Web-based value adding services promise a goldmine for companies following an e-business strategy. Jon Mainwaring looks at the impact of these on more traditional enterprise software
Love it or hate it, the Internet is here to stay. The World Wide Web has proved itself as a source of seemingly unlimited information, not all of it unreliable, while e-mail – the form by which the Internet first appeared to most adults – has proved a useful way of communicating with colleagues, friends and family.
Of course there is a downside too: the Web has led to unwanted competition for businesses that have traditionally preferred to operate in their own geographic region, while, for many white collar employees, sorting through e-mails is rapidly becoming the main activity.
But the Internet has led to many companies looking at their businesses in a totally different way. And this, of course, has had an impact on the kind of enterprise software they use.
While enterprise IT (ERP) systems have been used by many manufacturing organisations, both large and small, in an attempt to manage and automate business processes, the vendors of such systems have often overlooked or been unable to predict important developments in IT and business processes.
The rapid growth in the use of the Internet by businesses over the last few years has made these vendors wake up. ERP systems are now “modular” and offer “seamless” connections to other IT systems and e-business applications that add value to manufacturing companies.
Perhaps the software product that illustrates this transition best is mySAP.com from traditionally cumbersome ERP vendor SAP.
“mySAP.com delivers all the functionality that SAP has ever developed in the R/3 world,” according to Andrew Munday of SAP, who explains that it also embraces the Internet, allowing companies to operate an e-business strategy based upon concepts such as supply chain management (SCM), customer relationship management (CRM) and business intelligence (BI).
mySAP.com includes four separate elements: a core ERP system; a role-based interface that is aimed at providing users with the information tailored to their job function; application hosting, allowing companies to dispense with the headache of managing enterprise IT on their own servers; and an online marketplace for business-to-business (B2B) buyers and sellers.
This last is described as “a bit like a business Yahoo” by Munday. It allows businesses to buy and sell products and services online, and they can publish or bid on requests for proposals for contracts. SAP says that a solution enabling companies to sell off excess inventory is “coming soon”.
But Simon Bragg, analyst at consulting firm ARC, points out that while mySAP.com is aiming to be a solution that truly addresses e-business, taking on this solution could restrict the future development of the user’s IT systems. “SAP is talking about wall-to-wall [e-business] all written by one fair hand,” he says. “But do you throw all your eggs into one basket, or go for multiplicity? Why rip everything out when you can put EAI [enterprise application integration] in and integrate everything?”
Bragg is also concerned about the pricing model that SAP will be using for its combined ERP and e-business product. “There’s something nasty in the pricing of mySAP.com,” he says. “The fuss is about how you change from existing pricing to a new pricing contract. If you want to upgrade to mySAP.com you have to move to a role-based pricing contract. It involves buying new licences even if the number of users doesn’t change.”
Although the role-based nature of mySAP.com is central to the system – individual employees have information relevant to their particular activities pushed to them – Bragg points out that there is an issue about how to support users. Since every user will have a unique browser environment, helpdesk personnel and other support staff would find it less easy to work with users to tackle problems since, in many cases, it will be less likely that precedents for those problems will exist.
But for all these grievances, it looks like SAP has made a move in the right direction. So what do the other ERP vendors think about e-enabled enterprise software?
Martin Hill, e-business consultant at Intentia, says that linking into e-business applications is about growing the sphere of influence of ERP. “A lot of the new functionality is about extending the reach of the ERP system,” he says, explaining that linking front office e-business applications to back office ERP makes for truly value adding activities.
“One of the biggest growth areas is the e-marketplace,” says Hill, who points out that the founders of Internet-based trading exchanges have recognised that “there are people in any organisation, who aren’t part of the purchasing department, who buy things”.
Such people, when they have access to the Web, are ideal candidates for self-service tasks. Manufacturing engineers can order spare parts for shop floor plant online, while designers may want to buy components for prototypes over the Web. Meanwhile, all kinds of employees can buy train or aeroplane tickets for business travel via a Web-based ticket broker.
Allowing employees themselves to buy essential work-related items, rather than having them go through a company intermediary who is dedicated to such tasks, is bound to save companies money since it makes the purchasing task more efficient. “You know what you want so you’re unlikely to mess up your own purchase,” is how the logic goes.
And, of course, the existence of many sellers on these trading exchanges means increased competition, which helps to drive down purchasing costs. “People understand buying things as an individual consumer online,” says Travis White, J D Edwards’ vice president of marketing and industry solutions in Europe. “The logical next step is taking that buying power to the business community.”
White points out that, as they re-engineered their business processes throughout the Nineties, companies focussed too much on production and administrative activities. “Procurement was an overlooked process,” he says, explaining that building e-business links throughout the extended enterprise “is going to be the next major way to create efficiencies”.
Meanwhile, at Oracle the belief that the Internet is the business tool for the 21st Century is still at the heart of the company’s philosophy. “Oracle’s position is that all enterprise applications should be Web-based,” says Neil Brooks, UK applications marketing manager at Oracle. “You should have no specific software except for a browser.”
