Geared for growth

Having put their transactional systems in place, medium businesses are hungry for growth. Akhtar Pasha says that they are looking at strategic solutions

In the enterprise application software category (which includes ERP, SCM, CRM and NMS), ERP continues to rule the roost and account for more than 50 percent of the EAS market. ERP penetration was highest in the chemical and pharmaceutical segments (88 percent) followed by FMCG/consumer durables with 73 percent. Next came manufacturing (engineering) with 58 percent. In fact, most industry verticals barring BFSI showed strong ERP penetration.

Transactional systems are not enough

Having transactional systems in place does not mean that there are no pain areas. Of the four critical Ms—manpower, money, materials and methods—the only thing that small, medium and large businesses have in common is methods or processes. Additionally, as growth and customer acquisition are rapid in the case of medium businesses, there is a greater focus on how to sustain profit margins while keeping costs low and increasing customer satisfaction. According to Ravi Kathuria, Director, Marketing and Solution, SSA Global India, “Most medium businesses have some kind of transactional systems in place, whether it is developed in-house or uses a third-party ERP solution. Having done that, they are now looking at strategic solutions, often referred to as extended ERP, to execute strategies and maintain business growth.”

We explore the meaning of strategic solutions in an extended enterprise and why they are important for medium businesses. To get beneath the skin of a strategic solution, we should look at how a medium business’ pain points differ from those of small and large businesses. Explains Rajesh Ghosh, Vice-president and General Manager, Sage Accpac India, “Many medium businesses are catering to the export market, and because of the Indian cost advantage, large OEMs are outsourcing key manufacturing requirements to them. This calls for a high level of automation of operations to compete globally.”

Bottlenecks exist

Comments Nagaraj Bhargava, Director, Marketing, Alliances & Sales Operations, SAP India, “Their (medium business) own systems (in-house ERP or legacy transactional systems) and business processes have become a constraint, and they realise that these systems and processes are not aligned with their business goals and strategy for growth. Hence they are looking at optimising and automating demand forecasting, streamlining supply chain and customer relationships, and adding BI components.”

Adds Kathuria, “Tier-I and tier-II suppliers (in medium businesses) are under tremendous pressure because of demand drivers such as globalisation—both in exports and the domestic market. They need systems that can help them forecast and accommodate changes at a faster pace.” He cites the example of Goa Shipyard. Its customers demanded shorter manufacturing cycles with the implied threat that they would move their business elsewhere if that didn’t happen. Using ERP and PLM, the company has been able to trim its manufacturing cycle by 20 percent and reduce manufacturing cost by 10 percent.

Opines Deepesh Gosavi, Officer, Systems, Infrastructure Development Finance Company, “We have a homegrown transaction management system called

IBS (Information Business Systems) which integrates with Oracle Financial (used for Accounts Receivable, Accounts Payable and General Ledger); with these we manage our businesses. At any given time, it (ERP) offers us a single window of information from which we can get the status of an infrastructure project, cost incurred to date (men, materials and money) and disbursement of project finance, which is not possible in a manual, legacy system. For example, we can make instant changes in the interest rate of borrowers as per market conditions, and make necessary business adjustments to safeguard our business interests. Further, we can notify our customers on how these interest rates will impact project costs, and then make necessary changes in the supply chain and materials.”

Demand forecasting

For a better understanding of why it is important to manage stocks and forecast demand, let us study the case of MTR Foods that manufactures 200 different products for which it needs to source 600 raw materials. The company was relying on historical data to forecast demand for the raw materials before it went for a SAP solution. According to B G Shenoy, Head of Finance at the company, the problem with the old approach was that inter-category product profitability could not be determined. (For example, to maintain good product margins, product profitability should be at least 60 percent. If it gives you only 55 percent, then you need to analyse why the 5 percent is not coming through.) Additionally, there was no mechanism to check profitability on a regional basis. SAP R/3 helped control costs across categories and regions.

Affirms N Guruprasad, Deputy Manager, Indo National (the company that manufactures Nippo Batteries), “We use ebizframe from Eastern Software Solution to consolidate data across business processes from different branches that were manually controlled in the pre-ERP days. Sales forecasting tools help us plan our capacity and production.”

Atul Kirane, Manager, Systems, Indian Seamless Metal Tubes (a manufacturer of seamless tubes, pipe rings and axles) uses a homegrown ERP system at the branch level that interacts with customers to send quotations and work orders to the head office. The moment it locks in a customer order, the system triggers the BOM (Bill of Materials), plans capacity, and looks for the necessary minimum stock before moving to production.

Affirms R K Kanthi,Group Head, Enterprise Systems, 3i Infotech, “Medium businesses are moving away from post-mortems to planning and demand forecasting systems that help them plan their capacity and maintain just-in-time inventory.”

