most organizations are by and large, the same. Thanks to globalization, there has been a significant amount of uniformity, standardization and simplification of the core processes across the industry. Some of the technologies such as EDI have even standardized the contents of critical documents, such as shipping and purchase orders. Standard processes and procedures, for example, Letter of Credit, have seen a great level of standardization to suit International Trade. These developments permit companies in Germany and Netherlands to develop the world-class software that can be profitably used by a corporation in Bangalore also. By pumping in billions of dollars in understanding the business processed used by thousands of corporations worldwide, the ERP software vendors also bring in world-class practices to any company that implements the ERP software. In a similar vein, large ERP software vendors such as SAP & BaaN are also able to employ and retain thousands of software professionals who can continuously improve their ERP software product. No individual end user company can afford such large pool of software professionals. This is the secret of success of ERP. A possible analogy may drive home the point better. An average Indian has already realized the fact that a ready-made garment made using sophisticated technology can indeed fit him/her better than a street corner tailor. The highly sophisticated technology of Computer Aided Design to model human anatomy and Computer Aided Manufacturing tools to cut complex contours effortlessly at high speed, explain the better fit. Similar is the case of packaged software.

Do we get best business practices through ERP?

The answer to this question is Yes and No. ERP software like SAP R/3 or RAMCO Marshal has the benefit of understanding the best practices followed in thousands of corporations worldwide, where the particular ERP software has been implemented. In a sense, ERP software embeds these best practices inside their software. This explains the Yes part of the answer. One reason why end users pay an exorbitant amount to buy ERP software is the fact that ERP is not just a piece of "shrink wrapped" software. The embedded business processes inside provide the real value to the ERP software. So, ERP can bring "best of the breed" practices to any organization. However, the onus of profiting through these best practices entirely lies on the end users. An organization suffering from " Not invented here" syndrome may do too much over customization and build into ERP implementation the archaic practices followed for decades in a specific company. This in turn may deprive the benefits of the best practices to that company. This explains the No part of the answer.

{For core Business Processes it may be the best to follow the best business practices of the ERP vendor, but there is always a percentage of customization required for any ERP implementation. The ability of the ERP to extend easily is a critical factor to evaluate.}

How are ERP & BPR related?

BPR as an acronym stands for Business Process Reengineering. It used to be a buzzword until a few years ago. Overzealous BPR pundits caused so much havoc through job cuts, it is a controversial subject today in many countries. An organization can go for standalone BPR or they can choose ERP. Since ERP anyway comes bundled with several of the best practices, a well implemented ERP exercise leads to some amount of BPR, though the reengineering effort may not be full-blown. However, reengineering through ERP, generally termed package enabled process reengineering (PEPR) leads to less drastic change in an organization. Such package enabled reengineering through ERP has been received much better by the end users rather than stand alone BPR in many companies around the world.

Should BPR & ERP be taken in any order?

There is no easy algorithm that can give a simple answer. A BPR exercise preceding the ERP implementation can help the organization significantly. It may also increase a combined time of implementing BPR and ERP significantly. There is also a risk that a particular ERP software selected later may not be able to implement the reengineered processes. A simultaneous BPR and ERP exercise saves time and also minimizes the risk of sequential implementation of BPR followed by ERP. One rarely comes across the instance where BPR is followed by ERP. As such the ordering of ERP & BPR must be based on the needs of a specific organization.

What are the typical modules of ERP?

Typical Modules of ERP include sales (sales forecasting, customer prospecting, customer follow-up, support for telemarketing, database marketing), order processing (inquiry handling, order taking) shipping, transportation, invoicing, finance (G/L, AR, AP), asset management, cost accounting, financial accounting, manufacturing and materials management. Optionally quality project, warehouse, continuos production and other modules are also present in different ERP software. Industry specific modules to cater to hospitals, retail, banking, insurance, oil, shipping and transportation are also available from some vendors.

 Why is top management commitment necessary for the success of 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.

What is top management commitment in ERP Context?

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.

What are the special challenges of ERP introduction in India?

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.

How do you cost justify ERP?

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.

