Enterprise Resource Planning is undergoing a makeover. The growth of the internet, adverse publicity and the growing competition in the mid-market has been a major wake-up call to ERP vendors whose products have their roots in '80s and '90s business process re-engineering.

Now, rather than treating New Zealand as simply another place where they can resell cookie cutter solutions, traditional tier-one ERP providers have been forced to rethink the way they work with their customers.

The majority of recent release offerings have been re-engineered to become web-based, more modular and better suited to the typical Kiwi business. In the past, buying an ERP system would mean the inclusion of the complete functionality set, most of which was never used by the majority of purchasers.

The results were two-fold: Firstly, costs were higher in comparison to both the functionality used and the benefits gained. As a result the return on investment was either low, non-existent or impossible to measure. Secondly, having bought into excess functionality, companies felt compelled to invest further in customising it for their needs.  The result was to add implementation failure risk to the equation as projects became increasingly difficult to manage.  In fact, at one stage in 1999, 95 percent of one ERP vendor's European clients were taking legal action against the company.

So what are the ERP vendors doing to improve their systems and way of doing business for local enterprises and our 278,000-strong SME market?

Modular: Systems have become more modular, allowing buyers to pick and choose the functionality to suit their business processes, with the added bonus of being able to roll out systems in manageable mini-projects via the internet, instead of risk-prone, big bang, in-house implementations.

Functionality: Within modules, functionality has been simplified and aligned to only that which most buyers actually need.  Possibly the most extreme example of this will be SAP's trimmed down all-in-one offering - expect to hear a lot more on that in 2003.

Integration: Systems are increasingly built with adaptors and standards that allow simple integration with complementary modules and third-party systems.

Financing: Most major vendors now have arrangements with application service providers to deploy their systems from managed infrastructures via the internet - the recent Great Plains deployment to Fonterra from AppServ is a case in point. This, along with flexible financing options is allowing buyers to spread payments over 3-5 years, bringing the investment into operational expenditure budgets - often a more palatable option for boards with its closer link to return on investment.

The tier one vendors including PeopleSoft, SAP and Oracle, have all been working hard to come down a scale to suit the local market. They've had the enterprise market to themselves for some time and have many committed customers. As that segment becomes saturated they're redoubling their efforts in the SME market but finding themselves up against a raft of more nimble competitors.

Great Plains and Navision, both acquired by Microsoft in the past 18 months, are increasingly gearing to cope with small to medium enterprises. They're being gradually unified under a single code-set and will be fully integrated into the .Net infrastructure and the emerging Microsoft Business Framework.  Expect to see Microsoft integrate platform and application layers going forward and to hold this out as a key differentiator for these solutions.

Great Plains is geared for companies looking to expand their financial systems and includes project management, billing and sales order processing modules. Its front office sales and marketing solution can easily integrate with back office systems and scale up as businesses grow. It and its sister product Navision both work with Microsoft SQL Server.

Navision provides mid-range financial, logistics, manufacturing, CRM and e-commerce solutions geared to businesses with an average annual turnover of around $15 million and above - taking it up into the territory of Lawson and PeopleSoft. Its two products cover everything from food and beverage manufacturing to warehousing and distribution, local and central government and retail. Don't expect PeopleSoft to take the increased competition lying down though. It's raising the bar for vendors of ERP solutions with a standalone Supply Chain Management (SCM) system with advanced demand management and execution management functionality.

Lawson also specialises in manufacturing and distribution companies needing better management of logistics or transportation. The Movex ERP system which was originally written for IBM's midrange systems, has been rewritten in Java and is now available on Microsoft, Sun and Oracle platforms.

It is focused on organisations with an annual turn-over of between $50-$500 million in the food and beverage, dairy, meat processing, fashion and apparel, distribution and pharmaceutical industries. Modules include financials, manufacturing, distribution, e-commerce, business intelligence, maintenance, rental and asset management.

Geac New Zealand is a software and services organisation specialising in manufacturing and distribution for central and local government and commercial services organisations with annual revenues ranging from $10-$300 million with 10-100 users.

Within its various offerings including flagship product StreamLine - a Microsoft-based ERP solution - Geac is able to offer most modules to suit a range of industries from make-to-order, process flow and style manufacturing through to distribution and advanced warehousing.

CODA is a big UK-based ERP vendor making inroads here by specialising in financials for shipping, transport and retail. Homegrown Exonet has developed its market niche in light manufacturing and distribution.

While ERP offerings are now maturing, the customer base is waking up to the need to invest. For some organisations investment in an ERP will come after it has become clear that legacy or manual systems are not up to the challenges of future growth. Many, cautious of too much change over time and suspicious of moving too quickly will prefer to use middleware and data gateways to cobble together legacy systems until they're confident of the way forward. The typical New Zealand enterprise which may previously have decided it could only afford a stand-alone financial or manufacturing package is now looking harder at long-term connectivity and is beginning to invest with integration in mind.

While there are more suitable systems to choose from today and IT managers and boards are more informed than ever, they still demand evidence before investment. Customers want case studies, success stories, support and a vision of the future they can buy into before they commit.

For all the past concerns over ERPs, few general managers or CEOs would dare go into the next few years of business without the integrated information flow that an ERP system can provide. 

December 2002