Get the better of acronyms

Neha Kapoor

ERP, SCM, CRM - these are acronyms that have been at the centre of the hype cycle at some point or the other. A couple of years ago, an enterprise resource planning solution was the hottest thing going until the focus shifted to customer relationship management (CRM) and more recently, supply chain management (SCM). It took the dotcom bust and slowdown for the IT industry to develop hindsight, which helped separate some of the illusion from reality. Even so, certain things remain unclear... Is ERP dead? Is CRM essentially a front-end technology? Where does SCM fit into all this? How has corporate India taken to each of them?

Looking for an Indian perspective on these issues and more, eWorld spoke to D.V. Jagadish, Director, Marketing and Alliances, for SAP India Pvt Ltd - a company which has gone from being one of the biggest vendors of ERP solutions to increasingly promoting SCM and CRM solutions of late. Excerpts from the interview:

A lot of discussion has revolved around ERP lately. Some have written it off while others say it has only evolved with the changing corporate scenario. Do you agree with ''ERP is dead. Long live ERP''?

An ERP solution does one important thing...it tries to answer the needs of an organisation and meet the challenges that it faces. The challenges constantly evolve - the challenge today maybe one thing but as time goes on, competitors increase their efficiencies and offer more innovative products - and the bar goes up. An enterprise constantly needs to respond to these changes.

A big part of your response is based on what technology you use. It's as much a particular brand or company whose product you use as the overall initiative that matters. And ERP presented that kind of a solution at a point in time. Therefore, everything is related to what a company has done and what its needs were. I think it is rather frivolous to state that ERP is dead. An IDC report released just last month predicts that in India, over the next five years, ERP would have a CAGR of 9.6 per cent. Unlike CRM, where you show a growth of 44 per cent, the ERP market base is about 15 times larger. So ERP's growth over the years is much larger than CRM's or of any other application. Also, implementing ERP well provides you a springboard to jump on to other applications.

What kind of Indian companies have actually implemented ERP? And what is their learning?

Those who went in for ERP over the past five years are of two types - one set which was very clear about what it wanted; ''these are the problems we are facing, these are the initiatives that ERP will help us take and these are the results we want.'' Some metrics were set....''this is the base line, these are the average numbers and post-ERP, this is what we want.''

The metrics could differ from company to company, for instance, some may have wanted to close their books quicker than before, some may have wanted to handle inventory better while some could have wanted to increase responsiveness. For these companies, it was a step-by-step process solidly driven by business.

The second type were companies that implemented ERP because the guy next door was doing it. Proper metrics may not have been set, goals not defined. At the end of it, you didn't know whether you were successful or not, and eventually blamed the technology.

If the objectives were understood and there was strong management commitment behind the initiative, then companies - large and small - have been successful. Where there were problems, chances are they have been contributed by factors such as companies not understanding their needs or management not being committed to drive the initiative.

What is also important is the extent to which a company has successfully handled change management - to what extent do the ones that are supposed to use the software, understand, assimilate and actively use it for work? The differentiator between two companies with the same technologies, similar people implementing it and similar areas of implementation, is most definitely how well they have managed change.

A few trends are emerging now - large companies, which were the first to take up ERP, are well-placed to opt for CRM and SCM, depending on their needs. These are also the ones upgrading and deepening ERP applications. The other trend is the SME segment, which, having achieved a certain critical mass, needs the support of a stronger system that is more responsive to its needs. Then there are companies that want to leapfrog and implement two solutions at a time to make up for the time lost instead of remaining two years behind those who have already implemented.

So, companies, which are just undertaking these initiatives, want to cover not only the enterprise but also their partners.

And is this where SCM comes in?

Yes. Focus is now shifting to increasing efficiency in the supply chain. Just as you extracted better efficiencies within an enterprise, now you do so within a supply chain.

Here you need a solution that meets the requirement of the whole supply chain, competing against another supply chain. Hence the needs of the organisation change and ERP has evolved to add on those functions to bring additional features you did not need earlier. ERP is an incremental process which starts within the four walls flowing to the entire supply chain. The common thread running through ERP, SCM and so on, is the level of collaboration that goes on, increasing gradually at every step.

With some of the initial hoopla over CRM settling down, what is the role that it can really play for companies?

CRM is a very logical extension of ERP in trying to get a whole supply chain to work together.

CRM was initially treated as just a front-end - predominantly by dotcoms. And this was perhaps why CRM did not succeed - the problem was not with the technology, but with the perception. Everybody was focussed on making sites more attractive, on getting more eyeballs. It's like building a beautiful movie-set house where you invite people over but when they go behind the facade, there is nothing beyond the house. So where are they going to live?

So, CRM too has been through its learning cycle and the lessons are:

Setting up metrics.

Deciding why you need the solution - CRM can be used in very different ways in different business environments. When the market economy is booming, CRM can be used to attract and increase customer base. In a slowdown, you use CRM to retain customers and build better relationships.

The important thing to do is to put on your thinking cap and ask why you need CRM and what part of CRM can add value to your business.

Why did SAP enter the CRM market later than others? And having entered, you seem to be promoting CRM heavily. Why?

If you go by the ''just a front-end'' definition of CRM, then yes, SAP was late. But our definition was that a CRM solution should serve the entire lifecycle of the consumer transaction - starting from how you address customers to marketing and positioning products, fulfilling orders, continuing with service and looking at selling him more. So, for us, it was a continuous process and we came in when we felt the market understood the comprehensiveness of a CRM solution. Hence we have three components to our package - operational, analytical and collaborative.

According to IDC, CRM is expected to grow from Rs 23.7 crore in 2000-01 to Rs 147 crore by 2006 with a CAGR of 44 per cent. But I think it will go much beyond that once there is a turnaround. Besides, CRM is one of the five pillars of SAP's vision, the others being SCM, product life-cycle management (PLM) solutions, enterprise portal and marketplace solutions. As to focus, most R&D in SAP Labs, India, is centred around CRM with 40 to 50 per cent of our developers working on it currently.

What technologies do you plan to focus on in the future?

We see the way ahead bright for two areas - the enterprise portal and PLM. We already have these solutions but are just waiting for the whole importance and positioning of CRM and SCM to settle down before formally getting into these fields.

nehak@thehindu.co.in

Pic.: Mr D.V.Jagadish, Director, SAP India.

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