Does ERP leads to unemployment?

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.

What is the ERP life cycle?

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.

What is the special role of Big Six consultants - Who are they?

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.

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.

How do you decide a fit between an organization and ERP software? 

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.

What is the drawback of over customization?

Customization is the process of fitting the chosen ERP software to the needs of a specific organization. Whenever the processes represented in the ERP software differ significantly from the processes used by the firm one has two options. First is to build the organizational process into the ERP software through customization. The second one is to change the practice followed by the firm to suit the process native to the ERP software. Traditional common sense would force people to customize the software to suit the individual demands of the organization. This leads to two problems. The first one arises out of the fact that any customization done locally is outside the core ERP software. Accordingly, the next release of the ERP software would not support local customization. They have to be re-done by the end user for the new release. Second the very purpose of ERP is to take advantage of the best practices in industry that come embedded with the ERP software. By over customizing the implementers would deprive the benefit of world - class practice to the organization that is implementing ERP.

Who are the key ERP Software vendors in the world?

How are they positioned in India? 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. (The detailed list of ERP installations in India).

What is the secret of success of SAP?

SAP is a visionary company that could visualize the emergence of ERP twenty years back. Its flagship product R/3 also capitalized the client-server technology in late 80's, which was the right time to leverage client-server technology for mission critical applications. Both these points put together gave SAP a formidable early-bird advantage. The majority of the "top ten" companies (classified using every measure - annual turnover, profitability or market capitalization) in the world are with SAP today. Many leading companies such as Microsoft in software, Intel in microprocessor, IBM, HP, Compaq & Digital (today only Compaq) in computer industry are with SAP. Naturally, SAP not only has a large market share but also the "mind share" of the users. With increase in globalization of the large companies, the corporate decision of a company to go for SAP automatically translates to SAP installation in dozens, if not hundreds of the subsidiaries of the parent organization. This keeps SAP growing continuously. The "strategic selling" concept perfected by SAP keeps its partners happy all the time. For every dollar which SAP earns, its partners (implementation partners such as the "big six" consulting firms, hardware partners such as Compaq and software partners such as Microsoft) earn five dollars! Naturally the partners keep recommending SAP to all their clients. SAP's absence from "direct consulting" has indirectly helped SAP. The "big six" in particular have been extremely supportive of SAP. SAP's sales pitch has been more business oriented than technology oriented. SAP should be given the special credit for taking the software decisions to the boardroom. SAP style of selling the ERP concept to senior-most executives of the corporation (including the chief executive) often bypassing the MIS departments, is unprecedented in software selling. By a process of certification of every component involved in ERP - servers, operating systems, DBMS, Consultants and even installers of the software - SAP has created a strong brand loyalty and premium quality image. By restricting and closely monitoring access to training through its Partner academy, SAP has created a high-class of Certified Consultants who demand extremely high premium. Until recently SAP did not permit any one, other than its partners, to offer training on SAP products. This created scarcity of trained consultant, which in turn increased the market value of the consultant. This point alone has resulted in unrealistic ambitions amongst potential consultants. Teaching shops exploit this unrealistic expectation. Fuelling on each other, the trainee consultants & training houses almost enacted the drama of the "Californian gold rush" in the last few months. The recent Hyderabad incident is one such manifestation of this bizarre scheme.

What are the special features of SAP R/3?

