ERP Demand Being Re-heated

ERP Demand Being Re-heated
P.J. Jakovljevic - April 19th, 2000

Event Summary

As reported on March 5 in The Dallas Morning News/KRTBN -- E-commerce may get all the attention, but information technology experts say the demand for enterprise resource planning professionals is almost as hot. Companies, cured of the Y2K bug, are investing billions of dollars on ERP, which are software applications that are supposed to streamline and improve business processes.

"Once the Y2K wrap happened, large companies embarked on new ERP" projects, said Barbara Gomolski, research director at the Minneapolis-based Gartner Institute. "Our expectation is there will be renewed interest in ERP and e-business." Ms. Gomolski said companies reduced spending on ERP in the second half of 1999 because they had to focus on the year 2000 bug, which affected computer systems that represented years as two digits. Now companies are struggling to find qualified professionals to implement ERP systems. The trouble is that so many qualified ERP pros already have been lured into e-commerce projects, Ms. Gomolski said.

The shortage is an opportunity for non-technical professionals to enter the high-tech world, said John L. Hall, senior vice president of Oracle University, the training division of Oracle Corp. All the non-techies need going in, he said, is an understanding of how businesses operate. "We are seeing a significant increase in students that are coming from functional roles in business and are now applying those skills to IT," Mr. Hall said.

In the Dallas area, Plano-based Electronic Data Systems Inc. plans to hire 250 to 300 ERP professionals in the next nine months to keep up with the growth, said Robb Rasmussen, managing director of digital value chain at EDS' E.Solutions division. "This has been lucrative for a lot of people," he said. "I wish I was 23 [years old] making what they make." Ms. Gomolski said, "most companies will be willing to teach you what you need to know about software." "What they are more interested in is your business knowledge, your project management skills."

Paul Nielsen, an ERP consultant based in Cedar Hill, said people with detailed knowledge of specific industries are valuable because they can design computer systems to a fit corporation's specific needs. He has specialized in the chemical industry. "The ERP area is best for me because I ... look at the broad picture and understand where all the pieces of the puzzle belong," he said. "You have to have as much business knowledge as you have technical knowledge." Mr. Nielsen said his business has been thriving. He is buying a Cedar Hill office building for his firm, Tools, Toys and Technology, which he ran from home until recently. The downside is that Mr. Nielsen must spend a lot of time on the road. "ERP doesn't happen in your hometown," he said. "Most of the times your clients are all over the United States, Canada, and Mexico."

But Mr. Rasmussen said newer telecommuting technologies will make it easier on ERP consultants and their families. "In the future, much more will be done remotely," he said. "I am trying to move to a model where not all consultants have to fly out and show up on site." Mr. Hall said ERP can be a good stepping stone for people interested in e-business. The two areas intersect when data from the "front office" (Internet sales and transactions) is piped into the "back office" (internal departments such as finance and procurement). "It comes naturally for most people," he said. ERP professionals are "easily transformed into strong e-business consultants."

Market Impact

ERP is perking up - a sigh of relief for vendors, customers, and consultants. The fact remains that the majority of ERP vendors have been taken aback during the last 18 months by a combined effect of the following major factors: the Y2K-caused market slowdown, the Fortune 1000 market saturation, a bad reputation for exorbitantly expensive and protracted implementations, and the market's attention shift to e-commerce (B2B, B2C), supply chain management (SCM), client relationship management (CRM), business intelligence (BI), and other extended-ERP applications. We also believe that the majority of vendors tackled those difficulties with appropriate, time-and-money-consuming counteractions like developing more implementation-friendly and industry-tailored products attractive to the untapped mid-market, expanding product functionality to cover the above-mentioned hot trends, face-lifting or fundamentally revamping the product architecture, to name but a few.

The recent upbeat quarterly results from almost all major players except for Baan and SSA demonstrate the market is on its way back. We expect sales to return to full force by the end of the second quarter 2000.

User Recommendations

ERP is alive and kicking. This does not however imply that both vendors and their affiliate system integrators will not have to seriously put their current business models under a magnifying glass. The 'gravy train' days of multi-year implementations, with $2000 consultant's charges per day without producing obvious results, are past.

Users are now in the driver's seat and should be aware of the fact that they need a reliable back-office system in place in order to conduct their e-commerce business or client relationship management. Therefore, we encourage them to aggressively inform themselves about vendors' latest product offerings and vigorously negotiate contract terms. Pay close attention to vendors' extended ERP offerings and discern hype from reality. The 64,000-dollar question is how functionality rich those new modules are, and how seamlessly they have been integrated with the back-office. Alternatively, how feasible would the integration with third-party products be? Vendors' corporate viability remains a crucial factor in any selection process, and it seems as though the most of major ERP players are going to be around for a significantly long time to come.

A piece of advice to consultants: be agile and wary! Make every effort to maintain your skills according to market demands. A magic formula lies in the balance of both business skills and basic technical understanding of what happens "underneath the hood". Inform yourselves about the company you wish to join. Are they a 'hire-and-fire' place or a company who continuously invests in its people's skill sets and attempts to cross-train them before laying them off in droves? Needless to say that informal networking skills are needed in order to find the answer to this question.

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