Content area
If it fits and works, using an ASP to host some portion or even all of a set of ERP applications means that enterprises can reap value from their ERP investments faster and pay less in the long run. Ask an ERP vendor or its partners about this, and the strategy will sound fail-safe. But the ASP/ERP concept is still new, and it's great only if it works. Five years from now, using ASPs could be the norm, or it could prove to be another pothole on the road to ERP bliss. The ASP model definitely has downsides....
Full text
The reports of ERP's demise were greatly exaggerated. Tools for easing integration woes are making implementation less daunting, and its potential payoff is bigger.
In 1999, Hershey Foods Corp.'s revenues fell 12 percent, a decline that company officials blamed largely on Hershey's inability to get new products to market during the Halloween and Christmas seasons. This debacle was linked to its SAP R/3 implementation. While Hershey insiders blamed their ERP (enterprise resource planning) system, outside critics assigned equal fault to the company's decision to go live with ERP close to the holidays.
"Too much, too soon," the critics said.
A company the size of Hershey, they asserted, should have planned to implement its ERP system in a controlled, piecemeal rollout.
Fortunately, Hershey's ERP problems were resolved just over a year later. "With more than 18 months experience using the system, Hershey employees are much more comfortable and are able to execute at a higher level of performance," said Kenneth Wolfe, the company's CEO. "We have moved into a continuous improvement mode and have begun to realize the benefits of the new system's power."
In the past few years, tales of troubled ERP installations have become common. All the major ERP players, including Baan, J.D. Edwards & Co., Oracle Corp., PeopleSoft and SAP, have at one time played the villain in the all-too-familiar story of troubled ERP installations. But the situation is looking up. Just this May, Boston-based AMR Research predicted that total ERP company revenues will grow at a 14 percent compounded annual growth rate, improving to $36 billion in 2005 from $21 billion this year. The firm conducted a survey of more than 900 software vendors, measuring revenue and growth within the ERP segment.
So what has changed? Some of the improvements are tangible; others aren't. Two of the biggest factors are time and experience. Consultants, software vendors and the enterprise clients themselves have become more attuned to what makes a project go bad and have taken measures to prevent common mistakes. Some of these pitfalls include too much customization, poor end-user training and rushing to implement the complex systems.
Underestimating the time it takes to get these systems working used to be a typical bugaboo. According to AMR Research, ERP implementations usually take nine to 12 months for small companies, 12 to 14 months for midsized businesses, and three years or more for large, multidivisional organizations. After some rough implementations, vendors have become smarter. And clients have become cautious.
The sexier changes include the use of portals for end-user data access, the emergence of a new breed of EAI (enterprise application integration) tools aimed at easing ERP installation trauma and the use of ASPs (application service providers) to speed access to ERP applications. Wrapping the proprietary APIs used in ERP systems in Java code has helped too. All these changes are working to make ERP systems more credible as the plumbing for e-business.
The market for the new EAI tools is expected to explode as more companies move ahead with their ERP plans. Gartner Group has estimated that as much as 30 percent of the work associated with implementing a major enterprise application involves integrating it with other systems or wireless devices. EAI tools enable the creation of business processes that cross multiple applications and systems; the technology sees how applications fit into the new infrastructure and makes ways to use those applications while creating new applications as needed. EAI tools are being applied by companies such as IBM, iWay Software, SeeBeyond Technology and Taviz Technology.
TURNING THE INSIDE OUT
The key to implementing an ERP system that can serve as the pipeline for your e-business efforts is to expand the system outward and upward from the start. This sets the new ERP apart from the old one. The traditional definition of ERP is a group of software modules that work together to streamline the internal processes of an enterprise. But now these systems can serve as a base for other applications that aren't as internal. Tools such as CRM (customer relationship management), SCM (supply-chain management) and KM (knowledge management) applications are becoming all the rage.
For example, a chemical-process manufacturer that has an existing ERP implementation might add a fullfledged SCM solution. A company planning for an ERP system might consider including product-development application tools and a CRM product. This is what is meant by "building up." While standards for these solutions are being developed by industry alliances and groups such as CommerceNet, strict standards are not the norm yet, so it's still caveat emptor.
If you haven't integrated the internal process, do it. That means connecting your accounts payable with purchasing; accounts receivable with sales; distribution and logistics with sales and operations; and human resources with payroll and accounting. While you're at it, extend your networks toward your customers and partners and backward to your supply chain. Web-enabled solutions, ASP models, portals, partners galore and other specific solutions are taking shape as add-ons to the ERP infrastructure. These topics are hotand with good reason.
Installing ERP applications into a network places risks on the enterprise. With the code on the client, more things need to be installed, maintained and monitored-and this puts more risk on the client. So how are enterprises coping? It varies, but an increasing number of companies are making ASPs the pipeline for ERP applications.