SAP R/3 addresses the enterprise needs of typical large scale manufacturing and trading organizations. SAP R/3 product is ideally suited for large corporations that have multiple products, manufactured out of multiple plants, often distributed across multiple continents and countries. R/3 can handle multiple currencies, multiple language scripts and multiple accounting systems, multiple valuation schemes and multiple depreciation schemes exceptionally well. SAP R/3 also has outstanding consolidation schemes for holding companies and other complex organization structures. In the current days of mergers and accusations this point becomes particularly relevant for large corporations. SAP R/3 probably has the largest number of features among all ERP software products, though many of them remain unused often. Special versions focussed on specific needs are also available in the form of industry solutions (IS) for retail, banking, oil & gas, hospitals etc. SAP R/3 support the full N-Tier Client- Server Architecture that scales exceptionably well. It is also the only software that runs on widest range of hardware platforms, namely, CISC & RISC based processors from Intel, IBM, Sun, Digital, MIPS etc., AS/400 and IBM main frames. It also can support operating systems ranging from Unix (several versions from HP, Sun, IBM, Digital and SGI), Windows NT, OS/400 etc., It also supports multiple RDBMS including DB2 from IBM, Oracle, Informix and Microsoft SQL server. Naturally, there is a price the users pay for all these features. The software is complex and difficult to master. The system is rigid and forces the organizations to change their internal processes (though it ultimately benefits the users). The implementation takes a long time. The consultants charge a high fee. The software needs significantly larger resources in terms of processing power, disk space and network speed.

What are the special features of Oracle Applications?

 Oracle Applications evolved from Oracle financials an outstanding product. Since Oracle has an exceptionally high acceptance of its RDMBS product, Enterprise users were already Oracle users for a much longer time. A very large number of SAP installations use Oracle DBMS to support SAP R/3. Oracle also has an excellent manufacturing module in the form of Oracle manufacturing. As can be expected from an outstanding software company, Oracle Apps also has a superior GUI user interface compared to the prosaic interfaces of SAP or BaaN. Oracle has strong client base among manufacturing industry and financial services industry. Utilities and telecom companies are other strongholds of Oracle. Practically every cellular phone company in India is an Oracle client. Oil and Gas Industry is another focus area where Oracle is exceptionally strong.

What are the special features of BaaN?

BaaN Company is driven by innovation. It is a pure-breed client-server company whose products were available only in the Unix platform for many years. Today BaaN products run on multiple hardware and software platforms. The focused development of BaaN has led to several technological strengths for BaaN products. Very few companies commit and deliver software products, whose code length decreases with the new release of their product. BaaN is definitely one of them. Their software is exceptionally strong in manufacturing. The software is much less complex, far easy to master, for less expensive to implement and permits a faster implementation. Another dimension of BaaN's innovation is their tool Dynamic Enterprise Modeler (DEM) which permits a model-based implementation of the BaaN IV product. BaaN can run under modest computing resources suiting the SME sector very well. The recent announcements from BaaN about the use of component based software engineering tools (using Microsoft DCOM technology), tight integration with Microsoft BackOffice, component based licensing through its innovative BaaN Series product scheme etc show great promise.

What are special features of Ramco Marshall?

A World-class product from India in a true Swadeshi sprit from Ramco Systems has a lot of promise.  Endorsed by none other than Bill Gates himself,  Marshall is a true versionary product.  Marshal has the advantage of exploiting the great strides made in software engineering in 80's.  Being wedded to Microsoft and Intel for processor architectuire, Operating systems and DBMS (Intel processor based servers, Windows NT server O/S, & SQL Server) Marshal is an extremely focused product.  This in turn leads to better performance, simplicity of design and ultimately reduced cost of ownership for Marshall customers.  These late-comer advantages also imply the disadvantages such as blessings from the big six consultants, lack of implementation methodology and inflexibility in hardware & software platforms choice.

{Implementation methodology is present in the form of RSPRINT - Ramco Stratagic Program for Implementation and Training.  A process model of Ramco Marshall is also currently ready which will be used for implementation .  Big 6 blessings not there because we do the implementations ourselves, and this will be there the moment we achieve the critical mass.  Inflexibility in platform choice, but being wedded to Microsoft allows us to ride the Microsoft wave.  Oracle Apps also do not have RDBMS choice.   Most hardware companies today support NT and hence database is the only limitaion.}

Is there a specific place for IBM?

IBM should get a special place in the ERP arena. A couple of ex- IBM engineers originally designed a piece of software that ultimately became SAP R/3. But for the development of IBM Main frames, IBM's DB2 DBMS and many other tools, ERP as it is known today would not have been possible. However as in many other instances IBM could not directly benefit from its own development (The story of IBM PC, IBM printers, IBM DOS, IBM Windows etc., is no different.)

