ERP springs eternal

You would think ERP software had been packed up in a box and shoved in a dark corner somewhere. Analysts say it consumes roughly one quarter of the average enterprise software budget. Yet hardly anyone talks about ERP anymore - not since the big bang of the '90s, when most large enterprises spent many millions of dollars to roll out sprawling, complex ERP systems, in part to modernize for Y2K.

You would think ERP software had been packed up in a box and shoved in a dark corner somewhere. Analysts say it consumes roughly one quarter of the average enterprise software budget. Yet hardly anyone talks about ERP anymore — not since the big bang of the '90s, when most large enterprises spent many millions of dollars to roll out sprawling, complex ERP systems, in part to modernize for Y2K.

Just when you least expect it, up pop those three little letters again. Recently, AMR Research released ERP Application Spending Report, 2003-2004; it predicts that the number of enterprise managers planning to upgrade or buy new ERP licenses will increase slightly in 2004, the first such rise in three years. These numbers apply to ERP vendors' home turf of core financials, order entry, logistics, manufacturing, human resources, and purchasing, but not to CRM, business intelligence, or other ancillary modules. At the same time, to modernize their products, top ERP vendors now incorporate XML, web services, and Java to foster easier customisation and improve integration with the rest of the enterprise.

To get the real story on ERP, we went where InfoWorld Test Centre analysts can't go — into the heads of our readers to find out what they like, what they don't like, and how Oracle , PeopleSoft , SAP , and other vendors measure up. Our survey results show customers who aren't exactly thrilled with their ERP systems but who show little inclination to replace them. And most surprising: Readers seem to be exploiting web services to expand the reach of ERP in their organisations.

An Adorable Beast?

During the internet boom, ERP got no respect. Compared with sleek web apps, ERP programs seemed inflexible, overpriced, and mired in client-server deployment hell. To top it off, elabourate modifications wrought by big consultancies often incurred charges even greater than the multimillion-dollar ERP licensing fees. Disaster stories abounded.

But now that the dust has settled — and ERP systems have largely migrated from client/server to web-based technologies — satisfaction with ERP among InfoWorld readers stacks up pretty well. Sixty-five % of respondents to the 2004 InfoWorld ERP Survey say they would be likely to choose the same vendor, while a mere

6 % complain they're not at all satisfied (29 % are neutral). Jim Shepherd, vice president of research at AMR Research and co-author of its recent ERP report, believes ERP's drawbacks have always been overblown and that recent product improvements have made deployment and maintenance simpler.

"These products have gotten much, much easier to implement," Shepherd says. "The amount of intellectual property and tools built around these products to help a user through configuration and implementation has expanded dramatically."

On the other hand, only 23 % of respondents say they are very satisfied with their ERP implementation, which suggests the absence of a viable alternative. Who wants to rip and replace core applications and relive the tremendous disruption and expense of another big bang? Actually, many of our readers might, if they could escape high ERP licensing fees. In answer to a question we asked out of curiosity, a stunning 53 % of respondents say they would consider an open source alternative to their current ERP system. The catch: No such system exists.

Meanwhile, in the real world, when we asked readers which vendors they had chosen to supply their ERP software, Oracle, PeopleSoft, and SAP got the most mentions. Applications from SAP earned the most "functions well" ratings in all but the human resources category. A whopping 69 % of survey respondents think SAP's core financials function well, awarding it nearly 20 points more than nearest competitor Oracle. SAP's manufacturing application also enjoys a similar lead.

PeopleSoft's customers seem just as pleased as SAP's; the company was in a statistical tie with SAP in readers' overall satisfaction with their ERP vendor. A year into a PeopleSoft implementation, Craig Hunter, director of information technology for the City of North Vancouver, British Columbia, offers this testimonial: "It's already gotten us payback. We've installed it in house, and we didn't need a ton of consultants." He also notes his IT group made a conscious decision to modify PeopleSoft as little a possible.

