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Tailoring ERP for micro-verticals
Vendors have revamped their ERP solutions to suit the needs
of micro-verticals. This is paying dividends as SMBs go for these products in
a big way, says Akhtar Pasha
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With micro-verticalised solutions an SMB can start
the implementation with the conference room pilot, instead of having to
spend a lot of time on studying business processes, says S P S Grover |
In our March 2004 anniversary issue, we stuck our necks out and predicted that
this will be the year of small and medium businesses (SMBs) and that Enterprise
Application Software (EAS) vendors will look towards the volume market for growth.
We also predicted that the average deal size would reduce, putting pressure
on vendors to widen their customer base, slash prices and introduce solutions
for micro-verticals. We were right.
It is not surprising that SMBs are increasingly implementing enterprise resource
planning (ERP) systems, as they realise the need for visibility in financial
operations. Large OEMs expect their suppliers and partners to be able to interconnect
with their enterprise application systems. Since some of these SMBs are part
of the larger supply chain, OEMs would like to design and plan the production
and delivery so that the turn-around time is faster.
Fortunately, upgrading from a standalone accounting package
to an ERP system is more affordable today for an SMB as prices range from Rs
5 lakh for a mini-ERP to Rs 15 lakh for a full-blown ERP solution with a ten-user
licence. Although it could be a large chunk of an SMB’s EAS budget, it
is peanuts compared to what large enterprises pay.
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SMBs are investing in micro-vertical solutions as
these integrated packages are already pre-configured and drastically cut
down the cost of implementing EAS, says Srinivas Rao |
The low-cost ERP solutions on sale to SMBs are by no means
pared-down versions of what is on offer in the enterprise market. EAS vendors
say that no compromises have been made in the functionality of the packages.
Better yet, these solutions integrate specific requirements of the micro-verticals,
and are easy to upgrade and maintain.
The need to micro-verticalise
Customising a horizontal application to suit an SMB’s requirements extends
implementation time and puts an additional burden on already small EAS budgets.
Therefore SMBs require solutions that give them as much out-of-box functionality
as possible so that they can slash implementation time and cost. As Dib Chaudhari,
general manager, Enterprise Solutions, ICICI Infotech says, “SMBs would
like to have complete control of the project implementation so that the cost
does not escalate and simultaneously they can keep a close watch on implementation
time.”
Srinivas Rao, sales director, SMB, SAP India adds, “SMBs are investing
in micro-vertical solutions for two reasons—one, an integrated package
is already 85 percent pre-configured (with best practices and vertical domain
knowledge) and the remaining 15 percent is amenable to tweaking. Two, it drastically
cuts down the cost of implementing EAS by about 40 percent and reduces the overall
cost of ownership by 30 percent.” S P S Grover, senior director, E-business,
Oracle India cites another reason why SMBs are considering packaged solutions
over standalone ones: “Using micro-verticalised solutions an SMB can start
the implementation with the conference room pilot, instead of having to spend
a lot of time on studying business processes, gaps and conducting a requirement
analysis and so on. With micro-vertical solutions an SMB can go live in a couple
of hours using low-cost Intel servers running Linux at a price of Rs 16 lakh.”
Different strokes for different folks
Ravi Kathuria, director, Marketing & Enterprise Solutions, SSA Global India
explains the need for micro-verticalised ERP solutions using an everyday example
from the automotive industry. Typically, OEMs enter into annual contracts with
suppliers. The prices are supposed to be revised from April; however, the negotiations
usually extend up to August-September. Irrespective of when the prices are negotiated,
they are applicable from April and the entire calculation needs to be done retrospectively.
R Shankar, country manager, India, Middle East & Africa, Ramco Systems cites
another instance: “Our customers in the food industry buy milk from different
sources because of which the fat content varies from 3 to 4.5 percent. We have
a solution (Ramco e.Applications) that lets them calculate the fat content and
pay the supplier accordingly.” This kind of feature is not available in
standalone or customised packages. Shankar stresses that EAS vendors need to
gear up for micro-verticalisation of solutions.
