Where ERP is going
ERP has evolved much in recent years. The basic concept has
stayed the same, but the technicalities and design have evolved. What began
as an application meant only for internal use, now extends beyond enterprise
boundaries. by Minu Sirsalewala
ERP as an application has been around since the 1960s.
Until 1972, ERP was just a concept without a name or classification. The concept
was to integrate all departments and functions, increase revenues, and strengthen
Some say ERP originated from accounting. But ERP is
all encompassing. It not only gives a financial view of all the processes and
activities, but also a manpower view, a raw material view, and a machine uptime
and maintenance view.
Head-Consulting Services Practice, Blue Star Infotech Ltd
Through continuous innovation, ERP has evolved from
automated processes to Material Requirement Planning (MRP), and then to Manufacturing
Resource Planning II (MRP II). After that, it integrated all departments in
an enterprise, and became the ERP we know so well. Recently, ERP has been extended
beyond the enterprise and is called extended ERP or ERP II.
Prashant Karkhanis, Global Head-Business Consulting
at Mahindra Consulting said, ERP has evolved out of MRP (Material Requirement
Planning) solution devised in 1960. Over last four decades it has changed its
face and ability from MRP to MRP II to ERP. The current version of ERP though
not complete is sufficiently mature to address the business needs. It also brings
a wealth of knowledge gathered and developed over the last 20 years.
ERP is further empowered by new technologies like Internet
and WAP. This has made usage convenient for the users in the current competitive
Satish Gaonkar, Head-Consulting Services Practice,
Blue Star Infotech Ltd. said, "ERP began as a logical extension of the
MRP II concept. It came with a promise of encompassing all the functions of
business. Soon, companies discovered the domain boundaries of ERP and began
to realize the importance of SCM and CRM applications."
Most of the leading ERP vendors started offering a
Web enabled package. The functional scope has beenwidened by many vendors to
support the concept of an extended organization. This is reflected in concepts
like ERP II. Most vendors have extended their offerings to include SCM and CRM
Before ERP came along there were other attempts at
integrating departments. Notable attempts were MRP and MRP II.
||Hari Padmanabhan, President & Head, Enterprise
Solutions Group, ICICI Infotech
MRP is a sequential technique, which was used for converting
the Master Production Schedule (MPS) for the end products into a detailed schedule
for raw material and components. It starts with sales & operation planning,
and demand management. And ends with a detailed schedule for components made
in-house along with those purchased from vendors.
MRP II is a tool for planning and engineering the operational
and financial resources of an organization. The heart of MRP II is the MRP system
and around this, other resources are planned and controlled. But both these
concepts were geared more towards the manufacturing industry.
MRP loses relevance
A planning & control system like MRP II has become
less relevant in today's context due to the following changes:
1. Manufacturing has moved towards a made-to-order
environment. Products are moving away from being standardized to being highly
customized. Hence making the planning process complex.
2. Competition is more on the delivery. Quality and
cost have become the selection criteria for players who wish to compete in the
market place. Competition will now be based on delivery lead times and flexibility.
3. Need for greater integration with customers and
4. Need for greater product differentiation.
With constant changes in the market place and increasing
competition, customers have become more demanding. Product lifecycles have reduced
drastically. New technologies are influencing the way organizations do business.
Organizations felt the need to go beyond mere transaction
processing and automation of business processes. They required a tool to identify
and plan resources based on certain organizational constraints that are dynamic
ERP began as an internal enterprise application and
evolved into a Web-enabled tool, which lets you extend the applications to external
suppliers and end-users. An ERP of this kind is called an extended ERP. ERP
has evolved much in recent years. The basic concept stays the same, but the
technicalities and design of ERP have changed.
ERP and ERP II
With Web-enabled B2B, the ERP system can go much beyond
the boundaries of your enterprise. You can integrate it with Business Intelligence
to analyze your data; and you can couple it with CRM or SCM to increase your
involvement with your customers and suppliers. Various enterprises are implementing
these cross-functional changes.
||Zoeb Adenwala, Chief IT, Pidilite Industries
Demand for more sophisticated processing capabilities
to sharpen competitive edge has resulted in ERP II systems. Many businesses
are looking to improve and extend processes, offering customers, suppliers and
other trading partners access to integrated processing. This is done through
concepts like self-service functionality, and aims to deliver more efficient
and effective processes with reduced costs.
