L4 Erp Market

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ERP MARKET & PLAYERS

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Who are the main ERP vendors?

BaanJD EdwardsOraclePeopleSoftSAP

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Major Vendors

SAPOracle

QADRamcoInvensysESS

56.0%12.5%

10.8%10.0%8.0%2.5%

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Selecting an ERP Vendor and Software

1. Total costs, including cost of license,2. training, 3. implementation, 4. maintenance, 5. customization and 6. hardware requirements.

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Total Cost of Ownership of ERP

Total cost of ownership (TCO) is a model developed by Gartner Group to analyze the direct and indirect costs of owning and using hardware and software. TCO essentially helps a company determine whether it wins or loses from specific technology implementations.

Metagroup study among 63 companies surveyed showed that:– the average TCO was $15 million (the highest was $300 million and

lowest was $400k),– the average TCO per user was $53,320.

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

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Major ERP Vendors in INDIA

Vendor Cleients/Locations Major Clients

SAP 250/3500 BPCL,IOC,ONGC,Reliance, Nestle,Colgate-Palmolive, Procter& Gamble, L & T, Mahindra & Mahindra, Telco, Tisco, Marico

QAD 86/600 HLL, Godrej Soaps, Nicholas Piramal, Jhonson, Lucent Technologies

Ramco -/150 Jindal Iron & Steel, Indian AirForce – Nasik, Madras Cements, Madura Fabrics

BaaN 125/700 Godrej & Boyce, Kirloskar Copeland, Tata Info Tech, Larson & Toubro, Sulzer Pumps

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Major ERP Vendors in INDIA

Vendor Clients/Location Major Clients

Oracle Not revealed KPMG, TCS, HP, Compaq, GE, Sony India

Peoplesoft Not revealed Allianz Insurance, Citibank, Ford, VISA, Merrill Lynch

JD Edwards Not revealed Philips, Lexmark, SmithKline Becham

ESS -/170 Tribhuvandas Bhimji Zavari, Baroda Dairy, Sterling Tools

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ERP IMPLEMENTATION – CASE STUDYOrganization Godrej Soaps & Associate

Companies, MumbaiJindal Iron & Steel Company, Mumbai

Essar Steel Ltd., Hazira

Turnover Rs. 1300 Crores Rs. 900 Crores Rs. 3000 Crores

Products Soaps, Chemicals, Household Insecticides, Agro Products, Edible Oil and Fruit Drinks

MS Plate, Cold Rolled Coils

Steel

IT Investment Rs. 20 Crores Rs. 7.0 Crores Rs. 40 Crores

ERP Solution MFG/PRO – Materials, Manufacturing, Finance, Sales and Distribution, Costing

Ramco Marshal SAP R/3 Finance, Product Planning, Maintenance, Sales & Distribution, Quality Management

Status Live site Finance & Sales Order Management Live site

Live site

Cost of Solution

Hardware Rs. 2.50 Crores Rs. 4.00 Crores Rs. 20 Crores

Software Rs. 3.50 Crores Rs. 1.70 Crores All inclusive

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Organization Godrej Soaps & Associate Companies, Mumbai

Jindal Iron & Steel Company, Mumbai

Essar Steel Ltd., Hazira

Networking Rs. 1.0 Crores Rs. 60 Lakhs --

Consultants, Training & Other Implementation Cost

Rs. 6.0 Crores Included in Software Cost

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Implementation Process Snapshot

Start November 1995 1995 --

Role of CEO/CIO Driven by CEO/CIO Driven by VP-IT with support from CEO

Driven by Top Management

Function heads involved

All Departmental Heads All Functional Heads All Function Heads

Pit falls User’s resistance to change, High Turnover of IT personnel. Lack of over all ERP awareness

First version took time to stabilize, Bug fixing, Bad sizing of hardware, Process Optimization

--

ERP IMPLEMENTATION – CASE STUDY (Contd.)

