Enterprise Applications

CRM, BI and demand forecasting to the fore

Akhtar Pasha writes that the growth story that used to describe the EAS market two years back has switched gears and that customers are seeing projects in a new light—focusing on improving efficiency, reducing costs and improving customer service. CRM, demand forecasting and BI would be instrumental in driving this market to 10-12% growth in 2010

The spending on core Enterprise Application Software (EAS) was back in H2 2009 after an 18 month hiatus. According to Gartner’s forecasts, the Indian EAS market is expected to have grown by 6% to $344 million in CY 2009 in new license revenues and there would be a marginal growth of 7.26% expected in 2010. This is in sharp contrast to the golden period (2006-2007) where it grew by 22-24% in new license revenues. This, however, matches the pattern set by the growth rate plummeting to 12% for a total of $324.4 million in 2008.

ERP carried the overall EAS market in 2009 despite vendors facing erosion of new license revenues as new projects were shelved in H1. Thomas Abraham, Managing Director, Sage Software India Pvt. Ltd., said, “The revenues shrank a bit and we saw a significant dip in the average deal size in 2009. During 2007-2008, the average deal size used to be in the range of Rs 70-80 lakhs, which reduced to Rs 10-15 lakhs in 2009.”

The big spenders and SMBs came back strongly in H2 2009. Interestingly, a number of deals in CRM and analytics projects went on the floor in 2009 and this pulled up the EAS market from a certain slump to single digit positive growth. We estimate that the Indian EAS market has grown by 8% to $350 million plus in 2009. The trends that we saw in individual pockets of the EAS market would largely remain the same in 2010.

The slowdown in overall EAS software growth was only felt during H1 2009. Yanna Dharmasthira, Research Director, Gartner, said, “Earlier companies were investing in EAS to augment their growth and expansion plans. Today, they are cautious in justifying new purchases, including their ROI, and in ensuring that they are invested in their priority areas.”

SAP, the king maker of this market, closed some megadeals both in the enterprise segment as well with SMBs. According to Alok Goyal, COO, SAP India, “ERP continued to account for a big chunk of our revenues despite the weak economy in 2009. We closed some large deals across ERP, CRM, BI and SCM. Customers that have stabilized their ERP systems continued to buy additional licenses and rolled out new projects to augment their growth because of mergers and acquisitions and consolidation.”

Telecom, PSUs, infrastructure, utilities and manufacturing were the top five verticals that invested in ERP in 2009.

ERP gets a new meaning

Talking to CIOs from various verticals, we found that SMBs either shunted their new application development or looked at ERP projects in a different light altogether during the slowdown. Earlier SMBs viewed ERP projects as a way to automate their transactional systems, but after the market crashed and liquidity ceased to exist, they were looking at specific solutions that would help them identify cost culprits across their businesses processes and supply chain. In 2010, many SMBs will kick-start their ERP projects to identify costs culprits and to optimize their business processes in order to reduce costs, wastage, optimize the supply chain, streamline transportation and distribution (logistics) and increase customer focus for servicing them better. Reducing cost would be the single most important factor for SMBs to invest in ERP during 2010. In the mid-market and enterprise segment, customers leveraged CRM and analytics projects like never before.

Chetan P. Pathak, Country Manager, Tectura, said, “Customers took a cautious approach to EAS spending and invested in projects that had a clear RoI—such as lead management, increasing sales opportunities, reducing inventories etc. Therefore, it would be fair to say that we are not out of the woods yet. The SMB segment would emerge as a key enabler for the overall EAS market in 2010.”

ERP continues to carry the market

Businesses are looking at enterprise-wide optimization and want to identify their biggest cost culprits and reduce wastage. The focus is going to be on Financial Management Systems (FMS). Gartner felt that businesses would continue to invest in FMS, which is a segment of ERP, even in the current economy. FMS is the most mature segment, yet it is the core foundation of ERP with the largest revenue share and good growth. The forecast for FMS demand continues to be strong for the next five years. Business consolidation, M&A, achieving excellence in business operations, reducing costs and increasing the top line would be the mantra for Indian companies in 2010 and therefore the demand for ERP is expected to be back in a big way.

Surya Bhardwaj, Vice President-Application Business, Oracle India, said, “Mid-market customers are considering ERP projects to achieve excellence in their internal, external and transactional processes and therefore we are seeing demand for performance management dashboards, balance sheet management and HRM including Governance Risk and Compliance (GRC). This trend is expected to continue in 2010 as well.”

