ERP: Let The Party Begin

Though sluggish for the past couple of years, the ERP market witnessed better
results last fiscal, especially with renewed interest from SME customers. IDC
predicts that this business will reach the Rs 800 crore mark by 2006. Small
wonder then that vendors like SAP, Oracle, SSA Global, PeopleSoft and others are
all geared to offer customized solutions for various verticals.

The Enterprise Resource Planning (ERP) giant seems to be awakening from its
slumber. After a lacklustre performance for the past two years, it was the one
of the high-growth areas in 2003-04. According to IDC, the industry is expected
to grow faster than the total market at a CAGR of 10.4% till 2006, which would
enable it to touch the Rs 800 crore mark.

There are several reasons why the ERP market is in an upswing. To start with,
customers prefer to have a greater control over the solution in terms of
flexibility, adaptability and integration. Another major driving force is time
to benefit, which means shortening of the ERP implemention cycles.

The increased adoption of ERP among the SMBs, which constitute almost 70% of
organizations, has propelled momentum and competition among vendors in this
segment. To meet the specific requirements of this price sensitive market,
Indian and global ERP vendors have launched abridged versions of their existing
product at lower price points, primarily pushed through the channel. 

R Shankar, Country Manager-India, Middle East and Africa, Ramco Systems notes
that dominant players have acquired complementary products or competing brands
either to increase the market share or to increase the width of their offering.
"Software service firms have also been increasingly focusing on setting-up
implementation practices for leading vendors in the enterprise application
space." 

SME DRIVING INDUSTRY GROWTH

Some customer verticals which are aggressively adopting this technology are
banking, finance, services, insurance, automobiles, telecom, government,
healthcare and ITeS. But, the highest growth is coming from the SME segment.

According to market estimates, there are 2.3 million SMEs in India. And, this
segment is fast adopting the latest IT business solutions, right from storage to
ERP implementation. Companies like SAP, Oracle and others are quite bullish in
catering to ERP needs of SMEs and have unleashed offering numerous suites, which
help each of these customers fulfill their data management needs effectively.

IDC India predicts that the SME segment will fuel the ERP market growth in
India and this will be the potential segment for all ERP players. Neeraj
Bhargava, Director-Marketing and Alliances, SAP India says, "The SMB market
will continue to be a strategic focus. We are working closely with our channel
partners and have product offerings available today which are directly relevant
to and suit the business requirements of SMBs in India."

GOING STRONG

The perception of ERP has undergone a sea change, from a can-have to a
must-have business element. Oracle is piggybacking on this changed reception and
does not look and sell ERP as a separate business module. It considers it a part
of various data management modes that a customer needs and has developed
different suites, which would enable them to choose and pick.

So, Oracle has over 200 modules in its eBusiness Suite, which gives the
customer the liberty to take whatever he wants, with ERP as part of it. The
vendor believes that it is information, which is critical to the customer and if
only one gets information ahead of others, he/she can hope to make his business
grow faster than the market.

"Oracle's business grew more than the industry growth of 26% in
2003-04 and this growth has been the best for the company since last five
years," says Sukhdeep Singh, DirectorAlliances and Channels, Oracle India.

Other companies like SAP and SSA Global have also experienced a similar
growth last fiscal. Gopal Kanayalal Madnani, Country Manager SSA Global, India
says that last year's growth has definitely been better than the previous
year, particularly due to momentum in the SME sector and the general uptake in
the Indian economy. In 2003-04, SSA saw more than 25% growth.

SAP experienced the highest growth in the ERP segment in 2003-04. The company
grew by 70% over the previous fiscal and here too, the major boost came from the
SME space. According to IDC, SAP has 57.4% market share in the ERP space today.
The company is focused on retaining this leadership position and is
concentrating on customers striving to exercise increased cost-control, improve
efficiency, face consequences of globalization and continue to stay competitive.

Today, SAP India has over 650 customers and 1000 plus installations in the
country. Neeraj adds that the company has put together an accelerated growth
plan that will enable it to further strengthen its leadership position in India.

Even Ramco Systems has grown by over 10% in revenues in 2003-2004 as compared
to the year before. "For the JFM 03-04 quarter, we have achieved break-even
globally and in India. Ramco has registered a net profit of

Rs 4.20 crore during the last quarter of the financial year 2003-04," says
Shankar.

MID-SIZE COMPANIES ALSO CASHING IN

Interestingly, it is not only the big companies who are doing well in this
space. Firms like Visesh Infotecnics and Eastern Software System are also
reaping good rewards for the hard work they have put in this ERP space.
According to Sanjiv Bhavnani, MD, Visesh Infotecnics, "The mid- and
small-size ERP market is growing at a pace of 40% year-on-year and if this
number is something to go by then there is no doubt that the potential in this
space is enormous."