Although ASPs have traditionally targeted small and midtier enterprises, they can release resource constraints associated with ERP implementations. They are a nimble and quick solution to get ERP into the enterprise, and vendors are hustling to develop products that help clients use ASPs. PeopleSoft is touting an Internet-based ERP solution with no client software. SAP's mySAP.com is the company's attempt to drive a Web solution to its customers. Oracle is high on its Oracle li e-business suite as a complete product that takes much of the software risk out of clients' hands and puts it into Oracle's. Baan Americas claims its iBaan solution is a good fit for the ASP model. J.D. Edwards partners with more than 155 ASP companies that connect 12,000 users to J.D. Edwards OneWorld.
Partly as a result of these applications, ASP hosting firms are thriving. Analyst firm IDC expects ASP-related spending worldwide to grow from about $150 million to more than $2 billion by 2003.
It's no mystery why ASP spending is on the upswing. It takes a lot of work to keep an ERP infrastructure going. The resources can be enormous, and few companies want their IT staffs to be larger than their product marketing or sales staffs. By outsourcing to an ASP, a client enterprise company can focus on its core business and reap the benefits of a good ERP implementation.
For example, California-based electronic-component maker Flash Electronics needed a full-scale SAP solution using all major SAP modules for finance, manufacturing and sales. ASP Agilera partnered with SAP and provided a strategy that handles Flash's business processes. Instead of taking 12 to 14 months to implement, the Agilera-SAP solution took only five months to deploy.
Agilera also was the ASP for MD Helicopters, a U.S. helicopter maker. Agilera hosted an offering of J.D. Edwards ERP applications for MD. Through the ASP, MD employed ecommerce features, and let key customers order spare parts online directly from MD and seek specialized customer support. In this case, Agilera managed to get the applications up and running for MD in a fraction of the time it would have taken via the traditional route. With the ASP, it took months rather than a year or more.
If it fits and works, using an ASP to host some portion or even all of a set of ERP applications means that enterprises can reap value from their ERP investments faster and pay less in the long run. Ask an ERP vendor or its partners about this, and the strategy will sound fail-safe. But the ASP/ERP concept is still new, and it's great only if it works. Five years from now, using ASPs could be the norm, or it could prove to be another pothole on the road to ERP bliss. The ASP model definitely has downsides. For starters, finding a financially stable ASP to host your ERP applications is a challenge. The last thing you want to do is hand the keys to your ERP applications to a shaky player.
You may also encounter distribution headaches, unplanned downtime, multiple points of failure via the Internet and less control over upgrade cycles. What do you do when your ASP tells you it's not planning to support a mission-critical version of a particular ERP application? These are serious disadvantages to using an ASP to host enterprise applications, and they warrent careful consideration.
DATA-ACCESS CONUNDRUM
The ASP serves the extended enterprise. ERP clients want to look outward to collaborate and capitalize on e-commerce. ERP vendors want to book the clients up to ASPs and do all the nittygritty work so the two can connect. But what about the end users? What are companies and vendors doing to make life easier for them?
Zip Brown of American Management Systems sees employees, sales associates and a multitude of other users in need of a simple way to access key parts of their databases without spending the time to sift through a seemingly infinite amount of information. ERP vendors are now using XML (Extensible Markup Language) to streamline data access between applications. For end users, portals are helping make ERP data more accessible. Tailored to specific needs of user groups, portals give access to external data, which can be combined with internal data to let employees, suppliers and customers make decisions more efficiently.
For example, Claremont Graduate University in Claremont, Calif., wanted to improve student services, which include registration, admission and recruiting, and needed to streamline administrative processes. PeopleSoft's portal solution, which it provides through partners such as Brio Technology and Seagate Technology, considerably cut the time that students need to stand in line. Portal access lets students register on their own PCs.
Data access via portals is handy, but there's a dark side. For enterprise IT personnel, portals present a number of vexing issues that boil down to control--control of the desktop, control of corporate information and control of the company's appearance to its customers. Like ASP hosting, data access via portals could be a long-term boon or yet another bump in the road.
MANAGERS LEARN THE BUSINESS
What was a disaster only a few years ago is evolving into the plumbing for ebusiness. ERP is no longer the mysterious back-office system discussed in hushed tones by high-priced consultants who never seem to finish an installation. Today's ERP system is aimed at providing data to a new audience, including extranet partners and customers. The trend will get only bigger. For IT personnel, the challenge is to learn the business well enough to anticipate new ways to extend data outward and even make it generate revenue. It's no longer enough to know the technical workings of the ERP system-you have to know what the data can do.
With new technology and methods of deployment, ERP is again taking center stage in the enterprise. Whatever stage of the ERP progress chart a firm has reached, there's always something new to use and something more to build or improve upon. Just as with the old ERP, you never stop implementing.
Copyright CMP Media LLC Sep 17, 2001