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December 18/25, 2000

Break Out

Getting locked into an ERP suite is less of a concern these days as vendors add new functionality and introduce a broad range of integration schemes for third-party apps

By Steve Konicki

Illustration by Normand Cousineau

More on ERP:

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ot long ago, software buyers, industry pundits, analysts, and large consulting firms fretted that enterprise resource planning software, while virtually a requirement for managing business, had a severe downside. Once you installed a vendor's ERP package, you were locked into that software. Adding functionality from another vendor's products would likely require a major integration project that could take years and cost an enormous amount of money. The result: Many companies simply held off on adding functionality to their business systems--features such as E-procurement, customer-relationship management, and supply-chain planning and execution--in the hope that their ERP vendors would one day deliver the capabilities they needed.

Wishes can come true. In the past year, ERP vendors such as J.D. Edwards, Oracle, PeopleSoft, and SAP have added modern business tools to their traditional complement of financial, accounting, human resource, production management, and other core offerings. J.D. Edwards, PeopleSoft, and SAP say the new functions are so close to best-of-breed that users may not need anything else. Oracle CEO Larry Ellison is especially vocal on the topic, telling almost anyone who will listen that all a company needs is the Oracle 11i E-business suite because it provides best-of-breed functionality in virtually every product area. This isn't all public-relations puffery on the part of the vendors, either: Some users and analysts agree that the new generation of ERP software rivals the kind of systems that can be built by integrating best-of-breed offerings from numerous third-party vendors.

ERP vendors are improving their offerings in a variety of ways. All the major players have built some new application modules themselves. Additionally, some vendors have acquired technology from leaders in the field, as PeopleSoft did when it bought CRM software vendor Vantive Corp.; and others have pre-integrated best-of-breed offerings with their products, as J.D. Edwards does with CRM products from Siebel Systems Inc. and E-procurement software from Ariba Inc. At the same time, ERP vendors as a group are offering a broad range of open integration schemes, including XML messaging and proprietary connectors or open APIs, that make it simpler for their customers to manage integration with third-party applications without the need for lengthy, complex integration projects.

Colgate-Palmolive Co., which manages most of its global operations on SAP's ERP platform and integrates some legacy systems, doesn't consider itself locked into SAP, especially since the vendor began offering much of the business functionality that the best-of-breed approach offers. Packaged apps can provide a full suite of capabilities at a much lower price than buying and integrating a set of best-of-breed apps. The consumer-products company has begun implementing SAP's new CRM, B-to-B inventory management, demand-planning, and business-warehousing software into its mix. It began deploying SAP's core offerings more than five years ago to beef up a centralized business organization and now runs seven different instances of the ERP software vendor's apps to manage operations in 47 countries. "The time it's taken for [SAP's new] products to mature is acceptable to us, because it outweighs having to integrate point products," CIO Ed Toben says. "The value of having one umbrella is greater than individual points."

Since deploying SAP's main ERP applications worldwide, Colgate-Palmolive has saved $150 million by reducing working capital and inventory. "We're clearly joined at the hip with SAP," Toben says. "Our goal is to take a lot of time and therefore a lot of money out of the supply chain. The closer we are to one information flow, from purchase order to money in the bank, the better."

Of course, no application is an island. While Colgate-Palmolive is developing a B-to-B strategy that includes a mySAP.com-based private exchange to connect the company with its suppliers, it also expects to integrate its SAP applications with Transora, the food, beverage, and consumer-packaged-goods exchange powered by software from Ariba Inc. and i2 Technologies Inc. Business conducted by Colgate-Palmolive on the marketplace, which is expected to be live by year's end, will be handled by SAP apps, which can be tightly integrated with third-party processes via XML messaging. "We're doing that already with suppliers. They're getting to our SAP information so they can look at our product plans and inventory levels and automatically replenish our materials," Toben says.

With the deployment of the Web-architected PeopleSoft 8, Green Mountain Coffee Inc., an $84 million coffee producer in Waterbury, Vt., is able to more easily integrate its ERP applications with its B-to-B Web site; the company hopes to increase the amount of business it does with other businesses and consumers over the Internet.

But the company says that PeopleSoft's simple integration with third-party software via XML and other data formats is also letting it regain use of its Belltek System Design Inc. handheld inventory scanning software and scanners. Green Mountain Coffee had been using the scanners for inventory tracking of grocery-store deliver-ies until it deployed an earlier version of PeopleSoft ERP apps several years ago. At that time, it would have been difficult and expensive to integrate the ERP apps with the software that controls the handheld scanners.

