Though sluggish for the past couple of years, the ERP market witnessed better results last fiscal, especially with renewed interest from SME customers. IDC predicts that this business will reach the Rs 800 crore mark by 2006. Small wonder then that vendors like SAP, Oracle, SSA Global, PeopleSoft and others are all geared to offer customized solutions for various verticals.

The Enterprise Resource Planning (ERP) giant seems to be awakening from its slumber. After a lacklustre performance for the past two years, it was the one of the high-growth areas in 2003-04. According to IDC, the industry is expected to grow faster than the total market at a CAGR of 10.4% till 2006, which would enable it to touch the Rs 800 crore mark.

There are several reasons why the ERP market is in an upswing. To start with, customers prefer to have a greater control over the solution in terms of flexibility, adaptability and integration. Another major driving force is time to benefit, which means shortening of the ERP implemention cycles.

The increased adoption of ERP among the SMBs, which constitute almost 70% of organizations, has propelled momentum and competition among vendors in this segment. To meet the specific requirements of this price sensitive market, Indian and global ERP vendors have launched abridged versions of their existing product at lower price points, primarily pushed through the channel. 

R Shankar, Country Manager-India, Middle East and Africa, Ramco Systems notes that dominant players have acquired complementary products or competing brands either to increase the market share or to increase the width of their offering. "Software service firms have also been increasingly focusing on setting-up implementation practices for leading vendors in the enterprise application space." 

SME DRIVING INDUSTRY GROWTH
Some customer verticals which are aggressively adopting this technology are banking, finance, services, insurance, automobiles, telecom, government, healthcare and ITeS. But, the highest growth is coming from the SME segment.

According to market estimates, there are 2.3 million SMEs in India. And, this segment is fast adopting the latest IT business solutions, right from storage to ERP implementation. Companies like SAP, Oracle and others are quite bullish in catering to ERP needs of SMEs and have unleashed offering numerous suites, which help each of these customers fulfill their data management needs effectively.

IDC India predicts that the SME segment will fuel the ERP market growth in India and this will be the potential segment for all ERP players. Neeraj Bhargava, Director-Marketing and Alliances, SAP India says, "The SMB market will continue to be a strategic focus. We are working closely with our channel partners and have product offerings available today which are directly relevant to and suit the business requirements of SMBs in India."

GOING STRONG
The perception of ERP has undergone a sea change, from a can-have to a must-have business element. Oracle is piggybacking on this changed reception and does not look and sell ERP as a separate business module. It considers it a part of various data management modes that a customer needs and has developed different suites, which would enable them to choose and pick.

So, Oracle has over 200 modules in its eBusiness Suite, which gives the customer the liberty to take whatever he wants, with ERP as part of it. The vendor believes that it is information, which is critical to the customer and if only one gets information ahead of others, he/she can hope to make his business grow faster than the market.

"Oracle's business grew more than the industry growth of 26% in 2003-04 and this growth has been the best for the company since last five years," says Sukhdeep Singh, DirectorAlliances and Channels, Oracle India.

Other companies like SAP and SSA Global have also experienced a similar growth last fiscal. Gopal Kanayalal Madnani, Country Manager SSA Global, India says that last year's growth has definitely been better than the previous year, particularly due to momentum in the SME sector and the general uptake in the Indian economy. In 2003-04, SSA saw more than 25% growth.

SAP experienced the highest growth in the ERP segment in 2003-04. The company grew by 70% over the previous fiscal and here too, the major boost came from the SME space. According to IDC, SAP has 57.4% market share in the ERP space today. The company is focused on retaining this leadership position and is concentrating on customers striving to exercise increased cost-control, improve efficiency, face consequences of globalization and continue to stay competitive.

Today, SAP India has over 650 customers and 1000 plus installations in the country. Neeraj adds that the company has put together an accelerated growth plan that will enable it to further strengthen its leadership position in India.

Even Ramco Systems has grown by over 10% in revenues in 2003-2004 as compared to the year before. "For the JFM 03-04 quarter, we have achieved break-even globally and in India. Ramco has registered a net profit of
Rs 4.20 crore during the last quarter of the financial year 2003-04," says Shankar.

