Globalization and Regulation Slow ERP II Process Vendors

Transcription

1 Markets, Y. Genovese Research Note 14 March 2003 Globalization and Regulation Slow ERP II Process Vendors In 1Q03, vendors in our Enterprise Resource Planning II Process-Manufacturing Magic Quadrant face increased regulation and shrinking IT budgets. This market has a dearth of vendors, but it offers deep core functionality. Core Topic ERP II, Supply Chain & Manufacturing: ERP II Strategies, Applications and Technologies Key Issue How will ERP II vendors and markets evolve? Process-manufacturing vendors are experiencing the same economic woes as their asset-intensive and discrete counterparts, but they have less flexibility in reducing R&D expenses, because of increasing regulatory requirements, rapidly changing user environments and globalization. This has decreased the number of vendors and products serving the process manufacturers, as compared to the discretemanufacturing market (large and midsize combined). The process-manufacturing market does not have a large number of vendor choices, but it offers a greater depth of core functionality (including formula management, quality control, inventory and order management) than the other domains. Regulatory requirements from the U.S. Food and Drug Administration (FDA) and the World Health Organization (WHO) have always closely governed pharmaceutical enterprises. More recently, their scrutiny has begun to include the food and beverage industry. Because of this, enterprises with entrenched enterprise resource planning (ERP) systems are pressuring vendors to extend their depth in areas such as 21 CFR 11, as well as provide assistance with the management of enterprise supply and demand chain initiatives (see "21 CFR 11 Compliance: Software Abounds; Strategy Unclear"). Globalization in this industry segment affects sourcing (such as food products and pharmaceuticals), planning (transportation of sourced products and fulfillment) and demand generation. These requirements affect vendor product development, as well as the services offered by vendors. Many vendors (including Oracle, QAD and Ross Systems) are beginning to include services such as FDA approval and globalization planning in their implementation offerings to capture the attention of customers that are underserved by their current vendors. Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 This Magic Quadrant comprises the vendors focused on the ERP II process-manufacturing market space (see Figure 1). In many cases, a vendor may serve either the batch process or continuous area of the market. Discussions with Gartner analysts will assist clients in determining which vendors will be best suited to individual requirements. Figure 1 The ERP II Process-Manufacturing Magic Quadrant 1Q03 Challengers Leaders SAP Ability to Execute Industrial & Financial Systems Intentia Baan Process Oracle Agilisys QAD Ramco Systems Ross Systems SSA Global Technologies J.D. Edwards As of March 2003 Niche Players Visionaries Completeness of Vision Source: Gartner Research (March 2003) The Leaders SAP: SAP remains the only leader in the process-manufacturing segment. Its large customer base includes many of the leading enterprises in this market, and its viability and technology vision are supported by these customers. SAP's functionality supports both continuous flow and batch process manufacturing enterprises. Specifically, SAP's vertical industry focus covers most of the types of enterprises that users associate with process (such as chemicals, oil and gas, mill products, mining and pharmaceuticals). Although the vertical strategy has served SAP with R/3 market penetration in process manufacturing, SAP has proved the capabilities of extended components of mysap. Processmanufacturing users are unsure how mysap components, such as customer relationship management (CRM) and supply chain 14 March

3 management (SCM), are architected for their industry-specific requirements. This results in a lack of broad adoption of mysap across the process-manufacturing market. Process-manufacturing users should assess industry-specific functionality, as well as reference sites of mysap during the evaluation phase. Results should be weighed against best-ofbreed vendors that may offer industry-specific depth, but at a higher cost in integration. The Challengers Oracle: One of Oracle's strengths is that it offers a processfocused product that is separate from its discrete-manufacturing products. This has enabled Oracle to deliver process-focused enhancements that won't affect the budgets of the larger discrete-focused products. A particular strength of Oracle is its "one-stop shopping" approach, which includes products and services. Oracle's product functionality is broad and deep, covering such areas as formula management, quality control and connectivity to shop floor management. Most recently, Oracle has added workflow capabilities to track regulated items at the batch level, providing users with a choice of attributes, such as item family and specific items. Recent conversations with users indicate there are still issues with 11i implementations, specifically for users of order management software and those users that have both the discrete and the Oracle Process Manufacturing (OPM) solutions. Prior to 11i, the discrete- and process-manufacturing products were separate. Now, the two share financials, order management and procurement; however, users that have both solutions must still synchronize inventory. Oracle plans to combine these two inventory products in the next major release. User issues with order management are reported most often with r , with some improvement reported by users of r Enterprises considering a process-manufacturing solution in which FDA validation is a decision driver should short list Oracle. Oracle customers considering an 11i upgrade should put more emphasis on planning for the upgrade, specifically in the area of order management. Users planning to use both OPM and discrete-focused 11i should understand the risks associated with two master inventory management products. Agilisys: Formerly a division of SCT, Agilisys is now an independent company, with the goal of consolidating many industry-specific vendors in the ERP II market. Most recently, Agilisys purchased Brain, an ERP vendor focused in the automotive market. As a challenger, Agilisys has exhibited batch 14 March

