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News In Review

September 14, 1998


New Value In ERP

Companies are adding business-intelligence tools to their enterprise resource planning systems to speed access to data and improve decision making

By Tom Stein, Jeff Sweat, and Karen M. Carrillo

As companies deploy enterprise resource planning applications to improve their back-office and manufacturing operations, they're generating vast amounts of data on employees, customers, finances, products, inventory, and other business fundamentals. It's a wealth of information-but in many cases, it's not being tapped by decision makers, who've traditionally had to rely on analysts to make sense of the raw data. That's about to change.

The linking of ERP with business-intelligence tools such as data marts, online analytical processing engines, and desktop analysis software is emerging as one of the hottest areas in the software market. At its annual Sapphire conference this week in Los Angeles, ERP leader SAP is expected to announce the availability of its Business Information Warehouse, a data warehouse that pulls data out of SAP's R/3 applications and comes with front-end tools to analyze the resulting information. SAP is also expected to elaborate on its Strategic Enterprise Management application, slated for delivery later this year, which aims to help managers make decisions by monitoring such business indicators as sales by region or by product line.

The obvious need for such products has ERP vendors such as SAP and PeopleSoft, business-intelligence software providers such as Cognos and Information Builders, and a handful of startups scrambling to supply solutions. "We're at the point where the real return from ERP systems becomes the ability to translate raw data into useful information," says Jim Shepherd, an analyst with AMR Research. "Now, people believe they ought to be able to use data to actively support decisions, such as `Do I buy 1,000 of these parts or 10,000? Do I buy from vendor A or from vendor B?' All day long, these decisions have to get made, and there is a strong body of thinking that [ERP] apps can and will support these fundamental business decisions."

Bob JacksonPhoto by Don Ipok American Century Investments, a mutual fund company in Kansas City, Mo., has implemented PeopleSoft's human resources and financials module and is testing the vendor's business-intelligence application, called Performance Measurement. Bob Jackson, American Century's CFO, says Performance Measurement can help determine such things as revenue and profitability per customer. "In the existing world, it would take us four to eight weeks to aggregate the right data and massage it through a bunch of spreadsheets," Jackson says. "In the new world, we could get that information automatically and instantaneously by setting up the right set of metrics within the application." That means American Century would be able to react to changing market conditions more quickly. Adds Jackson, "This is huge in terms of how we price a new piece of business and how effectively we make adjustments."

ERP apps have been used mostly by low-level managers to support tasks such as processing inventory, shipping products, and taking customer orders. The challenge is to extract the raw data from a variety of systems and present it in an easy-to-understand format for analysis by a broad range of managers and senior executives.

A general manager of manufacturing, for instance, could query the application for current inventory levels. "These systems could really start to drive value and become the next competitive edge," says Josh Greenbaum, an analyst with the Hurwitz Group.

PeopleSoft will make its analytic application for performance measurement generally available early next year; the company will unveil a line of similar applications at its user conference in November. The applications will address areas such as profitability, customer profiles, market research, inventory markdowns, and assessing the value of organizational assets. "This is going to be one of the primary drivers of ERP going forward for the next 10 years," says Mark Nittler, PeopleSoft's head of product marketing.

Less-Costly Alternatives
Data analysis tools designed for ERP software can be a cheaper and easier alternative to creating a custom link between ERP and a general-purpose data warehouse, says Nittler. "Why would you try to write these things using OLAP and data warehouse tools if you can buy a packaged application?" he says.

Companies testing SAP's Business Information Warehouse include chemicals maker Hercules, Georgia-Pacific, Digital, Bay Networks, Colgate-Palmolive, and Dow Corning. The platform includes an OLAP engine for multidimensional data analysis and a metadata repository for managing data from both R/3 and non-R/3 applications.

Other ERP suppliers are offering their own products. Lawson Software's Lawson Insight PI combines data warehousing and OLAP with the company's Web-based financials, HR, and distribution software suite. Lawson has shipped versions of Insight PI for CEOs, CFOs, and chief operating officers. Versions of the product tailored to 27 other business roles, including HR and sales managers, will follow over the next year.

