On Cloud Nine
Migration to ERP 2.0 is not without challenges, but companies will enjoy major improvements across their value chain.
by Mitalee Kurdekar
Organisations who have embraced Enterprise Resource Planning (ERP) know the obvious advantages that a business enterprise-wide system brings. That is why there has been a rush for such business systems over the past three decades or so, even in India. The obvious bottleneck was the cost and time required to implement these solutions in the right way, in order to enjoy benefits across the entire business. ERP packages were large because they were enterprise wide, and hence expensive in terms of integrated modules for business processes included therein. They were also complex in implementation as there was no great scope for customisation, thus making businesses indulge in significant alterations to their work processes and practices. Despite this, many CEOs went in for the same. This is due to the other obvious benefits, such as the global application integrating processes across geographies and because the package, once implemented, became a veritable storehouse of best practices.
Emergence of Web 2.0 and Social Media
Over the past decade or more, we have seen a plethora of web-based applications emerge. These sets of applications are now collectively addressed as Web 2.0. The philosophy now is to maximise shared intelligence by adding value for all those who participate through a process of formal & dynamic creation and sharing of information available in the domain.
Samik Roy, country head, Microsoft dynamics (applications) business, Microsoft India, puts it aptly when he states, “Our philosophy at Microsoft has been to transform ERP from a system of transaction to a system of intelligence. The key in doing so successfully is in harnessing the power of the cloud to drive intelligence within the context of a business process via Machine Learning/Internet of Things and other means.”
Software models are not packaged anymore as in the case of ERP, but are now made available as services. Social media like Facebook, YouTube, Google Earth, Wikipedia etc. are new sources of web-based information and its processors. New architecture for processing business information is not limited to servers and work stations set within an organisation’s territories, but they now use Web as a platform for gathering, processing and sharing information. They are the new service-oriented architecture. This has brought about a clear shift in the use of ERP packaged software, where many third parties join hands to customise the software using a common interface. User Interface or UI is an important change in this new environment, where the interface is in a standard format that is understood by everyone. This provides the benefit of quick learning and adoption, and large software can be broken into useful pieces for common understanding.
Ajay Kumar, national sales consulting director – ERP, Oracle India, explains this change. He says, “ERP software providers adopted different approaches to mobility and cloud computing. Some vendors provided technology platforms where organisations could build their own mobile applications. Another set of vendors released pre-built smartphone applications. With the advent of cheaper Android handsets, we are now witnessing a much faster and wider adoption of these mobile apps for ERP. Technology providers like Oracle, who made a clear commitment and investments into providing mobility as a natural extension of core ERP, could ensure faster adoption.”
Migration to ERP 2.0
It is the same integrated ERP, but with a lot more use of web-based applications, and therefore a modern version of ERP. It is modern because it addresses the issues critical to businesses, mainly due to ease of implementation, costs appropriate to its benefits and uniform availability to all stakeholders in the business as per their needs. The biggest benefit is its flexibility, allowing business applications to expand from small to very big. In addition, its affordability allows the ERP owner to pay for what is needed rather than taking the whole package. Open source code is another benefit that allows incremental development and re-use as is necessary. Security of information and authentication of the same, though, remain to be guarded at each point.
Users too are waking up to the range of benefits on offer. Vivek Devgun, VP, manufacturing, Continental India, says, “An ERP system integrates virtually all operational business functions and processes and automates entries to finance and reporting within the enterprise (the legal entity or entities that make up an entire company no matter where its operations are). Further, the new generation ERP systems focus almost exclusively on operational excellence value propositions of process efficiency and automation.”
Elaborating on the key success factors of ERP 2.0, Roy suggests, “A lot has changed when we look at organisations doing an ERP evaluation today. Agility, flexibility, speed of deployment and Total Cost of Operations (TCO) are key ingredients of the selection of an ERP today. Unlike the past, customers are looking for quick deployments, which is only possible by reducing customisations and deploying it on the cloud. ERP on the cloud enables organisations to adopt Out of the Box (OOTB) functionalities with defined configurations and minimum tweaking.”
He further supplies, “Microsoft Dynamics (D365) empowered by Machine Learning and Business Intelligence drives usage via insight-driven action. This is possible due to mobility and the fact that our application is hosted on Azure, which opens doors to a realm of features in our ERP.”
