Fair game

THE GOALPOSTS ARE CHANGING and the playing fields levelling in the local enterprise resource planning environment.

South Africa has a relatively low number of large enterprises, and they're just not growing at anything like the rate of the smaller local businesses. This saturation effect is one of the main reasons that the likes of Oracle, SAP and Microsoft (who historically have focuses on large clients) are now moving into some of the SME sectors. SMEs are no longer something that the large ERP vendors can afford to ignore. But as the "tier one" players (like Oracle and SAP) push down into the middle markets, we're also beginning to see upward pressure from the traditional "tier three" vendors (smaller, local, niche developers) into the middle market these smaller players spread their wings and attack bigger projects.

It makes for an interesting battle.

Locally-listed IT services firm Business Connexion (BCX) is firmly in the SAP camp. BCX's Marlon Reddy says South Africa is going through something of an upgrade boom when it comes to ERPs. He explains the reasons for this.

Any cheaper than that and we'd be on a shelf in some retail store.

Derek Kudsee

"Current ERP releases address integration and efficiencies within the organisation, with associated cost savings - but future ERP needs are becoming more demanding in terms of performance improvements, speed of response to market changes and the need to increase end-user adoption and utilisation."

Added to this, Reddy says there is a big trend in the ERP space towards analytics and reporting, given that companies are under pressure to use the information from ERP applications more effectively for proactive reporting and decision making.

"To this end, business intelligence and strategic enterprise management are receiving greater attention."

Reddy also notices trends towards service-oriented architectures and to growing the end-user base and extending the reach of ERP systems - with new user front-ends and improved accessibility.

Oracle SA's senior sales consulting director, Attie Taljaard, says that - aside from the current upgrade boom - the major driving force behind new ERP deployments is regulatory compliance.

With the global focus on Sarbanes Oxley, with JSE-listed companies required to conform with IFRS and King II, industry specific standards like Basel and FICA, and then of course general standards like GAAP, regulatory compliance is very important.

Over 200 firms listed on the Johannesburg bourse are using Oracle's BI and ERP solutions.

The second major trend, he points out, is that "we're seeing significant interest from our customers around 'verticalisation', which goes some way to explaining Oracle's industry-specific acquisition strategy.

"Together with our fusion middleware platform, we're providing solutions that go deeper into the value chain of any specific enterprise," boasts Taljaard.

This is a small, competitive industry. One can ill afford to have a bad implementation or develop a bad reputation.

David Greenleaf

Finally, he confirms the view of Business Connexion's Reddy, in that SOA and the development of platforms allowing for greater agility of business process management are also fuelling the ERP adoption rates.

Back to this 'SME playing field'. Heavyweights Oracle and SAP have been extremely vocal in recent months on the issue of affordability - debunking the myths that their products are outside the price range of most small businesses.

SAP's small business product (SAP Business One), which caters for between one and 200 users, comes in at about R10 000 per user, explains the ERP giant's Derek Kudsee.

"Any cheaper than that and we'd be on a shelf in some retail store," he quips, adding: "though of course, we don't want to be there."

SAP has only been playing in the South African SME space for just two years (in some European countries it has been serving small businesses for as many as eight years). In that time, they have signed just a couple of hundred deals, but this side of the business is picking up rapidly, as Kudsee explains.

"Compared to the first year of operations, last year saw 175% growth with 145 new customers." But he is honest about the levels of scepticism among SMEs in South Africa, when it comes to the perceived expense of ERP systems. "We haven't had too many people coming and bashing down our door."

The key to keeping up the growth rate of the SAP Business One and SAP All-in-one (for 200 500 users) products is establishing and developing an efficient partner channel. This has been an area of concerted focus, notes Kudsee.

At Futurex 2007 SAP offered to buy back the accounting package licence fees from small businesses looking to migrate to Business One or All-in-One - showing that the gloves are off in this fascinating ERP battle.

"We're confident a SAP solution makes better sense than any accounting software package. There are affordable options such as Business One solutions that offer smaller companies consolidation of their sales right through to their finance processes," said Kudsee.

In fact, 65% of SAP's customers around the world are in the SME space.

Locally, Oracle has been promoting itself to smaller South African business owners for roughly the same length of time as SAP - about two years.

Taljaard sees both big and small firms as competitors in this space. "Some of the traditional mid-market competitors are pushing up into the SME higher-end market."

But, spanning the private and public sector spheres (he explains that smaller government departments and divisions are also regarded as SMEs), he says: "We've won some significant deals recently in that space - we won the Department of Health's human resources ERP tender.

Some of the public sector contracts are on hold, due to the National Treasury and SITA's massive IFMS project, but Oracle is in the bidding for segments of this R4 billion pie.

Tier two ERP vendors would be the likes of Microsoft and Cispro, tier three would be companies like Accpac, explains i5 Group sales director Paul Mare.

What's important is the level of customisation you can offer a client, he adds. "It's about being able to wrap a solution around your client's particular business.

i5 aims to differentiate itself from the myriad competitors by adding value in other areas - enterprise visibility through portals, bringing balanced scorecarding into ERPs, and improving user adoption by moulding functions into an Outlook-looking interface.

"Clearly we won't win any large enterprise accounts, but we often win contracts for certain departments in organisations," adds Mare.

Anyway, this isn't where the real battle is being fought.

When it comes to SMEs, BCX's Reddy points out that solutions geared to this size of business need to be comprehensive and powerful, but also must be scalable. "It's about solutions that will enable SMEs to become more competitive, and that will allow growth and expansion."

Customisable, friendly-interfaced, powerful, scalable and affordable. It is becoming quite a long list of demanding requirements.

Ability Solution's commercial director, David Greenleaf, throws mobility into this mix. He says that ERP systems on mobile devices increase the accuracy of input data, the speed of data transfer and data analysis, and extend the reach of ERP.

"You can have - for instance - a works order downloaded to a device. You can have real-time information on the work being done, interacting with the portals within which the ERP applications sit.

"Modern devices can be used to open up the ERP solution to people in the field," says the 28-year veteran in the IT industry. He has concerns about the 'big boys' of Oracle and SAP entering the SME market. "That's why we adopted Microsoft Dynamics as well - it's a reality. No matter how much people might loathe them, they are the leader in this space," he says.

Ability also deploys its own Ability Software Suite.

"This is a small, competitive industry. One can ill afford to have a bad implementation or develop a bad reputation," he remarks.

Oracle's Taljaard recognises this, saying that the challenges in the mid-market levels are different to those challenges one would tend to experience with large enterprises.

"But the mid-market is certainly attractive to us," he says, revealing that the game plan is to take template-type solutions and aim for rapid implementations with more predictable costs.

Taljaard says that when choosing an ERP solution, one should make sure it gives a 360-degree view of both customers and employees, as well as lending understanding to one's production capability and matching demand and supply.

"It improves reporting, the ability for organisations to leverage their resources, and visibility and auditability."

Reddy notes that the applications of an ERP system are diverse - from financial management to supply chain management, from CRM and supplier relationship management to human capital management - ERP enables organisations to become more effective and efficient.

Like Ability's Greenleaf, Reddy notes that convergence among applications, hardware and infrastructure is having a major impact on the evolution of ERPs.

"The move towards adopting SOA is starting to have an impact on how organisations are structured, how roles are defined and how organisations react to changes in their internal and external environments," he adds.

Its an interesting time for the ERP vendors, as players large and small meet up on a common battleground. It's here that the SME client demands a solution that will deal with its specific vertical industry need; at low cost, and with all the functionality of the big-bang ERP systems that many large businesses today could not do without.