MID-SIZE COMPANIES ALSO CASHING IN
Interestingly, it is not only the big companies who are doing well in this space. Firms like Visesh Infotecnics and Eastern Software System are also reaping good rewards for the hard work they have put in this ERP space. According to Sanjiv Bhavnani, MD, Visesh Infotecnics, "The mid- and small-size ERP market is growing at a pace of 40% year-on-year and if this number is something to go by then there is no doubt that the potential in this space is enormous."

The company grew by more then 100% in AMJ 2004. It clocked revenue of more than Rs 9 crore compared to Rs 4.5 crore in the same period last fiscal. Visesh is eyeing the same amount of growth each quarter this fiscal and the major driver for this growth is their ERP solutions designed to tap verticals like auto, corporates and the SMB space. It is also planning to launch PowerPro, a specifically designed ERP solution for the SME market in the US and India soon. "Once we launch this product, we would be able to tap more of the SME market where the growth is happening most phenomenally since last fiscal," Sanjiv adds.

Anil Bhakt, CMD, Eastern Software System says that the growth driver for the ERP market is the increasing pressure on all companies to export more. As more companies from abroad start sourcing their requirements from India, they expect Indian companies to be at least using an ERP.

SMB is the biggest market segment in India today. That's why every company is focusing on selling to this segment. "We are in the top six or seven companies in the ERP space in India. It is very difficult to assess the market share as genuine statistics are not available," he adds.

Sudheer Nair, CEO, GlobSyst Technologies India remarks that his company has received an unbelievable welcome for its ERP, E-Resource, which marked a 30% increase in its business. "In terms of percentage we have also marked an increase of 45% more inquires regarding the package and the turn around of inquires into orders has been 15% more since the launch of the package."

The ERP domain is a never ending domain and the supply to demand ratio will always be 3:7. Globsyst has a well-planned strategy for making sure that it makes its presence felt in the ERP market in the coming year, he adds.

R Raju, Director, Bluechip Infoway says that their company's revenue doubled compared to what it earned the previous fiscal. The company primarily caters to the manufacturing vertical with its ARA5 ERP solution. Lately though, Bluechip has launched seven other versions of this product which would ensure it makes inroads into BFSI, healthcare and other verticals.

Chennai-based Selvaraj, Director, Elmaq feels that the major growth drivers in the ERP business have been increasing competition and globalization such that manufacturers. These units are witnessing the need to be more updated in the systems and processes. Elmaq is also seriously considering mergers and acquisitions both in India and abroad which would enable them to enhance their reach.

ESolutions is one of the few companies who have experienced 200 per cent growth in the ERP space. It entered the ERP market two years ago, initially targeting the SMB. But now it has trained its sights on medium and large business house, which has reaped rich dividends. "We see good growth as more and more companies who were in the hesitant mover or wait and watch category are subscribing to ERP's like ours. We are planning to come out with the state of the art Version 2 based entirely on the .NET platform, which would make our product more modular and easy to use," reflects Gaurav Sri Krishna, Head, Business Development. ESolutions

EXTENDED APPLICATIONS
Today, ERP is not only one package, which the companies are looking at to have smooth management of their data. Vendors have come up with such suites that not only have ERP as one of the package but other modules are also reaped in a manner where the customer can enjoy the benefits which would in turn ensure better profitability for him.

Oracle looks at ERP in a different manner than most other vendors. ERP is a module which it offers in its suites because it has realized that anyone who would be investing in ERP would not only like his company's planning, manufacturing, finances, sales, marketing etc to be better moderated, but would also be looking at other processes. "This means that today, customers are much more far-sighted and we feel the next in thing would be information architecture where you only have one single source for collecting each and every data," Suhkdeep points out

According to a study by PriceWaterHouse Coopers, a major focus for the core ERP vendors and extended application development enabling the real-time enterprise. In essence, this term refers to an organization's ability to monitor and use the flow of information to react instantaneously to changes in the business.

It requires the ability to create an order and have it automatically flow up and down the supply chain, so suppliers can react to changes in demand. It also requires being able to recognize when a piece of the supply chain has broken down for example, when a supplier is unable to provide parts so orders can be redirected as quickly as possible without impacting sales.

Col Balwinder Singh, Director, Targus Technologies feels that today customers want to be updated every time and for that they are prepared to invest and ERP has seen growth primarily because of its ability to manage contents for the company in a smooth manner.