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}

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 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 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. 

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.

What are the special challenges of ERP introduction in India?

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

Does ERP leads to unemployment?

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}

What is meant by India version of specific ERP software?

ERP software must address all the enterprise needs of an organization within the social context in which the enterprise operates. This would imply that the local accounting practices, locally applicable taxation laws (excise, customs, sales tax and income tax) are fully adhered to in implementing the various business processes. The software vendor must incorporate India specific features before selling the software. The specific ERP software that has been adopted to suit to Indian statutory laws is called India specific ERP.

Should I go for ERP training?

This is a difficult question to answer and there is no clear yes or no answer to this question. It all depends on what you want achieve in your life, your background, your skills and the market in which you plan to operate. If you have communication skills, domain knowledge in key organizational functions (sales, manufacturing, materials, distribution, accounting, finance, HR etc or in areas such as quality, project or costing) and software skills with one of the leading ERP software, you will have a great time with possible assignments that will reward you with attractive compensation. This assumes that you are willing to look at the global market. If you have specific experience and knowledge in any of the key industry segments such as oil, finance, telecom, distribution, retailing, banking, hospitals, etc, it will be very useful. However deficiency even in one of the key segments is likely to hurt. If you are an MCA or B.E. or B.Tech. in computer science and fresh from the college, discount heavily the rosy pictures painted by the street corner training shops. ERP consulting or training does not need enormous computing skills. As such, non-engineers such as accountants, lawyer's etc can also make a career in ERP provided they have a good understanding of the organizational systems and processes, computer literacy and willingness to change.

How to get ERP training?

The ERP vendors and their implementation partners deliver most of the ERP training. There are several levels of training. Overview training in ERP concepts and ERP benefits would be necessary for the top management and steering committee members. An in depth software specific training would be necessary for the implementation team. An infrastructure management (hardware, software, networking) and ERP software maintenance training would be necessary for the IT team. Once implemented, detailed user-training would be necessary for a large number of users and potential users throughout the organization. User training would be limited to modules specific to individual users.

What is the ideal background for ERP Consultants?

An ideal background of ERP Consultants would be several years of domain knowledge (HR, Finance, Material etc) followed by extensive software training and implementation experience with at least a couple of real-world implementations. Technical knowledge by way of deep IT training helps but not mandatory. Knowledge of business process by way of formal business school education, once again is of help but not necessary. However business knowledge by the way of experience and consulting is a must.

What is customization in ERP?

Customization is the job of fitting the ERP software to meet the demands of a particular organization. This would mean the mapping of the organizational structures, processes & environment of the organization into the corresponding model of the organization that is embedded in the ERP software. In other words, it is a mapping of the real world into the model world of the particular ERP software. The structure and processes represent one part of customization; the creation of master data, input-output forms, validations, reports, queries, formats, authorization, backup / restore procedures, data administration procedures, disaster recovery processes etc., represent the full gamut of customization.

What is the ERP life cycle?

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"!

What is the role of implementation partner?

Implementation partners generally come from specialized ERP consulting houses that are generally outside the organization. Being experts in a particular area (materials, production, finance or distribution), these experts from outside, not only bring software expertise with respect to particular ERP software, but also bring the extra benefit from their vast prior experiences in other firms where they would have implemented that particular ERP. Over the years, the implementation partners have developed enough know-how in the form of templates for implementation. These templates significantly reduce the cost and time of implementation and errors of implementation. Though implementation consultants charge a high fee, they bring significant amount of value, thanks to their prior experiences. 

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.

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.

What is the drawback of over customization?

Customization is the process of fitting the chosen ERP software to the needs of a specific organization. Whenever the processes represented in the ERP software differ significantly from the processes used by the firm one has two options. First is to build the organizational process into the ERP software through customization. The second one is to change the practice followed by the firm to suit the process native to the ERP software. Traditional common sense would force people to customize the software to suit the individual demands of the organization. This leads to two problems. The first one arises out of the fact that any customization done locally is outside the core ERP software. Accordingly, the next release of the ERP software would not support local customization. They have to be re-done by the end user for the new release. Second the very purpose of ERP is to take advantage of the best practices in industry that come embedded with the ERP software. By over customizing the implementers would deprive the benefit of world - class practice to the organization that is implementing ERP.

