erp software for smes demonstrates that size isn’t...

ERP software for SMEs demonstrates that size isn’t always everything

a whitepaper from ComputerWeeklyCW +

The idea behind enterprise resource planning (ERP) is to provide a business with a single product that provides software to support the main business functions in the company. For smaller businesses,

choosing an ERP system is a double-edged sword. The products aimed at large multinational companies provide immense flexibility, but can be too complex. If SAP and Oracle are not the best fit, how should a medium-sized business choose an ERP system? This nine-page Buyer’s Guide to ERP Software gives CIOs and senior IT professionals an insight into the market that has grown for ERP aimed at SMEs.

Contents

In ERP, big is not always beautiful page 2

Cliff Saran assesses the alternatives to SAP and Oracle ERP systems for small and medium-sized businesses.

Can the middle men survive? page 4

Analyst Paul Hamerman examines the state of enterprise resource planning and the middle tier of suppliers.

Big ERP is dead, long live agile page 6

Michael Pincher looks at what the new breed of cloud-based ERP systems has to offer.

Why ERP needs joined-up thinking page 8

Bob Tarzey examines the business case for integrating ERP systems used by larger and smaller companies.

These articles were originally published in Computer Weekly magazine in May 2010. To print this document, select “Shrink to printable area” or similar in your print menu.

CW Buyer’s guideerp softWare

1

OJO

Ima

ge

s/R

ex

Fe

atu

Re

s

buyer’s guide

2

buyer’s guide

In ERP, big is not always beautifulCliff Saran assesses the alternatives to SAP and Oracle ERP systems for small and medium-sized businesses

For smaller businesses, choos-ing an enterprise resource planning (ERP) system is a double-edged sword. The

products aimed at large multi national companies provide immense flexibil-ity, but can be too complex.

The idea behind ERP is to provide a business with a single product that provides software to support the main business functions in the com-pany. The major products, such as SAP and Oracle, are claimed to encompass the best ways to run busi-ness processes. But since they cater for large complex businesses, such systems are often too sophisticated for smaller organisations, which may not have the same requirements in terms of scale and complexity of business operations.

Businesses that choose mid-market ERP tend to have limited IT resources but require a flexible product.

George Lawrie, principal analyst at Forrester Research, says there are two reasons SAP has not really taken off in the mid-market: “It needs a channel to sell to smaller businesses, and SMEs [small and medium enterprises] ques-tion the ease of implementing it.”

SAP and Oracle may be great for providing enterprises with industry-standard business processes, but standardisation erodes the unique selling point in smaller businesses, he says.

As such, the major ERP products from the likes of SAP and Oracle are not always a good fit in smaller organisations. Lawrie points out that customising these systems can be prohibitive. He says, “SMEs are wor-ried by the high maintenance fees and complex implementations asso-ciated with major ERP software.”

This is why a market has grown for ERP aimed at SMEs. “Mid-market

ERP tends to offer vertical specialisa-tion,” says Lawrie.

Mid-market ERPIf SAP and Oracle are not the best fit, how should a medium-sized busi-ness choose an ERP system?

Companies must tread carefully when selecting a mid-market ERP system. A company with an ERP product that works in a UK business may not offer the product abroad.

Even companies that are strong internationally may not offer the same product in every region, warns Gartner analyst Christian Hesterman. For instance, he says, “Lawson S3 is primarily used in the US public edu-cation and healthcare sectors, while the N3 product is focused on food, textiles and beverage businesses in the rest of the world.”

Hesterman says the product should be good enough in most areas, but businesses will need the flexibili-ty to adapt it. The alternative to hav-ing the flexibility to customise an ERP system is a product suite that has been tailored for a specific indus-try sector.

Microsoft Dynamics AX is one example of such a product. Hester-man says, “Microsoft has a clear

strategy to let the channel [IT resel-lers] build in functionality, then buy back the functionality and integrate it into the core product.”

This approach has put the AX product at the top of Gartner’s Magic Quadrant for mid-market ERP (see box, p3).