The company grew by more then 100% in AMJ 2004. It clocked revenue of more
than Rs 9 crore compared to Rs 4.5 crore in the same period last fiscal. Visesh
is eyeing the same amount of growth each quarter this fiscal and the major
driver for this growth is their ERP solutions designed to tap verticals like
auto, corporates and the SMB space. It is also planning to launch PowerPro, a
specifically designed ERP solution for the SME market in the US and India soon.
"Once we launch this product, we would be able to tap more of the SME
market where the growth is happening most phenomenally since last fiscal,"
Sanjiv adds.

Anil Bhakt, CMD, Eastern Software System says that the growth driver for the
ERP market is the increasing pressure on all companies to export more. As more
companies from abroad start sourcing their requirements from India, they expect
Indian companies to be at least using an ERP.

SMB is the biggest market segment in India today. That's why every company
is focusing on selling to this segment. "We are in the top six or seven
companies in the ERP space in India. It is very difficult to assess the market
share as genuine statistics are not available," he adds.

Sudheer Nair, CEO, GlobSyst Technologies India remarks that his company has
received an unbelievable welcome for its ERP, E-Resource, which marked a 30%
increase in its business. "In terms of percentage we have also marked an
increase of 45% more inquires regarding the package and the turn around of
inquires into orders has been 15% more since the launch of the package."

The ERP domain is a never ending domain and the supply to demand ratio will
always be 3:7. Globsyst has a well-planned strategy for making sure that it
makes its presence felt in the ERP market in the coming year, he adds.

R Raju, Director, Bluechip Infoway says that their company's revenue
doubled compared to what it earned the previous fiscal. The company primarily
caters to the manufacturing vertical with its ARA5 ERP solution. Lately though,
Bluechip has launched seven other versions of this product which would ensure it
makes inroads into BFSI, healthcare and other verticals.

Chennai-based Selvaraj, Director, Elmaq feels that the major growth drivers
in the ERP business have been increasing competition and globalization such that
manufacturers. These units are witnessing the need to be more updated in the
systems and processes. Elmaq is also seriously considering mergers and
acquisitions both in India and abroad which would enable them to enhance their
reach.

ESolutions is one of the few companies who have experienced 200 per cent
growth in the ERP space. It entered the ERP market two years ago, initially
targeting the SMB. But now it has trained its sights on medium and large
business house, which has reaped rich dividends. "We see good growth as
more and more companies who were in the hesitant mover or wait and watch
category are subscribing to ERP's like ours. We are planning to come out with
the state of the art Version 2 based entirely on the .NET platform, which would
make our product more modular and easy to use," reflects Gaurav Sri
Krishna, Head, Business Development. ESolutions

EXTENDED APPLICATIONS

Today, ERP is not only one package, which the companies are looking at to
have smooth management of their data. Vendors have come up with such suites that
not only have ERP as one of the package but other modules are also reaped in a
manner where the customer can enjoy the benefits which would in turn ensure
better profitability for him.

Oracle looks at ERP in a different manner than most other vendors. ERP is a
module which it offers in its suites because it has realized that anyone who
would be investing in ERP would not only like his company's planning,
manufacturing, finances, sales, marketing etc to be better moderated, but would
also be looking at other processes. "This means that today, customers are
much more far-sighted and we feel the next in thing would be information
architecture where you only have one single source for collecting each and every
data," Suhkdeep points out

According to a study by PriceWaterHouse Coopers, a major focus for the core
ERP vendors and extended application development enabling the real-time
enterprise. In essence, this term refers to an organization's ability to
monitor and use the flow of information to react instantaneously to changes in
the business.

It requires the ability to create an order and have it automatically flow up
and down the supply chain, so suppliers can react to changes in demand. It also
requires being able to recognize when a piece of the supply chain has broken
down for example, when a supplier is unable to provide parts so orders can be
redirected as quickly as possible without impacting sales.

Col Balwinder Singh, Director, Targus Technologies feels that today customers
want to be updated every time and for that they are prepared to invest and ERP
has seen growth primarily because of its ability to manage contents for the
company in a smooth manner.

"It is not only ERP that a customer looks at, he today also needs other
different modules which makes his back-end operations run smoothly and where the
downtime is less. I feel that ERP will be among various other modules which are
slated to experience mammoth growth in this fiscal," he added.

DIVERSIFIED PRODUCT MIX

Most of the vendors in the ERP space today have realized that the fact that
there is a huge potential market which was shying away from the ERP segment
because it was priced very highly. Today, Oracle, SAP, PeopleSoft, SSA Global
and others have products specifically designed for those who were not being able
to shell out huge money to own such a software and get it implemented. "We
have recently introduced a product which is targeted at the small businesses and
is priced very competitively in the market. This Oracle ERP solution has got
tremendous response and this is not only because it is priced low, but we have
made sure that we don't not cut out on any exclusive Oracle feature that goes
with our high-end solutions," Sukhdeep remarks.

