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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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• “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 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 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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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 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.
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