ERP in the cloudSuppliers such as Salesforce.com have made it possible to put custom-er relationship management (CRM) systems in the cloud, but core ERP software has so far remained largely untouched. If IT departments can make considerable savings switch-ing from in-house systems to cloud-based software as a service (SaaS), why stop at CRM? Businesses should consider using the cloud for ERP.

enterprise resource planning

>>

CW Buyer’s guideERP softwaRE

Clockwise from top left: Microsoft Dynamics AX; SAP Business Objects; NetSuite’s iPhone; and Lawson M3

It is far from clear how the major suppliers are going to charge for cloud-based ERP

3

more onlineIn-depth: Putting ERP in the cloud

computerweekly.com/240850.htm

Analyst’s report: IBM Cognos leverages value from SAP


Opinion: How to achieve ERP success


In-depth: ERP software suppliers – essential guide


Andrew Vize, who as propositions director runs Computacenter’s CIO panels, says, “The efficiency of serv-ices from Google and Amazon is superb. They offer the lowest power costs and are five to 10 times cheaper than traditional small datacentres.”

It makes sense for IT directors, but the major ERP suppliers have been reluctant to move to cloud computing.

SAP has been touting its Business ByDesign SaaS suite for smaller com-panies. Meanwhile, Oracle offers its middleware and database products on Amazon Elastic Compute Cloud (Amazon EC2), but does not recom-mend putting E-Business Suite ERP software in the cloud.

Oracle says in a blog post, “Since Amazon EC2 uses a virtualisation engine that is not supported by Oracle and has not been certified with E-Business Suite, this environ-ment is not supported for production usage of E-Business Suite. Using Amazon EC2 for hosting E-Business Suite may be suitable for non- production instances, such as demonstrations, test environments and development environments.”

ChargingIn fact, it is far from clear how the major ERP suppliers will charge for cloud-based ERP. The significant ongoing revenue they receive from annual software maintenance from on-premises applications makes it difficult for established ERP suppli-ers to offer cheaper software licensed on a monthly subscription basis.

However, smaller software compa-nies are making cloud-based ERP float.

Cloud computing specialist NetSuite has unveiled workflow management software called SuiteFlow which enables users of cloud computing business suites to automate and streamline complex business processes. NetSuite says SuiteFlow allows users to customise workflows to support the way they need to work.

Companies can use SuiteFlow to develop and deploy new business processes. NetSuite says it can be used to support processes such as contract renewal workflows with tasks, reminders and customer notifi-cations, sales processes that include mandatory data entry, follow-up tasks and rep notifications, and cus-tomer support processes, including inactivity reminders, escalations and service level agreement enforcement.

Lawson Software, which has mainly focused on traditional ERP, has moved into the cloud by offering its core Enterprise Management Systems and Talent Management suite on Amazon EC2 infrastructure.

The products will be included in the Lawson External Cloud Services offering, which is part of the com-pany’s Cloud Services portfolio.

Lawson’s cloud ERP service is targeted at mid-sized companies and organisations looking for a more affordable, flexible and agile deploy-ment option for full-function enter-prise software.

Jeff Comport, senior vice-president of product management at Lawson Software, is adamant this approach works. “We are making it easier for our customers to license, use, keep current and even pay for Lawson full-function enterprise software,” he says.

“This should be great news for CFOs and CIOs who worry about lengthy and complex on-premises installations, the cost and inefficiency of their datacentres, the best way to allocate IT staff, and the complexity and difficulty of maintaining software versions and upgrades.”

Open sourceSimilarly, open source ERP pro-vider Compiere, which is used by

companies such as Specsavers, has developed a version of its product that works on Amazon Web Services in the cloud.

Some experts believe it is unlikely ERP will move wholesale into the cloud. The major ERP systems tend to be architected as large homoge-nous IT systems, which may not be such a good fit for delivery via the internet cloud.

Licensing major ERP systems to deploy via the cloud is still imma-ture. Instead, niche software compa-nies are likely to build cloud-based services that do many of the func-tions of ERP.

“We will have much more special-ist systems that do a slice of ERP,” predicts David Bradshaw, IDC research manager for software and services in Europe.

