What started out as a fledgling with a limited budget, offering services like software development, educational training and onsite consulting, is today an SME ERP product company. Shipra Arora takes a peek at Eastern Software Systems and finds out how its unique strategy helped the company survive as an Indian software product player

ESS’s strategy is to position its solution as one specifically tailored to the SME ideology and working environment, says Sanjay Agarwala

An Indian software product company that’s also an Indian SME ERP product company? Normally, such a preliminary profile is reason enough to be dismissed by critics as yet another aspirant struggling to make it big.

But Eastern Software Systems (ESS) is not just another software company. To it goes the credit of pioneering the market for ERP within the Small & Medium Enterprise (SME) segment, and helping the transition of ERP from being something for the classes to something for the masses. This at a time when India has been quietly written off as far as software product development is concerned.

Barring a few success stories in the banking segment, written by Infosys, i-flex, etc, product success has continued to elude Indian software companies. While Nasscom and industry experts have been advising companies to acquire product development expertise as a step up the value chain, there have been few companies like ESS that have actually tried to do so. And fewer have been as successful as ESS, which has bagged over 225 customers since the launch of its ERP product in early 1997.

According to Sanjay Agarwala, director at ESS, the key success factor has been getting the right positioning strategy, which has generally been the weak point for many Indian product initiatives. “The success rate for products in any industry segment in the Indian market is about one in ten, meaning a very high mortality rate. Thus, what is required for success in the market is a differentiating factor.” This is the core strategy that ESS adopted to survive as an Indian software product player.

Strategy
The differentiation for the company lies in its niche offering as well as its marketing. As part of its positioning strategy, ESS is targeting SMEs with a cost-effective solution: the right technology catering specifically to the dynamics of their business. While a typical ERP solution in a large organisation costs several crores of rupees, with a 1-2 year time frame for implementation, ESS’s solution costs around Rs 5 lakh and can be implemented within 3-4 months.

“The problem with most of the other ERP solutions is that they are tailor-made for the needs of large customers, with almost 90 percent of their functionalities of no use for SMEs. Our idea is to position the ESS solution as specifically tailored to the SME ideology and working environment,” Agarwala explains.

As far as marketing strategy is concerned, while most Indian IT companies are targeting the overseas market, ESS is looking at the domestic market. Currently, the overseas market comprising Africa, the Middle East and Far East accounts for almost 30 percent of the company’s total business, and the rest comes from domestic sales. Adds Agarwala, “We plan to continue our focus on the domestic market even while growing our presence overseas, as opposed to focusing primarily on the international market as is the case with most software houses.” The company has outlined a long-term roadmap in line with this strategy.

ESS has deferred targeting the US and European markets in the near future as it would rather concentrate on building a sizeable user base in India before showcasing its expertise in developed markets. “In the products business it is important to first establish yourself domestically, and only then venture into markets like the US and Europe because they are not going to accept a product without a sizeable implementation base. We want to first gain significant mass in India, as well as other developing economies like those in Africa, the Far East and the Middle East for the next 18 months in order to be able to successfully showcase the product’s wide geographical capabilities,” says Agarwala.

Milestones
ESS started out as a small company with a limited budget, offering services like software development, educational training and onsite consulting to customers in the Middle East and Far East. As India hardly had any home-grown products, in 1994 the company started scouting for product ideas and zeroed in on ERP. Explaining the choice, Agarwala says that ERP was beginning to make waves around that time. Further, there was a huge dichotomy prevalent in the Indian ERP market. There were large players like SAP, Baan and Oracle, and small fragmented regional players. ESS therefore decided to build its differentiation on filling the vacuum in between.

At that time there was no product specifically catering to SMEs, whose dynamics are completely different from those of large corporates. In 1997 ESS became the first Indian company to launch an ERP solution called Makess, which was specifically designed to cater to the needs of SMEs. In 1999 the company came out with its ASP services offering its ERP-on-the-Internet called Makess-on-the-Net. This model offered clients less implementation time, and interconnectivity of branch offices at low cost.

Around 2000, during the e-commerce boom when the industry started writing off ERP, ESS—like many other ERP vendors—had to face the music. However, it was also an evolutionary period in the concept of ERP, and ESS adapted itself well to the evolution. According to Agarwala, this was the time when there was a lot of hype about e-commerce, and users began giving up ERP plans and implementing e-commerce plans without realising that e-commerce was not possible without ERP systems at the back-end. He feels that as reality dawned on these companies around early 2001, ERP resurrected itself with a fundamental transformation as more and more users started demanding Internet-enabled capabilities in their ERP packages.

Responding, ESS launched ebizframe, a comprehensive online business framework. While retaining the core solution of Makess, the new solution added Web capabilities, thus extending its functionality beyond common legacy ERPs. In addition to handling all functions of an organisation like sales, materials, finance, human resources, payroll, production and planning, it also integrates the complete business environment of a company with its customers, suppliers and multiple branches or manufacturing locations. The solution also offers other value-additions like website builder, knowledge management, Web-based e-mail and chat, e-transactions and self-service applications, thus enabling an organisation to develop its own portal. It also offers the benefits of e-commerce, including collaborative computing. The solution also integrates CRM and SCM applications. In the latter part of 2001, ESS launched its WAP-enabled enterprise solution, Cellbiz.

Agarwala points out that one of the key outcomes of the resurrection of ERP was that there was no longer the earlier hype of ERP being the ‘be-all and end-all’ of enterprise problems—companies had become more realistic in terms of their expectations. Even while currently facing the slowdown blues, ESS is keeping its feet firmly on the ground. “Our USP lies in our niche offering to SMEs. Awareness levels relating to enterprise automation have grown within this segment. From the question of whether they should go in for ERP, they have graduated to the question of when they should go in for ERP. This question is going to be answered soon as more of them realise that basic business automation is the most pressing need for the majority of SMEs today.”

Such optimism is not unfounded; within the space of just two months, September and October 2002, ESS has bagged around 16 orders worth Rs 80 lakh. It has further strengthened its foothold in the western and eastern regions, from where it has bagged these orders. Some of its new customers include Mettler Toldedo, D-Link, Shree Balaji, Plexus Technologies, Hindustan Colas, Meso and Sharp. Targeting clients across verticals like manufacturing, heavy and light engineering, printing, auto ancillary, jute and chemicals, ESS is now evolving a more ‘verticalised offering’ approach while maintaining its niche in the ERP market.