How can an ERP package transcend jargon and translate into real business growth? Yash Nagpal has the answer

IT solution providers seem to be falling into the trap of quirky terminology. ERP, ERM, BPR, SCM, CRM … let's cut through the jargon.

Rather than support investment in IT just because "Everybody is doing it," let’s answer the core question: What's in it for you? How can an Enterprise Resource Planning (ERP) package transcend jargon and translate into real business growth?

A quick look at why organisations are investing in enterprise business solutions reveals that the overriding benefit derived from IT investment is integration of diverse business process to simplify operations for faster decision-making.

Analysts at IDC recently pointed out four key drivers: corporate growth, improved customer service, efficient distribution system and reduced operational expenses. Of these, corporate growth is the most compelling driver. The study concluded that CEOs and other top management personnel have realised that if the organisation has to survive and grow, then ERP is an effective tool that can provide faster information and cut costs to increase efficiency.

The small and medium enterprise (SME) segment’s perspective on ERP is somewhat different. Among the main benefits that SME organisations are beginning to see are: Improvement in financial processes and management, enabling more effective management of operations and optimal management of resources.

Sure, there are no sledgehammers to profits and there are dangers attached to bespoke packages. If you have to change the organisation to fit into the package, you have a problem. Despite the general impression of inflexibility of enterprise solutions, changes are possible.

Just as when foreign car manufacturers came into India, they adapted their cars to suit the Indian market, best-of-breed enterprise solutions too are those that will mould the package to adapt to the market, those that will provide source code to solution centres to give customers the flexibility to mould solutions to their organisation needs, rather than the other way around.

Awareness of the benefits an enterprise business solution could provide—irrespective of the scale of business—is the critical bridge that was missing between IT and SME enterprises. Until now, IT had seemed to be the preserve of large and multinational companies. Smaller companies were hesitant to make a substantial investment. An average Rs 30 crore company in India was likely to invest no more than Rs 5-7 lakh. Needless to say, this was short-sightedness.

Today, however, circumstances are changing. With declining trade barriers and emerging competition from the neighbourhood—China, Russia, even Pakistan and Afghanistan—companies are searching for that critical competitive edge. Even traditionally family-run businesses are bringing in professional management and executives who realise the benefit of IT.

These crusaders in the SME segment are working hard at bringing transparency into the hidden preserves of cash flow and book-keeping.

This needs a culture shift and a complete transformation in attitude. Yet, real-life benefits emerging from real companies are facilitating this shift faster than we realise.

A kitchen designing firm, for instance, used to take weeks to provide a quotation to a customer. Each modification requested implied painstaking recalculation. With an enterprise solution integrating the processes in this firm, this could be achieved in real-time, implying faster turnaround time and more business.

There are many such instances. To the global interiors chain IKEA, an unmanageable financial system was becoming a monster at large. The implementation of an enterprise business solution meant the slaying of this beast. Today, IKEA franchisees using the solution need not wade through hundreds of reports to take business decisions. Data is available real-time on their desktops, leading to discovery of trends and opportunities that they couldn’t see before.

These success stories have a cascading effect. The size of the ERP market in India was estimated to be Rs 321 crore in 2000-01. According to a recent report published by IDC (India), this is expected to reach Rs 507.5 crore by 2005-06, displaying a CAGR of 9.6 percent.

As far as the adoption and implementation of enterprise solutions is concerned, the SME segment has emerged a real aggressor. In fact, of the 791 firms that implemented an ERP solution at the end of 2001, almost 60 percent were from the SME segment.

Meanwhile, although ERP has been around since the mid-70s, the segment is still evolving and adapting to developments in technology and the demands of the market. The transformation into enterprise business solutions is part of this evolution process, providing a platform to integrate all processes onto a single platform. These new packages are cost-effective, entailing smaller investment and shorter implementation cycles, ease-of-use and faster return on investment.

Even as CRM and ERP become buzzwords, the market needs to be jostled out of insular technology investment to enter a dynamic phase dictated by benefit to business.