Mid-market ERP comes of age
systems can help mid-sized companies improve their business metrics. Amitava
Sain, Principal Consultant, PricewaterhouseCoopers, looks at this trend.
The Indian economys opening up has led to a significant growth of the
mid-market segment across industry verticals in the manufacturing, retail, services,
communication and information technology sectors. This growth, along with the
associated competition and quest for enhancing marketshare, has led organisations
to re-look at their processes and procedures, and put in place proper process
enablers and solutions to make their business more efficient and effective.
One of the key solutions to address this requirement is the
implementation of enterprise resource planning (ERP) systems. The implementation
of such systems has helped mid-sized corporations significantly improve their
business metrics by process optimisation, improvement of the entire supply chain
process, integration across functionalities, and increase in transparency across
Most of the mid-sized organisations were living with home-grown applications
which were non-integrated functionally and technically. This resulted in living
with redundant technology, lack of support, and non-availability of critical
information at the right time, thus resulting in business loss.
The key drivers of going in for an ERP are the introduction of industry-standard
processes which are embedded in the application, integration across business
functions leading to transparency, access to real-time information, analytical
reporting for business decisions, and adoption of state-of-the-art technology
providing security and scalability. Another reason for choosing a packaged ERP
vis-à-vis a customised development is the speed of implementation resulting
in a quicker return on investment.
The objectives of embarking on an ERP implementation are to align business objectives
with technology solutions, evolve the organisational value chain by enhancing
customer confidence and stakeholder commitment, and achieve better organisational
resource and asset utilisation.
But the mid-market segment is very unlike larger and more established organisations
which adopt standard organisation-wide processes. Companies in this segment
carry burdens such as home-grown processes, people in the organisations who
have grown with those processes, disparate or no proper data systems, lack of
information transparency across functions, and reluctance of staff to adopt
new systems and processes. Despite these factors, since mid-market organisations
are emerging as major players, it is imperative to design appropriate implementation
approaches and applications to address their sometimes unique requirements.
The path treaded by an organisation from identifying the need for an ERP till
actual implementation is long. This involves identification of business needs,
budgeting for the procurement of products and services, evaluation of various
products to suit its business needs, starting the implementation journey, and
finally adopting the ERP as an organisation-wide solution.
The challenges that an organisation goes through in the ERP
journey start with the selection of a solution. Key
selection factors include the size of the business operations,
the projected scaling in the years to come, geographical
spread, nature of business and amount of investment
needed. Key considerations in evaluation and selection
- Scalability. ERP solutions are designed to grow
with the company, and they do not succumb to volume and change pressures.
- Vendor management. Managing a number of vendors
for customer service is not easy. An integrated suite gives you one solution
supplier to work with.
- Functionality. Access to the functionality required
to run the business over timeat an affordable price. It may not be the
cheapest choice at first, but it will usually be the most economical in the
long run as your business needs grow and change.
- Reliable service and support. The ability to access
affordable service and support is critical. It is easier to support an integrated
ERP environment than a mix of different applications.
This is a major and time-consuming activity which involves analysis of organisation
processes, recommendation of good practices, mapping the processes to the package,
data management, implementation and support. The choice of the implementer is
a critical factor as the experience of implementation using standard approaches
and methodologies, project management and change management are factors for
success. Also important is the implementers knowledge of the clients
business processes, local conditions, etc. The key considerations for implementation
- Knowledge of application. ERPs are designed on
a state-of-the-art architecture using best practice business functions, hence
knowledge of the application is essential for the implementer.
- Experience in implementation. ERP implementation
involves adoption of standard approaches, ability to resolve situations and
issues, and transfer of knowledge. These relate to the experience of the implementer.
- Reliable support. The ability to provide post-implementation
support is critical because a lot of issues arise once an organisation starts
using the application. The implementer necessarily needs to provide the support
services after the implementation.
Internal change management
An ERP implementation entails changes in processes and reporting structures.
Addressing this shift is a process that the organisation has to go through.
This will help in achieving the acceptability of the new system by the users.
There are three drivers of change management:
- People. They are the key players in any ERP implementation
since they will be the process owners, application users and application administrators.
The challenge of an ERP implementation is to achieve acceptability of the
system by the people who are going to use it.
- Process. One of the returns on investment is knowledge
of best business practices by virtue of an ERP. These processes impact the
efficiency levels to be attained by the organisation.
- Technology. Implementation of ERP automatically
entails adopting technology that will address scalability, death of distance,
and upgradeability to newer technologies.
ERP has to be viewed as a process enabler rather than a package
to be installed and run. The implementation process is a journey towards achieving
organisational efficiency. This demands a strong commitment by the organisations
stakeholders throughout the entire process.
Indian companies in the mid-market sector have shifted focus from requirements
and issues of deregulation, Just in Time and TQO to the requirements of process
standardisation, managing supply chain from inventory to distributors, electronic
interface across business, Web-based technology and customer relationship management.
Mid-market clients are now looking for business solutions that are fit
for purpose, and that would meet or exceed the users expectations
through continual improvement. Growing economies like India which are already
on the technology path are rapidly embracing these requirements to climb up
the value chain.
Possible ERP roadblocks
ERP may be a panacea, but even a panacea needs to be administered with finesse
and professionalism. The hurdles in the path of a successful ERP implementation
in the Indian mid-market context are:
- Expectations from ERP. There is a feeling that
ERP is an intelligent wand that solves all business problems. The fact is
that it is an application framework which has to be tuned to the organisations
requirement and run by humans who make the decisions.
- Unstructured processes. A majority of mid-market
segment organisations are closely-held businesses where processes have evolved
over the years. Realigning of these business processes and streamlining of
data to suit the ERP requirement is a major exercise where the participation
of the client is crucial.
- Commitment from management. Any ERP implementation
is phased over a period of time. In quite a few cases, it has been observed
that there is declining interest and commitment of the management during the
implementation process. The result is cost and time overrun, and in some cases
the process even gets nipped in the bud.
- Cost-benefit utopia. A common expectation is to
get the skies for nothing. Although there have been efforts to
optimise the total cost of ownership, the fact remains that the value which
one can expect is proportional to the investment one makes.
Investing in ERP is a significant decision for mid-market organisations, hence
the evaluation of an implementation and the benefits accrued is a major factor
in the overall success. The effectiveness of an ERP implementation can be somewhat
gauged by key performance metrics (KPIs) of business processes. KPIs are benchmarks
with quantitative or qualitative values that help an organisation assess the
success and effectiveness of the processes that have been implemented in the
Today, the trend is that with basic ERP being a given, ERP vendors are rushing
to integrate additional capabilities such CRM, sales force automation and RFID.