Justification of ERP in India


With globalization and gradual lifting of regulation, there is a paradigm shift in running the business. Indian companies now need to increase customer focus, improve speed of delivery, be cost competitive and provide value for money (improved quality at lower price). Indian companies therefore need to implement ERP systems for improving their business processes and becoming more competitive in the global environment.
                                  Though ERP implementation is costly and time consuming, it has several benefits which will help recover these costs in the long run. According to NASSCOM, during the year 1998-99, the Indian ERP market has been estimated at R5200mn compared to Rs2800mn in the previous year i.e. a growth of 85%yoy. The growth in the export market was far higher and more than doubled during the same time period. According to the NASSCOM, by the end of FY2001-02, the total Indian ERP market is expected to multiply by nearly 4 times and reach Rs65bn compared to Rs13.4bn in 1998-99.

India takes a somewhat special role in ERP market as different ownership structures can be found side-by-side. This includes
1.     State-owned enterprises (SOE)
2.     Foreign-invested enterprises
3.     Privately-held companies.

Moreover, larger companies as well as major internationally operating companies may be distinguished from small and medium sized companies (SME). That is, the role of size and ownership can be studied in relatively greater depth there than elsewhere. Another topic which makes India an interesting source is the rapid change also with respect to modern forms of corporate governance

ERP system application can be followed back for more than two decades with many national programs in India supporting IT developments. From the late 1990s, MRP II, ERP and SCM became more and more popular; many industrial enterprises have upgraded their ERP solutions or have directly applied new ERP systems of that time, such as SAP/R3, Oracle, and BAAN IV/V. Meanwhile, Chinese ERP software companies were active in extending their MRP II software products to ERP systems, the functionality of their ERP software became more and more powerful, and they started to replace some of the foreign dominators of the market.
                 Since 2001, the policy of using IT technologies to speed up industrialization has been widely implemented in India. At the same time, several large scale national projects on IT applications in industrial enterprises also have been launched. Up to 2003, more than 3000 industrial enterprises, have applied ERP systems. Moreover, SME as emerging market entities rise quickly, and request new ERP solutions to meet their demands. All of these demonstrate the maturity of the ERP market in India.

Snapshot for ERP software in India for the years 2008 and 2009:

Vendor
2008 (%)
2009 (%)
SAP
18.0
22.5
Oracle
4.5
8.0
PeopleSoft
25.1
22.5
JD Edwards
2.0
1.8
BaaN
14.8
12.7
QAD
3.2
2.0
SSA
4.3
3.7
Ramco
4.1
4.7
Others
24.0
22.1


ERP for Domestic Vendors: Based on the study of Indian market for ERP software, domestic vendors are benefited due to below reasons:

a.     Low price: An SAP application easily costs more than more than 10 lakhs, while some domestic systems cost as little as several thousands. Even with their 'high quality' image in India, SAP vendors have difficulties to customize the product especially in the emerging SME Indian market.
b.     Customer service: Domestic vendors can reflect the market quite quickly while foreign vendors may find it difficult to provide adequate and comprehensive customer support on time due to the shortage of on-time communication and technical personnel.
c.      Reporting format and content: India's accounting standards are different from international accounting standards. This requires foreign vendors to modify their financial accounting modules to generate the correct formats to meet local requirements. Many foreign vendors might encounter difficulties to do this appropriately while their Indian competitors took this advantage.

Difficulties for ERP in Indian Market: ERP journey from back office to all the operations in the enterprise creates lot of practical difficulties and pressure on Indian industry few of them are:

a.     Implementation: ERP experts will definitely be able to restructure the ERP systems with the help of resources and expertise available with them. However doing it all on sudden is a difficult task. The unrealistic deadlines and time pressures further add agony to this menace.
b.     Finance: It is a important determinant of ERP market in India. Some bigger companies still hesitate to invest in ERP due to the huge costs. It is indeed encouraging to find that a vast majority of them have realized its benefits and have determined to go for it. However some of them are keeping quiet due to the risks involved besides the unforeseen expenses and losses.
c.      Technical factors: ERP means restructuring in the technical and process aspects. The fate of the businesses that have already implemented and deployed using ERP remains a big question mark till it's successful. Even though change is inevitable and an element for growth. However it would be next only to impossible to change even before the current change has stabilized in the market.


FUTURE TRENDS FOR ERP IN INDIA: ERP packages now provide Web-enabled functionalities and e-business suites for use in B2B and B2C transactions. In this context, SAP has launched mySap.com, Baan has a product called iBaan, and Oracle has incorporated e-business functionalities into their new ERP software called Oracle Moreover, many ERP vendors have positioned themselves as one-stop vendors for different integration requirements, and are adding CRM and SCM functionalities into their software. This is in response to integration problems that organizations have had when they have tried to interface different best of breed solutions.
                                                Therefore, basic ERP packages are expected to serve as the back-end transaction-processing database, to which e-business modules incorporating functions relating to e-procurement, CRM and SCM would be added.


CONCLUSION:  Over the last few years, many organizations in India have benefited from improved processes and better information availability as a consequence of the implementation of ERP solutions. For many others, the adoption of ERP has resulted in a very painful transition and adaptation period, while the benefits have not been immediate or tangible.
                                                During implementation most companies are looking for consulting assistance with ERP system vendors themselves becoming the most popular consultants during the implementation. Nevertheless, some consulting companies with special experience have a considerable growth share. For the selection of appropriate consulting companies, price seems not the main influencing factor, but reputation and practical experience. Despite all the advances, there is still a considerable way to go for India regarding ERP implementation, and for improving their operational as well as their management level.

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