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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
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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