How MMP industry will mine its ERP benefits in 2011

The Mining Minerals and Processing (MMP) market is a significant one in South Africa and abroad for ERP solutions. The last 12 months have seen some interesting developments as the mining industry and solution providers collaborate on creating solutions geared for this unique space.

As 2011 begins, Conrad Steyn, Director of Barnstone Consulting, shares his insights on recent events and their effect on the ERP market, particularly in an MMP context.

As the year has progressed, so has activity in the mining sector, bringing with it a cautious optimism and an increase in expenditure on business solutions.

According to Steyn, the first half of 2010 proved to be slow for the ERP market for a number of reasons, many of which are knock-on effects of the economic downturn experienced last year:

* Residual caution following a very tumultuous 2009 contributed in part to the slow start. When combined with the protracted planning and rollout of MMP projects, this meant that even though expansions and growth were in the pipeline, it has taken some time for this to manifest itself as actual spend on business solutions.
* Many companies had adopted a conservative 'wait and see' approach and became more inward facing with a focus on streamlining business processes and containing costs.
* Investment from an ERP perspective was judiciously spent on enhancing existing solutions to optimise the business, as opposed to expenditure on new releases and large scale-deployments.
* Attracting and retaining key skills becomes even more critical during periods of uncertainty, so significant investment shifted towards talent management and employee retention programmes.

Recent trends are seeing the fragmentation of larger conglomerates into smaller more specialised and essentially more agile businesses such as Optimum Coal, Rand Uranium and Royal Bafokeng Platinum.

These 'new enterprises' tend to be headed by management teams accustomed to enterprise resources and are inclined towards enterprise-type thinking. Having enjoyed the benefits of a top-tier ERP solution, these companies want to maintain this level of functionality in their business going forward, even though they are a much smaller entity.

This is particularly true in the MMP sector, where the sale of mineral commodities and the cost to produce/extract are often affected by fluctuations in currency and demand, with significant impact on profitability. Managing this complex environment needs special skills, and to realise any sort of competitive advantage these companies will be looking for accessible solutions that will enable them to get their foot in the door, be quick to deploy, easy to adopt and offer immediate benefit and return on investment.

“This dichotomy presents some interesting opportunities as the adoption of ERP is being driven by multiple and diverse needs. Solution providers will be looking at creative means to meet these needs, ensuring there will be an offering for everyone,” provides Steyn.

2011 looks promising as the economy continues to recover, and the long cycles inherent to the MMP industry start to bear fruit. Steyn provides the following predictions for the coming months:

* With the deployment of ERPSs being driven both by highly educated, ERP-savvy users, as well as a need for entry level type solutions, ERP solutions look set to continue diversifying product offerings to appeal to the different levels within the market.
* Enterprise-level users will still offer opportunity for the provision of highly optimised solutions, but the real value will come from the emerging mid-market and SME segments.
* Technology developments in terms of better connectivity and the provision of cloud based services will also aid smaller organisations (and even the larger ones) with the adoption of ERP solutions. The option of having software delivered as a service (SaaS) eliminates traditional barriers of entry around the hefty cost of infrastructure and deployments and makes a proliferation of services and functions available on a pay-per-use model.
* Improved bandwidth and connectivity is opening up this channel even further for mining operations situated in remote locations, which were previously unable to access these solutions.
* Another factor to consider is the current speed of implementation. As solutions become more commoditised and easier to deploy, implementations are now faster - in six months or less in a typical MMP environment. As a result, the challenge shifts from the ERP system to the personnel and processes within the organisation, and their ability to acclimatise to and successfully adopt the new ERP environment. This is prompting service providers to focus not just on functionality, but also on the user interface and business process optimisation.