Enabling technologies like ERP II have led to the advent
of Collaborative Commerce (C-commerce). C-commerce is the electronic interaction
of businesses, whether within the supply chain or an industry.
"The boundaries of the enterprise have shifted
and now extends to customers and suppliers who are outside the organization.
With ERP II the customer, the vendor, the supplier and the company all work
in unison," said Hari Padmanabhan, President & Head, Enterprise Solutions
Group, ICICI Infotech.
Caution with ERP II
Though ERP II systems are supposed to facilitate transactions
between external entities, organizations should implement it with caution. One
should not migrate to ERP II systems without first addressing current systems
issues that may run the risk of adding to existing problems.
ERP II needs an open architecture and a vertical-specific
functionality. ERP focuses on trying to integrate departments and functions
throughout a company. It attempts to integrate everything into a single system
that can serve every department's needs. ERP broken down simply is an application/system
that both small and large companies are using today in order to streamline and
integrate operation processes.
Do we need ERP II?
ERP systems are used to integrate and optimize an organization's
internal manufacturing, financial, distribution, and human resource functions.
In contrast, ERP II addresses the integration of business processes that extend
across an enterprise and its trading partners. ERP II forms the basis of Internet-enabled
e-business and collaborative commerce.
The main reason why ERP II came into existence was
the need to look at a way to give customers and partners access to scheduling,
delivery, inventory, manufacturing, invoicing, and planning information.
Over the last few years, solutions like CRM and SCM
have leveraged the Internet to support these processes. ERP II incorporates
them all in a single package. To be globally competent, an organization needs
to open and reach out to its collaborative partners. ERP II enables businesses
to compete by providing information online and adding real value to businesses
of all types and sizes.
Arun Gupta, Senior Director, Business Technology, Pfizer
Ltd. offers a few words of advice. "If you are starting a green field project,
it will be a great idea to start with an integrated ERP (ERP II) across the
organization. The package may not offer you the best practices across all segments,
but the amount of effort you will put into integrating the discreet desktop
class applications will be substantially higher than that of a single application
The details of ERP solutions will change, but never
the idea and concept of what ERP stands for, and what its main goal is.
Integrating emerging technologies
Deployment of ERP II could take place through a single
vendor or a variety of best-of-breed application providers. The challenge is
to make SCM and CRM solutions from other vendors communicate with ERP.
Arun Gupta opines, "A major problem arises, in
a situation, for example, when you have an Oracle financial accounting system
and want to deploy CRM and then SCM. Assuming you have different vendor products,
the biggest challenge is to map this information across the multiple platforms
and different technologies. It is advisable to look at some of these interfaces
across application if you are going to start implementing them."
Ravi Kathuria, General Manager, Enterprise Solutions,
Baan Info Systems India said, The integration itself is an issue. The
transfer of data in the right format from one application to another at the
right time has to happen to make things work in unision.
Baan, for that reason has a technology called OpenWorld
which helps in integrating disparate applications. With our historic growth
from ERP as a monolithic application to the ERP-II era, we recognized the need
to have a solid foundation on which all applications can run. This is called
the IIC framework (Information, Integration & Collaboration framework),
Vendors have now addressed the integration issue and
are moving from a centralized architecture into synchronized components. If
you purchase an SCM or a Product Lifecycle Management (PLM) package, it comes
with a set of components that are pre-integrated
and have all interfaces publicly available. The interfaces are also well-described,
so that you can integrate them with solutions from other companies.
Prashant Karkhanis (Mahindra Consulting) said, One
does not face any major issues while integrating an SCM and CRM solution with
ERP if they are from the same product vendor. All major product vendors provide
a suite of solutions essential for the business. But, it is necessary to evaluate
the integration technology and ability in case of the multiple products. Considering
the maturity of the leading software solution, in my opinion one can use the
suite of the ERP, SCM and CRM product from a single vendor.