Cloud-based ERP could be the way forward for small- and medium-sized companies. Both Oracle and SAP offer products aimed at smaller busi-nesses such as JD Edwards from Oracle and SAP Business ByDesign. These may have a better fit with cer-

The role of SaaS and open source in mid-market ERP

NetSuite: ERP software delivered as a service over the net

<<

tain organisations, but implementing on-premises traditional mid-market ERP systems will be the most likely approach businesses take until cloud computing has matured. ■

buyer’s guide

www.computerweekly.com/240850.htm




4

buyer’s guide

Businesses are looking for deeper industry expertise from their ERP software providers to gain a more

integrated application environment and end-to-end process automation. To date, many companies have com-bined custom-built applications and customised industry packages to sup-plement their core ERP software. This environment leads to many moving parts, disparate usability, and integration challenges.

The industry evolution of ERP is playing out in three ways:

ERP mega-suppliers add vertical depth and breadthSAP and Oracle have invested heav-ily in industry-specific software, each touting capabilities in more than 20 vertical categories. Indeed, their commitment to industries has driven many acquisitions, particularly for Oracle.

SAP generally prefers to build industry functionality natively within its suite, but it has made several verti-cal acquisitions as well to accelerate time-to-market. Both also make use of services extensively to add vertical flavour, including partners.

As these two titans battle one another for the prime larger enter-prise accounts, they have polarised to some extent. Oracle focuses more on services, government, telecoms, and

utilities, while SAP is strong in capital-intensive manufacturing, including oil and gas and chemicals.

Nevertheless, these suppliers con-tinue to battle one another vigorously in most industries, including retail, government, manufacturing and banking. More industry-specific acquisitions are likely.

Second-tier ERP providers exploit seams in the defenceMid-size suppliers have found more success in providing deeper and more granular industry-specific func-tionality than the mega-suppliers, and in exploiting gaps in the market. Lawson, for example, has success-fully targeted industries such as healthcare, food and fashion.

Other software houses – such as

Microsoft, Epicor and Sage – may choose to be even more focused to elude the mega-suppliers in targeted industries, often relying on partners to add the last mile of specialisation.

Specialists focus on fewer vertical marketsIndustry-specific suppliers may not be considered within the scope of the ERP market when they serve a single indus-try or do not provide the core account-ing functionality that is at the heart of ERP systems.

Nevertheless, these specialised offer-ings are often compelling to customers and may also attract the attention of ERP suppliers looking to partner or acquire.

Specialist firms offering compre-hensive suites to particular verticals


>>

Can the middle men survive?Analyst Paul Hamerman examines the state of enterprise resource planning and the middle tier of suppliers

5

include Deltek (project-based busi-nesses), Blackbaud (not-for-profit), Mincom (mining and asset-intensive businesses), QAD (manufacturing), and IBS (distribution). CGI Group gives ERP suppliers stiff competition in government, including US federal as well as state and local governments.

Specialists dominate the lucrative healthcare market, particularly patient systems. Notable suppliers include Cerner, Eclipsys, Epic Sys-tems, McKesson and Siemens.

Supplier consolidationIt is inevitable that acquisitions will continue in enterprise applications. The leading acquirers have been Oracle, Infor and Sage. Microsoft has been inactive since it bought Great Plains Software and Navision several years ago, but it has the financial strength to shake up the market.

The effects of the economic down-turn have left several ERP suppliers with substantially lower market capi-talisations, making them easier tar-gets for acquirers. In addition, strate-gic acquisitions build pathways into new markets. Looking forward, the reasons why ERP suppliers may acquire or be acquired include:● To boost profitable recurring rev-enues. Sales of maintenance are a profitable and reliable stream, now accounting for half of the market’s revenue. Oracle and Infor have made this play multiple times, acquiring mature companies with strong cus-tomer bases.

As the market evolves, software-as-a-service (SaaS) subscription revenue is likely to become increasingly attractive as a recurring stream, putting targets on SaaS pure-plays such as Netsuite and Intacct.● To eliminate competitors. Though relatively rare, this aggressive acqui-sition play has been done. Despite a landmark antitrust case that brought close government scrutiny, Oracle prevailed in its hostile takeover of Peoplesoft and continues to enhance this successful ERP product.● To establish a foothold in new markets (eg, industry, customer size or geography). Going forward, the most frequent and likely acquisition scenario by ERP suppliers will be to expand into new markets.

