The enterprise resource planning software (ERP) market is expected to lift significantly this year after a global slowdown, as vendors offer the ability to link traditional ERP with CRM (customer relationship management) and SCM (supply chain management) applications. Mark Broatch finds one of the biggest issues for companies moving down this path is making all the pieces work together.
Something is happening in the ERP market. ERP vendors are offering the ability to integrate their software with related, customer-focused management systems and as a result, the ERP market is picking up again, say market researchers.
Early indications are that the ERP market is showing double-digit growth again after a slowdown in the late 1990s. Worldwide licence and maintenance revenue for ERP systems was worth $US21.5 billion in 2000, says Andrew Golloboy, ERP research manager at market research company International Data (IDC). This represents revenue growth of 13.1% from 1999 when the worldwide market was worth $US19 billion. In comparison, IDC’s preliminary figures show a growth of 8.1% between 1998 and 1999, when the worldwide market for sold licences and maintenance was $US17.6 billion.
The update in sales is ascribed by industry insiders to vendor efforts to link traditional ERP systems with CRM and SCM software, and allow users to access the resulting integrated information over the internet. ERP systems’ integration with various third-party software is far from seamless, however, and as a result ERP developers still have their work cut out for them if they want to attract more users and turn what is just the beginning of an upturn into sustained growth, observers say.
Kristian Steenstrup, research director for ERP/SCM for Gartner in Australia, says it’s harder to pick what’s happening locally as most vendors do not publish separate Asia-Pacific sales and revenue figures. “However, we have been aware of some local hiring of staff in some vendors and a steady flow of sales in mid-tier firms as well as some larger deals that are progressing.”
He considers “a slight upturn” is likely. “A lot of this growth is from new opportunities in CRM which some ERP vendors have packaged through development or acquisition, into their products.”
He says supply chain is also gaining momentum but more slowly. “This area is likely to be a strong area of upselling by ERP vendors to their client base as virtually all ERP vendors develop specific and discretely delivered SCM products.”
It’s a hard road finding the perfect enterprise system
Several enterprise application specialists confirm that it’s early days for ERP vendors getting into CRM and SCM. As a result, there are two camps forming, says Rachel Bakalich, Auckland-based supply chain development manager for ERP vendor JD Edwards. Either a customer opts for the end-to-end approach with one ERP supplier and gains superior integration but perhaps loses in functionality, or takes a best of breed approach and gets faster gains and years-in-the-making functionality, but suffers the pain of integrating foreign systems.
Bakalich, who has been at JDE for only three months but has experience as both customer and vendor at Carter Holt Harvey, SAP and PeopleSoft, says JD Edwards allows both approaches and suggests the approach customers want will be clearer in a year or two.
Certainly, both approaches are being taken in this country. “Organisations are always buying best-of-breed CRM systems even if they have CRM supposedly in-built into their ERP system, says CRM vendor Pivotal’s New Zealand head, Helen Robinson.
She is in no doubt that ERP vendors will struggle to match best-of-breed applications. “There is no one ERP system on the market today which can provide full CRM functionality. Unfortunately, numerous ERP vendors think that providing basic customer information is enough.”
But the truth is that an ERP system never does everything you want, says Tower Insurance’s general manager of development, David Callender. Organisations have to accept that a system may only answer 70% of their business needs, he says, hence there remains an ongoing need for better integration with other applications. Tower uses PeopleSoft financials and Vantive CRM — now owned by PeopleSoft.
Regardless of which approach is taken, integrating ERP systems with related software packages — and letting end users tap into the system over the internet — is never easy, for ERP vendors or for users implementing the systems.
Angus Scott-Knight, a director of Auckland SAP integration start-up Design Build Systems (DBS), says ERP software vendors’ progression into customer management and supply chain is often not a simple process for them.
“The difficulty is the back-end systems weren’t necessarily designed to be front-end CRM systems. The whole ERP mindset is very rigid and structured, whereas CRM in particular has to be a lot more flexible and very user-friendly. And different people [such as sales and marketing] have got their hands on the controls.”
The one-year-old DBS, whose seven SAP customers include government agencies and consumer goods companies, is working on components of CRM and SCM within its web business projects, such as firms wanting to account for transactions online or to interface ERP with sales order entry using handheld devices.
But integrating and web-enabling ERP is no picnic. Creating an invoice involves a “huge number of screens” in SAP, he says, while creating five web pages can involve 30 or 40 SAP screens. He also notes that SAP modules such as Projects project management are “exceedingly complex to use”. Scott-Knight says integration such as that which DBS does, takes away the arcane information and complexity from the end user and extracts the business rules of a company out of peoples’ heads and into the customer management system.
