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ERP.Er.. What?

2008-10-29

Antti SissonenERP -seminaari

TietoEnator Corporationantti.sissonen@tietoenator.com

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Table of contents.

• ERP 3

• ERP - Definitions 4

• ERP History in Brief 6

• From Operational Excellence to Business Agility. 7

• ERP User Interface example 8

• ERP Business Functions 9

• ERP Business Functions 10

• What would ERP fix in my business? 12

• ERP Markets 13

• ERP Vendors 14

• ERP Market Leaders 15

• SMB ERP Market Leaders 17

• ERP vendor competitive positioning 18

• ERP Today and Tomorrow - MARKET GROWTH, TRENDS, Hype Cycle 19

• Case Fischer & Wieser: Getting benefits from ERP 22

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Table of contents.

• ERP Integration 24

• ERP and Integration Architecture 25

• Middleware and Message Brokers 26

• ERP for SMBs 27

• Small Business’s typical path to ERP? 28

• Reasons for Changing to a new ERP. 29

• ERP Products targeting SMB markets 30

• Open Source ERP 31

• ERP Outsourcing 32

• Software as a Service 33

• SaaS ERP in Hype Cycle 34

• SMB SaaS markets in ”wait-and-see” -mode 35

• On-demand ERP or on-premise ERP? 36

• Summary. 38

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ERPEnterprise Resource Planning

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• “Accounting-oriented information systems for identifying and planning the enterprise-wideresources needed to take, make, distribute,

and account for customer orders.”

• “An industry term for the broad set of activities that helps a business manage the

important parts of its business.“

• ”A business management system that

integrates all facets of the business.”

• “A software package that provides the function of at least two systems. For example, a software package that provides both payroll

and accounting functions could technically be considered an ERP software package.“

• “Any software system designed to support and automate the business processes of medium

and large businesses.”

ERP - Definitions

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What is ERP?

• Gartner

• “ERP is considered the back-office application set, encompassing applications that enable manufacturing, human resource management, financial management systems and enterprise asset management.” (Dataquest Definitions Guide: Software Market Research, 9 May 2006)

• Enterprise Application Software includes CRM, ERP, SCM and Content, communication and collaboration

• Forrester

• “Core ERP consists of modules for finance, human resources, compliance, sales, and operations. Extended ERP suites consist of complementary applications such as CRM and supply chain.”

• TE• Enterprise Application Suite (ERP solution) is integrated software covering applications from Financials and HR to corporations industry specific operative solutions including integrated CRM and BI solutions.

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ERP History in Brief

• From.. MRP

• And.. MRP-II

• To.. ERP

• From.. Manufacturing industry

• To.. Industry independent

• From.. Enterprises

• To.. SMBs

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Business

Agility

Integrated Enterprise

Enterprise Resource Planning

Operational

Excellence

Business as a Network

Business Process Platform

1990s 2000s 2010s

From Operational Excellence to Business Agility.Deliver Competitive Advantage with a Business Process Platform

+

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ERP User Interface example

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ERP Business FunctionsWhat kind of functions could be handled by ERP?

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ERP Business Functions 1/2

• FICO

• General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets

• HR

• Human Resources, Payroll, Training, Time & Attendance, Rostering, Benefits, Travel

Expenses

• CRM

• Sales and Marketing, Commissions, Service, Customer Contact and Call Center support, Leads and contracts

• SCM

• Order to cash, Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission

Calculation

FICO = Finance and Controlling

HR = Human Resources

CRM = Customer Relationship Management

SCM = Supply Chain Management

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ERP Business Functions 2/2

• MDM

• Master data management: Customers, Vendors, Products

• BI

• Decision support, analytical tools, key performance indicators, data extraction, data

transformation and data warehousing, reporting

• Manufacturing

• Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow

• Projects

• Costing, Billing, Time and Expense, Activity Management

BI = Business Intelligence

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What would ERP fix in my business?

1. Integrate financial information

• The same performance figures across the company

2. Integrate customer order information

• Better visibility to whole opportunity to cash -process, less error prone, better

throughput

3. Standardize and speed up manufacturing processes

• Increase productivity and reduce head count

4. Reduce inventory

• ..By improving the flow of supply chain

5. Standardize HR information

• Unified, simple method for handling human resources. Especially important for companies with multiple business units.