Besides vertical acquisitions,

suppliers also seek to penetrate new size segments and geographies. Oracle, for example, cannot go too far downmarket with products that were designed for mid-size and large companies and could conceivably acquire systems for small and medium-sized businesses.

Geographic acquisitions are also potentially attractive in markets that are served extensively by local sup-pliers, including China (with the likes of Kingdee International Soft-ware Group and UFIDA Software) and Latin America (eg TOTVS). ● To complement platforms and services. While Oracle and Microsoft benefit from selling platform and technology products to applications customers, it is conceivable that IBM may also see a benefit in acquiring ERP assets, not only for its software and platform businesses, but also for its immense services businesses.

Forrester cannot rule out other major IT services providers or hard-ware firms acquiring applications firms, especially with recent diversifi-cation moves by Dell, HP and Xerox.● To find technology gems. Under-capitalised software companies with valuable intellectual property may be attractive to astute acquirers that understand the value of the technology.

These acquisitions would typically be smaller, but more strategic if the technology assets can be strengthened and marketed to a broader audience. In today’s ERP market, well-architected SaaS systems would be attractive, as well as those with compelling usability and process flexibility.

Upgrade-free SaaSVirtually all on-premises ERP sup-pliers have a strategy to deliver a SaaS offering, if they do not already have one. SAP, for example, offers Business ByDesign, which is still in a ramp-up mode. Oracle is considering a SaaS option with Fusion. Epicor has indicated that its Epicor 9 plat-form is SaaS-ready. Fujitsu’s Glovia has a SaaS ERP offering called GS Innovate. More are in the works.

Forrester’s survey data indicates that the classic objections to SaaS – security, cost ownership and integra-tion – are much less of an issue now. A problem for ERP, however, is the relatively limited availability of SaaS ERP systems, compared with more accepted customer relationship and human resource management appli-cations. Pure-play SaaS ERP suppli-ers include Intacct, Netsuite and Workday, although these firms have not yet created a full breadth of ERP application offerings.

Upgrades are the central tipping point leading to more interest in SaaS. Under the SaaS model, the application is managed by the sup-plier, which will provide software updates to all customers on the same schedule. In essence, all the custom-ers are running the same version of the software, whether or not they decide to activate the updates. The

buyer’s guide

updates generally occur on a much more frequent basis than on-premises software, avoiding the upgrade lag that is so common in ERP.

Another challenge for SaaS ERP is extensibility. Because of the com-plexity and breadth of ERP, SaaS applications must progress from multi-tenant, configurable applica-tions to SaaS platforms that will ena-ble customers to extend the applica-tions for specific needs without breaking the updating model. ■

this is an excerpt from The State of ERP 2009: market forces drive specialisation, consolidation, and innovation by Paul Hamerman, vice-president and principal analyst at Forrester Research. www.forrester.com

The economic downturn has left many ERP suppliers with substantially lower market capitalisations, making them easier targets for acquirers

<< Forrester’s vision of ERP supplier consolidation

© 2009, Forrester Research, Inc. Reproduction ProhibitedNovember 2, 2009

The State Of ERP 2009: Market Forces Drive Specialization, Consolidation, And Innovation For Business Process & Applications Professionals

10

· To establish a foothold in new markets (e.g., industry, customer size, geography). Going forward, the most frequent and likely acquisition scenario by ERP vendors will be to expand into new markets. Besides vertical acquisitions, previously discussed, vendors also seek to penetrate new size segments and geographies. Oracle, for example, can’t go too far downmarket with its ERP products that were designed for midsize and large companies and could conceivably acquire solutions for SMBs smaller than $50 million in revenues. Geographic plays are also potentially attractive in markets that are served extensively by local players, including China (e.g., Kingdee International Software Group and UFIDA Software) and Latin America (e.g., TOTVS).

· To complement platforms and services. While Oracle and Microsoft benefit from selling platform and technology products to applications customers, it is conceivable that IBM may also see benefit in acquiring ERP assets, not only for its software and platform businesses, but also for its immense services businesses. We cannot rule out other major IT services providers or hardware firms from acquiring applications firms, especially with recent diversification moves by Dell, HP, and Xerox.

