What lies in store for small ERP vendors

PUNE, INDIA: India is a unique market. One that is full of possibilities and challenges. There are unaddressed areas that spell opportunities that have not been tapped by the big league of players yet. At the same time, it won't be that easy for the newcomers to tap this minefield. Here's how.

Filling the gaps?

Ask a relatively small ERP company as to how unique ultimately can be its offering when the scales are compared with a big and already established big ERP vendor. One gets a variety of answers and USPs, which the small league firmly feels to be strong and formidable enough.

For iVitesse for example, it is the Enterprise 'Business Exception and Alarm System that works in tandem with ERP and can answer the requirements.

"Transactions captured by ERP can be tracked for abnormalities. Define normal bounds for transactions; all material available for executing a work order, ppm level below 10, no unplanned shut downs of machinery, etc.  This system is can be applied to any verticals."

Another player in the league, the $10 million Krawler Networks, that has in its portfolio CRM and ERM offerings built around search analytics on-demand/SaaS as its basic model, feels that the ERP market can see the Cavin Kare sachet success that once redefined the rules of the game in the FMCG market.

A shampoo sachet for on-the-go, small-pocket customer completely changed the market and attacked needs that were not thought of before.

"Why can't the same happen in the ERP market?" questions Shashank Dixit, CEO, Krawler Networks.

He maintains that they are still not in direct competition to the biggies. "We are only making the pie larger. Big players take care of typically large implementations. We are actually helping them sell more,” he says.

“The big boys, however, have burnt their fingers to some extent in segments like India which is a different market in itself. The high-value, low-volume Vs low-value, high-volume part comes into focus. If we look at the Gramin bank’s success with Micro-finance, they have changed the concept of volumes and value. India is a different market and let's not fight with that fact but make peace with it."

Changing the rules of the game, the way Dell did for HP and IBM or the way Google did for MS, is what players like Krawler attempt and aim to do. In terms of its distinctive advantage the areas to be claimed so far are usability and the untested fields of Enterprise 2.0.

"It soon became evident to the clients that our products were easier to use, easier to implement and provided much more value for their business. We aimed at bringing this rich user experience to Enterprise Software,” Dixit tells.

This area is known as Enterprise 2.0. And soon Krawler was the first and defining provider of Enterprise 2.0 Tools, as he goes on to add.

He is confident enough to say today that this offering secured the company victory over the established international brands like SAP, Oracle, Blackboard, IBM in all the Tender processes Krawler participated in.

Another ERP player MAIA Intelligence with about two and half years of existence, has sought its niche in the BI market, which it thinks has still plenty of room for due to penetration levels of 10 to 15 percent of the known user base.

The trick as these players hint is not to pit directly against the big players but complement, attack niches or indirectly compete.

MAIA for instance, is trying to attack India's BI market which in Asia Pacific is posting more than double the growth at 36 per cent, as compared to a 16 per cent. This market witnessed the maximum consolidation in FY 08 with three independent vendors, Business Objects, Hyperion, and Cognos, getting acquired by biggies like SAP, Oracle and IBM, respectively.

Even though the market was consolidating, it was not commoditizing and hence there was scope for vendors like SAS and MAIA Intelligence, shares its CEO. For MAIA, the strategy is one that of integration.

"ERP companies can offer their specialized solutions in specific sector like Pharmaceutical, Retail, etc.  ERP companies can integrate or bundle Business Intelligence (BI) with their offering to add more value to the entire offering,” Says Sanjay Mehta, CEO, MAIA Intelligence that has recorded 91 per cent growth with 47 large corporate using its solution.

“One of our OEM partners – Udyog Software India (Ltd.) offers solutions in Excise software with our 1KEY bundles for analytics and reporting.  In this way the Indian ERP companies can create a niche for themselves, at the same time offer an unique proposition to its customers by offering a reporting and analytical tool.  Bigger players do not cater to this combined solutions," he adds.

According to him, "Some organizations who have already invested in these MNC applications are keen to look at 1KEY for their Operational Data Analysis needs and reporting needs.

“Therefore our offering co-exists with most of these Strategic BI products. At the same time, Business Objects is very expensive and cannot be rolled out enterprise wide, SAS  is meant only for few expert users with analytical skills while Cognos is not an end-to-end BI Suite."

These tools are expensive and used by only top tier management level, expert users - analysts and the rest of the 85 per cent of business user pyramid is deprived of a BI for MIS, analysis and monitoring / gauge performances, which if provided can help them get gain visibility, into the business and drive performance and getting everyone working towards a common goal.

For CIOs like Gharge it localized functionality at very low cost that can be the true and effective USPs for small ERP Indian vendors. "Knowledge of Indian practical issues to adopt the best practices, can help local players design the more adoptable software."

It is easier to buy but tough to implement or convert a Branded ERP as per organizations requirement. New ERP Company can build their knowledge base and provide things which are required in much Indian way. "I mean a system not only based on international assumption, it should also based on hardcore industry experience." Singh suggests.

There are sure some missing pieces in a CIO's need basket that these smaller ERP vendors can fill in, but another CIOs like Gharge feel that cost wise it is very costly and it includes unnecessary functionality also.

"Once spent large sum on ERP, customer has to spend additional sum on all such missing functionality, as it becomes essential part of the business requirements, or get the missing functionality developed as customized solutions."

Tough nut to crack though

It would nevertheless be so easy for the smaller boys to challenge the big ones that have ruled and established their roots well in the market so far.
"By the time we had finished implementation of our product for the first client, we had evolved our product to compete with the biggest vendors of Enterprise Software. It proved to be a tough battleground to sell our products," Dixit from Krawler Networks shares.

The major vendors had flooded the scene with their marketing channels and the competition was tough. We had to fight for a chance to be able to present our products to the prospective clients who were already using products supplied by the well known vendors.

Brand name, acceptability by the customers, support ecosystem and capabilities, sustainability of the organisations and marketing muscle, are just some of the areas to start with. "Though the opportunity will be to provide localised software and availability of cheap but intelligent manpower, but the organisations should be able to exploit the same and provide excellent customer support to make them succeed," reasons Gharge.

As a CIO, Singh would like to be 100 per cent sure before considering any unbranded player and will make sure they are going to remain in the market for long. "Also from the maintenance point of view it should be easy enough to be handled just with small team."

In addition, would be critical areas like vertical knowledge base of the company, scalability and flexibility etc. "Whether they are going to be interactive or just going to behave like a system integration company." Asks Singh.

In fact looking at current penetration levels of big players, it would be extremely difficult for any small players to get attention of CIO for considering local players, unless he is able to see some distinguishing factors offered by the local party in their total offering, he adds.

Gharge from Bajaj Electricals for example, tried implementing one local ERP solution at one of the factories but faced lot of issues on software quality as well as support efficiency.

The verdict is that Indian local ERP software companies are not developing eco system for support and implementation and are hence not workable. Also sustainability of such small companies is also an issue hence CIO's would not like to risk their business automation requirements and hence will prefer big players.

This gap can skew into an advantage again for the bigger players. After attempting one such implementation, Bajaj Electricals  recently evaluated SAP and Oracle ERP options and started implementation of Oracle e-biz applications with Oracle Demantra and Oracle Siebel CRM pieces together. "We are mid way through and hopeful that we are able to implement all three software together." Gharge says.

To sum it up, yes there is space for more and better in the Indian ERP terrain. With questions around sustainability, support, scalability and penetration, it would be exciting to see what turn would the David Vs Goliath battle take from here on.