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Cover
Home-grown ERP bears fruit
The need for organisation-specific customisation has led
several companies to build ERP systems in-house, says Sushma Naik
 Implementing
an ERP system is a major decision. While companies are constantly in a state
of flux trying to choose the right vendor, a whole crop of organisations have
embarked on developing their own ERP. There are several reasons why they have
opted for this route.
Benefits of customisation
The shoe always pinches unless it is handcrafted. That’s the logic of these
folks who choose to build their own. It’s difficult for an organisation
to find an ERP system that encapsulates the business processes which the company
has developed over the years. Says Srikanth Nair, Database Administrator, Sami
Labs, “Over time, we had developed unique processes, and we could not find
a suitable ERP system in the market which catered to our needs.”
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An ERP system available in the market costs at least
Rs 5 lakh. Add to that 20 percent for an annual maintenance contract and
some more for upgrades,
customisation and so on, and the cost balloons
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The company did a cost versus features study of available
packages, and figured that nearly 50 percent customisation was needed for any
basic ERP package. In such a situation, Sami felt that it was better to get
an ERP system built by its in-house IT team rather than spend time and effort
customising an off-the-shelf package. There was also the possibility that an
external package would not serve the purpose even after customisation.
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When we considered factors such as the time taken to
train staff, and their taking to the system, the time taken with a home-grown
system is less
Matthews Daniel Senior Manager, Systems Development Blue Dart Express
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Deploying a ready-made ERP system involves a change in business
processes. Compare this with an in-house ERP system that integrates smoothly
with business processes. Explains Matthews Daniel, Senior Manager, Systems Development,
Blue Dart Express, “While building our own ERP, we try to build the application
around the business processes, rather than having a system that changes our
business process.” For example, Blue Dart made available scanned copies
of delivery slips to shippers with the help of handheld devices. This feature
is closely linked to the company’s ERP system, which enables scanned copies
to be viewed on the company’s Web site.
Integrating such a feature is easier in a home-grown application.
Even small companies such as garment exporter iSex Fashions plumped for an in-house
ERP system. Every garment exporter has a different way of going about its business,
from sampling to production to packing to shipment. All this may not be captured
in existing ERP packages, even those that claim to have modules for the textile
industry, believes Jaweed Aslam, Systems Administrator at iSex. The accounting
department may change its system due to changes in the business process. With
an in-house ERP system, the IT team can easily integrate these changes which
may be difficult with a vendor’s system, Aslam points out.
Besides, changes in business happen at regular intervals.
These situations can be better handled if the company can change the ERP application
itself to suit such needs. The big advantage is that the source code for the
application resides with the company. This is a big issue, and is contributing
significantly to the decision of so many companies to build ERP systems in-house.
Cost vs. time
Pros
- Helpful for start-ups that lack standardised
procedures.
- Companies can build ERP around business
processes rather than vice-versa.
- Making changes is easier in an in-house
ERP system.
- Source code is available, and, therefore
changes can be integrated quickly.
Cons
- Scalability may be an issue in the future.
- Brand value is low.
- Consulting services do not come as a part
of the roll-out.
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Cost, the traditional stumbling block of ERP, is also an issue
for many companies. According to Aslam, ERP systems available in the market
cost at least Rs 5 lakh. Add to that 20 percent for an annual maintenance contract,
and some more for upgrades, customisation and so on, and the cost balloons.
“When we compare this to what it might cost companies to build an in-house
ERP system, the results do not vary drastically,”
adds Aslam.
Furthermore, while deploying an ERP system, a lot of learning needs to be imparted
to end-users. Affirms Daniel of Blue Dart, “When we considered factors
such as the time taken to train staff and their taking to the system, the time
taken with a home-grown system is less, and this will help reduce the TCO.”
Most companies that Express Computer spoke to took an average of one to three
years to complete an ERP deployment. The approach is to start module-wise. This
they feel has two advantages. First, it allows the team to rectify mistakes
in future modules. Second, the working environment doesn’t change overnight
for employees.
Integration and migration
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The implementation of Citrix metaframe
presentation server has enabled Jyothy to roll out ERP applications centrally
across the enterprise
B V Dinesh
IT Consultant
Jyothy Laboratories
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There was nothing wrong with the
home-grown ERP system per se, but the company’s growth was too fast
for it to handle
Arindam Bose
CIO
LGEIL
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ERP systems have functions that involve not just internal
integration but also communication with distributors, retailers and others.
So what happens when these companies interact with businesses that have different
ERP systems?
Each case varies. While most companies have not run into obstacles, others have
come across the occasional hitch. “It is a rare occurrence, but when we
do encounter one we try to make changes in the system that will integrate with
the third-party system,” says Nair.
Companies are also confident that in-house ERP systems can support more applications.
Business Intelligence is one such application that CIOs vouch for; some of them
have even developed one, and found that it can be better integrated with in-house
ERP systems.
Companies that have their own ERP appear a satisfied lot. That said, these in-house
ERP systems might fall short of expectations. LG Electronics India Limited (LGEIL)
had this experience.
It had deployed an in-house ERP application built by LGED (LG Electronics Division),
the software arm of LGEIL. With the growth plans that the company has made for
the next five years, it now feels that its ERP system has scalability issues.
According to Arindam Bose, CIO of LGEIL, “There was nothing wrong with
the ERP system per se, but the company’s growth was too fast for it to
handle.”
Now the company plans to roll out SAP by December 2005. Some parts of the earlier
ERP system, such as the HR module, will be retained.
Adaptability is of utmost importance. Typically, vendors such
as SAP provide consulting services that stress the need for companies to prepare
people for adopting change management without which an ERP implementation might
just fail. This is however not the case with companies developing home-grown
systems. Clearly, in-house ERP is an alternative for companies to fill in gaps
left by packaged ERP.
| Jyothy Laboratories is one of the leading FMCG companies
in India, with brands such as Jeeva Ayurvedic soap, Ujala Supreme Whitener
and Maxo mosquito coils. Jyothy went ahead with an ERP solution that it
developed in-house. The company has manufacturing plants and stock depots
across 60 locations in the country. Before implementing the ERP system,
all major processes were manual, and there was no consolidation of information.
Says B V Dinesh, IT Consultant to Jyothy, “As there was no information
consolidation, it was challenging for the company to gauge its own performance.
It was also not possible to have an efficient flow of information across
the organisation, which resulted in lack of transparency.”
The challenge for the company was to deploy a solution
to streamline operations across branches using existing resources. Jyothy
chose to deploy an in-house solution after it realised that procuring
a standardised solution and then customising it to meet its requirements
would involve a lot of investment. Moreover, with the continuous upgrades
required, the company felt that it would be easier for the in-house team
to tailor a solution that was developed by them.
Implementation work began in April 2002, and was
completed by the end of that year. The aim of the exercise was to centralise
operations and make them accessible online to the entire organisation.
Affirms Dinesh, “Post-implementation, the decision-making process
has improved as data is visible across the company.” Further, the
procurement and inventory process has been centralised. This has ruled
out issues pertaining to excess stocking of materials. The implementation
has also resulted in efficient production planning and communication throughout
the organisation. It is now easy for the company to analyse the performance
of its sales staff, thereby leading to enhanced productivity. Jyothy is
now planning to add HR, payroll, media management and logistics modules
to its system.
To improve the performance of ERP-related applications,
the company decided to deploy a Citrix metaframe presentation server (CMPS).
“The CMPS enabled us to roll out ERP applications centrally across
the enterprise. This has resulted in the timely flow of information without
putting additional pressure on man-hours and departmental budgets,”
states Dinesh.
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sushma@expresscomputeronline.com
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