· To find technology gems. Undercapitalized software firms with valuable intellectual property (IP) may be attractive to astute acquirers that understand the value of the technology. These acquisitions would typically be smaller, but more strategic if the technology assets can be strengthened and marketed to a broader audience. In today’s ERP market, well-architected SaaS solutions would be attractive, as well as those with compelling usability and process flexibility.

Figure 5 vendor Consolidation Will Continue In ERP

Source: Forrester Research, Inc. 48390

Oracle

Infor

The Sage Group

Microsoft

SAP

IBM

Private equity

LawsonSoftware

NetSuite

ExactSoftware Deltek

Agresso

IFS

Epicor

Intacct

Verticalplayers

Regionalplayers

QAD

IBSSoftware

Active acquirers Potential acquirers

more onlineReport: The benefits of third- party SAP and Oracle support


Computer Weekly Special Report on SAP


Choosing between in-house and outsourced SAP services


Gartner: Two-tier ERP suite strategy – considering options






6

>>

buyer’s guide

If the rate of change outside your organisation is greater than the rate of change inside your organi-sation, the end is in sight,” said US

businessman and author Jack Welch.There is something religious about

taking up enterprise resource plan-ning (ERP). It needs faith that the goal will justify the sacrifice and change. In short, it requires enormous disci-pline. This factor was often lacking when many organisations hired con-sultants instead of adapting to ERP, dismantled the software and rebuilt it to fit existing business processes.

They were designing doctrines around how they worked rather than working to industry standards,

to maintain, modify and update. Traditional ERP continues to be

expensive and risky. Given the state of the economy and the fact that tra-ditional big-bang ERP implementa-tions cost more than some organisa-tions can currently afford, SaaS ERP is gaining ground.

Dreams and realitySo what if you want to swap a lum-bering enterprise system for a more agile one? The drivers for changing such monumental structures are complex. In selling alternatives to the

Many organisations are saddled with monolithic, highly customised systems developed for a different era


OJO

Ima

ge

s/R

ex

Fe

atu

Re

s


buyer’s guide

Big ERP is dead, long live agile

believing they would lose competi-tive advantage if they conformed to “best practice”. Now, with a new breed of software as a service (SaaS)/cloud computing agile ERP offerings, is it time for change?

Outside pressureWith the private and public sectors challenged, respectively, by moderate growth prospects and government reform, and with both under budget-ary pressure, business systems must be adaptable. For example, emphasis in the public sector is now on shared services as part of the Transforma-tional Government agenda.

When different organisations have to share systems, you need a commo-nality of standard processes, but with the ability to support diverse needs. This puts a strain on departments that have implemented a “one size fits all” model, such as that provided

by market leaders SAP and Oracle. Sadly, in the public and private

sectors alike, many organisations are saddled with monolithic, highly customised systems developed for a different era.

The winds of changeIn a recession, businesses change. They consolidate operations and cen-tralise or decentralise functions, and as they do, management’s informa-tion needs alter dramatically. Although legacy ERP applications can adjust, they cost enormous sums

Michael Pincher looks at what the new breed of cloud-based ERP systems has to offer

7

<< Benefits and risks of SaaS ERPboard, go back to the rationale used to convince them to “big bang the en-terprise” in the first place. From the snake-oil medicine they bought on the golf course to the slick consultant presentations, measure the dream-to-reality difference.

First, did the old project ever end? Chances are that it didn’t.

Seeing a major consultant’s deployment tool, I was astonished at the “make work” formula deployed against the organisation using the consultant. With big-hitters hammer-ing on the boardroom door, organisa-tions surrendered in the face of the onslaught – particularly in the public sector, where the salesperson would earn more in commission than the client would in a lifetime.

The software supplier and the con-sultant deliberately created a parasite designed to live off the host. This view is supported by data showing that 85% of respondents agreed that their ERP system was essential to the core of their business, but just 4% said it gave their company competitive dif-ferentiation or advantage. Remember, suppliers count on inertia.

It’s a business problemSecond, while trying to synchronise organisational processes with an ERP application, internal arguments blow up about how best to define some-thing simple, for example a chart of accounts. In trying to define an overall view of assets, liabilities and expenses, you will find each business unit has a different view.

