Net Presents ERP Vendors with New Challenges

RELATED TOPICS

Something is happening in the ERP (enterprise resource planning)

market. ERP vendors have been offering the ability to integrate their

software with related, customer-focused management systems and as a

result, the ERP market is picking up again, according to market

researchers.

Early indications are that the ERP market is showing double-digit

growth again after a slowdown in the late 1990s. Worldwide license and

maintenance revenue for ERP systems was worth $21.5 billion in 2000,

according to preliminary figures compiled by Andrew Golloboy, ERP

research manager at market research company International Data Corp.

(IDC), who is in the middle of doing the survey. This represents

revenue growth of 13.1 percent from 1999 when the worldwide market was

worth $19 billion. In comparison, IDC's preliminary figures show a

growth of 8.1 percent between 1998 and 1999, when the worldwide market

for sold licenses and maintenance was 17.6 billion.

The update in sales is ascribed by industry insiders to vendor efforts

to link traditional ERP systems with CRM (customer relationship

management) and SCM (supply chain management) software, and allow users

to access the resulting integrated information over the Internet. ERP

systems' integration with various third- party software is far from

seamless, however, and as a result ERP developers still have their work

cut out for them if they want to attract more users and turn what is

just the beginning of an upturn into sustained growth, observers said.

Integrating ERP systems with related software packages from different

vendors -- and letting end users tap into the system over the Internet -

- is not easy, for ERP vendors or for the users implementing the

systems.

"I know a number of customers who have tried to do this, but who have

failed," said Joshua Greenbaum, principal of Enterprise Applications

Consulting in Daly City, California.

One vendor that has extended its ERP system recently is Dutch software

developer Baan Co. NV, which announced a move to integrate its ERP,

CRM, and SCM systems with WonderWare's FactorySuite manufacturing

management software at the CeBIT trade show in Hanover, which ended

last week. Baan and WonderWare are affiliated, since WonderWare's

parent, Invensys PLC, bought financially beleaguered Baan last year.

Another vendor, JD Edwards & Co., announced at the CTIA Wireless show

in Las Vegas two weeks ago a deal under which it will support Microsoft

Corp.'s Pocket PC platform for its OneWorld ERP package -- another suit

of integrated software.

Database giant Oracle Corp. is currently marketing its own version of

integrated software, the so-called E-Business suite of products. Oracle

is offering, just like its competitors, an ERP system that is connected

to a CRM as well as an SCM system.

The biggest ERP vendor by far is Germany's SAP AG with a 35-percent

market share, according to research company Gartner Group Inc. SAP has

its own well-known version of integrated software called MySAP.com., a

suite of ERP, CRM and other products that can be linked together using

Internet portals.

That users want these types of integrated systems is illustrated, for

example, by Swedish ERP vendor Intentia International AB's recently

announced sale of its product suite Movex -- a combination of ERP, CRM

and other management software -- to Luxury Timepieces International, a

watch-making unit of Gucci Group NV.

The reason ERP vendors are now opening up their systems to be linked to

other software is that the Internet has changed the fundamental way

companies do business. Customers now demand the ability to tap into

their suppliers' management software to track orders and information,

and this has created a new generation of ERP, according to industry

observers.

In the past, ERP systems were designed to integrate various departments

within the enterprise -- typically, manufacturing businesses -- by

offering different components. These components -- such as

distribution, accounting, human resources, and factory floor automation

modules -- could all be linked in a configuration customized to

individual companies, with data flowing among the various modules. But

the integration remained within the four walls of the enterprise,

according to Nigel Raynor, a research director at Gartner Group Inc.

Now, an end user wants to go straight into a distributor's system over

the Internet and see whether a product is in stock before he orders it.

A distributor wants to see where in the manufacturing chain a product

is at each precise moment, according to SAP AG Chief Executive Officer

Henning Kagermann at a press conference at CeBIT. This means

integrating the traditional ERP modules with CRM and SCM software.

"The connection between ERP, CRM and SCM (supply chain management) must

be integrated in the software solutions," said Thomas Ochs, chief

information officer at Villeroy & Boch AG in Mettlach, Germany. The

company uses SAP's R/3 ERP system. Also, the vendor must have "a view

for the problems and business of their customers," he said.

Nigel Raynor at Gartner agrees, and stresses the importance of opening

up the information stored in integrated ERP systems via a Web-based

interface, so customers of an enterprise can view appropriate

information.

"ERP vendors must open up their systems to use XML (extensible markup

language) as the interface," he said. The XML specification for

formatting data on Web pages gives more complete information about data

than HTML (Hypertext Markup Language), and can be used by different

software programs to share data over the Internet.

Also, some vendors are developing their own middleware to connect

systems together. JD Edwards, PeopleSoft Inc. and Oracle are doing

this, Raynor added.

"We are calling this ERP2," said Raynor.

In other words, a company should be able to use the systems so that a

customer who wants to order, say, 10,000 shoes from a shoe manufacturer

logs onto a CRM system over the Internet, said Enterprise Applications

Consulting's Greenbaum. The customer places an order, which is then

processed by the CRM system. The system checks the customer against an

existing database to see if the customer has any specific requirements

or outstanding debts for example. If the systems say okay, then the

order can be fulfilled, he said.

The order goes automatically on to the SCM system which checks whether

there is enough raw material in the factory to make all these shoes. If

there isn't the SCM system, or possibly the ERP system should, in

theory, be able to order more supplies so that the shoes can be made,

Greenbaum said.

Then the ERP system will process the order and prepare the shipping

papers. It connects to the SCM system again which alerts the logistics

partners to make sure the shoes will be delivered to the right place at

the right time. Then the information is linked back to the financial

part of the ERP to send out confirmation of delivery and invoices,

Greenbaum said.

"In an ideal world, this should all be automatic," said Greenbaum. "But

it will only work if everyone in the chain is completely automated,

otherwise this whole thing is going to break down."

For all of this to work over the Internet, the software vendors must

first integrate their systems offline, so that users tapping in to the

systems from the Web can get an integrated view of data.

"Typically, the way it works is that the vendor will provide you with

the integration tools," said David Boulanger, research director at AMR

Research Inc. in Boston. "SAP has its business application interfaces,

and Oracle and i2 (Technologies Inc.) have their application

integration modules. These have predefined ways to find the touch

points in other systems," Boulanger said.

Many vendors also use an external supplier's EAI (enterprise

application integration) tool, which is a programming tool for

developers who want to connect their software to other vendors'

systems. SAP for example uses WebMethods' (Inc.) EAI, said Boulanger.

Then, when the systems are connected, they need to go through an

Internet transaction server, for example an XML server, in order to be

reachable via the Internet. The end user doesn't see any of this, he or

she will just see the transactions happening on his screen from a Web

portal, said Boulanger.

While ERP vendors are beginning to deliver on this promise, however, it

remains to be seen whether they can continue to develop seamless links

between their traditional systems and more recently developed software,

and sustain a growth market for their wares.

RELATED TOPICS
What’s wrong? The new clean desk test
View Comments
You Might Like
Join the discussion
Be the first to comment on this article. Our Commenting Policies