PUNE, INDIA: Maybe David wins, may be doesn't necessarily always. But the duel between a David and a Goliath is always an interesting sight, no matter what battlefield or market it touches.

A similar tussle is surfacing in the Indian ERP market. With long-unaddressed gripes against the big ERP suites like absence of India or vertical specific localization, hefty prices, costly upgrades and disconnect with the user, there is enough room for local or smaller players. But how realistic and comfortable is the space in reality?

The basics

ERP, basically is a software that helps companies streamline different parts of their business and its scope can cover inventory, operations, budgeting and human resources.  The three big boys so far rein the market for ERPs in India.

SAP  India dominates with a 48.3 per cent share, followed by Oracle India Pvt. Ltd with a 24.9 per cent share and then comes Microsoft India Pvt. Ltd at 12.2 per cent, as per some data from late 2007 analysis of the previous year's data by research firm Frost and Sullivan.

Typically an ERP business is split into fresh licence sales, software updates and maintenance revenues. New licences flag the growing reach of an ERP vendor and the other two bigger components follow. A change is surging due to the demand for ERP solutions coming from small and medium enterprises.

The tables could turn if some analyst forecasts are to go by, both between and beyond the big three. Microsoft could overtake Oracle Corp. in fresh licence sales of business software in India by 2010, helped by its focus on small and medium businesses and also the market for fresh ERP licences sold each year in India.

SAP has clearly been the de facto ERP ruler king in India for years now, and even Oracle has showed increase in market share in 2006-07 that is owed much to its successful integration of Peoplesoft and JD Edwards.

Indian ERP vendors like Tally, 3i Infotech, and Ramco though had their niche positions simultaneously but have been pitted gravely against the biggies when it comes to market share and penetration. Other niche players include names like Infor (formerly Baan), Intentia or QAD etc.

A lot has changed with the recent emergence of the mid-market segment that has now companies re-looking their processes and procedures, and put in place proper ERP solutions for better, effective and more efficient businesses.

With the growth of the mid-market segment and their realization of the imperatives of an ERP investment that is being increasingly reflected in the on-ground ERP investments, the story of the big three pecking order may however not remain the same.

Even if it does, there is sure a beefed-up action and struggle that Indian market is witnessing from the so-called smaller players that seem to be all set to challenge the might of the biggies.

Apart from the erstwhile bracket of Indian players like Tally, Ramco there is emerging a host of new breed-ERP players who are attempting to venture forth in the market with a distinctive proposition, a unique feature or a niche segment. This could be the enterprise 2.0 offering from Krawler Networks, the Business Intelligence solutions as from MAIA or alarm-cm-analytics from a player like iVitesse.

Small is Big

There is definitely some potential in the market for indigenous and relatively smaller ERP companies in India vis-à-vis bigger players like Oracle, SAP, MS that have already penetrated the market. The question is just how much, how easy and how attractive that potential actually is.

The potential is huge, only one should have the ability and expertise to strike, opines Vishwajeet Singh, National Manager, IT, FCm Travel Solutions (I) Pvt. Ltd.

"ERP is not meant for only big brands, it is actually a system which automates the day-to-day processing at any company. It can play a vital role in any organization irrespective of their nature of business i.e. production or service," he says.

As he goes on to explain, to make ERP success, one needs to have expertise in that vertical.

"Today people are selling the products which are readily available and have a brand name but if you see no ERP can be implemented without doing customizations. There are many times that we don't require the modules or feature which are there in the system and contributing to its cost.”

Small player can be precisely to the organization requirements and this will be cost effective and less time consuming effort for all, he adds.
As Gartner estimates, India ERP market has been one of the fastest growths in Asia-Pacific. As per the best scenario forecast, India software revenues in 2008 is estimated to reach $ 211.9 million representing a double digit year-on-year growth for 2008.

"While suite vendors have extensive channel network, complete offerings, and strong R&D, then, indigenous vendor(s) that focus on niche market, and also supported by local strong sales and services network, as well as extensive channel coverage in the country, should have a competitive advantage," points out Yanna Dharmasthira, research director, Gartner

iVitesse Technologies, an ERP vendor that has so far achieved traction in construction and manufacturing verticals, attributes the presence of such a potential to the differentiator created by smaller company which in its own view, is much easier than a larger one. The reason being that a small company can focus micro vertical solution specific to industry.

"Each vendor backed by its marketing muscle would present its own value proposition to SMBs. The right Solution is not presenting extensive product features but the essential features to support," iVitesse asserts.

Pratap Gharge, vice president and CIO, Bajaj Electricals Ltd, agrees that there is definitely scope to accommodate local ERP software, in spite of very high penetration, particularly for small and medium segment of the businesses.

This, he explains, is primarily due to very high licensing cost and implementation cost required for big ERP vendors. These international players are also sometimes lacking in the localized functionality required by Indian companies.

FCm Travels is using a customized application and a satisfied CIO in form of Singh tells that this was selected after meeting all the who's who of the market and then finally closed on the customized one.

"And you believe me this system is capable in returning all its initial investment within two years eight months from now, after that it is all profit. This is what you can achieve with the so called new ERP company Vs established one."

Citing comparison from markets like China with specific domination of local and indigenous vendors such as in China,  Dharmasthira  points out strong localization (language, functionality), competitive price, strong channel network nationwide, long establishment in the market, in which they have managed strong brand establishment and a focus on the mid market, as some vantage areas for small players.

What has been happening in other countries/markets may not completely apply to Indian market. However, in the bulk part , the above elements are  the significant advantages for many local vendors, she clarifies.

"Also, if you are talking about 'new' ERP companies in India, then it will be another challenge. These newer companies will need to prove their differentiation in terms of innovation, among other things."

The strategy for relatively smaller and Indian ERP companies is very clear. Create a niche and penetrate into that market with a unique solution, is what this genre of ERP vendors has as its strategy.

Will the big fish eating small fish attitude spell doom for the smalltimers in ERP market?