U-Bix Corp., a local office systems and services provider, will go live with its SAP AG enterprise resource planning (ERP) software implementation this week, an event that is not only significant for U-Bix but also for the local subsidiary of the German ERP software provider and its growth prospects in the Philippine market.
U-Bix is SAP Philippines first customer for a program it started mid-last year to aggressively attract small and medium enterprises (SMEs) to invest in a traditionally expensive ERP software. After U-Bix, two other local companies are lined up for the program called M3Lite, an ERP software package designed to cut the usual ERP investments by half using industry accepted templates and letting go of certain customized features in the software system.
For SAP, the U-Bix win signals a successful attempt to break a perception barrier that ERP software is only for large companies.
Although the local SAP subsidiary has been able to sign up smaller companies for ERP implementation in the past, breaking into the SME market has historically been tough for ERP vendors in the country. Two of SAP's local SME clients include Customer Contact Center Inc. (C-Cubed) and Quantum Foods Inc., but smaller companies have been harder to pursue.
A classification ratings chart of the Department of Trade and Industry shows that SMEs comprise 94 percent of all local firms. SAP defines medium-sized companies as those earning from US$99.9 million to $20.1 million in annual revenues while small firms are those earning $20 million or below.
Although U-Bix, a 1 billion peso (US$17 million) annual revenue company, is by no means a small firm, the results of its ERP implementation will be used as a gauge for future M3Lite installations. How a template-driven software system as opposed to the traditional full ERP implementation can be quickly adopted and implemented by a company will most likely become a yardstick for other companies looking into the same software package.
Krishnendu Datta, SAP Philippines managing director, explained during the launch of the M3Lite program last year, that the software package is not a stripped-down, bare-bones version of its full ERP software. Instead, SAP has re-packaged the software and removed some of the modules that a mid- to small-sized company might not need. The company also took away customization services for the software, but put in place industry accepted business processes that client companies are recommended to adhere to.
For some companies, changing their existing processes to adopt a new template might be too much, which is why they would rather go for a full ERP implementation. For U-Bix, however, adopting the new process poses no problem at all, said Loraine Garcia, U-Bix senior assistant vice president for finance. "We had to change our processes anyway. We are on an expansion mode so we really have to change," she added.
Before adopting an ERP system, U-Bix has been using 17 different software applications that were developed in-house. The fact that these applications were not integrated actually pushed U-Bix to invest in an ERP system. Its objective to grow and expand further also pushed U-Bix to embrace an ERP system that would integrate its business processes. The use of business process templates that already came with the ERP software package made the company's transition from using 17 applications that operated separately to an integrated software easier, explained Garcia.
It remains to be seen if other companies will feel the same way about the M3Lite approach. But SAP is very optimistic that the SME market in the country will find its new programs attractive, Datta said in an interview with Computerworld Philippines late last month.
Datta stressed that although the bulk of SAP's local business will still come from its bigger customers, a respectable 40 percent of all its new ERP clients for the year will come from the SME market. This will represent 20 percent of SAP's total local revenues for this year, he claimed.
Datta, who has been at the helm of the local SAP office for only less than a year, remains bullish about his company in 2004. After posting a 30 percent growth in local profits last year, SAP is very optimistic that it can sign about 20 new customers this year, aside from growing its other service offerings such as consulting and education. Datta expects eight of these new clients to sign up for the M3Lite and the Business One program, a similar package offering but aimed specifically at the consumer products and retail industries.
Aside from the cost of an ERP system, part of the challenge of convincing SMEs to implement this type of software is educating them that an ERP is more than just an accounting system, said Datta. Thus, another significant focus of the company this year is getting its message across, especially to SMEs, about the benefits of an ERP system.
One of the benefits that U-Bix expects to get from its own ERP implementation is a faster workflow, Garcia said. By integrating its materials and billing processes, for example, the company can eliminate certain reconciliation processes that were needed in the past. She added that the company could improve the monitoring and control of its resources and readily get an audit trail. Aside from increasing the productivity of workers because they can concentrate better on their assignments, the ERP system will allow support groups to get reports like financial information much faster and be able to analyze them quickly.
On U-Bix's decision to implement the M3Lite program, Garcia explained that from among the other ERP vendors they looked at, including Oracle, it was only SAP that could provide the company with a solution for its billing system requirements. The cost of the M3Lite would also be much cheaper in the long term compared to the other software packages, she added.
With the business process templates already in place in the M3Lite program, U-Bix was also able to implement the ERP system quickly, said Garcia.
In a previous interview, Annie Alipao of Magnus Philippines, the implementing partner of SAP for the M3Lite program, said one of the program's attractions is a quicker implementation cycle. She even claimed that they could complete an implementation within 60 days. But in U-Bix's case, Garcia said the company kicked off the project in September last year and would only go live this week.
Garcia said they have had no major problems with the ERP implementation which, of course, is good news for Datta and the SAP subsidiary. The M3Lite program is a unique offering that is available only in the Philippines. SAP's head office has given the local subsidiary some allowance in its profit targets just to be able to offer the ERP software at a lower price than in other countries. To be sure, the big bosses are watching closely how the program performs.
This story, "SAP snags first M3Lite client" was originally published by Computerworld Philippines.