Source: CIO.com

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ERP MarketsCan you think of any ERP vendors?

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ERP Vendors

Netherlands2750Exact Software

U.S.3000Epicor

IntentiaU.S.3800Lawson

Norway

Netherlands

Sweden

UK

U.S.

U.S.

Germany

U.S.

HQ

2850Visma

CODA3500Unit 4 Agresso

2600IFS - Industrial and Financial Systems

13000Sage

Baan9200Infor

J.D. Edwards, Peoplesoft, Siebel, BEA Systems840002Oracle

Business Objects, TopManage Financial Systems

51000SAP

Great Plains, Navision890001Microsoft Dynamics

Significant acquisitionsEmployeesCompany

1 Microsoft Corporation2 Oracle Corporation

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ERP Market Leaders

• Depends on

• Type of the industry

• Size of the industry

• Geographical areas

• Major market drivers

• Regulatory compliance

imperatives (Sarbanes-

Oxley etc.)

• System architecture

consolidation to reduce

support and integration

costs

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Gartner defines total software revenue as

revenue generated from new licenses,

updates, subscriptions and hosting, technical

support, and maintenance. Professional

services revenue and hardware revenue are

not included in total software revenue.

ERP Vendor Market Shares

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SMB ERP Market Leaders

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ERP vendor competitive positioning

Large

enterprise

Midmarket

Small

business

SAP

mySAPERP

Oracle

EBS and

PeopleSoft

NetSuite

Lawson

SAP

Business

One

Microsoft

Dynamics

AX

Microsoft

Dynamics

NAV,

GP,

SL

Oracle

JDE E1

Epicor

SageGroup

Infor

Exact

Agresso

SAP

All-In-One

SAP

A1S(future)

Source: Forrester Research Inc.

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ERP Today and Tomorrow - MARKET GROWTH

• Annual Growth Rate: 6.9%

• Market size today: €28 bn

• Forecast 2012: €37 bn

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ERP Today and Tomorrow - TRENDS

• Trends

• Consolidation and niches

• Industry specific functionalities

• Business process expertise

• SMB markets

• Emerging markets (China, India, Middle-East, Latin America)

• Green ERP, ecologically sound technologies and solutions

• Mobile solution support

• Rapid implementation methodologies

• More vendor professional services (BPO offerings)

• Expanded solution-centric ecosystems

• Partnering to provide complete solutions (e.g. SAP-TIPS)

• Technology

• Web GUI, Portals, Improved usability

• SOA & Middleware standardization

• Microsoft Office Integration

• RFID

Business process outsourcing (BPO) is a form of outsourcing which involves the contracting of the opera-

tions and responsibilities of a specific business function to a third-party service provider.

Traditionally, BPO is undertaken by manufacturing firms, for instance Coca Cola, where almost the entire

supply chain is outsourced and the company is essentially becoming a marketing organization.

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ERP Today and Tomorrow - Hype Cycle

Distributed order management (DOM) enables an organization using e-commerce to capture a multiline order contain-

ing items, such as products and services. However, after the order is captured, DOM can manage the order across part-

ner systems (for example, distributors, wholesalers and resellers) outside the firewall or multiple internal back-office

systems within the firewall, or as one single order.

Third-Party ERP Maintenance Enterprises may opt for third-party technical support for these reasons:

Will stay on the current application release for an extended period, such as five or more years

No concrete plans to upgrade to the vendor's new release, or plans to migrate away from the current vendor

at some point

Anticipate minimal implementation of purchased functionality that is not being used

Installation operates with little need for break/fix assistance

Maintenance fees are high for the level of support received or anticipated

Configuration templates for ERP deployment are used to expedite package implementations. Intended to jump-start a

software package implementation.

Enterprise Portals A portal is Web software infrastructure that provides access to and interaction with relevant infor-

mation assets (such as information/content, applications and business processes), knowledge assets and human assets

by select targeted audiences, delivered in a highly personalized manner. Enterprise portals may face different audi-

ences, including employees (business-to-employee — B2E), customers (business-to-consumer) or business partners

(business-to-business). B2E portals are the most relevant type of enterprise portal to the highperformance workplace,

but portals serving other audiences also play important roles.