 What are the three dominant approaches to ERP implementation? 

The three dominant approaches to ERP implementation are "big bang", location-wise and module-wise implementation. In the big bang approach the organization decides to implement all relevant modules, for example - Financials, Logistics & HR- all at the same time. This has the advantage of getting the full benefit of the integrated software across all functions of the organization. However there is a risk of the implementation getting out of control. In "Location-wise" implementation, the organization chooses a specific location, say, the head office, one of the new plants etc. The choice could be based on better infrastructure, better IT culture, more co-operative set of users, higher level of automation etc. In "module-wise" implementation individual modules are taken up for implementation in a phased manner depending on the criticality of applications. Once again a module taken up for implementation can be implemented across all locations or just one location. Later they can be rolled out to other locations.

What is 'big bang' approach to ERP?

This has already been explained elsewhere. See previous answer.

ERP being integrated software does one benefit by implementing only specific modules?

Yes. The full benefit of ERP would accrue if all the ERP modules are implemented. However many organizations implement ERP only in those functions, which are, considered to be of strategic importance. Some of the modules, though they appear to be limited to specific functions, in fact integrate with many other functions indirectly. For example finance module primarily targets the accounting and finance functions. However the accounts payable module address all the material purchases and in turn impacts the entire materials management functions. Many more examples can be quoted to reinforce our viewpoint. The process orientation of ERP software definitely contributes to a better management of the organization. Even partial implementation of the ERP therefore leads to significant benefits.

Why are "financials", the first module implemented in many Indian ERP implementations?

Financial modules provide the basic pulse of an organization. It also impacts all other modules. Successful implementations of financials show up immediately reinforcing the faith of an organization in ERP. Other modules cannot be implemented without the financial module in place. All these factors explain the fact that financial modules are taken up first.

Why do consultants recommend changing business practice to suit the ERP software rather than customizing the software to every user needs?

A key contribution of ERP software is the bundled business process knowledge that come along with ERP software. These processes have evolved over the past two decades of ERP implementation in some of the most well-managed corporations around the world. By adapting to those processes that have proved successful in some of the finest corporations around the world, an organization implementing ERP would get the advantage of these "best of the breed" practices. That is the reason behind the consultant recommendations.

I have a large MIS department with outstanding programmers and analysis - Should I create my own ERP?

Unless your line of Business is so unusual that no existing ERP software available in the market meets your needs you should not attempt to develop your own ERP software. The reason why ERP software has been so successful is due to the deficiencies of software developed in house by MIS departments. IS/IT staff who generally constitutes the MIS department lack business and process orientation. The success of ERP is due to the fact that ERP software development teams have business knowledge. In house software development has also proved to be more costly and time consuming compared to the implementation of packaged ERP software. No MIS department can afford to hire hundreds, if not thousands of professionals dedicated to software development. You should attempt ERP software development only if you want to address the general business needs of an enterprise through a standard ERP software product, not to meet the requirements of your organization. As you can readily see these are entirely different games. A software giant Microsoft decided to use SAP R/3 rather than develop it in-house!

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 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.

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.

Who are the project champions?

Project 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.

What does "going live" mean?

After many months of implementation plan every organization would decide a particular date when they would shift from their legacy system to the ERP system. Up to that time the ERP software would be under development followed by testing and quality assurance. Once by ERP implementation team feels convinced that the development is complete and testing is satisfactory, they would decide to "go live". In a sense "go live" date marks the end of ERP project completion. Generally most ERP project "go live" on the starting of the fiscal/ financial year, namely April 1 in India.

How is "data migration" managed for ERP implementation?

