It doesn’t get more “core” than ERP. Enterprise resource planning software is at the heart of most large companies today. It also tends to be at the heart of their IT budgets, with price tags running from hundreds of thousands to hundreds of millions of dollars.
Major ERP vendors enjoyed boom times at the end of the ’90s, as Y2K fears and then the beginning of the “dot-bomb” era drove sales, and IT budgets were increased 10 percent or more per year as a matter of routine. Now ERP vendors, as well as companies that sell other comprehensive and usually expensive suites of products for customer relationship management (CRM) and supply-chain management (SCM), face a “mature” market.
But not a stagnant one. With deep pockets and massive market penetration, these firms are not content to wait for the market to rebound. Mergers, new products, and relentless marketing have characterized 2003 and will continue throughout next year.
While many other software vendors struggle to convince would-be customers to try something new, large enterprise players are more likely to win business by encouraging customers to switch. Most companies already have software that can do what ERP does; the question is, does it do it as well as a replacement system? And how much better does a new system have to be to warrant the investment?
Investing in any large-scale enterprise software is so expensive and time-consuming that many companies are loath to switch. And yet they do, for a variety of reasons. Consider The Dial Corp., where CFO and executive vice president Conrad Conrad (who prefers to be called “Rad”) is not averse to making radical decisions. He’s now in the midst of replacing three separate systems—ERP, CRM, and SCM—with one integrated system from SAP AG. “I wanted a seamless system that didn’t involve a lot of interfaces—a word that scares me,” says Conrad from the headquarters of the Scottsdale, Arizona-based $1.3 billion consumer-products company.
Dial’s previous IT architecture—a $20 million Oracle ERP installation, a CRM application from Siebel Systems, and SCM software from Manugistics—worked adequately, Conrad says. But he was fed up with the ongoing costs of maintaining and integrating the systems. “Interfaces cost money in terms of maintenance and upgrades,” he explains. “Once you update one system, you have to go through the same effort to take care of everything else. I was looking for an across-the-board solution that would require very low maintenance and incur less expense.”
Simplicity doesn’t come cheap: Dial is spending $35 million for the SAP system and will take 18 months to implement what Conrad calls “the whole kit and caboodle”—that is, modules that address everything from the factory floor to customer service. Dial hopes such an approach will solve a dilemma it faced when it confronted, as one of many examples, trade promotions. “In the old world,” says senior vice president and CIO Evon Jones, “it was difficult to line up our consumer consumption data, which is in our order-to-cash system, with our trade-promotions data, which is part of our CRM system. We had to build a bridge between these two systems so we could apply the appropriate promotional incentive to the right order.”