the first Indian companies to have adopted ERP practices are HLL,
ONGC, ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd.,
Century Rayon, Citibank, ACC, ANZ Grindlays, German Remedies, Blue
Star, Mahindra & Mahindra, Rallis India, Sony India Pvt. Ltd.,
Ceat Ltd., Indal, Ford Motors, Kirloskar, Knoll Pharmaceuticals, and
First tier companies (those with a turnover greater than Rs.10
billion) implement ERP to increase internal efficiency and external
competitiveness. Once ERP is established at this level, these large
companies begin to desire similarly increased efficiency from their
suppliers. Hence, second tier companies are pressured to implement
ERP, and a trickle-down effect ensues. Powered by the axiom that a
chain is only as strong as its weakest link, Indian industry quickly
has recognized that in order to work at maximum efficiency, ERP must
be implemented at all levels.
Initially, the majority of ERP solutions have been marketed to
companies with greater than Rs. 2 billion, and generally, according
to industry reports, the total cost of deploying ERP has ranged
between 1 and 2 percent of companies' gross sales. Lower cost
solutions are available for comparatively smaller sized companies.
Though the market seems to be very encouraging for ERP
implementation, the time-frame for deployment may be an issue.
However, since many companies that have not yet implemented ERP are
leaders in their markets, it reasonably can be assumed that they
will go for it within next five years. In fact, the ERP market
should grow at a rate somewhere near the industrial growth rate.
Some industry categories, such as Automotive, Steel, Consumer
Durables, Engineering, and Textiles have shown a very high ERP
penetration. This means that these categories represent the greatest
potential markets in next two years - other industries will follow.
Figure 1 illustrates the market across various industries.
Survey of Industry ERP Implementations
implementations completed between 1995 and 1998 in India can give a
sense of specific hurdles that companies may encounter in ERP
deployment. Several companies were surveyed, and numerous ERP
professionals were interviewed in order to assess the state of ERP
The results indicate that Indian companies are moving forward
with ERP implementation primarily in response to thrusts from parent
collaborators, to revamp in order to meet increased load, or to
reduce lead times and inventory levels, and improve customer
Resistance to change - in the form of fear of the unknown,
reluctance to learn new techniques, or IT department reluctance to
change due to attachment to its product - was a major hurdle faced
during many ERP implementations. Additionally, the duplication
required in the initial stage, and the intense pressure exerted on
manpower proved to be problematic, as did the level of customization
necessitated by disparities between company requirements and
solutions offered by ERP software. This problem is diminishing due
to advances in the software facility models.
Cost overruns also proved to be a pervasive problem with ERP
implementations. Since most consultants charge on a man-hour basis,
project time overruns substantially inflate incurred costs. To avoid
this problem, top management must develop the necessary commitment
to ERP, and all employees should be prepared for the change before
the ERP implementation process is started. This model should help to
eliminate needless project time and cost ballooning.
ERP in the Service Sector
medical care, hospitality, courier service, telecommunication,
banking and financial services, and entertainment represent the
major components of India's service sector, and on probing into the
various needs of these groups, it becomes apparent that the courier,
transportation, and entertainment industries do not have specific
current needs for ERP. Banking and telecommunication each have very
specialized requirements that the manufacturing-inclined software
solutions on the market would not effectively address. The same
holds true for the medical care and hospitality industries. The
service sector has the potential to become an important ERP market
within a few years. At this time ERP implementation in the services
sector is very limited - only a few hospitals and banks have done
small-scale experiments. New software and processes will need to be
developed to meet the specific demands of the service industries, so
ERP players should begin now to prepare themselves for the
tremendous potential of this future market.
The Indian economy has reached a
level of maturity that demands advanced technology. Although the
Indian agricultural sector has not yet mechanized and there is
little potential need for agriculture-based ERP in the foreseeable
future, the services sector offers a largely untapped potential.
With the pace of developments in the services sector continuing at 7
percent, there is a large scope for ERP in these markets.
Many Indian industries already have realized the need for ERP
solutions, and the industry-related market growth should match the
expansion of the sector as a whole. The maximum potential growth of
the ERP market rests with companies that have a greater than Rs. 2
billion turnover, with smaller companies positioned to follow
India is developing its infrastructure, ERP manpower requirements
can be met, and the Indian mindset is changing with the times.
Certainly, if the national railways could computerize operations,
ERP does not seem an insurmountable challenge. In fact, the Indian
ERP market looks very much like a $7.5 billion opportunity that has
decided to take the plunge.
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