Subhomoy Sengupta, Group Director, Microsoft Business Solution, Microsoft India, added, “Customers are taking more time to park their revenues and are doing incremental spending on projects where they sees value which can be measured quickly and the benefits shown to top management.”

According to Thomas, many BPOs and KPOs are looking for automation to mitigate risk and governance and to meet International Reporting Financial Standards for better control on accounting. Businesses in this domain need consolidated financial reporting in order to track time and cost for each customer project, profitability and balance sheet by line of business and expense management.

Demand forecasting comes to the mainstream

To streamline logistics and distribution, demand for SCM will continue as end user organizations need to be agile and closely monitor logistics, production and time to market as their customer demand may continue to fluctuate. Additionally, fluctuations in fuel prices during 2009 forced oil & gas companies to adopt demand forecasting and optimize their supply chain and inventories. The largest demand of SCM will derive from supply chain planning, followed by procurement and supply chain execution.

ONGC implemented SAP’s solution to optimize its inventories and procurement through reverse auctions. The online bidding process has helped ONGC reduce the cost of procurement and logistics across the supply chain.

Large companies such as SAIL, TTSL and Vodafone invested in SAP Supplier Relationship Management (SRM) for online collaboration with their suppliers. Other sets of companies such as Alok Industries, Vizag Steel, Sesa Goa, Dabur and Amara Raja Batteries were found leveraging demand forecasting for capturing the secondary and tertiary point of sale (PoS) data to plan their capacities, inventories and production. Goyal said, “Most of our customers are using demand forecasting solutions at various points of the PoS and using the data for backward planning of their inventories, BOM and production to increase efficiency and reduce wastage.”

Similarly we saw many instances of demand forecasting in logistics and transport and we feel that this trend would continue in 2010. Sesa Goa, an iron mining company, uses SAP to optimize its logistics and transportation. The solution helps the company route trucks that carry iron ore in such a way that the utilization of trucks (onward and return) is 100%. Sesa Goa gets incremental revenues each time a truck returns fully loaded carrying some other goods.

DIESL, a Tata logistics venture, is using an Oracle solution to optimize its logistics business. It is using planning and demand forecasting for its fleet management and this has helped deliver reliable service timelines to its customers.

Investments in business forecasting and automation in logistics and distribution would continue in 2010.

CRM makes inroads in mobile customer service

The CRM industry has evolved from SFA and taken a quantum leap towards the automation of post sales support and field service, loyalty programs as well as tapping customer concerns through social media.

According to Rajendra C Mruthyunjayappa, Managing Director, APAC, Talisma Corporation Pvt. Ltd., “We have seen a 40% growth in our CRM business and added 25 enterprise customers.” There were several instances where customers took CRM deeper into their other operations. For example, Maruti Udyog is using Talisma’s service module to address customer queries/complaints through online chat. This would also include tracking warranties on components and engine management. It would provide a standard platform to deliver services to all of its partners through integration with a call center. The National Stock Exchange is using Talisma’s service module for member servicing through e-mail and phone. Manipal University uses Talisma for student acquisition and for servicing its existing student base.

BPCL, Essar Group (Steel and oil & gas divisions), Nerolac Paints and iGate have taken huge strides in CRM spending as well. BPCL, for example, is using SAP CRM to monitor the supply of petrol, diesel and gas to its customers.

Education will continue to invest in CRM in 2010 as well. Besides Manipal University, Sharda University and IIM Shillong used CRM to manage the lifecycle of students, fees collections and classroom management.

Going into 2010, there would be a couple of additional business factors that would drive CRM spending. Here are some examples.

Improving sales and service through CRM

End-user organizations will continue to prioritize customer service. Basic CRM functionalities, such as contact center, customer service and technical support, will continue to represent the bulk of demand in many Asia-Pacific countries, including India, and this has been the factor powering the first wave of CRM deployments that we have witnessed in the past two years.

Another area that has been growing significantly is anything that relates to the issue of increasing the effectiveness of sales related activities. Both customer service support and sales are expected to have moderate double digit growth rates in 2009 and 2010. About a fortnight back, we reported how mobile customer service drove the CRM market in 2009 where best-in-class companies were using mobile devices to capture sales better and their service engineers are leveraging this captured data pertaining to service issues, warranties and spare parts in their R&D to take corrective action and help build safer vehicles. There are four key areas that are expected to drive the mobile customer service market in India—boosting sales force efficiency; using real-time customer data to innovate and develop new products; service management for improving the overall customer experience as well as simultaneously pushing business critical data such as sales in pipeline, sales revenues etc. to the smartphones of business managers and top management so that they can take necessary action.