To complete the ERP implementation one would need to migrate master data, including customer master, material master, budget head, employee list etc from legacy systems. Large number of earlier transaction (pending transaction for completion, archived transaction for analysis) would also be transported to the ERP system. In a typical corporation these would call for significant amount of data transport. Often they many not be available in machine-readable form. Often manual data will have inconsistencies such as incorrect code numbers, multiple code numbers to represent the same item, misspellings etc that needs data cleansing. Data cleansing itself could be a major activity. Even if data is available in machine-readable form, it may be distributed across heterogeneous hardware and software platforms. Reasonable amount of effort must be spent in reconciling such data. Special utilities are available for data migration both from ERP vendors and third party vendors. For the Indian IT industry data migration itself could be a major business opportunity.

For ERP implementation across multiple location does one need dedicated communication channels like leased lines/ V SAT terminals?

Many ERP implementation sites that are geographically distributed need reliable communication links for on-line transaction processing. In the absence of public data network in India, most organizations are forced to go for VSAT networks and leased line circuits in India.

What is the main reason for end users accepting ERP?

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.

ERP Related Conferences

Most of the ERP conferences are specific to products. This include SAPHIRE for SAP (held many times a year in all the continents), BaaN World held twice a year for BaaN, Oracle World for Oracle Apps and the recently started Ramco Conference (Marshal in the New Millennium), QAD Conference. BMA / CSI / IIMB conference ERP98 held early this year in Bangalore is a trailblazer in India. It was followed by two such conferences hosted by Media Transasia.

 Research Institutions working on ERP IIM, Bangalore has a well established ERP Studies Center with initial funding from SAP / Intel / Compaq. BaaN Institute in Hyderabad, SP Jain Instiute in Bombay, NITIE in Bombay, PSG Tech in Coimbatore and are the other Institutions with focussed groups working in the ERP area. IIT Delhi & IIM Calcutta are in the process of establishing ERP Centers. 

How much does it cost to go for ERP?

The cost of ERP project would vary significantly from one instance to other. The actual cost depends on the nature of the industry, the size of the firm, the geographical distribution of the organizational units such as offices, plants, warehouses and distribution points, the number of user licenses and the extent of ERP implementation (the number of functional modules implemented). A typical mid-size Indian company with about Rs 100- 300 crores of annual business will have to invest about five to twenty crores of rupees in the ERP project. This includes ERP software licenses, server cost, communication network cost and the cost of consultants who would do the implementation. Large corporations with Rs 1000+ crores of annual business might invest Rs 100+ crores in ERP project. A number of small companies have managed to implement ERP in about Rs 1 crore. It may be noted here that in a typical installation the cost of ERP software accounts for only about 20% of the overall cost. A major component in ERP project is the cost of the implementation consultant (both internal and external).

What is ERP?

ERP stands for “enterprise resource planning”.  The definition of enterprise resource planning is an integrated software solution used to manage a company’s resources.  ERP systems integrate all business management functions, including planning, inventory/materials management, engineering, order processing, manufacturing, purchasing, accounting and finance, human resources, and more.

Why implement an ERP system?

ERP software integrates all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.  ERP combines finance, HR, manufacturing and distribution all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.  This integrated approach can have a tremendous payback provided the software is installed and used correctly.

What are the benefits of an ERP System?

The benefits derived from ERP can far outweigh the costs of the system, providing that the system is selected carefully and is appropriate for your company from a feature, cost, and technology standpoint.  Some of the benefits realized are:

A single integrated system

Streamlining processes and workflows

Reduce redundant data entry and processes

Establish uniform processes that are based on recognized best business practices

Information sharing across departments

Improved access to information

Improved workflow and efficiency

Improved customer satisfaction based on improved on-time delivery, increased Quality, shortened delivery times

Reduced inventory costs resulting from better planning, tracking and forecasting of reQuirements

Turn collections faster based on better visibility into accounts and fewer billing and/or delivery errors

Decrease in vendor pricing by taking better advantage of Quantity breaks and tracking vendor performance

Track actual costs of activities and perform activity based costing

Provide a consolidated picture of sales, inventory and receivables

An ERP system provides the solid operational backbone manufacturers and distributors need to improve the volume of production and fulfillment of orders while reducing costs.  By optimizing your manufacturing and distribution operations with ERP, you'll also be able to focus on new business opportunities.