Buy Vs. Butcher

In eschewing customisation, Hunter falls on one side of a chronic dilemma during ERP implementation. An anonymous survey respondent succinctly described it as "the decision to change business process to conform to the ERP or to change the ERP to conform to the business process." For anyone who has gotten his or her hands dirty with ERP, that decision sums up the implementation challenge.

Hunter offers a cautionary tale to illustrate the hazards of stretching an ERP system to fit existing business processes: "The City of Vancouver had a horrendous install when they tried to do SAP. They tried to make it like their old systems. Well, their old systems had been butchered and bastardized for 20-odd years." According to Hunter, those in charge didn't want employees to notice any changes in procedure, so they twisted the SAP software into submission, inviting disaster. "They issued a whole bunch of paychecks with zero dollars on them right before Christmas," he says. "And people noticed."

Typically, such Rube Goldberg farces involve consultants, and although none of the survey respondents flamed their ERP vendors, a few had choice words for consultancies. A reaction against consulting excesses, along with a dose of cost-cutting, may underlie a general trend toward insourcing rather than outsourcing. In our survey, three times as many readers said their IT staff's responsibility for directly maintaining ERP applications would increase rather than decrease during the next 12 months.

Consultants also make a convenient scapegoat. AMR's Shepherd says the culprit may be a lack of commitment to the idea of packaged software. "Often, what we find is that the consultants are battling hard to try and convince the companies to change their business processes to fit the product better, and they just can't get them to do it," he says. "They're battling hard (because) they know who's going to be held to blame." Shepherd observes that one of the good things about implementing an ERP system is the opportunity for enterprises to rethink and rationalise business processes across the organisation.

The other side of the coin is that some changes are inevitable. Jeff Loewer, vice president of planning and information technology at Sonnax, an automatic transmission manufacturer, remembers the functional-requirements phase well. "We found ourselves falling back on our processes and falling back on customisations," he says. "A lot of good intentions tend to fall by the wayside when you're in the heat of it."

The Upgrade Treadmill

The great risk of customisation is that upgrades shatter already jiggered systems. In February 2001, at Oracle AppsWorld in New Orleans, , Larry Ellison admonished customers not to modify the Oracle 11i E-Business Suite at all for just this reason. He was lambasted — and he ultimately backed down — but he had a point.

As North Vancouver's Hunter puts it, "You can sit there and turn (the) PeopleSoft (ERP software) upside down and sideways and say, 'Now, make it do what I asked it to do.' But then, next upgrade — poof — it takes four years."

That may explain why, when asked when they completed their ERP implementation, most respondents answered either "1999 or before" or "not yet completed." You may have an ERP system in place, but you're never done implementing.

Patrick Harris, IT director at Sealing Devices, a seal and gasket manufacturer, describes the complexity of deploying a single patch in one module of Oracle's E-Business Suite. "Well, it's a big integrated system," he says. "You look at this patch and you find out what is prerequisite. So you install the prerequisite and then you learn ... that affects the accounts-receivable application. So now I have to upgrade accounts receivable. But I can't upgrade that, because if I upgrade that, then I have to upgrade order management. It turns out to be this huge project just to get this one bug fixed."

Such interdependencies aren't exclusive to Oracle's suite. "We've already encountered issues where you really have to upgrade the whole PeopleSoft suite at the same time," Hunter complains. "If you upgrade general ledger and not accounts payable, you find issues with that, so you end up just saying you're going to upgrade the suite at the same time, which then compounds the whole testing issue. You can't keep it isolated. They say you can, but, realistically, you can't."

Toward Service-Oriented ERP

The only real way to solve the upgrade problem is to crack ERP applications — and their custom modifications — into discrete components that use standards-based interfaces. Upgrade one component or even a group of them and, with luck, you won't break anything else.

"The idea that you really need to componentize the functionality, separate the logic from the process from the application, is something that isn't just good computer science, it's good business, too," says Joshua Greenbaum, an analyst at Enterprise Applications Consulting. "Without a doubt, that is where the market is going," he says and adds that this massive overhaul of architecture, although underway, will take years.