Oracle and Baan are rolling out similar systems. "There's an enormous amount of information in our applications, but most people only know how to get it out on a transactional level," says Ron Wohl, a senior VP at Oracle. "Now, they are recognizing that the value of their business system is not just that they can reduce employee head count, but that they can actually grow the company. Business intelligence is key to that."

Other companies are stepping forward, too. Tibco Software Inc. last week introduced two products that deliver ERP data directly to desktop PCs, and Cognos began shipping OLAP and reporting tools for System Software Associates' ERP applications. This week, Infospace Inc. will introduce Infospace Information Center for SAP, a data-analysis platform that includes D2K's Tapestry. Harmony Software, Broad- base, and Acta Technology rolled out business-intelligence offerings for ERP earlier this year.

Looking Inside
Liebhardt Mills Inc., a manufacturer of home-textile products in Daleville, Ind., is moving away from thick paper reports that take days to generate. "We want to get the information in the hands of the people who make changes in a more positive and timely manner," says Christina Fogle, the company's director of IT.

Liebhardt Mills has deployed Cognos' PowerPlay and Impromptu data analysis tools to work with its ERP applications from Symix. It's now easier for the company to compare, for example, the cost of making pillows in Georgia vs. North Carolina. "Business-intelligence tools have allowed us to take a step back and look deeper within our organization," says Fogle.

Fujitsu Computer Products of America, in San Jose, Calif., is using Harmony Software's Business Performance Management product to extract information from its Oracle ERP system and legacy applications. "Before, to figure out cash flow or point-of-sale results, we had to sift through a web of Excel spreadsheets, E-mail, and fax reports," says Kevin Parker, senior VP of finance and administration. "With Harmony, we expect to speed up the process and get the information we need on a more timely basis." Fujitsu plans to roll out the application to about 75 executives this year.

Microsoft is also tuned in to this emerging market. In the fourth quarter, the company is scheduled to ship SQL Server 7.0, a database upgrade that it will position as a data warehousing platform and which will include an OLAP server. Microsoft is working with Baan, PeopleSoft, and SAP to ensure compatibility with their application packages. "Everyone has incredible amounts of data in transaction systems, in Web pages, even in E-mail systems. They have as much data there as they do in databases," says Charles Stevens, VP of Microsoft's applications developer customer unit. "We'll let them access it with everyday tools from anybody they choose."

More Than ERP Data
Federal Express Corp. recently added Arbor Software's Essbase OLAP server to its PeopleSoft financial software. "The information that the ERP systems present us is critical information," says Cynthia Spangler, VP of corporate systems at FedEx. Still, Spangler notes that FedEx can't get by on its ERP data alone. "It's hardly all that a company of our size needs," she says. The company is also deploying data warehouses and data marts that aggregate data from systems across the company.

To answer that call, independent software vendors are creating products to extract data from any source, including ERP systems, data warehouses, and highly customized legacy systems.

Adaptec Inc., a high-tech manufacturer in Milpitas, Calif., is using Tibco's middleware to gather sales and product data from its corporate intranet and external Web pages, and then push the information to the desktops of sales reps, programmers, and engineers. In the future, Adaptec plans to use the software to extract data from its business applications, including SAP's manufacturing module and Remedy's customer support software. Key employees can be notified when inventories fall below a certain level, and sales managers can be alerted when a large order gets placed in the manufacturing system.

"We are interested in pulling information not just from our SAP system, but from our customer database, our marketing database, and our Remedy call center," says Doug Phan, director of IT architecture at Adaptec. "This system will allow managers to see in real time how the company is performing."

For most companies, the need for business intelligence is predicated on a simple truth: Better access to data means better-and faster-decision-making. That's exactly what businesses need to succeed.

--with additional reporting by Stuart J. Johnston

Read sidebar story, "Tapping Into R/3."


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