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Case Fischer & Wieser: Getting benefits from ERP

• Company: Fischer & Wieser Spec Foods

• Size Range: 100-250 employees, revenue $25-$50M in sales

• Industry: Food & beverage manufacturing

• Selected ERP:

FourthShift Edition SAP Business One

• Questions:

1. What were the key drivers for the company to

implement a new ERP system?

2. What were some of the immediate improvements that the new ERP system managed to establish?

3. What kind of additional functionalities is the

case company planning to implement?

Case Fischer & Wieser -

video

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Case Fischer & Wieser: Getting benefits from ERP

• Company: Fischer & Wieser Spec Foods

• Size Range: 100-250 employees, revenue $25-$50M in sales

• Industry: Food & beverage manufacturing

• Selected ERP: FourthShift Edition SAP Business One

• Answers:

1. What were the key drivers for the company to implement a new ERP system?

• Better control over manufacturing operations and warehousing

• CRM needs: growing numbers of retailers, distributors and on-line customers

• Functionalities to meet the needs and expectations of big customers

2. What were some of the immediate improvements that the new ERP system managed to establish?

• Reduced inventory variances (30-40% down to 2%)

• Customer service and visibility of product availability

• Lot trace capabilities and managing regulatory recall process readiness

3. What kind of additional functionalities is the case company planning?

• CRM, bar coding, web portal

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ERP Integration

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ERP and Integration Architecture

Company X

ERP

EDI

MiddlewareFICO

MES

External Services

HR

HR

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Middleware and Message Brokers

• Most SMB Vendors attempt to standardize on middleware

Source: Forrester Research Inc.

Middleware is computer software that connects software components or applications. The software consists of

a set of enabling services that allow multiple processes running on one or more machines to interact across a

network. This technology evolved to provide for interoperability in support of the move to coherent distributed

architectures, which are used most often to support and simplify complex, distributed applications

• Message Integration Standards (examples)

• Industry specific:

• papiNet, ESIDEL, RosettaNet, HL7

• Industry independent:

• UN/CEFACT - UBL Oasis, UN/EDIFACT

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ERP for SMBs[1,000 employees or less]

Small business = 100 or less employees,

Medium size business = 1000 or less employees,

Enterprise = over 1000 employees

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Small Business’s typical path to ERP?

• Paper and pen

• Excel

• Financial management software

• Invoicing

• CRM

• Customer-oriented approach

• Entry-level ERP

• Full-scale ERP

• SMB’s ERP implementation challenges:

• The same level of business complexity as in large enterprises

• Lack the IT resources of larger organizations

• Legacy ERP and other IT systems distract the business requirement definitions

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Reasons for Changing to a new ERP.

• Legacy ERP systems tend to:

• Lack out-of-the-box vertical requirements

• Deployments often require expensive and extensive vertical customizations -> solutions neither upgradeable nor extensible

• Remain disconnected from other applications

• Integration to other applications. Rigid APIs, lack of interoperability standards, and nonexistent Web services

• Discourage collaboration across new stakeholders

• B2B and B2C Integration

• Cannot keep up with a changing workforce

• ’Green-screen’ with shortcuts and codes vs. point-and-click environments

• Constrain business process flexibility

• Once best practices provided out of the box hard to upgrade in the long run

• Ignore the spirit of a perpetual license

• Maintenance and periodic upgrades often approach the scale of a reimplementation

Source: Forrester Research Inc.

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ERP Products targeting SMB markets

• Products designed and targeted especially for SMBs

• SAP Business One

• SAP All-In-One (e.g. TE Manux and TE PaperSolution)

• Total ERP

• Abas ERP

• Mid-Comp International Stockman

• Lemonsoft

• Sage

• Microsoft Dynamics NAV

• Traditional on-premise installation

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Open Source ERP

• Benefits in comparison to traditional ERP delivery model:

• No license fees, lower upfront investment

• Lesser dependence on the vendor

• Consider these:

• Limited availability of experienced suppliers

• Accountability and risks solely on customer

• Associates many legal issues and implied conditions which has to be dealt carefully

• Availability of new features and improvements is bounded by the popularity and diffusion of the software

• Open source ERP vendors:

• Compiere

• Pupesoft

• Adempiere

• OpenBravo

• OpenERP (formerly Tiny ERP)

• NOTE: Differentiate this from open-source infrastructure, such as database, middleware or application server, to support the actual ERP application.