4 process capabilities that extend the core application into supply chain planning (SCP) and supply chain execution (SCE). Agilisys' independence will present pros and cons to its customers. The positive aspect is that it will enable the Agilisys development team to focus at least one part of its business on process manufacturing. However, there will be less capital from the parent company to support R&D efforts at a time when market conditions are poor. To address this R&D challenge, Agilisys will conduct cross-product R&D activities, as opposed to research specific to a particular product area. Users considering a batch-process-focused product should evaluate Agilisys. The Visionaries J.D. Edwards (JDE) moves into the Visionaries quadrant with the release of J.D. Edwards 5, which includes functionality driven from users and partners in the consumer packaged goods (CPG) segment. J.D. Edwards 5 adds such functionality as product variants for multi-attribute items, lot control enhancements and dual units of measure. JDE is also focusing on sales by assigning an internal group to lead sales and marketing activities. Prospective users should put J.D. Edwards 5 on their "long list," evaluating functionality specific to their industry segments and reviewing references. The Niche Players Intentia: Intentia's solutions fit well for most batch-process industries, and the vendor has historically performed well in Europe in the food and beverage, textile and batch process industries. Specific functionality for batch process industries includes the ability to schedule production, as well as the maintenance of assets. However, its lack of penetration in the United States affects its "mind share" as a global vendor. In addition, customer concerns with financial stability, a focus on the AS/400 platform and a lack of mind share in the process market segment have hurt its ability to acquire new customers. European users inclined to use the AS/400 platform that are looking for a batch process solution should consider Intentia. QAD: QAD recently refocused its marketing efforts along vertical segments, with food and beverage being a core part of that strategy. Although it has had an installed base in process manufacturing, it lacked a vertical strategy that included longterm commitments to users. As a result of the change in focus, QAD is now building in functionality for 21 CFR 11 and working with systems integrators (SIs) to help customers become compliant with the FDA regulation. QAD's efforts to augment technology with WebSphere and Java will help customers that 14 March

5 are concerned with QAD products' dependence on Progress Software. However, although QAD's F3Q03 results were better than expected largely due to a recent refocus on industry segments enterprises remain concerned with QAD's long-term financial health. The vendor's increasingly strong cash position and low stock price could make it an acquisition target, but with the original owners actively involved in the operations of the company and owning a controlling stock interest, this is unlikely. Enterprises looking for a low-cost, plant-level solution in the food and beverage industry should put QAD on their shortlists. Ramco Systems: Ramco's product is rich in core process manufacturing functionality, but the most interesting area of Ramco is its unique technology vision, which includes a servicebased architecture. This architecture is intended to assist enterprises in modeling their current environment and subsequently building out company-specific functionality from the core set of functionality covering a broad range of industries. Implementation of this product will require services assistance from Ramco or a certified partner. Ramco's lack of recognition as a global vendor is affecting its future as a leading vendor in the process market. Mind share is mostly centered around areas of the Asia/Pacific region and varies widely across other regions. Enterprises considering Ramco must ensure that the local partner has experience in their specific industry, and they should closely scrutinize the partner's long-term viability. SSA Global Technologies: SSA's BPCS product has a large following in process manufacturing. Most of these users are longtime enterprise customers in many cases, divisions of larger companies that might be using SAP or Oracle as their primary product. With economic conditions slowing IT spending, BPCS is often used as a second-tier alternative to SAP. However, SSA, is more focused on becoming a larger vendor through an acquisition strategy than extending its reach into the process market. Enterprises considering this two-tier strategy should evaluate the associated integration costs and must specifically understand BPCS's integration capabilities with other ERP products, as well as its extended enterprise functionality (including CRM and SCM), which is largely provided by partners. Invensys Production Solutions: Although the Prism and Protean products contain functionality that rivals many leading vendors in process manufacturing, users of these solutions suffer "whiplash" from the continual product strategy changes coming from Invensys. In the past three years, Invensys process customers have gone through several iterations of strategy, resulting in a lack of confidence in the vendor to deliver their 14 March

6 specific market needs. The first strategy for the products, which was announced after the Baan acquisition, was to release a Baan product that combined functionality for discrete and process manufacturing. After listening to customer feedback and reconsidering investments, Invensys changed that strategy to one termed "Baan Process," which included five process products coming to Invensys through acquisitions: Baan IV Process, Dimensions, Prism, Protean, and Baan Cable and Wire. Now that Invensys has announced the "re-investigation of the Baan asset," it has located the Prism and Protean products in their own profit-based division, called "Invensys Production Solutions." Although these latest announcements are positive and indicate a return to the promises originally communicated by Invensys after the acquisition of Marcam, Prism and Protean users should evaluate their long-term use of the products, based on current functionality, rather than future vision. Until Invensys settles current company-related profitability issues, the viability of all of its products will be a concern. Ross: Ross returns to the Magic Quadrant after going through some tough financial times, which resulted in the company being unable to convince users of its long-term health. Ross has been profitable for the past nine quarters, and Gartner has observed an increased user interest in the vendor that justifies its placement on the Magic Quadrant. Ross' core functionality rivals that of many market competitors. Recently, it added CRM functionality (sales, marketing and customer care) through a partnership with Selligent and extended its established relationship with Prescient Systems for SCP. Enterprises in the food and beverage, life sciences, chemicals, metals and natural products industries should consider Ross a viable option. Acronym Key CPG Consumer packaged goods CRM Customer relationship management ERP Enterprise resource planning FDA Food and Drug Administration SCE Supply chain execution SCM Supply chain management SCP Supply chain planning SI Systems integrator WHO World Health Organization Bottom Line: Few vendors serve the process-manufacturing space, but their breadth and depth in vertical-specific functionality requires long-term commitment and partnerships with their installed bases. Users considering a processmanufacturing enterprise resource planning (ERP) II product should consult with users in their specific industries for references of vendors that show this level of commitment in current product and vision. In the long term, this market will continue to consolidate to include a set of vendors that migrates toward larger enterprises and another group that migrates toward smaller enterprises. Users should evaluate vendor commitment to the industry in the form of vision and R&D commitments with time frames for future product enhancements. In addition, users in regulated industries should ensure that their specific vendor has functionality and capabilities to help guide them, not only through implementation of the product, but compliance with such Food and Drug Administration provisions as 21 CFR March