Endurance tests

Endurance tests

Enterprise resource planning is a relatively mature technology making its way down the food chain from large organisations to small enterprises. However, industry consolidation presents fresh perils for users.

New Zealand Dairy Foods - producer of household brands Anchor, Primo and Fresh and Fruity - has a multi-million dollar ERP (enterprise resource planning) system made by a company that no longer exists. The company's ERP system was by JD Edwards, which was bought by PeopleSoft, and which in turn, was recently taken over by Oracle. But, chief information officer Peter Scott says he is not worried, yet.

Scott, whose ERP system went live in November 2003, says he is "happy with the application".

Dairy Foods is "in a good position to see what happens with the Oracle situation", he says. "It is good to see Oracle will support the current version."

In contrast, food merchandiser Brandlines, Hynds Pipe Systems, polymer products manufacturer Elastomer and perfume importer CS Company, all say the long-term viability of their ERP supplier is essential.

Indeed, Oracle's US$10.3 billion takeover of PeopleSoft has left a swathe of New Zealand industry using software made by companies that no longer exist. Industry analysts estimate a couple of hundred firms and government agencies are left with JD Edwards and PeopleSoft systems.

Though laying off most of PeopleSoft's sales staff, Oracle has promised to support PeopleSoft customers for 10 years and plans to retain more than 90 per cent of product development and support staff.

Gartner analyst Kristian Streenstrup says, however, PeopleSoft and JD Edwards users need to clarify what individual product lines will be supported and their own requirements for product upgrades.

Maintenance and other agreements need to be verified and this should be done in writing, not over a handshake, he says. Around 2007, Oracle plans to release a new "Fusion" product combining the systems of JD Edwards and PeopleSoft, whose existing users will be "encouraged" to migrate to the Oracle platform.

"The critical point that has not been made clear is whether Fusion will support non-Oracle databases. That will be an important question for customers not using an Oracle database," says Streenstrup.

Gartner expects further consolidation in the enterprise application space, adding Microsoft was mooted to be taking over SAP recently. SAP itself bought US-based Tomorrow Now, whose packages help PeopleSoft users migrate to SAP.

"Customers need to protect themselves. Any terms and conditions they negotiate need to be planned out with the possibility that the company they are talking to may be taken over. That means to write in terms and conditions that ensure that those obligations are inherited by any successor company," says Streenstrup. "Oracle has given JD Edwards and PeopleSoft users short to mid-term comfort but the long-term question-mark is what will happen to the fusion product eventually."

However, more encouragingly, IDC believes Oracle will treat PeopleSoft customers "like gold" for fear of losing them, thus undermining the aim of its takeover - buying the customer base. "Therefore, PeopleSoft (now Oracle) customers can expect full, attentive, and long lived support for PeopleSoft products, including PeopleSoft 9," says IDC New Zealand country manager Graeme Muller.

An attractive sector

Takeovers aside, what else is happening in the New Zealand ERP marketplace? Tier one vendors like SAP and Oracle are moving towards the SMB space, a much larger market of some 278,000 potential customers. Other ERP vendors include Geac, Intentia, and Microsoft, through its Navision and Axapta offerings.

Local developers customise offerings, so Infinity Solutions, for example, offers MeatPro, a Navision-based product targeting the meat processing market. Christchurch-based Jade has industry-specific products for ports and other verticals.

ERP is becoming more suitable for the SMBs, by becoming more modular, allowing users to pick and choose functionality, which in turn is becoming more simplified and aligned to their business needs.

With such choices available, decision-making is hard for organisations seeking to upgrade their ERP systems.

NZ Dairy Foods had an old Oracle suite whose modules did not talk to each other. Scott was also unhappy with Oracle's customer service.

The $500 million a year business has 200 licensed users for its ERP system, which handles data like ordering, financials, and distribution amounting to some million orders a month and "hundreds of gigs of data".

Scott says his selection process was unique and earned him "pretty hefty" discounts from large vendors keen to secure such a high-profile customer. There was no RFIP process. Instead, he got some two dozen vendors in the same room together and explained to them NZDF was "on a voyage of discovery".