Photo by Craig Line Green Mountain Coffee is looking forward to pulling out the scanners, dusting them off, and starting to use them again, says CIO Jim Prevo. "Some customers will say, 'Gee, we forgot to order this,' so we'll leave what they need or we'll have to inventory their existing stock and replenish it. The scanners get rid of a lot of paperwork--two to three pieces at each stop--and let our drivers use the time in a better way." Prevo says shaving minutes from each stop will enable a driver to service more stops in one day.

But like Colgate-Palmolive, Green Mountain says there are some things worth waiting for an ERP vendor to deliver. The company has deployed PeopleSoft 8's manufacturing, distribution, financial, and human-resources management modules. It's now eager for PeopleSoft to complete integration of its recently acquired Vantive CRM software. "We've taken the attitude that we'll wait for some features we want because PeopleSoft will develop them," Prevo says. "The appeal of PeopleSoft for us is the tightness of the business processes and their tools for developing interfaces. The most important part of our corporate IT strategy is that we need integrated enterprise applications. That's why we bought PeopleSoft in the first place."

Most vendors say they've been trying hard to strike the right balance, recognizing their customers' need for tightly integrated core business systems and their need to accommodate additional applications from third parties. "We offer the best of both worlds," says Perry Moss, J.D. Edwards' product manager for interoperability. "We have an integrated suite with advanced E-business capabilities--E-procurement from Ariba and CRM from Siebel--and we make integration simple." But since customers may not want to use Ariba or Siebel or may need specialty soft-ware to run their businesses, Moss says, the company has spent the past year working on its architecture to make sure users can easily integrate the applications they want to add.

ERP vendors say they've recognized that even companies that haven't minded waiting for them to catch up with competent E-business and CRM apps have felt a bit behind the curve during the waiting period. Colgate-Palmolive, for instance, wasn't immediately able to join the post-Y2K boom as sales-force automation, warehouse management, supply-chain management, CRM, E-procurement, and other capabilities became a reality for more and more companies that were willing to buy those tools from other vendors. Nonetheless, the company couldn't reconcile itself to the idea that the best approach was to build out its ERP system by integrating a host of best-of-breed software products, Toben says. Just as Colgate-Palmolive is taking advantage of SAP's tight level of integration among its own modules for the company's in-house projects, Toben will be taking advantage of recent SAP enhancements that now enable companies to integrate third-party apps at the business-process level in its dealings with Transora.

Toben's view of sticking as close as possible to a single vendor is similar to the approach AMR Research urges its clients to take. In a recent report, the market-research firm advised buyers to consider the new offerings from ERP vendors before deciding to pursue an aggressive third-party integration strategy. The report's author, senior analyst Rod Johnson, says that after Y2K the attention of software buyers shifted, not back to ERP, but to E-business and software for E-procurement, CRM, and supply-chain functions. Hundreds of new application vendors appeared on the scene, with offerings aimed at solving specific business problems. More than 20 new application categories emerged in customer-facing applications, ranging from E-services to marketing analytics to personalization to E-mail response-management systems. And software buyers often took on the task of integrating a large number of such applications with their back-office systems.

With most major ERP vendors having spent the last few months enhancing and expanding their offerings to provide broad business-management and E-business capabilities, Johnson says that it's now time for software buyers to focus instead on core ERP applications that meet the larger part of their needs and then select only a small number of software products to add. "Clearly, single-vendor strategies are dead, but companies need to bet significant portions of their strategies on three or four big pieces rather than 15 piece parts," Johnson says.

Ontario Store Fixtures Inc. in Toronto, which adopted J.D. Edwards' OneWorld ERP suite in 1996, has taken the position that much of the functionality it needs must come from J.D. Edwards. "It's ERP that drives the transactions, and the ERP solution must be the foundation of the business," says Delvin Fletcher, VP of information systems at Ontario Store Fixtures. "The philosophy we operate under is very much oriented to working toward as much of a common solution as possible."

Fletcher says companies that try to integrate pieces from many vendors to get a best-of-breed IT infrastructure end up with limited functionality because cost and time constraints often lead to an inadequate integration. "Less-than-perfect integration will result in imperfect functionality," he says.

Now that J.D. Edwards has close partnerships with some best-of-breed vendors, however, Ontario Store Fixtures will be able to take advantage of new applications in the coming year without hassles that can warp functionality, Fletcher says. The company has completed the first phase of a project during which it will deploy a MicroStrategy Inc. knowledge-management package that has been pre-integrated with J.D. Edwards as part of the ERP vendor's effort to provide its customers leading functionality from other companies. Ontario Store Fixtures is also planning to take advantage of J.D. Edwards' pre-integration with Siebel Systems' CRM offering.