ERP Adoption amongst Indian SMEs

CONFIANZYSCONSULTINGPVT.LTD.
ERPAdoptionamongIndianSMEs
StatusQuo&ChallengesintheIndianMarket:
ASectoralAnalysis

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CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010
www.confianzys.com Email:[email protected]
Contents
1. TheIndianERPMarket..................................................................................................................... 3
2. StudyBackground ............................................................................................................................ 4
Glossary ............................................................................................................................................... 5
3. ERPfortheTextiles&ApparelIndustry........................................................................................... 6
ResearchFindings ................................................................................................................................ 7
Inferences ............................................................................................................................................ 8
4. ERPfortheRealEstate&ConstructionIndustry ............................................................................. 9
ResearchFindings .............................................................................................................................. 10
Inferences .......................................................................................................................................... 11
5. ERPforthePackagingIndustry ...................................................................................................... 12
Inferences .......................................................................................................................................... 15
6. ERPfortheLogisticsIndustry......................................................................................................... 15
Inferences .......................................................................................................................................... 17
7. ERPfortheHeavyMachinery&ToolsIndustry ............................................................................. 18
Inferences .......................................................................................................................................... 20
8. InSummary .................................................................................................................................... 21

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1. TheIndianERPMarket
EnterpriseResourcePlanning(ERP)canbedefinedastheuseofanintegratedsoftwarepackage
to bring together various business departments such as Manufacturing, Finance, Human
Resources, Payroll and Sales. In practice, companies may choose to integrate specific
departmentswhere integratedworkingandvisibility isseenascritical tocostoptimizationas
wellasprofitability.
ERPisnotnewtotheIndianmarket;yet,ascomparedtodevelopedmarkets,theIndianmarket
for ERP is highly fragmented. IDCs report on the India Packaged SoftwareMarket (200913)
estimatedthedomesticmarketforERPin2008at$263.3million.
ThethreelargestplayersinthemarketareSAPAG(thegloballeader),OracleCorp(whichhas
acquiredotherERPvendorssuchasPeopleSoftandSiebel)andMicrosoftCorp.,arelativelylate
entrantandsmallerplayer.
The presence of these big guns has not prevented other smaller players from attacking the
market, with many of them building entirely customized solutions and thus, not strictly
adheringtothedefinitionofanERPsystem.
AtConfianzys,webelievethatpostthedownturnof200809,201011arepoisedtobeexciting
andchallengingyearsforERPvendorsandimplementationpartners.Thisreport,basedonour
indepthresearchconductedwithERPusersandpotentialusersacross5keyindustrysectors,is
aimedathelpingthoseintheERPindustrybetterunderstandthemarketdynamicsaswellas

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outlook. It covers the status quo of ERP implementation in these sectors as well as the
underlyingfactorsdrivingcurrentandfutureimplementation.
2. StudyBackground
The study was conducted among 5 sectors (mentioned above), with respondent companies
situated across India. The target companies approachedwere all in the small andmidsized
enterprises(SME)bracketwithturnoverintheRs.30to100crores($6to22mio)range.The
respondent actually interviewed was the IT Manager or Finance Manager. Interviews were
conductedtelephonically.
Thetotalsamplesizeforthestudywas228.
LearningOutcomesExpectedfromthisReport
(Across5sectors:Textiles&Apparel,RealEstate&Construction,Packaging,Logistics&
Transportation,andTools&HeavyMachinery)
CurrentStateofERPImplementation
ERPVendorShare
Drivers/BarrierstoERPAdoption

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Asectorwisebreakupisgivenbelow.
Fig2.1Respondentsinterviewed,bysector(Numberand%)
Glossary
Someofthetermsusedforpurposesofthisstudyareexplainedbelow:
GlobalPlayers:Marketparticipantswhoseoriginmaybefromanycountry(includingIndia),
butwhose currentoperationsextendacross geographical borders. Examples includeSAP,
Oracle,Quadra,Tallyetc.
LocalPlayers:MarketparticipantswhoseoriginaswellasareaofoperationissolelyIndian.
InhouseERP:ERPprojectsthathavebeenimplementedbythecompanysinhousestaff.
UnbrandedERP:ERPproductsfromextremelysmallandregionalplayers,wherefrequently,
theclientisunabletorecallabrandname;theseplayerstendtobelocal.

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Others: Branded ERP products, which individually account for a very small proportion of
thatmarket,andhavethereforebeengroupedtogether; thesecouldbeglobalor local in
origin.
3. ERPfortheTextiles&ApparelIndustry
ThetextilesandapparelindustryinIndiaprecedesliberalizationbymanydecadesandhasbeen
anindustryofsomeimportanceduetoitsemploymentgeneration.However,traditionally,the
industryhasbeenhighlyfragmentedandaslowadopteroftechnology.Postliberalization,the
industryhasgeareduptocompeteintheglobalmarketwhereitfacesimmensepressurefrom
other lowcost producers such as Bangladesh, Vietnam and Sri Lanka besides China, which
operatesonagiganticscaleofitsown.
The need for higher productivity and business efficiency has been the driving factor for ERP
implementation.However,whiletherearesomefullservicemanufacturers,mosttextileand
apparel industry players still work in a specific area of the value chain, such as spinning,
weaving, dyeing, finishes or garment production. One of the challenges for the industry is
thereforemore affordablepackages that canworkon limited resources anddealwith fewer
departmentsandprocesses.
Someofthekeydriversthathavemotivatedtheindustrytomodernizeandadopttechnology,
includingERPare:
Wideningcustomerandsupplierbaseinaglobaleconomy

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Shorterleadtimesandincreasingdemandforjustintimesupply
Backwardandforwardintegration,inordertocapturealargershareofthevaluechain
ResearchFindings
Ourstudyfindingsrevealthat58%ofthetargetrespondentshadanERPsystemofsomekind.
Ofthese,45%hadacompleteERPsolutionandanother34%hadapartialsolution,while21%
ofrespondentswereunabletoordidnotprovidearesponsetothisquestion.
Fig3.1WhetherERPImplemented Fig3.2StateofERPImplementation
As for choiceofproduct, SAPERPhadbeenused inonly14%of cases.A large chunkof the
companies surveyed had opted to use either an inhouse ERP solution or an unbranded
product.Tallyaccountedforasmaller7%ofcases.
It is interesting to look at a breakup of the partial implementation cases, in terms of the
productapplied. In60%ofcaseswhere therehadbeenpartial implementation, the inhouse

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ERPwasused,whichimplieseitherlimitedobjectivestobeginwithoraninabilitytodealwith
theintegrationofcomplexanddisparateprocesses.
Fig3.3ShareofPlayers Fig3.4ShareofPlayers(PartialImplementation)
Inferences
Considering the relatively low usage of SAP ERP in this segment and the preponderance of
unbranded and inhouse ERP, it is evident that there is a felt need for ERPwhich organized
playershavenotbeenabletocapitalizeupon.Whilecostcouldbeaconsideration,unbranded
players could also bemaking inroads because of a higher level of familiaritywith the Indian
apparel industryanditsspecificrequirements.Requirementsanalysiswilltherefore

ERP Adoption amongst Indian SMEs

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