Will ERP eat itself?
1 April 2005 | 0
Enterprise Resource Planning (ERP) is a highly successful genre of business software—and it’s probably on the way out!
That may sound more than a little cheeky, given the multimillion dollar takeover battle involving Oracle, PeopleSoft and JD Edwards, not to mention Microsoft’s moves into this territory. But the underlying essential is that what we now call ERP morphed itself up from the earlier MRP (Materials Resource Planning), which was originally a set of management techniques that software engineering provided a means of automating to some degree.
This whole field is actually an attempt across a broad front to develop integrated ICT systems that will comprehensively answer all of the requirements of the enterprise. Yes, ‘integrated’ is a much abused term and every known software company will claim the
ability to deliver it. But the truth is the market continues to believe instinctively that it is more likely to be really, truly, deeply integrated if it all comes out of the same box with the same logo at the same time. Just look at Microsoft, Oracle, SAP, etc. I rest that case.
So when you start looking at ERP as a quest for ever more comprehensive coverage of the business processes that an organisation can automate, it seems clear that inevitably it will
supersede itself. Today, ERP ranges from core financials, even sales and invoicing, to supply chain systems and automated materials/supplies/components/ ordering to mobility add-ons and even bells and whistles like SMS alerts when real human brains are needed to sort something out.
All such systems, of course, require fluency in XML and XBRL and the ability to collaborate by internet. If the links to Supply Chain Management (SCM) are fairly obvious, think of online customer self-service in ordering and specifying products—increasingly common to the point of being standard—and in no time at all you are in Customer Relationship Management (CRM) territory. What it all means, it is fair to assert, is that we are all converging from different directions on total business systems that will incorporate
all of the above, out of the box from a single reputable software company.
It is certainly clear where Microsoft is coming in, aiming as it has consistently done to offer comprehensive application product ranges that are designed to work with each other so that users need not look anywhere else. Since the late Nineties it has acquired Great Plains, Navision, Axapta, Solomon—all originally financial systems, now being marketed in enhanced forms as ERP product lines. Microsoft Business Solutions could hardly be a clearer declaration of strategy in a business name, and a June announcement of its ‘road
map’ states firmly that each of these ERP suites has SCM and CRM capability. Its additional promise of ‘business analytics’ seems almost superfluous.
‘They are being given the look and feel of Microsoft products and already offer—or soon will—tighter integration with other Microsoft software such as Office and Outlook,’ says Neil Tanner, Ireland manager for Microsoft Business Solutions. He explains further that
Microsoft has a straightforward dual strategy of continuing to develop each product in its own right (but with the family resemblance becoming ever more pronounced) while simultaneously proceeding with ‘Project Green’ to replace them with a new business applications set. This will be built on a new global code based on Longhorn, the next Windows client and server product set, and will not hit the market before 2008. Even then it will be targeted at new users, so existing Axapta, Great Plains, Navision and Solomon customers are promised development and support until 2013.
Whether this Fab Four are simply talented individuals under the same management or four apocalyptic horsemen of the evil empire galloping towards world domination is a much debated question in IT circles—or at least in the Dublin pubs the many wary Microsoft-sceptics frequent. Between them they offer a choice of integrated business systems for both US and European (or Europe-oriented) markets because both Axapta and Navision have impeccable Danish pedigrees and were bought as a merged entity by Microsoft in 2002 for a historic $1.4m. It is interesting to speculate on alternative history because Axapta was in fact introduced to the USA as a business partner by IBM and is written entirely in Java (Sun Microsystems) for omni-platform performance.
But apart from its useful multilingual, multicurrency development experience, Navision brought with it a legacy to which Neil Tanner is very happy to give full credit—and from which he is ready to take every possible market advantage. ‘Navision has a 70 per cent
market share in Denmark for very good reason—and it’s not just the language,’ he said. ‘It has a brilliant history in vertical markets because the company has a huge base of code partners which have developed applications for an astonishing range of specialist sectors
These many vertical products have been exchanged, worked on by other developers and generally have continued to mature into definitive products in terms of capability. Neil Tanner has set up a very promising ‘twinning’ programme between Irish resellers and their counterparts in other European markets which is already bearing fruit. The other major competitive strength of Navision in the Irish market (and possibly its principal threat to other products) is that it was always aimed at European scales of business, so its range from five to 1,000 employees is a single, scalable offering for almost the entire private-sector market.
