ERP's
Enterprise Apps -- Not Just ERP Anymore -- Some customers want sales, supply-chain, and other links
built into their enterprise resource planning products. Vendors are stepping up.
InformationWeek, Friday, November 28, 1997 at 22:53
by Tom Stein
While many companies are begging their enterprise resource planning
vendors to make the software easier to implement and maintain, scores
of leading-edge customers are courting even more ERP complexity.
They're demanding tighter integration with sales-force automation and
supply- chain software. Some customers want built-in data warehousing
and data mining capabilities. Others need modules that address
after-sales service and support.
The goal for these customers is to stay a step ahead of their
competitors. "People want solutions to as many of their business
problems as they can get," says Ron Wohl, a senior VP at Oracle. "ERP
is a solution to a piece of their business problems. No one wants just
ERP anymore."
All the major enterprise application vendors are hustling to deliver
"extended ERP" capabilities, for customers such as Northern Telecom,
Fujitsu, and Pillsbury. Market leader SAP is developing its own
supply-chain, sales-force-automation, and data-repository links to its
manufacturing, financial, and human resources apps. Oracle is piecing
together these kinds of features through technology integration deals
with "best of breed" vendors. For instance, last week Oracle announced
a technology-integration and sales pact with supply-chain software
vendor i2 Technologies.
J.D. Edwards will announce this week that it will embed planning and
scheduling technology from vendor Ilog into its OneWorld ERP suite.
Baan has gone the acquisition route, buying supply-chain-management
vendor Berclain and sales-force-automation vendor Aurum. PeopleSoft,
which acquired supply-chain specialist Red Pepper in September, has
already integrated that technology into its new manufacturing
application. PeopleSoft has also buzzword-enabled its new-breed
software, labeling it ERO-for enterprise resource optimization.
Extended ERP offers both advantages and disadvantages. Users will be
able to tie together front- and back-end operations on a single,
integrated system, helping them scout prospects and bond with suppliers
and customers, as well as improve manufacturing and logistics. Such
integration can ultimately mean big savings if companies don't have to
stitch together disparate systems. But customers also risk becoming too
dependent on a single vendor, and they may come up short on
functionality offered by more specialized vendors.
Committed To One Vendor
Some companies already are committing to a single enterprise apps
vendor. Northern Telecom, for example, is looking to Baan not only as
its ERP standard across all business units, but also to better
integrate its manufacturing operations with its sales effort. "In the
past, our business units could do their own thing," says Muriel
Prentice, assistant VP of information services at the telecom equipment
maker. "We needed a standard way of operating to get a single,
consistent view of our customers." Baan promises that the sales-force
automation (SFA) and supply-chain technology it acquired earlier this
year will be fully integrated into its core ERP suite by the middle of
next year.
The SFA features will let Nortel's salespeople develop product
proposals and extract pricing details while they're with customers,
instead of having to call headquarters for information. The SFA system
also will link with the Baan manufacturing system to let users
determine what's in stock and what's on order. Salespeople will be able
to pass customer orders directly into the manufacturing system,
eliminating manual handoffs and cutting the time between getting orders
and completing them.
With the supply-chain features, Nortel plans to map out "what if"
scenarios. Currently, the Baan system doesn't take into account whether
all the resources and supplies needed to execute a manufacturing plan
are in place. The supply-chain application will propose a schedule,
highlight bottlenecks, and let users adjust due dates or resources.
Once this optimal plan is devised, it's zapped into the ERP system so
that the right products get manufactured at the right time.
Currently, some 1,200 Nortel employees are on the Baan system.
Prentice says she expects to add about 18,000 users over the next 24
months, many of them with the SFA and supply chain features. "We have
been pleased with the Baan strategy," she says. "They are going in the
right direction, and we are making sure we are staying aligned with
what we think is of value."
Skip The Hassles
Smaller companies like Plantronics Inc., a $250 million telephone
headset maker in Santa Cruz, Calif., are turning to integrated ERP
packages in part because they don't want the hassles of integrating SFA
and other features themselves. Plantronics recently finished
implementing Oracle's core manufacturing, distribution, and financials
modules. "It will take us about six months to absorb that," says CIO
John Dick. "Then we will start thinking about expanding our system. We
will look at what Oracle has to offer in sales-force automation and the
supply chain."
Oracle is trying to become what IT analysis firm Forrester Research
calls a portfolio assembler, teaming with select best-of-breed vendors
and agreeing to sell, support, and integrate their products under the
Oracle brand name. In September, Oracle officially unveiled an
internally developed SFA suite that integrates with the vendor's core
ERP modules. But on the supply-chain side, Oracle is teaming with
Manugistics and i2 rather than developing its own high-end
application.
National Instruments Corp., a $200 million maker of computer-based
instrumentation hardware and software, recently chose Oracle's new SFA
product, called Oracle Sales and Marketing, to tie together islands of
information across its international organization. "We couldn't see the
whole picture," says Libby Wright, VP of IS. "We had a legacy system
for SFA that wasn't integrated with our ERP system."
Customer information now resides in disparate contact-management,
financial, and manufacturing applications. But once the Oracle
implementation is completed, information about National Instruments'
customers and products will be integrated, Wright says. "We need to
know which products are in stock, where that product came from, who
called in the order for that product, who the end user of that product
is, when that product was shipped, and how the customer paid for that
product," she adds. "By putting it all together, we get a better flow
of information to our suppliers and become more responsive to our
customers. Integrated information can be a very powerful tool."
SAP is breaking its ERP mold with internally developed supply- chain
software set to roll out next summer. The company is poised to enter
the SFA market as well. Given the choice between a Baan-like
acquisition or internal development, it's likely SAP will pick the
latter. "It's more difficult to merge another company than build from
scratch," says Paul Wahl, CEO of SAP America. For supply-chain
features, SAP originally teamed with i2 but then decided to develop the
technology itself.
