ERP for the Internet age

Whatever you know about enterprise resource planning is soon to be old news, thanks to the Web.

By -- Modern Materials Handling, 8/1/2000

For years, enterprise resource planning (ERP) systems have been thought of as the information backbone within the four walls of an enterprise.

If that's still your view of ERP, you may be as behind the times as the "URP?" guy, the poor fellow on television who doesn't have a clue what the acronym ERP stands for.

While ERP systems still provide the plumbing and wiring of an enterprise information system, including financials, manufacturing, and distribution, that is only the beginning of today's ERP systems. In fact, ERP is taking that core competency within an enterprise and expanding it out to the rest of the supply chain, especially when it comes to e-commerce.

"In the Internet age, ERP is the bricks behind the clicks," says Mary Haigis, vice president of marketing for American Software, Inc.

A successful information system then involves the integration between the front office, where you receive orders through an electronic store front, to the back office, where those orders are processed, filled, and shipped. And it provides for the flow of information across a supply chain to your trading partners, even to disparate ERP systems.

"That might mean using ERP to provide an advance ship notice to your customers or giving a demand forecast to your vendors," says Lou Unkeless, Sr., director of worldwide marketing for Oracle.

Sharing information is what transforms an ERP system into the backbone of a supply chain, and not just the backbone for your company. As a result, many providers argue that the term ERP is becoming outdated.

"The scope of today's systems is changing to include human resources, customer relations management, carton-level visibility, and Internet procurement," argues Jon Snilsberg, vice president, IFS. "We think of ourselves as an e-business solution provider."

Instead of ERP think EAP, or enterprise application provider. Enterprise applications combine the traditional ERP functionality with supply chain integration and business intelligence.

Here's a look at some of the trends changing the ERP market.

All about the supply chain

Mergers, acquisitions, and collaboration between trading partners are forcing ERP beyond the four walls of an enterprise and into the supply chain. "The challenge is to provide interoperability between systems," explains Cindy Jutras, vice president of product strategy, interBiz. "That allows one company's ERP system to operate in a seamless way with a disparate system in another division or company."

That may also require integrating with disparate systems across the globe, taking into consideration different languages and currencies. "Once you put up your Web site, you're open to the world and have to address that," says Haigis from American Software.

Finally, it involves integration with a new set of hardware components as well. In the near future, Kewill's Petersen expects to see ERP systems that integrate personal digital assistants, portable PC's, and other wireless devices, all in real time.

Speed counts

Gone are the days when a company was willing to commit several years to the implementation of an ERP system. Some vendors are offering rapid implementation programs, on a fixed time and fixed fee basis, using a standard implementation methodology.

One way to accomplish those goals is through a modular approach to applications. "Each application of our suite can be implemented and run as a separate best-of-breed component," says IFS's Snilsberg. "That allows users to determine where they're going to get the most bang for their buck, and then to transition over time while still using an existing legacy system."

More business intelligence

Business today is about the intelligent use of information.

"Over the years, ERP had become a big data repository," says Haigis of American Software. "But to advance your business, you need to distribute that information on a need-to-know basis, and in a way that allows a company to use that information to proactively run their businesses."

Business intelligence allows a user to monitor key performance indicators that are important to their job, and to be notified through e-mail alerts and instant messaging when something changes.

Jutras of interBiz calls this "contextual analysis." Using business intelligence, an executive can customize the system to monitor the key performance indicators that are important to that person's job, and to notify them when something changes.

"Now, when an executive comes into the office, he can go to the computer and find a dashboard display of his performance," says Jutras. "When there is a problem, business intelligence allows him to drill down to the transaction level to analyze the problem."

Still a best of breed world

ERP vendors still promote the concept of an integrated suite of applications, which may be appropriate for users who don't require broad and deep functionality. But they also recognize that in today's economy, best of breed solutions rule.

Rather than fight the tide, ERP vendors are developing integration tools that will allow their systems to work easily with other point solutions and other systems.

"The freedom to choose a best of breed application to solve a particular problem is crucial," says Mike O'Meara, director of technical marketing for J.D. Edwards, Denver, Co. "Making that work with your ERP system shouldn't be rocket science, whether you're using a specific J.D. Edwards solution or not."

The Net may just be the future

Application service providers (ASP) models for ERP systems are still in their infancy. Nevertheless, distribution of software over the Internet is the way of the future.

In an ASP model, a service provider maintains the system and hardware, which users access from a Web browser on a desktop PC. The result is lower costs for software and hardware as well as a closer fit between what the company actually needs and what it uses in terms of software capabilities.

At the moment, the market has been slow to embrace the application service provider model for mission-critical applications like an ERP solution. However, nearly every major supply chain software provider, including ERP providers, is in the process of developing an ASP or exchange model to distribute their products.

Right now, the best candidates for an ASP are start up companies and small to medium size organizations with limited resources and no internal IT structure. Kewill ERP, for instance, says there are 180,000 manufacturing job shops in the U.S. with 20 or fewer employees who are a prime market for an ERP solution offered through an ASP.

"Small companies have the same needs as large companies," says Allen Peterson, president of Kewill ERP. "But a small company needs to get a system implemented in 8 mo or less, and needs a 3 to 6 mo payback."

The market of potential users will broaden dramatically in the future. "With think industry specific ASP's will have a major impact on this field, with the ASP being the glue that links a supply chain together," says O'Meara from J.D. Edwards.

Whatever your approach to implementing an ERP system and measuring your company's progress, it's important to realize that the vast majority of businesses today are in the process of transforming themselves to take advantage of the new business models made possible by the Web. Few, however, have completely made the transition.

"Almost any company we approach is in the process of e-transformation or will be soon," says interBiz's Jutras. "What we've found is that while the percentage of companies that have a Web site is high, the percentage that allows you to transact business over the Web is incredibly low."

"But," warns Jutras, "things are changing, and they're changing quickly."