Industrial sector showing more appetite for ERP

Enterprise systems are coming back into fashion. Vendors, analysts, market researchers and implementers are reporting increasing activity, with more orders in the last three months than for any quarter post Y2k. Word is that as manufacturing starts looking up, business improves and share price projections move with them, enterprise IT systems, which for many have stagnated in the last two years, are coming back onto the agenda. Stalled and shelved projects are now being given the go-ahead. That’s not to say we’re seeing a resurgence of large scale ERP implementations. Some are now happening, but those days are largely gone. Increasing ERP activity is across the board, but enlightened and already IT-equipped manufacturers are now looking for enhancements and going steadily for relatively short projects that can demonstrate ROI (return on investment) in months, not years. That’s on the user side of the equation. On the IT vendor side, systems being offered are becoming much more industry-specific as, for the last couple of years, former ERP software vendors have found it expedient to listen to their customers, develop software in partnership with them and then leverage their improved functionality in core grouped software. Additionally, as they have got closer they’re now talking a language that manufacturing businesses recognise: the language is of better agility and control across the extended enterprise. And users are accepting the new face of the ERP vendor – now turned long term software and business process development partner. Examples in the mid manufacturing market abound: SSA GT, Geac (formerly JBA), Baan, IFS – it’s hard to think of vendors that aren’t talking, and in many cases demonstrating, the partner message. It’s bound to have resonance in an industry where IT staffing has seen cutbacks, where users’ healthy (and sometimes unhealthy) cynicism has grown post Y2k and, far from the anticipated growth in the board level IT director community, financial directors are increasingly assuming the mantle or responsibility. Baan’s launch in March of its iBaan for IM&E (industrial machinery and equipment) typifies the sector-specific vendor functionality approach. And at its InForum conference in Rome last month, the revelation of two orders for that system from heavy machinery and rolling equipment manufacturers Andritz in Austria and Komatsu Mining Systems in the US typifies the user response. Both are buying modules, rather than full systems. Andritz, the €1.3 billion production equipment maker for the pulp and paper and steel industries, is focusing on what could be called the CRM (customer relationship management) side. Construction and mining equipment manufacturer $500 million Komatsu, is looking at portal development for the supplier side. Alexander Krasser, Andritz’s CRM manager, says: “The implementation can help us better co-ordinate our world-wide distribution of customer information. This will help us better support our global account management team… increase our hit rate of our proposals, consolidate all customer data into one source of installed base knowledge and will help us increase our service business.” Ken Ryburn, IT director at Komatsu, says: “By building supplier portals to help us better manage supplier relationships, we have been able to reduce time to propagate changes in plans, forecasts and POs from days to real-time.” He also says the firm has already reduced supplier lead times from 60 days to 30, eliminated 3,000 pages of correspondence per month and saved some of its suppliers up to 20 hours a week by enabling them to download changes online. At the moment, all this is based on anecdotal evidence: there is little data to support the observations. ERP company results are mixed, with SAP at one end of the spectrum reporting an unexpected downturn in growth for its most recently released quarter, while K3 and Scala at the other report substantial improvements in license and maintenance revenues. Our belief: extended ERP, with its modular incursion way beyond the scope of two years ago, will now see growth resuming at or more likely above market researcher Benchmark’s forecast of 2% this year.