According to George Varghese, head, Marketing & Alliances, SAS India, some
SMBs are savvy-technology users and want business intelligence (BI) tools so
that they can react faster to the competition and to
changing market conditions. “SMBs conducting clinical research demand
BI tools for cleaning data, querying and reporting, and for making predictions
and analysis. These tools help them take decisions faster.” SAS has customers
such as Quintiles, Accutest Laboratories and Synchrom Research Services.
Packages score over custom solutions
Pranav Kumar, research director, Enterprise Application Software, Gartner Asia-Pacific
says, “About 35 percent of SMBs (organisations with at least 70 people)
are in the process of deploying ERP solutions or have already done so. Of these,
only about a third have implemented a packaged ERP solution.” He explains
that packaged solutions are easier to maintain and upgrade, as they incorporate
best practices, new technology foundations and offer better scope for integration.
Custom solutions may provide a better fit to immediate needs but they don’t
offer these benefits. Yash Nagpal, managing director, Navision Software India
concurs, “We have seen SMBs struggling to maintain custom applications
and ending up paying more [than they bargained for].”
According to Rajesh Ghosh, country manager, ACCPAC India, until recently SMBs
were using non-integrated solutions in various functions resulting in the creation
of islands of information. There are also time and cost over-runs resulting
in a situation where rigid and expensive solutions get deployed. Hence the demand
for micro-verticalised products.
A classic case in point is Kale Consultants. Earlier the firm used Tally and
then QuickBooks for accounting. Sameer Nadkar, CFO, Kale Consultants explains,
“The accounting system was not talking to other applications such as project
planning and human resources. With Oracle’s E-Biz Special Edition Suite
we have an integrated view of our business processes and can take decisions
faster. Now we can do resource planning and have budgetary control of projects.”
In the next 18 months, the SMB segment will emerge as a key contributor to the
growth of EAS licence revenues. EAS vendors need to bring interesting models
to market in order to woo SMBs. Rumour has it that vendors are already planning
special offerings wherein EAS will be bundled along with the hardware (entry-level
servers), operating system and the database. These bundles will be priced aggressively
in the range of sub Rs 25 lakh. If this comes about, SMB usage of EAS should
rise rapidly.
| A rupee or dollar of investment made by an SMB into IT is proportionally
greater than for a large enterprise. Therefore, EAS vendors need to demonstrate
the value of investing in packaged solutions. Since ‘one size does
not fit all’ they need to have creative pricing with a high degree
of hand holding (post-sales support)-because SMBs do not have large IT shops |
| EAS vendor |
Key offering |
Customers |
| SAP |
mySAP All-in-One |
HR Johnson, Amit Spinning, GTN Textile, Network Clothing Company, Abhishek
Industries |
| Navision |
Axapta |
ProAgro Seeds, Nunhems Proagro Seeds, Tyresoles, Sah & Sanghi Auto
Agencies, Mother Dairy Fruit & Vegetable, GKB Rx Lens |
| SSA Global India |
SSA Baan 4 |
Advantac Coils, TEI Electronics, Tata Yodogawa, Fedders Lloyd |
| ACCPAC |
ACCPAC Business Solution |
MTL, Manpower Industries, Somphy, Agarwal Fasteners, Synthetic Packers |
| Ramco Systems |
Ramco e.Applications |
AVT McCormick, Vallabhdas Kanji, Srinivasa Sign Arts,
ITC Greeting Card Division, Hanuman Weaving |
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| SMBs in B & C class cities that are in the process of setting up infrastructure
with operations spanning multiple locations require Network Management Software
(NMS). CA spotted this trend and came out with a special bundle of its NMS
solution for SMBs that is priced at Rs 2.99 lakh. Pravir Arora, Director,
Marketing, CA India expects 20 new installations by the end of this year.
He says, "The typical SMB requirement for NMS would be for network
management including intrusion detection systems, network usage and bandwidth
management. Hence there is no need to offer the complete NMS pack."
Vishaka Industries, Kribhco, Sham Rao Vittal Co-operative Bank and Bharat
Co-operative Bank are some of CA's customers for this product. |
akhtar@expresscomputeronline.com
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