InformationWeek
Defining The Business Value Of Technology
January 4, 1999
Enterprise AppsBig Strides For ERP
With core applications in place at most large companies, users are exploring what can be done with ERP software
By Tom Stein
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he enterprise resource planning market promises to make big strides in 1999. Now that more than 60% of Fortune 1,000 companies have implemented core ERP applications--manufacturing, financials, and human resources--they're exploring more ways to take advantage of the software, as well as add to it.For example, many still have trouble extracting timely, business-critical information from their systems. That's where business-intelligence packages come in: They extract and analyze data from a host of enterprisewide systems, then present the information to busy executives in a graphical, easy-to-understand format.
Web-based procurement applications, which integrate with core ERP systems and let users order supplies online, will also grow in 1999, analysts say. And so will the trend toward outsourcing ERP applications, as companies choose to rent the software and have it hosted off-site, rather than deal with the headaches of installing it themselves.
American Century Investments, a mutual fund company in Kansas City, Mo., has implemented PeopleSoft Inc.'s human resources and financials modules. It's now testing the vendor's new business-intelligence application, Performance Measurement. CFO Bob Jackson says he needs to know 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," he says. "In the new world, we could get that information automatically and instantaneously by setting up the right set of metrics." Jackson says that by receiving the right information at the right time, he'll be able to see trends within his business much more quickly and react more nimbly to changing demands.
Josh Greenbaum, an analyst with the Hurwitz Group, says business-intelligence applications are on the verge of becoming a huge market. As they help managers analyze information and make better-informed decisions, he says, "these systems could really start to drive value and become the next competitive edge."
ERP vendors are listening. SAP, for instance, will offer a set of Strategic Enterprise Management applications to sit atop its Business Information Warehouse. The package includes Business Planning and Simulation, Corporate Performance Monitor, and Stakeholder Relationship Management. It's designed to help business managers make better decisions by letting them monitor such indicators as sales per region and sales per product line.
Lawson Software, meanwhile, will be adding more role-based applications in 1999 to Lawson Insight PI, a packaged offering that combines data warehousing and online analytical processing with the company's Web-based financials, human resources, and distribution software suite. A CFO, for example, could use the product to choose from a number of preselected performance indicators, such as balance-sheet vertical analysis and net income to capital. Baan, Oracle, and PeopleSoft will roll out similar systems in the coming year.
Third-Party AppsStill, not everyone is convinced the big vendors have all the answers. John Keast, CIO of energy company PG&E Corp. in San Francisco, says he plans to invest a good part of his 1999 budget in analytical applications designed to sit atop his company's SAP R/3 system. But Keast says he's leaning toward third-party applications, rather than SAP's own data warehouse and analytical apps. "I'm concerned it will be too rigid," he says. "SAP is still a very closed system, and with decision support you want maximum flexibility."
The next ERP frontier could well be Web-based procurement applications. New software packages from Oracle, SAP, and others let users browse product catalogs online, check availability, and order supplies directly through the system. The result: All users within a company can order goods and services directly from their desktops, reducing purchase and delivery times.
PG&E says it has been able to save a significant amount of money since it began using SAP to purchase office supplies over the Internet earlier this year. Teresa Tang, director of systems architecture and integration at PG&E, says that by linking SAP with an online catalog application from software vendor CommerceOne, PG&E was able to reap the financial benefits. "It is much easier for us to direct purchases to the appropriate vendor and negotiate discounts," she says.
PG&E will soon move to a multivendor catalog that will let users search for products based on price and other capabilities. The company also plans to extend the application to include the purchasing of other goods, such as production tools and supplies. "We'd like to integrate all our suppliers," says Tang.
Another emerging market is the outsourcing of ERP applications. The major vendors are all offering outsourcing programs to attract small and midsize organizations that typically can't afford to implement the systems themselves. Instead, the applications, as well as the servers and databases needed to support them, are hosted and maintained at a remote data center. Users connect to the software via a Web browser and pay a flat monthly fee for the service.
The Meta Group expects the market for ERP outsourcing and other post-implementation management services to rise from about $1 billion in 1998 to between $6 billion and $8 billion by 2003.
Texas Instruments' semiconductor unit was one of the first companies to outsource the implementation and support of its SAP applications to Andersen Consulting. "We wanted to get the best talent available," says Phil Coup, CIO of the TI unit. "We felt that Andersen had much more skill than we did." Once all the financials and distribution modules are up and running early this year, Andersen employees will stay at Texas Instruments to perform help-desk and maintenance work. Andersen will also support the system from a remote service bureau.
Midmarket Internet portal company Excite Inc. in Redwood City, Calif., opted to outsource PeopleSoft's financials application rather than implement the software itself. "Cost was a big consideration, as were the infrastructure issues," says CFO Bob Hood. Corio Inc., his outsourcing partner, agreed to implement, maintain, upgrade, and host the PeopleSoft applications at a fraction of what it would have cost Excite to do all the work. "The price was so prohibitive that we would not have chosen PeopleSoft had we had to do it the traditional way," says Hood.
He's not alone. But as companies look to link more of their automated business processes, they will find ways to turn to their ERP vendors to fill the bill.
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