ERP Adoption amongst Indian SMEs

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Transcript of 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

    ResearchFindings .............................................................................................................................. 13

    Inferences .......................................................................................................................................... 15

    6. ERPfortheLogisticsIndustry......................................................................................................... 15

    ResearchFindings .............................................................................................................................. 16

    Inferences .......................................................................................................................................... 17

    7. ERPfortheHeavyMachinery&ToolsIndustry ............................................................................. 18

    ResearchFindings .............................................................................................................................. 19

    Inferences .......................................................................................................................................... 20

    8. InSummary .................................................................................................................................... 21

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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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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    CompanyConfidential:ConfianzysConsultingPvt.Ltd August2010

    www.confianzys.com Email:[email protected]

    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