Kumar agrees to these key success factors when he points out that, “Every ERP vendor now has a mobility solution to support ERP transactions. For smaller organisations wanting to adopt ERP systems, high upfront investment is no longer a deterrent as cloud computing has drastically cut down the time and cost of deploying & maintaining an ERP application. Ability of cloud solutions to scale down or up as required will bring in the next wave of transformation for organisations of all sizes and scale.”
Migration from ERP 1.0 to ERP 2.0 has been a focused initiative requiring a great deal of commitment and investment. It has been achieved by major ERP providers with some ease, owing to their own Development Centres and quick adoption to web-based tools with help from trusted partners. One major development has been on the accessibility front, where the anytime/anywhere concept has gained popularity.
Roy supports this idea, saying, “The anytime/anywhere access is what defines today’s work environment. That has been a cornerstone for our product investment areas, leading to a core focus on enabling mobile scenarios and of course developing a full browser-based solution. We also additionally invest in our customers’ success by providing direct engineering-led guidance and support to our customers, so they can fully optimise the value of our investments back to their businesses. Dynamics ERP can be accessed through Outlook making it simple and adaptable, can be hosted on cloud, and can be accessed through web and mobile, thus making it perfectly fit for anytime/anywhere ERP.”
Oracle’s approach is somewhat similar. As Kumar professes, “Oracle has been investing billions of dollars on R&D year after year. We have a strong research & development organisation, including the India Development Centres. Oracle has been continuously modernising its ERP systems to keep pace with newer trends in technology. Our latest cloud applications make it even easier for users to support global operations on a variety of devices, anywhere, anytime, giving a consistent user experience.”
Major service providers are keenly working on this new solution along with their customers. Also, the response from customers has been quite encouraging. Roy suggests, “We are consistently witnessing our customers reduce implementation and try to keep the solution as close to the OOTB features as possible. Many have relooked into the manual processes and tweaked the same to adopt the best practices of D365 Operations, our ERP solution.”
S Ravichandran, senior VP, plant III, Oragadam, Delphi-TVS Diesel Systems, offers that they use SAP ERP 6.0 (ECC EHP7), adding that they have been provided with supplier interfaces in their ERP implementation. This includes an external interface for suppliers with a website platform to access supply chain functionality. “Rolling delivery schedule was started on a weekly basis as planned for suppliers using MRP functionality of SAP and the same is available to suppliers through our company website, immediately on each release. This has shortened the delivery lead time by optimising the information & material flow. Suppliers can create advance-shipping notification (ASN), view their goods inward details, delivery schedules, and purchase orders. In addition, suppliers payments routed through ERP were fully automated with banks via Real Time Gross Settlement (RTGS) practice,” he confesses.
Devgun explains his company’s supply chain collaboration on the customer side, by using SAP (R/3) ERP 6.0 modules in their tyre operations. He in fact claims it as their best practice by saying, “The supply chain model currently being used at Continental India Tires is a best practice example and it includes any tyre transfer from plant warehouse to dealers (RDC/CFA), Original Equipment Manufacturer (OEM), and export or direct sales.”
“The system is built in way to enhance the operational excellence and help us in improved efficiency across inbound & outbound logistics; improved customer service for increased customer retention and greater chance of repeat business opportunities; automation of workflow for reduced overhead and operational costs; more flexible supply chain solutions like identifying bin location of tires in warehouse, following FIFO & traceability; and transparency to access complete, current insight into transactions progressing through SAP, including accountability and response time,” says Devgun.
Kumar welcomes this excitement amongst customers, saying, “We are seeing a lot of interest from customers in next generation ERP systems. With pressure on costs and limited IT investments, we now get a lot of queries on how customers can maximise their usage of ERP, by using new functionalities in existing modules as well as adopting new modules to extend ERP coverage. A lot of customers are also adopting a cloud-first strategy, where for any new module to be taken up, a cloud option is explored first. This gives them a chance to experiment and understand cloud solutions without disrupting their core operations.”
It is clear that Indian customers are slowly realising the potential of ERP 2.0 and given the explosion of Internet-based apps, it is only a matter of time before this new product-cum-service will be lapped up extensively across Indian manufacturing companies.