Originally published - November 14, 2007
In today's global economy, manufacturers are facing new challenges. One of the main issues today's manufacturers must contend with is compliance. As new chemical engineering meets present-day demands in such industries as food and beverage, pharmaceuticals, and textiles, manufacturers must now adhere to both domestic and international standards.
According to Technology Evaluation Centers' (TEC's) research, over 80 percent of companies that need to evaluate enterprise software to help automate and streamline their business, in addition to addressing compliance and other industry issues, do not use a standardized methodology, and thus run over time and over budget. On top of this, once a selection has been made and the software implemented, over 50 percent of the implementations fail to meet functional and total cost expectations. Project teams run into trouble for three main reasons:
They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.
They have no ability to prioritize the different criteria, once identified, relative to one another. Consequently, final priorities are often more the result of internal political agendas than true needs and requirements.
They have no ability to gather objective, validated, updated data on different vendor alternatives. Vendors often have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So What's the Solution?
The solution to the problems listed above is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from TEC's clients that have completed internal technology selections suggest that project teams examine five key categories of criteria. The first two categories examine product-specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.
Let's review these five key criteria categories:
Category number 1—Product Functionality
Product functionality is the primary phase in process enterprise resource planning (ERP) software selections. Simply put, this phase of the evaluation assesses the features and functions delivered by the product as it currently exists—i.e., what capabilities are available out of the box. Other criteria, such as service and support, corporate viability, and strategy, also contribute to the software selection.
Category number 2—Product Technology
Product technology defines the technical architecture of the product and the technological environment in which the product can run successfully. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a shortlist of applicable solutions that pass muster relative to the most basic mandatory selection criteria. Sub-criteria include application architecture, software usability, administration, platform and database support, application tools, workflow and document management, and reporting capabilities.
Category number 3—Corporate Service and Support
This set of criteria defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long-term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes such categories as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.
Category number 4—Corporate Viability
Corporate viability (also known as vendor viability) is a critical yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurement, the financial stability of the vendor simply can't be stressed too much. The vendor viability category should combine quantitative Wall Street ratio-and-metric analysis with qualitative management and corporate evaluations. Only by combining these two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.
Category number 5—Corporate Strategy
Corporate strategy evaluates the corporate road map and strategy of the software vendor with regards to specific timelines of how the product will be developed, sold, and supported within the process ERP software market. This is the most strategic and long-term set of evaluation criteria, and it rates how effectively the stated vendor's three-to-five year product, support, and sales strategy maps to the overall market direction.
Snapshot of the Process ERP Software Landscape
The growth of the ERP market has been a direct result of the fierce global competition, short product life cycles, highly distributed operations, and information-driven management that characterize today's business environment. A process ERP software is a collection of technologies, components, and services that address the needs of the process manufacturing industry. A typical process ERP system today is suited for organizations manufacturing products that cannot be disassembled into constituent components, such as paints, chemicals, pharmaceutical products, plastics, food and beverages, and so on.
Process ERP applications, like all ERP software, aim at full integration of management, staff, and equipment. They also offer broad functional coverage; vertical industry extensions; a robust technical architecture; training, documentation, implementation, and process design tools; and so on.
The major issue facing process manufacturers is compliance. The steady increase in global trade and competition over the past 10 years, combined with a new awareness of health and governmental regulations, requires manufacturers to comply with both local and international standards. Following are the five main issues that process ERP vendors are focusing on in today's global economy:
Compliance within process ERP software.
Software vendors that provide process ERP applications are meeting today's compliance challenges by providing the following functionality: advanced planning and scheduling (APS), product data management (PDM), manufacturing execution systems (MES), customer relationship management (CRM), business intelligence (BI), and e-commerce tools. Within each module listed, certain functionalities that may be required are addressed. For example, within the BI module, the compliance needs can conform to industry-specific standards.
Sharper vertical focus.
Typically, ERP vendors have used a generic approach when developing their software. However, as businesses require industry-specific functionality, vendors have developed specific functionality that will meet these needs. Since process manufacturing has many different verticals, ERP vendors have developed modules to handle process manufacturing in different industries, such as pharmaceuticals, different chemical industries, and so on.
System flexibility enabled by adaptable architecture.
Given the increase in competition, number of regulations, globalization, and mergers and acquisitions, software architecture plays a key role in how quickly vendors can implement, maintain, expand, customize, and integrate their products. Software architecture does much more than simply provide functionality, the user interface, and the platform support; it also determines whether a product is going to endure, whether it will scale to a large number of users, and whether it will be able to incorporate emerging technologies—all in order to accommodate increasing user and regulatory requirements.
Web and e-commerce enablement of ERP systems.
For the process manufacturing industry, the ability to conduct business online is crucial. Web-based collaboration between companies and their customers and suppliers has become the reality of doing business each day. In terms of compliance issues, companies can upload information from different Internet sources in order to keep abreast of new standards and to improve business activities, and to integrate these new pieces of information into the process ERP system.
Another advantage of Web commerce is that by extending the existing ERP system to support e-commerce, organizations not only leverage their investment in the ERP solution, they can also speed up the development of their e-commerce capabilities.
Leading ERP vendors have also made moves to adopt Web portal strategies. Essentially, the goal is to create a virtual, personalized workplace and marketplace for ERP users, where the ERP applications, other disparate back-end systems, and external content and services (such as catalogs, directories, travel services, benefits administration, and so on) can be seamlessly and transparently accessed by users via the Web.
Intensified market merger and acquisition activity.
Presently, three vendors sit at the top of the ERP vendor market: Oracle, SAP, and Infor. Each offers very broad functionality, but each has made so many significant acquisitions that all three have vertical expertise in many areas as well. Since ERP software historically has been focused on manufacturing, these three vendors have extremely well-developed manufacturing modules.
Some other notable vendors that have a strong presence within the ERP market include CDC Software, IFS, Lawson, and Microsoft. Some older software vendors (those that have been in the industry for 10 to 20 years) have chosen to focus on specific verticals; they do well, but they cannot compete with such “giants” as Oracle or SAP.
A Brief Summary of Market Trends
ERP remains the information backbone for contemporary manufacturing enterprises. But today's ERP systems can also be characterized by new types of technologies, such as software as a service (SaaS) models and service-oriented architecture (SOA). These technologies have addressed more than the manufacturing process that is taking place within the walls of an enterprise. The advent of the above technologies has been a direct influence from Web and e-commerce. Other trends include easier enterprise applications integration (EAI), more flexible pricing, a lesser need for application customization, and the embedding of analytical applications and knowledge management within solutions.
To learn more about the difference between process ERP and discrete ERP, please see Process ERP vs. Discrete ERP Differentiation.