Another interesting development was where equity and mutual fund companies are using CRM to fulfill customer orders. Abraham said, “CRM will impact the overall EAS market in 2010. We had many instances where brokerage houses, wealth management companies and healthcare are fulfilling customer orders and attending to queries in the shortest possible timeframe from the leads generated through their call centers.” Sage has taken a horizontal approach for the CRM market where it is saying that CRM is for everybody—from lead management to acquiring customers and retaining existing customers. CA Firms are showing interest in CRM projects. Small manufacturers are using it for account, quotation and order management.”

Customers are setting the pace for manufacturing as manufacturers look to them for trends. A big reason for this morphing of CRM is that the customers own the business ecosystem—not the company, if you consider what A.G. Lafley, former CEO, Proctor & Gamble said recently, “We have to create a great experience every time you [the customer] touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer's experience better, but better in her terms.” In other words, customers are now the dominant center of the business, and they control their own experiences and relationships with companies. For example, HLL is using CRM to capture sales data and its movement from various touch points and using that data to bring new products that customers want.

Social CRM

Another trend that will have a significant impact on CRM spending is social CRM which is an extension of an existing CRM system with added functionality to leverage social networks. It allows marketers and merchandisers to listen

to customer conversations (offline/online), draft appropriate messages, join customer interactions happening on social media and offer them value in terms of information and solutions. It also helps generate marketing intelligence. Both vendors and marketers have started using it in their campaigns. SAP, EMC, Gartner, IBM, HP, Dell, HLL, P&G, Tata Tea, Titan and HDFC are leveraging networking sites such as Facebook and Twitter to push their brands. They are listening to what customers are talking about their brands and products and using that information to innovate and take corrective steps.

If you look at the sales pipeline for some vendors, the picture for 2010 becomes clearer. For example, Talisma sees increased engagement with the government. Various central and state governments want to set-up complaint and grievance management and citizen portals. Similarly, the government wants to improve customer service in foods & civil supplies, education, tourism, forests and police. For example, the forest department would like to keep a tab on the movement and purchase of timbers.

Small accounts and verticalized solutions

Verticalization of ERP would continue for some time as there are a number of SMBs that have outgrown their Tally systems. That apart, vendors would offer solutions to capture the Tally market. For example, Sage is going after smaller accounts with verticalized solutions. Abraham said, “We are going after very small businesses with a bundled offering for as low as Rs 2.29 lakhs for five-user licenses that can be implemented in two weeks.”

Business analytics to grow

Business analytics saw the highest growth in 2009 as it was used by large businesses to identify cost culprits and to optimize their business processes in order to maintain growth and profitability. We covered this trend recently in our March 15th, 2010 issue looking at where and how customers are using analytics in their businesses.

Ashit Panjwani, Executive Director - Sales, Marketing & Alliances, SAS Institute (India) Pvt. Ltd., said, “Businesses are graduating from reporting tools to analytics and this would take BI to the next level. Analytics will be used heavily in energy and power management.”

The CFO and Chairman of a downstream oil & gas company embarked on a huge analytics project in 2009 when fuel prices were fluctuating. Various airlines had issues with the company regarding settlement of payments. The company wanted to monitor its entire operations especially as to how its refineries were doing in comparison to each other, the number of machines engaged in the operation and the energy consumed by these machines. Additionally, it wanted to monitor who its biggest customers were and why they were not buying in recent times. Clearly these kinds of projects are fairly large and display the depth of imagination and the extent to which companies want to use analytics.

Sanjay Mehta, CEO, MAIA Intelligence, added, “Customers need not wait to build a data warehouse in order to start using analytics. They are demanding quicker deployment of analytics so that they can apply the same across their business operations.” Since there is a clear requirement to gain enterprise-wide visibility, we feel that the demand for BI would remain high throughout 2010 and it would play a key role alongside CRM to drive double digit growth in the EAS market.