Brooks is also a fan of Web-based trading exchanges for the simple reason that they give even large businesses the opportunity to reduce procurement costs. “Companies like Ford are very efficient at purchasing, but what they can’t do is reverse auctions,” he says.
Reverse auctioning is becoming a common phenomenon on trading exchanges powered by technologies from e-business vendors like Commerce One and Ariba. It allows manufacturing companies to post details of a product or service that they will need in the future. The theory is that because these details appear on a well-known, commonly used Web-based trading exchange, suppliers soon become aware of the offer of new business and their numbers help to drive down the cost of whatever they are to supply as they compete with each other. And, says Brooks, “you can get access to the suppliers you don’t know about”.
Commerce One’s auction service has already started operating, with Schlumberger Oilfield Services using it to find suppliers for two industrial commodities. “Having experienced this initial reverse auction, we now see even greater opportunity for additional auctions and cost savings,” was the comment from William Lynch, director of global procurement and logistics for Schlumberger Olifield Services.
Other Web-based applications that Brooks is keen on include those that enable ‘supply chain synchronisation’.
With customers becoming increasingly fussy about their purchases, the ‘availability to promise’ issue has become highly important. These days, customers tend to want to know how long it will take to build and deliver a product before they part with their hard earned money.
By linking your manufacturing system and the supply chain that feeds it to your front end selling systems, customers can see whether a particular product meeting their specifications can be built in the time frame they have in mind. “Or they can vary the order to get a better time,” says Brooks.
Doubtless there will be many more Web-based applications, not to mention e-mail notification services, that will operate in tandem with ERP systems.
But ERP systems themselves, as Oracle and now SAP have recognised, are set to go Web-based. Already, Oracle, J D Edwards and other ERP vendors are using application service provision (ASP) to deliver their software tools to manufacturers in the US. And they are currently bringing the ASP model over here. Just as you outsource electricity, water, telecommunications and other services vital to running your business, many commentators believe that it will not be long before outsourcing the operation and maintenance of your IT systems will be commonplace.
Meanwhile, some companies may want to make their existing applications available to suppliers, partners or just to far flung divisions of their own business. The ‘thin client’ approach, where the software running these applications resides at a central location while users can access them from remote locations, promises to be a cost effective way of doing this, especially when the cost of leasing telecommunications lines comes down.
GraphOn is a company that can deliver the thin client model to your business thanks to its proprietary technology. “What we do is take an existing application and Web-enable it immediately,” says Robin Ford, its executive v-p for sales and marketing.
GraphOn’s Bridges technology connects “any Windows, Unix or Linux application to any desktop anywhere in the world over any connection”, according to the company. While the application is sitting on a server the user can experience an almost real-time session from his remote desktop. “It makes the application act as if it is sitting on your desktop,” says Ford.
Ford says that she expects a huge market for GraphOn’s technology as independent software vendors (ISVs) struggle to get the newest versions of desktop operating systems and applications to customers. Going the ASP route should “solve a huge time-to-market issue for them”.
Also, Ford points out that many decisions to merge with or acquire a company are becoming increasingly reliant on the ability of companies to integrate their software. One way to do this, naturally, is to Web-enable applications. “What we do is Web-enable them today,” she says. “It can be done overnight.”
Finally, with the recognition that many employees, even in a manufacturing company, do not necessarily spend all their working day at one site, IT applications vendors are producing software that will enable such people to access important business information while on the move. “The ERP system won’t just live in the company anymore,” says Brooks. “And in the future it won’t be limited to PCs either. The Web gives you that universal touch.”
The wireless application protocol (WAP) means that mobile phones can be used to receive textual data, and perhaps in the future even voice messages, directly from your enterprise IT system. “We think that wireless access is going to be the next big step,” says J D Edwards’ White.
An obvious application for manufacturing firms is a way of co-ordinating field service engineers. “What is needed, especially in CRM applications, is to integrate field service people,” says ARC’s Bragg.
Bragg points out that since many products have rarely arrived at customers as they were supposed to be designed, and that they undergo further modifications as they are maintained, then data should be collected every time a modification is made. “You need that information in the product history,” he says.
Companies could save a huge amount of post sales maintenance time by removing the need for their service engineers to relearn everything about a product that is different from its original specification every time they are called upon to fix a fault. Product specifications, according to Bragg, should be seen in three forms: as designed, as manufactured and as maintained.
Although there are obvious inherent problems in trying to bring all this data together. “You’re talking about pretty serious integration here, and you’re talking about three groups that don’t traditionally talk to each other,” says Bragg.
But however enteprise IT develops, you can be sure that it will mean integration of all kinds of IT systems that don’t traditionally talk to each other. Integration is the future, and you can bet your house that the one thing that all enterprise IT applications will integrate with is the Internet.
Author: Jon Mainwaring