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ERP Outsourcing

• Simple, quick, cheap

• On-demand application hosting / SaaS1 solutions available

1 Software as a Service

* Finnish company

Workday Solutions

Xpress

QuickBooks

Business Edition

Professional Edition

Force.com

Plexus Online

Enterprise 21

Oscar

Everest On-Demand

Tuppas

Aladobix

Business ByDesign

PSA, PSA Premium

NetSuite, OneWorld

Product

MESManufacturingTuppas

CRM, HR, PMServiceSevera*

FICO, CRM, InventoryRetail & wholesaleEverest Software

End-to-endManufacturing, ServiceSAP

FICOService, Retail, HospitalityIntacct

FICOIndependentIntuit

CRMIndependentSalesforce.com

HR & FICOServiceWorkday

HRIndependentTaleo

HRIndependentSuccessFactors

End-to-endManufacturingPlexus

End-to-endIndependentTGI

SCM, FICO, MESManufacturing, Services, RetailOscar Software*

CRM, InventoryBMM Solutions*

End-to-endWholesale/distributionNetSuite

Key functionalitiesIndustriesCompany

TGI = Technology Group International

PSA = Professional Services Automation

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SaaS vs. ASP: What’s the difference?• Traditional ASP1:

• application services in a hosted data center style

• customer-specific applications run by one ASP

• expertise needed in each application

• service-level and financial failures

• customer needs for in-house expertise

• ASP of today:• More narrow focus on chosen vertical(s)

• Also SaaS-type services

• Software as a Service:

• applications specifically designed to be hosted

and delivered over the Internet to many customers

• no need to buy the software from a third

party.

• customer specific instance of the application

• Still economies of scale because of the simpler application scenario

1 Application Service Provider

SaaS In Brief -video

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Software as a Service• Good fit for companies with

• many geographically dispersed users

• mobile software users

• users who collaborate with each other or outsiders

• no need for in-house application

developers or experts

• Common perceptions and concerns about SaaS:

• Base on a survey comments

• concerns represent largely

unsubstantiated perceptions

Source: Forrester.com

• Other benefits:

• Less upfront costs

• Easy set-up and use

• Predictable monthly ongoing expense

• Server management, back-ups and upgrades SaaS vendor’s responsibility

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SaaS ERP in Hype Cycle

• Cost-effectiveness of SaaS solutions, TCO over a longer time period still to be proven.• Expected to have a transformational effect on ERP markets once reaching mainstream

adoption

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SMB SaaS markets in ”wait-and-see” -mode

Source: Forrester.com

• Adoption expected to improve exponentially in the next couple of years as larger

vendors get their SaaS offerings ready.

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On-demand ERP or on-premise ERP?

• Case: Small locally operating company

• Industry: Tax and financing services

• Revenue: 4m€

• Observed time span: 15 years

• Number of licensed users: 5 at start, growing up to 15

• Implemented modules: FICO, CRM

• Simplified implementation:

• No adjustments needed to out-of-the-box solution

• No integrations to any existing systems

• No data migration from existing systems

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On-premise ERP or on-demand ERP?

• Option 1: SAP Business One

• On-premise installation

• Licenses

• Implementation: 35-40k€

• 10 additional licenses 29k€

• TCO: 64-69k€

• + ASM

• + Training?

• + Possible version changes?

• Option 2: Severa PSA

• Hosted server and software

• Includes maintenance and upgrades

• Data back-ups

• Two day training

• Premium Online: 150€/month

• Licenses: 15€/month/user

• ”Kickstart” setup cost: 2900€

• TCO: 57k€

TCO = Total Cost of Ownership

ASM = Application Service Management

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Summary.

• ERP offering for SMB customers is growing rapidly, also large vendors are

targeting SMB markets.

• SMB customers have viable alternatives for on-premise ERP implementation.

• SaaS delivery models are still on their way to become a transformational force

in ERP markets.

• The concept of ERP is evolving from

integrated business processes into

business as a network.

• ERP market is still fairly fragmental.

• Small vendors are concentrating on

their own niches.