The ERP (Enterprise Resource Planning) market is scrambling to reposition itself at the centre of e-commerce, says EDS Enterprise Solution Division Manager, Shaun Schmidt.
"To some extent, some ERP vendors thought the e-commerce market would come to them. They thought this would be a natural result of the need to integrate front-end systems into back-end logistics, billing and finance systems, traditional ERP turf."
As it turned out, vendors found they needed to do more than put a browser front-end and an immature e-commerce suite onto their systems. Says Schmidt: "Clients want full CRM, e-procurement and online selling capabilities with proven integration into their ERP systems. The market wouldn`t buy some of the ERP vendor community "me-too" claims around e-commerce, which is why we have seen companies like SAP and PeopleSoft striking alliances with or acquiring stakes in e-commerce market leaders."
ERP market growth has been slow post-Y2K because businesses want to figure out their e-commerce priorities before they are willing to invest more in ERP. "In most cases this makes sense," Schmidt continues, "but some businesses are delaying making obvious decisions regarding ongoing value extraction and efficiency generation from their ERP systems."
At the same time, everyone is watching the Application Hosting or Application Service Provision (ASP) market with a great deal of interest, but adoption rates have been low. "The logic looks compelling. It seems to make sense to let someone with a pre-built solution for your industry build, maintain and run your applications. However, there are major performance and security issues in running ERP systems over the Internet, particularly given the varied access to network bandwidth across the country."
Schmidt says there are also competitive issues - this approach `commoditises" applications for an industry, so where is the competitive edge? (see next paragraph) In S.A., and abroad, the ASP industry is mostly targeted at the SME market (below R200m p.a.). Schmidt cautions that a cookie cutter approach, which is what ASP is, will not necessarily suit the SME market. "Just because they are small businesses doesn`t mean they aren`t complex. Their competitive edge often relies on their flexibility - the last thing they need is a system which is too generic in its standard form, and too expensive to customise to their own requirements," he explains.
Small to medium sized organisations should figure out which parts of their business can and should be standardised, and which parts are competitively unique. Either the ASP provider must cater for these unique requirements cost effectively, or the business must continue to look after them itself.
Schmidt believes ASP will stumble, be adjusted and then come back - very industry specific, down to sub-niches, driven by a franchiser, or a "gorilla supplier", such as an auto manufacturer prescribing a dealer system.? "Company size will not be the main factor defining who uses ASP. Competitive functionality and trading communities will be the attractions, regardless of size," he asserts.
How has the Internet changed the ERP market? "Partly though hype - is anything about the Internet not hyped? The puffery around the Internet has led to an unwritten understanding that `if my ERP doesn`t have a browser it`s a dodo`, which is not the real issue. The more important issues are the ability to integrate with other vendor`s computer applications and handle mutiple data sources through a standard like XML," he says.
ERP has also been changed by e-commerce, both B2B (Business to Business) and B2C (Business to Consumer). ERP will feature in the realisation of both, wherever there is a supply chain, so clearly Enterprise Resource Planning (`ERP`) has become a misnomer. The name will be superseded in the next couple of years," Schmidt explains, as the role of these systems as backbone transaction collectors becomes better defined
According to Schmidt SA has access to the same technology as any other market - except for the regional network speeds and size of market. "And we do have exceptionally good technical skills. There are brave entrepreneurs seizing the new market opportunities. While some of that market is South African, the biggest winners will use local skills and products to capture international revenue streams. If we can use this low-cost base to provide more affordable solutions to a global community, there is a huge opportunity for firms with SA-based skills who know how to get their message across internationally. Some are already laying the groundwork for global expansion."
But while SA vendors may feel bullish globally, their local customers are still cautious adopters. Schmidt explains that they are learning from the mistakes of Europe and the U.S. Nevertheless, there will inevitably be some road-kill in the local digital economy. In the end, says Schmidt, ERP systems are just good tools. It`s who uses them that counts most.
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