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ERP IMPLEMENTATION – CASE STUDYOrganization Elgi Equipment Ltd.,

CoimbatoreIndian Renewable Energy Development Agency Ltd., New Delhi

Punj Lloyd LLtd., New Delhi

Turnover Rs. 185 Crores Rs. 472 Crores Rs. 250 Crores

Products Compressors, Garage Equipment

Financial disbursements Engineering Construction products

IT Investment Rs. 1.5 Crore prior to ERP, Rs. 1.0 Crore on ERP

Rs. 3 Crores Rs. 8 Crores. 2 to 3 Crore annually

ERP Solution Baan’s solution, Manufacturing, Distribution, Finance, Service

IFS, Finance, Projects, HRM (payroll)

Oracle Applications Purchase, Inventory, Finance

Status Live site Live site Live site

Cost Solution

Hardware Rs. 30 Lakhs Rs. 1.20 Crore Rs. 1.0 Crore

Software Rs. 50 Lakhs Rs. 75 Lakhs Rs. 80 to 90 Lakhs

Networking Rs. 20 Lakhs -- Rs. 20 to 30 Lakhs

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Organization Elgi Equipment Ltd., Coimbatore

Indian Renewable Energy Development Agency Ltd., New Delhi

Punj Lloyd LLtd., New Delhi

Consultants, Training & Other Implementation Costs

Included in Software Rs. 45 Lakhs Rs. 1.0 Crore

Implementation Process Snapshot

Start 1996 1994-95 1995

Role of CEO/CIO Driven by CEO Project Consultant CEO & Consultant

Function heads involved 16 function heads as key users

Heads of Finance, Management Services, Project & Technical Services

Heads of Accounting, Purchase, Projects, Equipment & Maintenance

Pit falls Data integrity and migration

Attitude of people, Absence of IT knowledge, Multiplicity of processes

ERP IMPLEMENTATION – CASE STUDY (Contd.)

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Relative ERP Module Use(Mabert et al. 2000; Olhager & Selldin, 2003)

Module Use reported - US Use reported – Sweden

Financial & Accounting 91.5% 87.3%

Materials Management 89.2% 91.8%

Production Planning 88.5% 90.5%

Order Entry 87.7% 92.4%

Purchasing 86.9% 93.0%

Financial Control 81.5% 82.3%

Distribution/Logistics 75.4% 84.8%

Asset Management 57.7% 63.3%

Quality Management 44.6% 47.5%

Personnel/HR 44.6% 57.6%

Maintenance 40.8% 44.3%

R&D Management 30.8% 34.2%

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Reasons for Implementing ERPmeasured on 1-5 scale (5 best)

Most important Avg Small Large Sig.

Replace legacy systems 4.06 87% 90%

Simplify & standardize 3.85 72% 95% ***

Improve interactions-suppliers & customers

3.55 71% 76%

Gain strategic advantage 3.46 70% 92% **

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Reasons for Implementing ERPmeasured on 1-5 scale (5 best)

Less important Avg Small Large Sig.

Link to global activities 3.17 36% 74% ***

Solve Y2K problems 3.08 62% 42% **

Keep up with competitors 2.99 42% 60%

Ease of upgrading systems 2.91 35% 54% ***

Restructure company organization 2.58 33% 35%

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Implementation Time Required

6 months or less 9%7 to 12 months 25%13 to 18 months 24%19 to 24 months 21%25 to 36 months 11%37 to 48 months 6%Over 48 months 2%

Rate of technology change makes 18 month IT projects dubiousalthough ERP a major system, longer times appropriate

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Cost Component % of total implementation

Survey Interviews Range Small Large

Software 30.2% 15% 10% to 20% 35% 23%

Consulting 24.1% 30% 20% to 60% 24% 25%

Hardware 17.8% 25% 0% to 50% 21% 14%

Impl. Team 13.6% 15% 5% to 20% 11% 23%

Training 10.9% 15% 10% to 20% 10% 12%

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BOLT-ON Software

Demand planningInventory managementE-ProcurementB to BIntegrated suite systems (I2)Order trackingFactory planning & schedulingOn-line collaborationWarehouse managementData mining

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Example Bolt-OnsMabert et al. [2000]

Bolt-On Example Vendor

Demand planning Demand Planner BAAN

E-procurement Ariba Network Ariba, Inc.

Business to business MANAGE:Mfg Cincom

Integrated suites Manugistics 6 Manugistics

Order tracking Intelliprise American Software

Factory plan/schedule Capacity Planning JDEdwards

On-line collaboration Aspen OnLine Aspen Technology

Warehouse mgmt CSW Warehouse Management System

Cambar

Data mining Enterprise Miner SAS Institute

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Advanced Planning System Providers

i2ManugisticsNumetrixCAPS logisticsBAAN SCM components

J.D. Edwards SCM components

Oracle 11i

PeopleSoft Enterprise Performance Management

SAP SAP APO

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ERP Success Factors Business Horizons 2000

1. Senior management involvement2. Cross-functional implementation team3. Extra effort up-front defining detailed plan4. Clear guidelines on performance measures5. Clear guidelines on using outside consultants6. Detailed plans to train users