SBS Grover Senior Director for E-business, Oracle India
said, We have the Oracle E-Business suite. It is one single product that
includes ERP, SCM and CRM. It's a single composite suite of applications using
a single data model. It's one integrated piece of software and you can enable
different pieces of it when required. You can start with certain processes like
purchase and take on other processes like manufacturing later on. It's one single
piece of software that works on the same server and the same database.
Tariq Farooqui, Country Manager, JD Edwards India (A
PeopleSoft company) opines, Companies with ERP systems in place are now
looking to add a CRM or a SCM solution or upgrade to a new one. And, tight integration
between ERP and CRM/SCM systems is critical to gain a complete view of customers.
ERP basically works on an OLTP process and SCM/CRM work on an OLAP process;
the latter requires usage of business intelligence data, which is analyzed.
The issues or areas to be considered are: platform issues, whether the ERP as
well as CRM/SCM are centralized or decentralized deployments. These days integration
is not such a big issue because most vendors offer connectors between their
solutions. What is important is to consider the various integration points between
the two systemshow, when and how often will the two systems talk to each
ERP has evolved much over the years but more enhancements
are required. In the future we could see increased Web-based interfaces and
object-oriented databases. A stronger move to ASPs (Advanced Scheduling and
Planning) is also expected.
ERP will become more widely used in smaller companies,
and not just Fortune 500 firms. With improvements in the software, ERP projects
will take less time to implement.
Prashant (Mahindra Consulting) said, Currently
ERP products are available to address all business functionalities. But often
customers do not need all the functionalities at a time. This has led to a new
trend of component-based solutions. ERP vendors are in the processes of providing
component-based product. One may decide to buy only sales and finance components,
and can add materials and production later. This will address the budgetary
constrains and the customer will pay only for what he needs. Hence the ROI model
will look more attractive and business will be able to justify the investments
Zoeb Adenwala, Chief IT, Pidilite Industries Limited
said, "India is opening up and going global; and playing a very important
role in the business of IT. If Indian companies have to survive and be competent
in the global market, they have to move to ERP II by 2005. If they don't, they
will miss out on business opportunities. ERP implementations have moved from
big companies to the SMB segment. The SMB segments are also competing and there
is an upward trend in the market."
Tapping the SME
Not too long ago many industry analysts went on record
to say: "ERP is dead." But ERP has been alive and moving to higher
levels of delivery and efficiency. It forms an integral part of most manufacturing
organizations. And now with the growth of the SME segment, a lot of ERP implementations
are also happening.
This in turn has caught the attention of vendors and
consultants. Most of the big vendors have realized the need to tap the SME segment
since the large enterprise market is nearing saturation. The vendors are now
offering condensed granular versions to suit the SME market along with their
regular ERP solution portfolio.
Industry specific solutions/vertical solutions with
rapid implementation methodologies are being offered now. Most of the bigger
ERP vendors have recognized the need to tap the SME segment since the large-scale
market is saturated. These ERP vendors are now offering condensed granular versions
to suit the SME market.
Cost will become more complicated. With more complex
software it will take a more experienced person to implement the software. Thus
raising the implementation costs. The size of the software will also increase,
as the applications become more complex.
Satish Gaonkar adds, "ERP would be just one component
of the technology ecosystem of an organization. A one-size-fits-all scenario
does not exist, and there would be other applications working with ERP to drive
growth and efficiency. With growing recognition of business process management
(BPM), another layer of BPM applications would be working with ERP, SCM, and
CRM application integrated with EAI tools."
Dhruv Chadha, Enterprise Solutions - Marketing, Infosys
Technologies said, Most of the big companies have gone in for implementation
of some ERP system. The major ERP software vendors have been targeting large
sized companies till now and their products were more suited for such companies
only. However, now they are seeing a potential in small to mid-sized companies
and are coming up with products suited for the same. For instance, SAP recently
launched its SMB product - Business One. Oracle has also launched its SMB version
of its Oracle E-Business Suite, named EBS-SE.
In terms of technology, the ERP systems are evolving
to more user friendy versions. They are in the process of moving from client/server
technologies to being Internet-based applications. The self-service modules
in the products are aimed at lay users who need not be trained for using the
To summarize, the trend definitely is moving towards
integrated packages for decision support, large vendors catering to all market
segments and players focusing on the full spectrum of IT services around these
Minu Sirsalewala can be reached at email@example.com