ERP Getting a New Breath of Fresh Air in Europe




ERP Getting a New Breath of Fresh Air in Europe
P.J. Jakovljevic - August 4, 2000

Event Summary

According to silicon.com, a leading European IT TV News Service, European companies began to realize the importance of customer oriented ERP applications and are set to dramatically increase their investment in related projects over the next two years. A report commissioned by Oracle and enterprise systems provider Bull claims European companies will increase ERP projects by 50 per cent, double the volume of business intelligence (BI) and data warehousing (DW) projects and treble the use of CRM applications in the next two years. Two out of three companies surveyed regarded integration of established ERP systems with new CRM solutions as a crucial business strategy. The survey, conducted by IDC, was based on the IT strategies of 1,000 enterprises throughout Europe.

According to Peter Reed, marketing manager for enterprise solutions at Bull, the drive towards customer focused applications is accelerating now as e-commerce takes off and as company resources are freed from developing Y2K solutions. He said while the results of the report were positive, it highlighted a worrying trend of European companies embracing CRM applications as a cost reduction exercise rather than copying the US trend of using it as a method of customer acquisition.

Market Impact

This is a confirmation of a trend we have long noticed in the global market rather than any kind of a surprise. All major business applications players realized the need to shift from an internal to an external focus some time ago, particularly after feeling the Y2K-induced pinch. Over the last few years, the main players have been actively developing internally or partnering in order to provide solutions that allow businesses to collaborate more effectively. Also, while the vast majority of vendors have distanced themselves from using the unpopular, outdated term ERP in their marketing campaigns, at the same time, they have tacitly been enhancing their traditional back office functionality and/or providing hooks to external 'killer' e-business applications.

The real reason for this lies in the fact that the boundaries between ERP, CRM, e-commerce, BI and Supply Chain Management (SCM) have been blurred. If the ultimate objective is to win and retain customers, one must consider the entire chain, which includes traditional ERP and SCM functions as well as the more remarkable CRM and e-commerce activity, with the inevitable need for extrapolating useful information for all management levels by using BI.

The ERP system remains the backbone of the supply chain. It sets the structure a company needs to do business and to communicate with other businesses. The combination of ERP, supply chains, and the Internet, or collaborative commerce, is an integration designed to offer faster and easier access to business transactions as well as customer and supplier data. This combination does not mean ERP systems become obsolete over night. While the traditional introverted mind-set of ERP becomes history, its functionality remains critical. The 'new economy' will not cause the obsolescence of general ledger and accounts payable & receivable for example. On the contrary, it may only emphasize the importance of their efficient use. Integration and interconnectivity are therefore the name of the game in the future.

We also concur with the above-mentioned opinion that implementing CRM and e-commerce only for cost cutting and process streamlining is a rather myopic strategic move. The much stronger demand for extended-ERP components than for a core ERP system are also not unexpected, mainly due to a large ERP market penetration and saturation compared to other much more recent markets.

User Recommendations

Users 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. While in a minority of cases a legacy system can perform these functions satisfactorily, we encourage businesses to aggressively inform themselves about vendors' latest product offerings, perform cost-benefits exercise and vigorously negotiate contract terms.

E-commerce is not merely electronic retailing via a Web site. The ability to coordinate the entire supply chain, fulfill orders, and service customers quickly and efficiently is what matters. Therefore, 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 and service & support capabilities remain crucial factors in any selection process.

Organizations currently initiating an e-business software component(s) selection are advised to research the major players in respective niches, seek assistance in the selection process from unbiased service providers, and base their decisions only on existing functionality that the vendors are able to demonstrate during scripted scenario sessions. 'Bolt-ons' should be selected only from official business partners of the primary contractor, after making sure that partnership is not a mere marketing pitch.

 
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