Suddenly, something simple becomes complex because you have to get powerful people aligned behind one vision. This can build up to a multitude of contentious issues. In short, customise means compromise.

In most cases, industry best prac-tice has already resolved it for you, so the out-of-the-box application that matches the process will probably fit. As a CIO, you have to negotiate between suppliers promising that what they are selling will work and your own team saying, “That won’t work for us.”

Your main objective is to limit costs by educating business managers as to why customisation is not the best route in the long run. This is not easy because every company thinks (with little rationale) that its processes and products are so individual that cus-tomisation is a must. In truth, off-the-shelf works just as well.

Time for changeThird, in selling an agile alternative to ERP, you have to overcome the notion that you do enterprise systems once, concrete them over and hope

you never have to dig them up. This is a difficult mindset to shift because it takes five to seven years for invest-ments in ERP systems to deliver sub-stantial returns. But do you have that time any more?

This is the moment to ask the question: what are the alternatives to sticking with Oracle or SAP? Companies that realign around more flexible service offerings hold a key to future success because they can achieve process efficiencies without having to use one system to control the business.

The underlying principle is sim-ple: a smaller, tier-two system is cheaper and faster to deploy than force-feeding tier-one ERP software to company units that do not need the headache and cannot take the cost.

Barely repeatable processesIn certain non-transactional busi-nesses, where each task can lead to many non-standard workflow paths, it is difficult for enterprises to establish a standard view of core business proc-esses. In such cases, ERP – a mantra for efficiency and transformation – is more likely to reflect a centralist desire for control.

However, more agile systems, where users can define the rules, are the route to achieving the fine balance between management reporting and operational needs – a system that delivers the data for decisions in which everyone, from the chief executive to the area manager, has confidence, and also has the ability to cope with non-standard requirements without bespoke programming.

New paradigmFlexibility is the difference between agile ERP and its forerunner. Plasti-city in workflow, event management, and so on, means that unexpected changes can be accommodated with-out needing expensive consultants.

These are pliable systems open to modification during their lifecycle, rather than those fixed on day one. The market has changed and tradi-tional ERP is facing extinction.

An iterative approach to ERP soft-ware design, development and imple-mentation is a refreshing change from projects that overrun on time and cost.

But there are risks to this approach: organisational risk, where users become frustrated when their system changes because of updates; business risk, such as what happens if there are problems processing payment as a result of going live without ironing out the wrinkles; and change risk, because it is hard to draw a line in the sand when people know a system is easy to change.

Buyer bewareBut is agile ERP the no-brainer some make it out to be? Aspects to consider when evaluating SaaS options are: ● Cost: while it is true SaaS is cheaper than tier-one ERP systems – SaaS does not require a complex internal infra-structure to support and you pay less up-front than with traditional on-premises ERP – the ongoing annual leasing costs may be higher. ● Flexibility: there is less you can do to change the software to fit your busi-ness, but this is a reasonable trade-off for a small business, although larger enterprises may struggle.

More agile systems, where users can define the rules, are the route to achieving the fine balance needed

www.showmeagresso.com

www.cdcsoftware.com

www.consona.com

www.dynacom.com

www.epicor.com

www.globalshopsolutions.com

www.ifsworld.com

www.intacct.com

www.iqms.com

www.microsoft.com/dynamics

www.netsuite.com

www.oracle.com

www.plex.com

www.sagesoftware.com

www.sap.com/businessbydesign

www.syspro.com

Suppliers of agile ERP

more onlineComputer Weekly Special Report on Oracle


Report: Maximise success with Microsoft Dynamics


Microsoft Dynamics Sure Step methodology cuts costs


Microsoft Dynamics CRM boosts service and profits


● Ease of implementation: SaaS’s selling point is that you can have a system working in a few weeks. The problem is in defining business proc-esses and ensuring people are trained in the new process workflows and transactions. ■

buyer’s guidebuyer’s guide





8

buyer’s guide

Why ERP needs joined-up thinkingBob Tarzey examines the business case for integrating ERP systems used by larger and smaller companies

There is no doubt that SAP is the world’s biggest provider of ERP software. According to ERP Lists, it has about

one-third of the market. But that still leaves a lot of share for other suppli-ers, the names of which may not trip off the tongue. It can be hard to find out where the applications of some of the smaller players are being used.