Meanwhile, back up at the enterprise Tier-One level (big outfits) the heavyweights are still SAP, Oracle and its PeopleSoft/J.D. Edwards acquisition target. Software Resources is Ireland’s leading PeopleSoft/J.D. Edwards house with clients like De Beers, Irish Sugar, Anglo Irish Bank and An Post. According to managing director Tiernan Quinn, its products are just as applicable to smaller companies as they are to large manufacturing outfits.
‘There is a lingering misconception because of the history of ERP software,’ he said. ‘Yes, our largest client has about 700 users around the world. But we can also point to a manufacturer with about eight users. All ERP companies have become extremely conscious of smaller customers, scalability and speed and ease of initial installation—where a reputation for complication was probably one of the biggest turn-offs for businesses of all sizes.’
He points out that all ERP companies are making a huge thrust into vertical markets where a product that is to a great extent prepackaged for a sector can offer quick wins for the customer. ‘Once upon a time we all talked about “best of breed” and thought we were geniuses when we got a set of systems “integrated” ie working together,’ he said. ‘Today, Tier One ERP is an integrated system and we have moved on to embedded systems—sales
order processing, MFP, CRM etc. are all part of a unified, whole enterprise solution.’
That theme of comprehensiveness is taken up by John Caulfield, Oracle Solutions Director in Ireland: ‘We have moved on to hyper-integration—very sophisticated, real time, trigger-based integration,’ he said. ‘Clients want a unified information architecture with all of their data in one place and zero information latency—a single real-time view of the enterprise.’
That is driving the increasing footprint of traditional finance and ERP applications which are becoming just elements in a flow-through business process. Web-based and distributed, such systems offer infinite self-service options to regular and more occasional users such as customers: ‘You can have a browser based application, essentially nothing on the desktop, then log on and be presented with any actions the organisation chooses to give you,’ said Caulfield. ‘In essence, whatever you can see you can do and the rest of the system is invisible to you.’ That is also the essence of many of the most sophisticated new manifestations of ERP, such as the use of mobile devices.
One Irish software company has been quietly in the ERP business since it was formed in 1982: Manser, in the Datapac stable since 1991, has developed its ManserIE modular ERP product to answer the growing needs of medium-scale businesses in Ireland. ‘In a sense we are tackling Oracle and Microsoft head-on but we have a strength for Irish SMEs that we think is fairly unique,’ said Frank Corr, General Manager of. Manser. The company has 30 or so ERP customer sites, seven of whom have the ManserIE product launched last year. It is in fact built on an Oracle database and makes use of the Microsoft .NET platform for much of its e-enabled capability. ‘We can scale from about 10 concurrent users to 50 or 100,’ said Corr. ‘We are focussing on Irish manufacturing and distribution companies in industries like electronics and food that today need first class quality control and traceability systems. We also offer a per user, per month rental model that suits smaller businesses with growth objectives.’
Site Report: Irish Ferries
Irish Ferries is the country’s leading ferry operator, a subsidiary of Irish Continental Group, which operates four routes on which it carried more than 1.7m passengers, 400,000 cars and 200,000 freight vehicles in 2003. The company’s SAP system went live in 1999, implemented by Client Solutions, and in March of this year it completed an upgrade to SAP Enterprise.
Financial accounting was at the heart of the new Irish Ferries system and special requirements included integrating its customer billing with a legacy ticketing system for RoRo and container freight. Many large customers now have online access to the booking systems.
The ERP installation began with the purchasing function: ‘We saw that we needed to improve business processes and control costs as tightly as possible,’ said financial controller Anthony Kenny. ‘Procurement and stock management are key functions for us
across our catering, technical—engineering maintenance and spare parts—and fuel purchasing.’ The initial implementation was combined with a Y2K systems review and movement to Euro compliance.
‘A ferry is a large hotel and catering complex that also happens to be a ship, so the range of supplies required is really vast,’ Kenny continued. ‘A common procurement pattern throughout the organisation gave us tighter control and real-time information as well as automating many processes in a tight margin business. We had very specific needs and went for SAP initially because it is based on Best Practices and so gave us a platform to re-organise our people and tasks accordingly. We refocused on customer service and
integrated team working based on our four routes rather than our traditional functional lines: deck, engine and catering.’
The ERP elements of the SAP system have been accompanied by extensive management reporting across all functions which will be enhanced by the extra features and capabilities of the current upgrade.
Site Report: American Power Conversion
American Power Conversion (APC) is one of the world’s largest manufacturers of Uninterruptible Power Supply (UPS) units for essential IT, telecommunications and other systems. Now 11 years old, its Galway facility employs 650 and mainly produces the larger
UPS systems for network-critical physical infrastructure in data centres and industrial applications. APC also employs 170 in its Castlebar plant and 40 in the Dublin office.
