The biggest business challenge facing companies in the new millennium is to enter the e-commerce fray as quickly as possible. The e-business and e-commerce drive has also meant that instant access to information gives a company the market-edge.
Travis White, JD Edwards VP of marketing, Europe, Middle East and Africa, defines the difference between e-business and e-commerce: "In our view, e-commerce is the application of digital technologies to the buying and selling of things. E-business, on the other hand, is the application of digital technologies in all aspects of a business, with the objective of increasing sales, reducing costs and improving asset management. E-commerce is narrowly focused on a single activity. E-business is simply a better way of doing business."
It is with the advent of e-business that ERP systems are coming under the spotlight. The new generation ERP model can no longer afford to be the monolithic "jailhouse" that it once was, used only for accessing data from within the company, says Craig Smith, Customer Relationship Management (CRM) Solutions Strategy Architect at Calibre.
Before the explosion of e-business, says Smith, companies were more concerned with utilising the ERP system for supply chain management. However, companies soon realised that processes within the company could not work in isolation.
Additional functionality such as CRM software needed a backbone to work off and data had to be centralised and accessible to everyone within the company. It was no longer the domain of the sales force and accounts department to have exclusive access to customer information. "Companies need to manage people within the same framework," notes Smith.
Overcoming hurdles
Many organisations spent huge amounts of money implementing ERP systems with the expectation that ERP would solve their information systems problems. It was soon discovered that the system was good for gathering data, executing data and storing data, but systems had no idea what to do with the data once stored. Accessibility and streamlining remained the biggest hurdle.
"Enterprise corporations are now realising that with the new equity bill, information will have to be available and consolidated at all times. This is impossible if there is no structured system in place," says Daryl Robbins, senior partner at Arthur Andersen.
Cost of installing and running ERP systems can be misleading, with companies often underestimating the ongoing cost of infrastructure implementation and software upgrades.
A recent study by Meta, the US IT research group, released in February this year and commissioned by Sun Microsystems, shows that insufficient attention is given to the investigation of the total cost of ownership (TCO) of the systems. Meta investigated TCO of small companies ($200 million in annual revenue) and found that the choice of platform significantly impacts the overall support costs of ERP solutions.
Meta found that on-going support costs comprise almost 40% of the overall expense of an ERP solution`s three-year TCO. Additionally, infrastructure costs represent roughly 70% of the on-going costs of the ERP systems on an annual basis and 40% over the three-year period.
Studies also revealed that small organisations pay three times as much per user for on-going support than larger organisations (over $5 billion in revenue).
However, smaller organisations do not enjoy the same economies of scale as their larger counterparts. A large organisation may pay a similar price for an ERP system, but because it has many more end-users, the average cost per user is less than that of a smaller organisation. In fact, the Meta study shows that larger organisations support four times as many end-users per support staff member than smaller organisations.
Meta also points out that IT professionals frequently fail to consider issues such as platform scalability and therefore underestimate the actual server capacity ERP packages require. Most, says Meta, underestimate capacity by as much as 50% of their actual requirements. In addition to adding to hardware and software costs, this underestimation may lead to a choice of platform that will be challenging to scale and from which it would be difficult to migrate.
Quo vadis?
So what are ERP companies doing to address these problems? We are moving into an age where traditional systems are mutating into scaleable, modular type systems that cater for clients` immediate needs, allowing for add-ons to follow.
Speaking at the launch of the new SoftworX business model, MD Gary Lawrence said: "South African businesses are demanding a guaranteed return on their IT investments, especially in the ERP arena. According to some US surveys, 40% of all installations are only partially successful and one in five are scrapped as total failures."
SoftworX also revealed that it has added CRM, e-commerce, outsourcing, application service provision and consulting services to its traditional ERP and supply chain solution offerings.
"We are remaining true to ERP because it is integral to the success of so many other IT and business initiatives. However, we are maximising the potential of these systems in our existing clients by adding new solutions that link into the back-end.
"By utilising the technology already in place, companies can upgrade their systems to incorporate e-commerce, supply chain management and CRM strategies without incurring huge costs," explains Lawrence.
Keith Goosen, senior consultant at EMC, says companies must pay particular attention to the time-to-market aspect when choosing ERP solutions. E-commerce and e-business enablement for companies is critical. Having a sound backbone to support data and work in the speed necessitated by Internet business is crucial, says Goosen. Companies that lag in Internet-facilitating their businesses will miss out.
The driving force
ERP vendors have acknowledged the importance of the Internet to drive businesses.
"Key challenges facing the SAP services divisions over the next year include advancing communication to Internet speed and bringing down market barriers," says Claas Kuehnemann, GM of professional services at SAP Southern Africa.
"For SAP to become a true solution provider, we must continuously enhance existing services and develop new services to enable business solutions for the economy - becoming involved in our customers` business planning cycles and understanding their key drives. The introduction of mySAP.com accelerates this need," says Kuehnemann.
Simon Griffiths, national marketing and alliances manager at JD Edwards SA, says embracing new technologies driven by the Internet will be paramount for ERP companies to stay in business. JD Edwards is close to bringing to market solutions that incorporate handheld devices and Wireless Application Protocol.
Griffiths believes that making use of available technology to speed up processes within company systems is what will set companies apart from their competitors in the future.
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