ERP is one of those areas where it is not that easy to get an accurate pic-ture of market share. The reason is twofold. First, it depends on the size of the companies. SAP and its closest rival, Oracle, are focused mainly on larger businesses, while suppliers such as Microsoft and Infor are more involved in the mid-market – so overall market share does not give much away.

The second reason tying down ERP market share is tricky is that large enterprises also buy mid-market products. That is not to say they ignore the big players, but they select certain products to fit niches that SAP and Oracle do not serve well. SearchManufacturingERP.com gives the example of French company Areva using Infor SiteLine for site operations alongside SAP for its financials. It felt the Infor product was more cost-effective and easier for

its employees to learn to use for that particular purpose or group of users.

Such mixed use is known as tier-two ERP and is making a muddle of market share figures because many product usage surveys only ask ques-tions such as, “What is the main ERP product you use?” or only interview representatives from the finance department who forget about prod-ucts used by other departments.

In fact, mid-market suppliers see the two-tier market as an opportunity for increasing their market share. Microsoft has a page dedicated to tier

two on the Microsoft Dynamics area of its website, which provides a number of case studies, including German company Wurth, which uses Microsoft Dynamics’ Navision in branches while maintaining SAP at its headquarters.

Mid-market targetBut it is not a one-way street. SAP has been targeting the mid-market for many years with its Business All in One product. Quocirca spoke to a number of SAP’s mid-market custom-ers last year. A motivator for some of

them to use SAP – including Dish-man, a UK-based pharmaceutical components supplier, and Consol, a South African bottling company – was that it was easier to participate in the business processes of larger organisations that also use SAP.

To enable this, bigger organisations need to open their ERP applications to authorised outsiders. The degree to which they were doing this was examined in Quocirca research a few years ago. This found that 50% of the enterprises surveyed were allowing external users to access their ERP


>>


ERP – a two-tier market?

Source: Quocirca

Applications being web-enabled

Source: Quocirca

External users of applications

Source: Quocirca

at a glance❯ Many large businesses find enterprise-wide ERP suites do not always cater for the demands of niche areas of their business

❯ Products from mid-market ERP suppliers with a niche industry focus are often added to the mix

❯ This leads to two-tier ERP, but there is a need to provide integra-tion between niche products and enterprise-wide systems

❯ Reluctance to standardise on a single product means emerging SaaS-based ERP products will often serve only niches too

9

more onlineIsle of Man uses Microsoft Dynamics in IT programme


IBM’s acquisition of SPSS is good for SAS/SAP customers


Kronos time and attendance applications achieve greater ROI


The Open Group: World-class enterprise architecture


systems, putting it third behind sup-ply chain management (SCM) and customer relationship management (CRM). In the past, this may have been done using electronic data inter-change (EDI), but it is now usually achieved by web-enabling the appli-cation – allowing secure external access via a web browser.

It is interesting that CRM is at the top of this list, with more than 60% of organisations allowing external access. Of all enterprise applications, CRM has been the most successful in moving over to the software-as-a-service (SaaS) delivery model, as evi-denced by the rise of Salesforce.com and others in the past decade. So why isn’t more ERP being delivered in this seemingly obvious way to enable the sharing of functions between businesses?

<<

buyer’s guide

Bob tarzey is an analyst at Quocirca

The answer is that ERP is being web-enabled, but on a more modest scale. Businesses have been slower to web-enable their own ERP applica-tions ahead of other, more obvious, candidates such as portals, content management and CRM, but even when Quocirca’s research was pub-lished, 25% had done so.

The market for SaaS-based ERP has been growing, although suppliers in this space admit it is complicated to build such applications. The best-known pure-play SaaS-ERP supplier is NetSuite, and the traditionally on-demand suppliers are following, including SAP with its Business-by-Design product. So is there some-thing holding back the market for SaaS-based ERP?