‘We have a global Oracle finance and ERP system that underwent a major upgrade to Oracle 11i two years ago and is now seeing a lot of further development activity in relation to Sarbanes-Oxley and other compliance and security issues,’ says Eugene Maxwell, IT
Director of APC in Ireland. After 9/11 APC, like many other major US corporations, looked very seriously at its management systems. It took the strategic decision to centralise all operational and financial data globally in a single consolidated Oracle database. Galway is one of three APC technology hubs worldwide and also a replicated data site for security (controlled from APC Massachusetts, with HP Ireland managing the physical infrastructure). So APC Ireland is in fact working on the global US-based system even though the back-up system is on its Galway site.
‘Prior to 1998, each new APC site was a new organisation with a separate database and set of systems and all of the obvious complexity and potential for problems from an enterprise point of view,’ said Maxwell. ‘But since we made the multimillion dollar investment in the global system our business growth and a number of acquisitions have actually trebled the number of ‘organisations’ on the Oracle database yet no data is kept at local level. When adding a new facility or production line we automatically have a standard platform worldwide. Most importantly from a business point of view we have a single view of the enterprise.’
‘We have been expanding the footprint of the ERP system,’ he continued, ‘for example in adding our field service processes and developing the Supply Chain Management elements as we gain more manufacturing partners.’ The technical challenge to the ERP system in the future is an increase in the build-to-order component of APC’s business, including rugged and special designs, so that it needs greater flexibility in the materials and components procurement elements. APC Ireland has up to 750 concurrent users, making it one of the largest ERP systems in the country.
Site Report: Chubb Ireland
Chubb Ireland specialises in security and fire protection products and services, from the famous safes that began manufacture in Wolverhampton in 1818 to advanced electronic security systems and today’s alarm monitoring and man-guarding services. The business combines retail and trade product sales with services and design and installation projects.
The backbone of its finance and ERP system is Sage Line 500, installed and configured by FDS Technology for a current total of 48 concurrent users (and up to 90 actual users) running a group of five companies. ‘We first began adding ERP capability to our financial systems in 1999,’ said IT Manager Michael Devitt, ‘originally on a Unix platform but later we moved to Windows. We have taken on additional Sage modules as we progressed, such as Fixed Assets and especially Project Accounting. The ability to enter budgets by Project, rolled up into the General Ledger, is the key to very tight financial control. 2003 was a big development year for our systems upgrading the service side of operations—the Alarm Base control system for our monitoring service, for example, was integrated with Line 500.’
But it is the Project Accounting elements that have enabled Chubb to build an effective ERP system: ‘It was difficult enough to configure it the way we wanted,’ Devitt continued, ‘but it was well accomplished and once it was up and running a couple of years ago we had a very steady platform on which to build additional functionality. At all times we have had good reporting and feedback, with the Credit Control module adding real value and more recently we have added Purchase Requisitions both for tighter control of the purchasing process and for greater speed and efficiency. This has now brought us into an automated workflow scenario which promises an excellent return on investment.’
Site Report: Kilkenny Living
Formerly Kilkenny Mantelpieces with a 20-year pedigree of craftsmanship, the business relaunched itself as Kilkenny Living in 2003 and extended its range of designs, materials and products. Timber fire surrounds are the core business, now extended to include complete fireplace sets in classic and contemporary styles with cast-iron and stone elements and complementary furniture items such as overmantels and mirrors, tables, etc.
‘We have 40 staff here in Kilkenny, resellers all over Ireland and Britain and last year we sold nearly 14,000 units,’ said General Manager Tom Bergin. Both in direct sales and through the fireplace trade Kilkenny Living operates principally on a build-to-order model from its standard catalogue. Some elements can be one-off, where a chimney breast or other feature in a house is non-standard.
‘We operate on a Just-in-Time production system, working from our component stores and raw materials such as mahogany, to match the incoming orders,’ explained Bergin. Kilkenny Living has been a user of Irish software Manser since 1990, starting with the Manser Manager finance and production system on Unix, which later migrated to Windows. Last year the business made the decision to move on to the ManserIE ERP software suite which has the capabilities to handle all of its current needs in a single integrated suite, currently with 10 users.
‘Working with the Manser people has been very successful,’ said Bergin. ‘But there is more to do, in the sense that there is a challenge to get the best out of the system and its functionality. Right now, for example, we are working on a project to introduce bar coding on the production floor—and we are building a new warehouse—and both elements will enable us to generate new efficiencies and tighter cost controls in the future.’