Other dairy managers took part, saying they wanted a vendor who understood the importance of delivering fresh food daily. Within a month, NZDF had narrowed the contenders to a few, who were asked to provide demonstrations on a server and a few PCs in a boardroom. Then, just JD Edwards and Intentia's Movex were left, with both systems meeting company needs. The dairy firm chose JD Edwards because it had a better "cultural fit".

It was a "ruthless implementation", recalls Scott. The implementation was managed in-house and completed under a year, only just exceeding a "tight" $6 million budget.

With hindsight, he says, NZDF should have brought in US experts sooner to help with the implementation, but mistakes were avoided by keeping a "register of good ideas" and not letting staff get sidetracked.

Scott says the new system allows better and faster decision-making, has brought the company together on business process lines, rather than departmental lines. Annual maintenance costs have dropped from $1.8 million to just $300,000.

The cost for running IT operations is also 10 to 20 per cent lower.

Nonetheless, NZDF will eventually look at a new system. "No matter what Oracle does, in a few years, Oracle will have an offering. Microsoft will have a product and SAP will have one. We will have a choice between three very good offerings. In the meantime, we are stable and we are fine," Scott adds.

Brandlines, on the other hand, turned to Microsoft Axapta to help manage its import products line that includes Smints and Asian Home Gourmet sauces. It had an enterprise accounting software package that did not integrate with other company systems. Staff had to enter data twice or more.

The company also wanted to record the expiry date of foodstuffs so stocks could be managed more efficiently. It wanted reports available online rather than have management waiting a month for paper-based versions.

Staying power

Brandlines corporate services director Joy Chapman says the company searched the internet for potential suppliers. Representatives of six companies were invited for a presentation and asked to name their major competitors. Two named Axapta, which the company had not listed. Thus, Brandlines approached Microsoft, which passed them onto resellers Koorb and Solution Partners, which won the implementation as Brandlines believed "they had a better feel for our business".

"We were looking for a company that would be there in 10 years time. Microsoft fits that bill. There were things going on with JD Edwards so we were not confident the packages would exist for a long time. We looked for packages that would grow as we grow and they had funds going into the research and development of the product," explains Chapman.

The implementation began in June 2003, with the software selected that September, and the system going live January 2004.

A year on, Brandlines claims savings in removing four of nine administrative staff, huge efficiency gains in stock management and write-offs, and a stable and robust system requiring only a single entry for data.

Auckland-based CS Company went live with Microsoft Axapta last April, after what it says was a 10-week installation working with Koorb.

CS Company financial controller Ray Guilford says the benefits include efficiencies in keying in data, information being stored in one location, plus streamlined financial, warehousing and sales order management.

The business, he adds, has doubled in the past five years. The previous disparate systems could not cope with this, while Axapta is architectured for easy future upgrades.

Likening the purchase to "a new car", Guilford adds, "We wanted something that would be around for a long time. I believe we have a package we can build on."

Hynds Pipe Systems is another enterprise that places a premium on vendor viability. It went live with Intentia's Movex ERP in 2003, replacing manual systems for stock transfers, financial data, ordering, purchasing and distribution.

Managing director Adrian Hynds claims information on site performance and financial results is available three times faster than before. Having centralised information brings further cost savings. Improved resource management also means better customer service and hence, higher revenues.

"We were looking for a partner that was going to be with us in the future. This was our top priority, as we plan to be around for a long time. We also wanted a committed New Zealand team - not just a presence, but a team that would be there to back us up fully and that would support the system locally."

Even companies with more established implementations still stress the importance of a vendor's long-term viability.

Elastomer, which installed Geac's Streamline ERP system for manufacturing and distribution in 1999, remains content with the product after six years.

IT manager Mike Byrnes expects the GEAC product to have a long life as the company adopts new releases as they appear. Streamline, he says, is a "best of breed" product resulting from Geac buying several vendors.

"Generally, the functionality provided in the older products have been carried forward and enhanced. Who can give assurances over support? But products with a wide customer base generally have a business case for the continuation of that product after acquisition."

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