Directly impacting the bottom line

Many medium businesses are catering to the export market, and because of the Indian cost advantage, large OEMs are outsourcing key manufacturing requirements to them Rajesh Ghosh Vice-president Sage Accpac India

EAS can directly impact revenues as well as the bottom line. Adds Kirane, “We are able to make 90 percent of the deliveries on time at the branch level. This adds to our revenues and profits.” Nandkishore Panch, Manager, IT, Elder Pharmaceuticals, has this to say, “We have replaced our legacy supply chain systems with IBIS (a supply chain management solution). This new solution has accelerated our decision-making by allowing us to analyse reports across the supply chain, something that was not possible with the legacy system.” The IBIS supply chain solution has helped the company reduce expenses by 25 percent through effective planning. SCM has also impacted the company’s profits by 1 percent. These are powerful testimonials that EAS has a direct correlation with business performance and profitability.

CRM stops at SFA

BFSI and telecom have been the traditional adopters of CRM in India as they have the resources to understand its value and sufficient legacy data to mine it. In the case of medium businesses, they have been sticking to what is available with transactional systems—Sales Force Automation (SFA) and marketing management.

Notes Kathuria, “Medium businesses currently do not require a complete CRM solution, and most of their requirements are available in their ERP systems in the form of SFA, marketing and configuration management. Additionally, these businesses do not have products that need to be cross-sold or up-sold as in the case of large businesses.” Therefore, the big-bang approach to CRM wherein everything is deployed as a fully integrated solution isn’t on the cards in Indian Medium Business Inc.

We see the manufacturing vertical implementing SFA, but currently not even 1 percent of manufacturersare doing so Ashish Kamotra CEO Adapt Software IAP India

Comments Ashish Kamotra, CEO, Adapt Software IAP India, which sells CRM solutions to SMBs, "We see the manufacturing vertical implementing SFA, but currently not even 1 percent of manufacturers are doing so." He cautions that unless SFA is closely knit with transactional systems, it will not serve the purpose.

Manufacturing (industrial equipment, auto and medical equipment), distribution and services are some of the key adopters of SFA. Some mid-sized businesses are using SFA to manage business leads, and as sales cycles are longer in the case of manufacturing, these organisations need to track their sales cycle and marketing campaigns. These businesses have been relying on historical data for decision-making, but that is changing fast.

Says Amit Ahuja, Chief Executive Officer at Multitec Aids, a special purpose printing equipment manufacturer in Faridabad, "We have several customers, each using a different kind of printing equipment. We need to manage quotations, prices and warranty terms throughout the shelf life of printing equipment, which is long. If a customer calls and asks for replacement during the warranty period, we need to look into customer data (historical data) and then respond to the customer—a process that used to take 2-3 days. Adapting a CRM solution, SFA, helped us streamline this, and the response time has reduced to a few hours. SFA has directly impacted our revenues."

Corporate performance management

Some medium businesses such as those in services and manufacturing are set to drive the data warehousing and business intelligence (BI) market. Says Tripureswar Chattopadhaya, Country Manager, SMB Sales, Ramco Systems, “We see demand for BI tools such as Corporate Performance Management and the Balanced Score Card in the telecom, BPO and manufacturing (including garment manufacturing) segments.” If a medium business wants to increase its profitability by 10 percent, it will need to know which indices have to be monitored. It will also need to study the consumption patterns of customers and plan capacity accordingly while keeping its inventory low. IP Rings, Moser Baer and ICI Uniqema are examples of companies using BI tools.

Supply chain remains important

Medium businesses recognise that automating the supply chain is a must. As these businesses have seen the benefits of transactional systems, they want to use supply chain systems to manage the distribution of products beyond primary sales points. They want to capture transactions and experiences that take place between customers and retailers so that they can plan better. According to Gowri Shankar, Executive Director, Take Solutions, “Medium businesses are looking for visibility into their secondary sales data. They want to know the consumption pattern of customers while choosing clothes, shades, sizes, prints and textures. Businesses also want to know the answers to questions such as how much stock of size 40 is lying with retailers at a particular location.”

NMS—point solutions

49 percent of respondents using NMS employ network or infrastructure management tools to manage their IT infrastructure. These tools have high penetration in BFSI, services and telecom. That’s because these verticals were early adopters of technology and have put their network infrastructure in place a long time ago. Express Computer found that medium businesses are yet to catch up with large businesses when it comes to using network management tools such as HP OpenView, IBM Tivoli or CA Unicentre. Medium businesses are predominately using network management tools that come bundled with network equipment.

Observes Lingaraj Panda, Systems Incharge at Indira Gandhi Institute of Development Research which has 12 Cisco switches, “We are using Cisco Works software that comes bundled with these switches. It helps us monitor and manage ports, helps us keep network uptime at 99 percent.”

Rajiv Ranjan, Senior Engineer, Infrastructure Resource Planning, Blue Star Infotech, comments, “Though we are still evaluating which network management software meets our requirements, we want an NMS tool that can help us manage our 3,000-node network (voice and data ports, including redundant voice and data ports) and Internet bandwidth.”

Clearly, EAS will remain a key focus area for the mid-market.

akhtar@expresscomputeronline.com