"It is not only ERP that a customer looks at, he today also needs other different modules which makes his back-end operations run smoothly and where the downtime is less. I feel that ERP will be among various other modules which are slated to experience mammoth growth in this fiscal," he added.

DIVERSIFIED PRODUCT MIX
Most of the vendors in the ERP space today have realized that the fact that there is a huge potential market which was shying away from the ERP segment because it was priced very highly. Today, Oracle, SAP, PeopleSoft, SSA Global and others have products specifically designed for those who were not being able to shell out huge money to own such a software and get it implemented. "We have recently introduced a product which is targeted at the small businesses and is priced very competitively in the market. This Oracle ERP solution has got tremendous response and this is not only because it is priced low, but we have made sure that we don't not cut out on any exclusive Oracle feature that goes with our high-end solutions," Sukhdeep remarks.

Partners also agree to the fact that earlier it was the corporates and big business houses that went for ERP solutions and other such modules. But now, even smaller businesses can afford it and this has ensured more implementations happening in the last fiscal. SAP acquired more than 60 customers last fiscal and this number is reflective of most of the other vendors who have either acquired more or are in tune with SAP in terms of implementation of ERP at the customer site.

Partners feel that in this fiscal the price structure in the ERP solution is going to drop more enabling even more penetration of smaller companies. All this price reduction started two years ago when the global economy was not going great guns and companies like Oracle, SAP, SSA Global, PeopleSoft and others saw the need to cater to the mid market.

And once the need was foreseen, action on this front happened very quickly and all these global majors launched numerous such modules in their architecture suite, which were priced very competitively in the market. "Price point and performance are the two issues that we needed to address before we wanted to tap the mid and small market and today we are ideally placed to do that," Gopal reflects.

PROPER IMPLEMENTATION IS THE KEY
One of the major drawbacks in ERP space is that there are high ratios of failure in the implementation process. This has made sure that vendors only choose those partners who have the required skill sets to perform this process smoothly. "Training is one of the major part in ERP business and we train our partners round the year along with our employees and only deal with those who are serious about it," Sukhdeep mentions.

But the question that still haunts many vendors is that there are still not enough partners in this arena who can be trusted to get the perfecting implementation done. Here it must be noted that an ERP implementation can take anything between 15 days to three months depending upon the size of the project.

"A few channels have invested in learning about ERP. Those who have invested have been able to sell and over a period of time recoup their investment many times over, says Anil. Most vendors agree to what Anil is suggesting here. Though, there can be no doubt that the partners involved with ERP couple of years back were far less than what the market scenario is today, but still lot needs to be done to excite more partner involvement in this space.

Chennai-based Accel, which is selling PeopleSoft ERP software experienced 10% growth last fiscal despite being a new entrant in this field. This figure only shows that there are lots of opportunities in this filed to excel. K Joseph, Senior Manager, ERP Division, Accel says that the business in this space has increased slightly but more growth is due to come in the next couple of years. "I feel the rapid growth of IT awareness in the SME space would enable a huge opportunities for partners like us to tap the data management market," Joseph adds.

In Delhi, most of the partners saw growth between 20% to 25% in the ERP space last fiscal and they hope that this growth is at least going to be the trend this fiscal also.

SAP also highlights the fact that it makes all efforts to make its partners world-class and this in turn enable themselves to get associated with large companies and keep the relationship ticking. Companies like Visesh Infotechnics are now looking for the best of breed partners who can implement its soon to be launched product in the market.

"I still have my doubts on how much technical expertise we have in ERP space on the partners' front and this needs to be addressed very soon if we want to tap this huge market potential. Today, the safest bet is to make and stay with your existing customers and that is why we do not see 100%percent selling happening through channels," Sanjiv cautions.

Some of the trends which are likely to ensue with the changing market demands include a shift towards best-of-breed solutions that address the unique business requirements rather than a monolithic product/solution offering that is very generic.

"There is also an increased emphasis on the software solution's ability to support and sustain key competitive differentiators, vis-à-vis standard functionality," says Shankar.

For solution providers, the ERP market is rife with opportunities. All they need is an ability to achieve cost-effective integration with other enterprise applications on multiple technology platforms.

ATANU KUMAR DAS with inputs from Goldie in Bangalore, Nelson Johny in Mumbai and S Gopikrishna in Chennai

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