Manufacturers across industry look to smaller bite size enterprise software add-ons

Enterprise software evaluations by the large global manufacturers are on the rise this year, but firms are now looking at smaller implementations and shorter term return on investment (ROI). Packaged IT selections are up an average 3%, but their value is down around 7%. These are chief among findings from analyst AMR Research, which has been tracking software project evaluations for the last year around the world. It finds retail, chemical and process, aerospace and defence and discrete manufacturing most active, while ERP and HR (human resources) are still seeing most activity, followed by supply chain systems, although activity is falling, and then plant systems, including MES (manufacturing execution systems). The data is US-centric and heavily slanted towards very large organisations. AMR says its database covers 150 organisations with most (64%) in the Fortune 1000 bracket (average 2001 revenues $17 billion), and that 90% had revenues of more than $1 billion. But it does cover a range of industries – aerospace and defence, discrete manufacturing, automotive, consumer packaged goods, chemical and process and pharmaceuticals as well as some utilities. And it does feel right, although the pity is it’s not broken down into more specifics around the ‘smaller’, faster benefit applications. In a little details, AMR finds ERP and HR purchases representing approximately 38% of new evaluations during the latest two quarters of 2002. Since these are typically long-term projects, there is unlikely to be significant variability. Plant systems it finds stable, averaging between 10.5 and 8.8& of new selections for the first and second quarters of 2003 respectively. Product lifecycle management (PLM) applications have shown a marked increase from a low base, growing from 1% in the fourth quarter of 2001 to 8% during the last two quarters. Unsurprisingly, AMR says it expects growth in consumer products, automotive and complex discrete industries as manufacturers look toward product development as a focus for growth. The firm notes, however, that large deals look unlikely since “many buyers will pursue PLM incrementally”. Though supply chain application purchasing made up around 23% of selections in the first quarter of this year, the percentage was down to about 13% by the second. Seems the problem among the bigger manufacturers centres on still incomplete implementations of applications purchased in recent years, and, importantly, greater difficulty and expense in successful deployment than was originally anticipated. Lower cost, more pragmatic supply chain event management (SCEM) and web-based collaborative planning and replenishment (CPR) systems may well take over – leading to home-grown portal based private web hub systems and others most likely supplied by ERP vendors. Finally, customer relationship management (CRM) deals continue to decline. New CRM projects were apparently down about two-thirds in the second quarter of this year compared with the last of 2001. “As companies continue to struggle with top-line growth and limited demonstrable ROI associated with these projects, [we] project fewer deals that are more selective,” says AMR. Our own albeit anecdotal indicators show that loosely within ERP, the add-ons currently causing most interest currently include: business intelligence (BI), supply chain event management (SCEM) cum fulfilment (SCF), relevant aspects of cut down CRM (customer relationship management), SFDC (shop floor data collection) and APS (advanced planning and scheduling) and FCS (finite capacity scheduling). Enterprise application integration (EAI) engineering product data management (PDM), or more likely CAD management systems are also high on the agenda.