Construction industry opens up to ERP

BANGALORE: The Indian construction and building industry is witnessing significant growth, thanks to the real estate boom in the last 3-4 years.

This unorganized sector is finding it difficult to cope with the ever-increasing building projects for the want of systems in place.

To bring a semblance of order to the chaos, some builders are waking up to the advantages of enterprise resource planning (ERP) systems in their companies.

Unlike its western counterparts, the Indian construction industry is more labor intensive and has to deal with a welter of taxation laws. With the sector receiving more foreign investments, industry bodies and individual companies are becoming more organized, and implementing IT to streamline processes and to track projects.

The National Institute for Construction Management and Research's inclusion of ERP in its curriculum last year is a positive step in this direction.

“The industry is quite unorganized. One has to deal with laborers who are not educated and at the same time, deal with architects, consultants, MNCs and customers. There are no work orders or fixed rates,” said Tom Thomas, spokesman for Jeena Engineering, a contracting company involved in Bangalore projects like the Prestige Meridien and Brigade Towers.

High potential sector

It is estimated that there are around 15,000 contractors and around 3000 builders in India. ERP vendors like SAP are gearing up to tap this high-growth vertical.

Builders are, however, wary about investing a lot of money into ERP solutions. “There is a perception in the industry that SAP deployment is expensive. We are trying to correct that,” said Srinivas Rao, executive director, small and medium enterprise, SAP India.

This explains why SAP has decided to team up with a vertical-specific partner, Quadra Software Solutions, which focuses on the building and construction sector, to offer its SMB solution MySAP All-in-one.

Quadra, backed by Kerala-based construction company Skyline Developers, has created its own specific ERP solution. In 2000, the company decided to offer the product to other companies in the segment.

The company has a development center in Kochi and around 40 customers. Around 30 percent of these customers are Bangalore-based and include big names in the building and real estate arena such as Mantri Builders, Puravankara Group, Prestige Group, Shoba Builders and Jeena Engineering.

Quadra offer two-product suites - for contractors, and for developers and builders.

Thanks to its roots in real estate and building, Quadra managed to gain a foothold in the traditionally IT-conservative building industry. Rao admits that Quadra's existing base of 40 customers makes it easy for SAP to target the sector.

“Most of Quadra's customers have expanded their businesses and want a solution that can scale according to their growth,” he said.

Offering a good value proposition

Joseph Philip, MD, Quadra Software Solutions claims that at least 2-3 percent of a company's turnover can be saved by using Quadra's solution.

“For a real estate developer, using a system can result in larger number of customer conversions and effective follow-up of enquiries,” he said.

Jeena Engineering opted for Quadra's solution and completed the implementation in ten months. “Before we decided to take up the ERP implementation only 50 out of 240 employees used computers. Now around 200 employees are using the system,” said Thomas.

He added that the Rs 75 crore company decided to go for a solution since it was getting unwieldy to track 25 projects on a manual basis.

With the SAP partnership, Quadra plans to go after large companies in Delhi and Kolkata. However, the company will continue to market its homegrown ERP to entry-level customers.

SAP is throwing its marketing muscle to go after SMBs with MySAP All-in-one. Vertical is passé. The company is now getting super-specialized and targeting its pre-configured solutions out to micro-verticals like building and construction, retail, rubber products, whole distributors, textiles, paper, metal products, etc.

“SMBs are looking for rapid deployment of ERP. So it is essential to have 90 percent of the solution ready for deployment,” said Rao.

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