SAP customer Fujitsu Microelectronics is interested in the vendor's
supply-chain functionality so it can do capacity scheduling across its
worldwide operations. "Right now, we can't do planning on a global
scale because many of our factories are not tied together on a single
system," says Walter Curd, VP of IT at the semiconductor maker. "Having
to tie in other apps on top of our SAP system to do this could turn
into a high-cost solution. In terms of efficiency and saving money,
there are benefits to going with an integrated package. The more SAP
includes, the less we have to spend."
Pillsbury is about to sign a multiyear, multimillion-dollar deal with
Price Waterhouse to extend the Minneapolis foodmaker's SAP R/3
financial applications, now in use at the company's operations in Japan
and Europe, across its North American operations. A longer-term goal is
to marry SAP supply-chain and order-management modules with the
financial apps, says Karlene Seime-Noble, Pillsbury's director of IS.
Pillsbury already has EDI links with its customers and vendors. The
company plans to incorporate EDI with R/3 for prototype purchasing and
financial applications next year, and then bring a live pilot up in the
spring of 1999. The target is full commercial rollout by 2001, Seime-
Noble says.
"The goal in all this is to provide key information that our
businesses need to operate and strategically plan in a more timely
manner, instead of having to sift through myriad applications to find
the information they need," she adds. "We have a lot of different
applications right now. We can do this much better." R/3 will displace
a variety of custom and packaged software the company has assembled
over the years.
Data Warehousing, Too
An R/3 add-on SAP is touting is the Business Information Warehouse, a
feature due out next spring that will add data warehousing capabilities
to the company's R/3 suite. SAP is also working on adding a data mining
capability to BIW, letting customers better analyze and draw business
value from their stockpiles of R/3 information.
Several large U.S. customers, including Bay Networks, Compaq Computer,
and Intel, are testing BIW. Jorge Taborga, VP of business applications
at Bay, says BIW will pull together information that's now isolated on
R/3 systems at the company's far-flung business units. "We want to put
all kinds of data, from sales information to business-performance data
to manufacturing data, into the warehouse," he says. "With BIW, we can
define what data we want and how frequently we want to refresh it. This
is critical to a global business."
Oracle and Baan, meanwhile, are expanding into the growing
maintenance, repair, and overhaul (MRO) market. This type of software
covers such after-sales areas as project management, including the
installation of equipment at customer sites; maintenance and repair of
equipment; and parts management, including the tracking of spare
parts.
Oracle unveiled in September an application for after-sales service
and support called Service Resource Planning. The standalone software
is aimed at manufacturers of complex products such as airplane engines,
computer systems, and medical equipment. Baan plans to compete when it
launches its own MRO product sometime next year. Baan has acquired a
small MRO company to gain "domain expertise" in this area, says Anil
Gupta, director of industry marketing at Baan. Gupta wouldn't disclose
the name of the company.
Slice Of The Pie
For the past few years, the big ERP vendors have let niche companies,
such as Manugistics on the supply-chain side and Siebel Systems on the
SFA side, slip under their radar to secure million-dollar contracts for
add-on features. But now the big vendors, under pressure to continue
their high-double-digit growth rates, want a piece of that business.
As a result, some smaller vendors may not survive, analysts say.
"There will be a shift in the market," says Byron Miller, an analyst
with Giga Information Group. "Some of the bigger third-party names will
continue to exist, but weaker players that are not well positioned will
be hurt."
The best-of-breed vendors now compete-many of them thrive-on the
feature-richness of their specialized offerings. But few question
whether the ERP vendors have the resources and brainpower to develop
competitive systems.
National Instruments picked Oracle's new SFA product over several
best-of-breed rivals. "We don't believe we lost functionality," says VP
Wright. "Oracle has a robust development staff. The best-of-breed
software packages have more functionality today, but that might not be
the case tomorrow."
One factor that weighs in Oracle's favor was the fact that National
Instruments has used Oracle's manufacturing, financials, and
distribution apps since 1995. "The cost and maintenance needed to
support a third-party interface outweighed the fact that the product
was early in its life cycle," Wright says. National Instrument plans to
roll out the application to about 500 users over the next two years.
But the debate over whether to get an all-in-one system from a single
vendor or to go best-of-breed still rages. "If you depend on a single
vendor, you get a common architecture, lower support costs, and cheaper
seats," argues Vinnie Mirchandani, an analyst with Gartner Group Inc.
"On the other hand, upgrades become a bear because you have to do
everything at once. Also, as you become more dependent on a single
vendor, you risk outsourcing your entire IS department to them."
Even though IS managers, at least in principle, want the freedom to
pick and choose vendors, most will ultimately go with a single vendor,
says Bruce Richardson, an analyst with Advanced Manufacturing Research
in Boston. "The truth is, we started building these complex IT
backbones and had to become systems integrators," Richardson says. "It
makes more sense to buy as much as you can from a single vendor. There
isn't a company in the world that has the IT infrastructure to stitch
10 packages together."
Baan customer Ken Ouchi, CIO of manufacturing outsourcer Solectron
Corp., likes the fact that ERP vendors are adding more features, but he
cautions IT managers to beware of computer system overload. Ouchi
worries that many of Solectron's critical transactions will be slowed
down by a cumbersome application suite running on a single server. "The
key to this would be to break up the applications and run them on
distributed NT servers," he says. "But all the vendors are having a
hard time swallowing this."
Still, the big ERP vendors have shown their ability to adapt to
changing customer demands and market conditions. The question now is
whether bigger enterprise software packages make for better enterprise
software packages.
-with additional reporting by Marianne Kolbasuk McGee
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