There is a limiting factor, and this brings us full circle. Small suppliers

need to integrate with their larger suppliers’ ERP systems, but their internal processes and requirements will often be very different. Many will buy the ERP application that most suits their internal use and seek to integrate it with whatever applica-tions are used by organisations they trade with.

In other words, tier-two fragmenta-tion of ERP does not exist only in large organisations, it is a fact of life across broader business communities. The interests of ERP users are so diverse that the market will continue to sup-port a wide range of products, includ-ing those for enterprise-wide needs and those for specialist niches, and the various products will always need to talk to each other at some level. ■

Midlands Co-op, the UK’s second largest independent co-operative, is this year due to complete a three-phase ERP project that began in 2007, covering 160 retail stores, writes Arif Mohamed.

The ERP platform provides central data management, automated order and inventory management, stock replenishment, electronic point of sale (Epos) and business intelligence, as well as streamlined invoice matching and accounts payable processes. But, notably, it is not an Oracle, SAP or IBM system, but one from second-tier ERP supplier Aldata.

Mark Ruttley, head of IT at Midlands Co-op, consid-ered both SAP and Oracle before opting for Aldata.

“I was keen to have an integrated system rather than plug-and-play modules and looked at Oracle in particular,” he says. “But it was very clear it was a set of different products bolted together. We wanted some-thing much simpler, modular in description and licence terms, but integrated.

“Aldata provides a real-time solution, from the till to the central data store, with a little bit of handshaking, and it is very scalable. It’s very easy to add on a store because it is centralised and integrated into one system so there are not a lot of technical architecture issues.”

Midlands Co-op replaced a patchwork of core systems across its stores, some of which joined the Co-op network through merger and were running technology platforms at least 10 years out of date.

Some core legacy applications dated back to 1993 and were not well integrated or scalable. They were also prone to escalating maintenance costs. “It was quite a convoluted system and we wanted to take a leap ahead of the pack,” says Ruttley.

Three-phase implementationThe organisation embarked on a three-phase implemen-tation of Aldata Gold, starting with an overhaul of its master data, which was formerly held on a Unix-based RB2 system. Phase one involved upgrading core infrastructure and creating a co-ordinated data strategy that ensured the business had consistent operational data across its stores. Phase one went live in November 2007.

Phase two spans September 2008 to June 2010 and covers the implementation of Epos, store inventory

management and PDAs. This phase brought the first wave of financial returns, which helped to fund the whole project. The higher revenue came mainly from opera-tional improvements and customers having a better experience, says Ruttley.

Among the ERP system’s new features was the ability to operate in-store gap and price checks using mobile Motorola wireless PDAs. This helped to speed up the reordering of stock, which was previously done overnight via a batch update.

Midlands Co-op brought in new tills and Aldata’s Epos software to replace legacy ones, and this has helped to drive returns. “We did have some issues and niggles with the store front-end solution, but no show-stoppers,” says Ruttley. “By mid-June it will be running across the estate.”

Phase three will run for the rest of this year and is centred on driving further returns through automated sales-based ordering and sophisticated business intelligence. “These will bring truly tangible returns,” says Ruttley.

For example, the organisation has been piloting a sales-based ordering project that enables high-value goods, such as tobacco, wines and spirits, as well as fast-moving products, to be reordered the minute they are sold through the till. Co-op staff do not have to fill out an order, which creates huge operational efficiencies. The plan is to roll this out across certain categories of product, and in the larger department stores.

Midlands Co-op employs 8,000 staff and has gross sales of more than £800m. Its principal activities are food and non-food retail, travel and funeral services.

Lessons learnedThe phased implementation has meant the Co-op could break down a massive IT project and focus on particular IT components and issues.

Completing phases also minimised its reliance on “more expensive” external technical and project experts, says Mark Ruttley, head of IT at Midlands Co-op. “Having all the expertise in the project all the time would be expensive.”

The Co-op focused on granular go-live dates very early on, for example a pilot store or a group of five stores. This helped it to learn valuable lessons before moving on to the bigger stores. “Everyone knows their role and what to do if it goes wrong,” says Ruttley.

Case study: Midlands Co-op’s three-phase ERP project

Phase 1

Phase 2

Phase 3

➧➧





erp software for smes demonstrates that size isn’t...

Documents