Partners also agree to the fact that earlier it was the corporates and big
business houses that went for ERP solutions and other such modules. But now,
even smaller businesses can afford it and this has ensured more implementations
happening in the last fiscal. SAP acquired more than 60 customers last fiscal
and this number is reflective of most of the other vendors who have either
acquired more or are in tune with SAP in terms of implementation of ERP at the
customer site.

Partners feel that in this fiscal the price structure in the ERP solution is
going to drop more enabling even more penetration of smaller companies. All this
price reduction started two years ago when the global economy was not going
great guns and companies like Oracle, SAP, SSA Global, PeopleSoft and others saw
the need to cater to the mid market.

And once the need was foreseen, action on this front happened very quickly
and all these global majors launched numerous such modules in their architecture
suite, which were priced very competitively in the market. "Price point and
performance are the two issues that we needed to address before we wanted to tap
the mid and small market and today we are ideally placed to do that," Gopal
reflects.

PROPER IMPLEMENTATION IS THE KEY

One of the major drawbacks in ERP space is that there are high ratios of
failure in the implementation process. This has made sure that vendors only
choose those partners who have the required skill sets to perform this process
smoothly. "Training is one of the major part in ERP business and we train
our partners round the year along with our employees and only deal with those
who are serious about it," Sukhdeep mentions.

But the question that still haunts many vendors is that there are still not
enough partners in this arena who can be trusted to get the perfecting
implementation done. Here it must be noted that an ERP implementation can take
anything between 15 days to three months depending upon the size of the project.

"A few channels have invested in learning about ERP. Those who have
invested have been able to sell and over a period of time recoup their
investment many times over, says Anil. Most vendors agree to what Anil is
suggesting here. Though, there can be no doubt that the partners involved with
ERP couple of years back were far less than what the market scenario is today,
but still lot needs to be done to excite more partner involvement in this space.

Chennai-based Accel, which is selling PeopleSoft ERP software experienced 10%
growth last fiscal despite being a new entrant in this field. This figure only
shows that there are lots of opportunities in this filed to excel. K Joseph,
Senior Manager, ERP Division, Accel says that the business in this space has
increased slightly but more growth is due to come in the next couple of years.
"I feel the rapid growth of IT awareness in the SME space would enable a
huge opportunities for partners like us to tap the data management market,"
Joseph adds.

In Delhi, most of the partners saw growth between 20% to 25% in the ERP space
last fiscal and they hope that this growth is at least going to be the trend
this fiscal also.

SAP also highlights the fact that it makes all efforts to make its partners
world-class and this in turn enable themselves to get associated with large
companies and keep the relationship ticking. Companies like Visesh Infotechnics
are now looking for the best of breed partners who can implement its soon to be
launched product in the market.

"I still have my doubts on how much technical expertise we have in ERP
space on the partners' front and this needs to be addressed very soon if we
want to tap this huge market potential. Today, the safest bet is to make and
stay with your existing customers and that is why we do not see 100%percent
selling happening through channels," Sanjiv cautions.

Some of the trends which are likely to ensue with the changing market demands
include a shift towards best-of-breed solutions that address the unique business
requirements rather than a monolithic product/solution offering that is very
generic.

"There is also an increased emphasis on the software solution's
ability to support and sustain key competitive differentiators, vis-à-vis
standard functionality," says Shankar.

For solution providers, the ERP market is rife with opportunities. All they
need is an ability to achieve cost-effective integration with other enterprise
applications on multiple technology platforms.

ATANU KUMAR DAS with
inputs from Goldie in Bangalore, Nelson Johny in Mumbai and S Gopikrishna in
Chennai

GROWING AT A BRISK PACE

The key verticals adopting ERP are auto, telecom, healthcare, ITeS,
manufacturing and government. But, ERP and other software application modules
have also made inroads into the textile segment as well, with amazing results.

Lakshmi Machine Works (LMW), one of the country's largest textile spinning
machinery manufacturer has increased its revenue by 20%, last fiscal, with the
implementation of Oracle's E-Business Suite.

Founded in 1962, LMW is one of the three global manufacturers that provide a
complete range of textile machinery and boasts of 68% marketshare in India. To
effectively compete with rising global competition and price pressures, it
needed to implement aggressive cost controls, become more responsive to customer
requirements, increase supply chain efficiency and introduce decision-making
processes based on business intelligence.

LMW selected a phased implementation and went live with the first phase in
2003, just 10 months after the implementation began. It is currently using the
Oracle's Enterprise Asset Management, Balanced Scorecard, Financials, Human
Resources Management System, Manufacturing, Sales, Services and Procurement. The
current implementation of product lifecycle management concludes the second
phase of deployment.

"LMW has seen positive results from the Oracle implementation,"
says Sanjay Jayavarthanavelu, Director, LMW. "The automation of processes
across the business has improved efficiencies in our manufacturing operations,
helped us to increase revenue and cut costs last year."