In the interim, all of the top three ERP vendors have released application servers that may someday provide the underpinnings for a fully component-based ERP. But today they manifest themselves mainly as souped-up integration servers and development platforms. SAP's NetWeaver, which Greenbaum calls "representative of the future of enterprise software," provides the most prominent example. The NetWeaver platform has two run-time engines: one J2EE compatible and one as a container for apps written in SAP's ABAP (Advanced Business Application Programming) development language.

Oracle and PeopleSoft now also come with application servers, all of which embrace web services standards and best practices. Despite how new the web services push still is, most of the survey respondents say that this technology has played some role in their ERP application implementations. Thirty-two % say the purpose is integrating ERP apps with other enterprise systems. And 41 % say they're using web services to expand the functionality of ERP apps to a greater number of users, which makes sense given our readers' prediction that more employees will use ERP apps in the next 12 months.

Return of the Monolith

Discrete business logic components and web services everywhere may be the bright future of ERP. But today, AMR's Shepherd sees another, more immediate trend toward consolidation, not just among ERP vendors but within large companies that want to merge many ERP systems into one.

"They can't have 22 copies of SAP out around the world, each one implemented differently with different options turned on," Shepherd explains. "They want to have common processes; they want to have global visibility."

Companies now crave a single global accounting function, Shepherd says, with global visibility and common processes. Other business drivers include global cash management, global credit management, a more unified view of customers, and global purchasing leverage in procurement.

Consolidation is driving ERP to far-flung places where it never took root before. Remote offices that used low-end accounting systems may suddenly be faced with the prospect of an ERP deployment, even if that runs roughshod over products that were working just fine. Inevitably, the old lessons will apply.

"It's an implementation that affects every level of the company, every level of the organisation," says Sonnax's Loewer. "An ERP implementation seems like it's 75 % culture and 25 % technology."

SIDEBAR

In the trenches with an SAP developer

DJ Adams wryly refers to himself as "a dog's body." he says, "I do anything that needs doing, really."

A senior technical architect who maintains an SAP R3 installation for a large British DVD manufacturer, Adams has 17 years of experience working with SAP software — and a candid perspective on how the software giant's products have evolved and what it's like to work in a software ghetto so poorly understood from the outside.

As a developer, Adams has what he calls a "love-love-hate" relationship with SAP's ABAP (Advanced Business Application Programming) language. "I can't slag it off too much because I've grown up with it," he says, "and it has grown up with me. You learn to live with its quirkiness and its warts."

Adams observes that, today, there's everything but the kitchen sink in the ABAP language. "So in that respect, it's a fairly ugly language," he says. "I think anybody who has grown up with Java or with Perl or C++ and saw ABAP for the first time would throw their hands up in horror and say, 'What sort of language is this? This is a ... Frankenstein of a language!' " Yet Adams has learned to appreciate ABAP's charms, particularly what he calls the "beautiful" object implementation in the new version for the NetWeaver platform.

NetWeaver, along with SAP's shift toward open standards, has earned Adams' admiration. But staying abreast of new SAP features and technologies is a full-time job. "What SAP does, in my opinion, is they have this machine gun, and they load it up with developers and fire that machine gun willy-nilly in a 180-degree arc, and whichever developers stick, they go in that direction," he proffers. "They have so many technologies and initiatives and directions that go in opposite directions and all of a sudden converge."

Although Adams claims he actually enjoys the challenge of keeping up, he's less enthusiastic about the verbose way SAP documents its technology. "I used to be an IBM mainframe hacker," he says. "I loved those days of going to an IBM documentation room, which had rows and rows of documentation 10 feet high. At the time, somebody said IBM was the biggest publisher in the world. I could believe it. But I think SAP is really going for the crown."

Nonetheless, Adams says, if there's a key to working with SAP's vast portfolio of enterprise software, it's "read, read, read, and then read some more. It does pay in the end. SAP is renowned for having a really bad website. It's hugely difficult to find anything. Well, persevere, because there are nuggets of information out there that make all the difference."

Join the newsletter!

Error: Please check your email address.

More about AMR ResearchEnterprise Applications ConsultingIBM AustraliaOraclePeopleSoftSAP Australia

Show Comments

Market Place

[]