DBS, which sprang from the IT team at kiwifruit marketing arm Zespri, uses Backsoft’s bTalk for the SAP integration and Allaire for the web development side.
Can ERP vendors make the move into SCM and CRM? Scott-Knight is diplomatic. SAP has an array of tools that “we believe are not so open”, he says, though it is “on the way” with Java development and the recent purchase of an application server company (ProSyst Software, now with the odd name of In-Q-My).
Open wide
Regardless of what customers or integrators think, all the major ERP vendors are continuing to extend into customer management and supply chain. Many have bought and integrated CRM and supply chain products into their suites or partnered with other vendors, and continue to “web-ify” components.
For instance:
- PeopleSoft added browser access to all its modules in version 8, released last month. However, analysts such as Giga Group and AMR say the sales force automation and call centre features are inferior to CRM specialists such as Siebel — despite the company’s buyout in 2000 of customer management software specialist Vantive.
- Financially beleaguered Dutch software developer Baan — now owned by Invensys — is to integrate its ERP, CRM and SCM systems with fellow Invensys subsidiary WonderWare’s FactorySuite manufacturing management software.
- JD Edwards, which a couple of years back bought supply chain software company Numetrix, is adding support for Microsoft’s Pocket PC platform for its integrated OneWorld ERP package. It partners with Siebel on CRM and Ariba on B2B commerce.
- Database giant Oracle offers its own version of integrated software, the so-called E-Business suite of products, which include ERP, CRM and SCM. This month it launched a standalone online purchasing product Procure-to-Pay.
- SAP offers a version of integrated software called MySAP.com, a suite of ERP, CRM and other products that can be linked together using internet portals. In the third quarter it plans an updated CRM module with a new order-to-cash billing tool and better integration with SAP or rival supply chain applications.
Auckland-based Andrew Group, a two-year user of the software range from smaller Danish ERP company Navision, is taking the gradual approach by being what is believed to be the first site in the world to go with the end-product of Navision’s joint deal with CRM vendor Siebel.
Drivers
The reason ERP vendors are now opening up their systems to be linked to other software is that the internet has changed the fundamental way companies do business. Customers now demand the ability to tap into their suppliers’ management software to track orders and information, and this has created a new generation of ERP, according to industry observers.
In the past, ERP systems were designed to integrate various departments within the enterprise — typically, manufacturing businesses — by offering different components. These components, such as distribution, accounting, human resources and factory floor automation modules, could all be linked in a configuration customised to individual companies, with data flowing among the various modules. But the integration often remained within the four walls of the enterprise.
Now, an end user wants to go straight into a distributor’s system over the internet and see whether a product is in stock before he orders it. A distributor wants to see where in the manufacturing chain a product is at each precise moment, which means integrating the traditional ERP modules with CRM and SCM software, and web-enabling.
Merger ahead
While some vendors are developing their own middleware to connect systems together, others often use an external supplier’s EAI (enterprise application integration) tool, which is a programming tool for developers who want to connect their software to other vendors’ systems. JD Edwards uses its XML-based XPI (extended process integration) tool and SAP uses a similar tool, both using technology from connectivity specialist WebMethods, says Bakalich.
The Open Polytechnic of New Zealand, for instance, is using XPI to link its JD Edwards OneWorld system with its SalesLogix CRM system. The project, which will replace the organisation’s student and financial management systems for 80 users, is expected to be complete by October. The system replaces the Ingres-based student management application SEARS and a financial system called Prophecy.
The Open Polytechnic’s Doug Standring says the new system is processing 600 brochures requests daily and “has improved effectiveness and efficiency in the direct marketing, brochures inventory and customer services areas”. The polytechnic had already been using SalesLogix for tele-phone enrolments since January 2000 and chose OneWorld as they made the “best combination”. Integrating the change of system into work practices will be the toughest challenge, says Standring.
Often these tools are as useful in linking several ERP systems as they are joining ERP to CRM or e-procurement systems. CHH, for instance, uses three ERP systems (SAP, JDE, MFG-Pro) and a CRM application (Great Elk), says Bakalich. Linking one product to the web is far easier than several, she notes.
She says that traditionally the most work and maintenance goes into integration, but the benefit from using a best-of-breed product with an ERP system can sometimes outweigh the labour. This trade-off needs to be weighed up for each customer, she says.
While specialists like Bakalich say integrating back-end and front-end applications are “less difficult probably than people think”, and the tools may be getting better and more “open” to other applications, no one Computerworld spoke to expects ERP integration to be a cakewalk any time soon.
The ERP vendors are rising again. There’s still life in the old war-horses yet.