Part I : Oracles or Saps?

25 July 2005

It's on the 'must have' list of every mid-size company. In a three-part series, M Alagappan* outlines the plusses and minuses of enterprise resource planning (ERP) systems

Los Angeles city has a population of around 3.5 million. It has 600 city buildings, 44,000 city employees and a budget of just over $5 billion (Rs22,000 crore). Up to three years ago, each of the departments conducted its own purchasing. To put that in perspective, if we assume each invoice coming out of a Los Angeles city office to be a single A4-size sheet and if we arranged them one on top of the other, they would approximately stand at half the height of Mt Everest.

The city administration decided it was high time a software solution was implemented. It successfully did so in 2002. Immediately, cheque processing staff was cut in half, even as processing speed improved. The number of workers in the warehousing department was reduced to 40. Inventories tumbled from $50 million to $15 million. Vendors started interfacing with a single point of contact, not to cite other benefits too numerous to mention.

Enterprise resource planning (ERP) may well count as the most important development in the corporate use of information technology (IT) in the 1990s and beyond.

ERP market
What exactly is the market for ERP systems, and where is it going?

The global market for ERP software is predicted to grow by 10 per cent through 2006. The top five software vendors competing for the pie are SAP, PeopleSoft, Oracle, Microsoft and Sage.

A recent study by IDC — the premier global market intelligence and advisory firm in the information technology and telecommunications industries — surmised that this kind of accelerated market growth is a result of the general increase in IT spending, as well as repressed demand for integrating legacy systems to boost productivity. The analyst firm also predicted that by the end of 2008, the ERP market would touch $36 billion. Competition, it said, would heat up between vendors centred on specific industries and those selling more generic products.