CRM & analytics to drive database projects

The growth of the database market is directly proportional to the growth of EAS and IT infrastructure upgrades. According to preliminary estimates from Gartner, the RDBMS market is expected to have grown by 20% to $233 million in 2009 up from $194 million in 2008. We felt that the market would actually have grown by 14-15% YoY. The growth enablers for the database segment were CRM and BI projects. PSUs (Railways, SBI and Punjab National Bank), insurance firms, white goods manufacturers, FMCG and telecom embarked on huge BI and analytics projects.

However, the traditional spenders on RDBMS did not participate in this market in 2009. Manufacturing, retail and SMBs postponed their capacity building projects and this significantly brought down the requirements for and deployments of ISV applications and also upgrades of existing applications. This, in turn, led to a sharp decline of RDBMS growth in the first half of 2009. However, the database market picked up in the second half of the year.

Pallavi Kathuria, Director, Server Business Group, Microsoft India, said, “While we estimated that the RDBMS market would grow at 15%, SQL Server reflected 30% growth in 2009 and this was mainly driven by BI projects in PSUs, e-Governance projects at the centre and state levels and banking. Going forward we expect a 20% growth in our SQL Server business in 2010.”

Nitin Singhal, Country Manager-Information Management, IBM India Software Group, added, “We sold 2.5 times more new licenses in the second half of 2009 than in the first half. Much of the new revenues came from data warehousing projects. Other verticals that contributed to our growth included the Rajasthan government's e-district project, BFSI, travel and transportation (Metal Junction) and Asian Paints.”

The core engine for applications such as ERP, CRM and analytics is RDBMS and, after Q3 09, these projects were back in demand. We expect the RDBMS market to grow at 22-24% in 2010.

Most of the vendors’ growth stories revolved around scalability and performance for OLTP transactions and end-of-day type of transactions with compression capability.

Sundar Ram Vice President, Technology Sales Consulting Oracle Corporation, Asia Pacific, said, “M&A and consolidation of physical resources (servers, applications) etc. set the pace for the RDBMS market.”

Kathuria added that a key technology being incorporated into databases is business intelligence. This helps solution providers enhance the solution that they are offering to their customers without any added costs on the database layer. This can be a compelling value proposition as customers today are looking at ways to make their businesses more efficient and business intelligence can provide these valuable insights.

RDBMS and non-SQL databases

Most RDBMs vendors dismissed the fact that they are seeing any challenge from non-SQL databases. Singhal said that IBM did not see any threat from non-SQL databases as they are mostly deployed in non-transactional environments where response time is not a priority. For example, a search engine company would use CouchDB or Hypertable for simple search and query processes over the Internet using multiple servers. Most of the time they are doing SQL queries, where the workloads are distributing on multiple servers. HBase, HyperTable and Sandra are other non-SQL databases that are used in search and querying.

Kathuria added, “The non-relational databases are an emerging area with an insignificant presence in India. RDBMS will remain a critical requirement for business computation and no impact is expected on RDBMS sales. We see an uptrend in manufacturing and retail which will encourage smaller SMBs and associated companies to invest more in IT and applications. This will drive up application and, in turn, DBMS sales as well.”

Going forward Singhal is counting on some of the megadeals that are expected to come about in 2010 such as Mobile Number Portability (MNP) where a fast in-memory database such as SolidDB would be required to facilitate the process of migrating a number from one operator to another.

Switching loyalties during upgrades

There is strong speculation in the RDBMS market that customers would switch loyalties as a result of not having upgraded their IT systems for quite some time. Microsoft agreed that there was a strong trend towards customers changing loyalties when they consider upgrades. According to Kathuria, the hurdle is primarily that of application vendors who may not have certified or tested their application on the latest DBMS platforms. “The trend will move towards cost efficiency. Paying hefty fees to DBMS vendors yearly will push customers to influence their application vendors and IT staff to look for alternatives and this is where we see DBMS vendors competing fiercely for business,” she added.

IBM has set its sights on migrating Oracle's MySQL customers. Singhal said, "It’s been quite a while since customers upgraded their infrastructure. Once that happens, it would open a new window of opportunity to go after the competition."

Final word

First, based on the projects that are there in the pipeline and the trends that are seen in ERP, SCM, CRM and business analytics, we are projecting that the EAS market would grow at 10-12% in 2010. ERP projects are back on the agenda; CRM and SCM are making deeper inroads and analytics is at the forefront of driving profitability and RDMBS will grow in the shadow of EAS.

akhtar.pasha@expressindia.com