ERP. Er.. What? Antti Sissonen ERP -seminaari TietoEnator Corporation
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1 ERP. Er.. What? Antti Sissonen ERP -seminaari TietoEnator Corporation 1
2 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
3 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
4 ERP Enterprise Resource Planning 4
5 ERP - Definitions Accounting-oriented information systems for identifying and planning the enterprise-wide resources 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. 5 5
6 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. 6 6
7 ERP History in Brief From.. MRP And.. MRP-II To.. ERP From.. Manufacturing industry To.. Industry independent From.. Enterprises To.. SMBs 7 7
8 From Operational Excellence to Business Agility. Deliver Competitive Advantage with a Business Process Platform Operational Excellence + Business Agility Integrated Enterprise Business as a Network Enterprise Resource Planning Business Process Platform 1990s 2000s 2010s 8 8
9 ERP User Interface example 9 9
10 ERP Business Functions What kind of functions could be handled by ERP? 10
11 ERP Business Functions 1/2 FICO HR General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets 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 11 FICO = Finance and Controlling HR = Human Resources CRM = Customer Relationship Management SCM = Supply Chain Management 11
12 ERP Business Functions 2/2 MDM BI Master data management: Customers, Vendors, Products 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 12 BI = Business Intelligence 12
13 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 13 13
14 ERP Markets Can you think of any ERP vendors? 14
15 ERP Vendors Company Employees HQ Significant acquisitions Microsoft Dynamics U.S. Great Plains, Navision SAP Germany Business Objects, TopManage Financial Systems Oracle U.S. J.D. Edwards, Peoplesoft, Siebel, BEA Systems Infor 9200 U.S. Baan Sage UK Lawson 3800 U.S. Intentia IFS - Industrial and Financial Systems 2600 Sweden Unit 4 Agresso 3500 Netherlands CODA Epicor 3000 U.S. Exact Software 2750 Netherlands Visma 2850 Norway 1 Microsoft Corporation 2 Oracle Corporation 15 15
16 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 16 16
17 ERP Vendor Market Shares 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
18 SMB ERP Market Leaders 18 18
19 ERP vendor competitive positioning Large enterprise Midmarket Small business SAP mysap ERP SAP All-In-One SAP A1S (future) SAP Business One Microsoft Dynamics AX Sage Group Oracle EBS and PeopleSoft Microsoft Dynamics NAV, GP, SL Oracle JDE E1 Lawson Infor Agresso Epicor Exact NetSuite Source: Forrester Research Inc
20 ERP Today and Tomorrow - MARKET GROWTH Annual Growth Rate: 6.9% Market size today: 28 bn Forecast 2012: 37 bn 20 20
21 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 21 Business process outsourcing (BPO) is a form of outsourcing which involves the contracting of the operations 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. 21
22 ERP Today and Tomorrow - Hype Cycle 22 Distributed order management (DOM) enables an organization using e-commerce to capture a multiline order containing items, such as products and services. However, after the order is captured, DOM can manage the order across partner 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 information 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 audiences, 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. 22
23 Case Fischer & Wieser: Getting benefits from ERP Company: Fischer & Wieser Spec Foods Size Range: 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 23 23
24 Case Fischer & Wieser: Getting benefits from ERP Company: Fischer & Wieser Spec Foods Size Range: 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 24 24
25 ERP Integration 25
26 ERP and Integration Architecture Company X EDI HR External Services ERP Middleware FICO HR MES 26 26
27 Middleware and Message Brokers Most SMB Vendors attempt to standardize on middleware Source: Forrester Research Inc. 27 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 27
28 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 28
29 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 29 29
30 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
31 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 31 31
32 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
33 ERP Outsourcing Simple, quick, cheap On-demand application hosting / SaaS 1 solutions available Company Product Industries Key functionalities NetSuite NetSuite, OneWorld Wholesale/distribution End-to-end Severa* PSA, PSA Premium Service CRM, HR, PM SAP Business ByDesign Manufacturing, Service End-to-end BMM Solutions* Aladobix CRM, Inventory Tuppas Tuppas Manufacturing MES Everest Software Everest On-Demand Retail & wholesale FICO, CRM, Inventory Oscar Software* Oscar Manufacturing, Services, Retail SCM, FICO, MES TGI Enterprise 21 Independent End-to-end Plexus Plexus Online Manufacturing End-to-end Salesforce.com Force.com Independent CRM SuccessFactors Professional Edition Independent HR Taleo Intuit Intacct Workday Business Edition QuickBooks Xpress Workday Solutions Independent Independent Service, Retail, Hospitality Service HR FICO FICO HR & FICO 1 Software as a Service * Finnish company 33 TGI = Technology Group International PSA = Professional Services Automation 33
34 SaaS vs. ASP: What s the difference? 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 Traditional ASP 1 : 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 SaaS In Brief -video 1 Application Service Provider 34 34
35 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 Other benefits: Less upfront costs Easy set-up and use Predictable monthly ongoing expense Server management, back-ups and upgrades SaaS vendor s responsibility Common perceptions and concerns about SaaS: Base on a survey comments concerns represent largely unsubstantiated perceptions Source: Forrester.com 35 35
36 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 36 36
37 SMB SaaS markets in wait-and-see -mode Adoption expected to improve exponentially in the next couple of years as larger vendors get their SaaS offerings ready. Source: Forrester.com 37 37
38 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 38 38
39 On-premise ERP or on-demand ERP? Option 1: SAP Business One On-premise installation Licenses Option 2: Severa PSA Hosted server and software Includes maintenance and upgrades Data back-ups Two day training Implementation: 35-40k 10 additional licenses 29k Premium Online: 150 /month Licenses: 15 /month/user Kickstart setup cost: 2900 TCO: 64-69k + ASM + Training? + Possible version changes? TCO: 57k 39 TCO = Total Cost of Ownership ASM = Application Service Management 39
40 Summary. 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. 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
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