Part 1: Self-Service Apps -- ERP's Next Frontier

Now that ERP self-service apps are the norm, employees check and change their health-care provider and vacation time over an intranet without thinking twice.

What's next is the extension of this Web-based model beyond the firewall. Companies are slowly granting external suppliers and customers access to their internal billing, inventory, manufacturing and scheduling systems.

The engine pushing business into this new frontier is the enterprise resource management system, by far the most expensive and complex-and most widely used- packaged software utilized by corporations today.

The role of enterprise resource planning (ERP) in this journey is key. Plenty of companies have figured out the value of replicating some information-say, a parts catalog-to a Web server and then pointing suppliers, dealers or customers to this URL. There may even be dynamic updates between the inventory database and the Web server to keep information timely and up to date. But Webifying ERP is different. It extends core, mission-critical systems onto the Web while retaining the strength of ERP, streamlining and integrating complex business processes.

An immediate next step for self-service ERP will be systems that handle the ad hoc purchases for goods and services that aren't already handled by automated master schedules, says Frank Buchheit, director of business-to-business procurement at SAP.

"This cuts down on maverick buying," he says, adding that it also removes labor-intensive tasks from purchasing professionals, who can instead focus on negotiating better agreements with suppliers. SAP's Business-to-Business Procurement module, which uses a browser front end, will be generally available this month.

Self service offers a framework for integrating ERP supplier and inventory information into a Web purchasing system, giving users an easy way to shop for the goods they need, but in a structured way that captures every transaction.

At Micros Systems Inc., the $280.2 million supplier of restaurant point-of-sale and hotel-property management systems, an Oracle ERP system offers more than 500 employees and customers a browser-based view to vital business information. Because its customers can see for themselves the ship dates, carrier numbers, even a link to the FedEx page, they are less likely to ask routine questions, points out Micros Systems CIO Robert Moon.

"In less than three years, we've gone from the Web being a novelty to a critical application,'' Moon says. "It's now our main focus.''

Another company moving past the firewall is Cable-Link Inc., which later this month will launch a Web site selling its refurbished cable TV equipment worldwide.

"We'll have a catalog, a listing of all our inventory, that will come out of our Macola ERP system," says company president Brenda Castle.

Until now, customers have called Cable-Link to ask about inventory and place orders. Along with CableLink's products, the site will feature product listings from OEMs. CableLink's solution is being built by Fourth-channel Inc., one of dozens of new companies offering Web-to-ERP systems. Two-year-old Fourthchannel, which claims nine customers, has formed alliances with a number of second-tier ERP vendors, including JD Edwards and Co., Macola Software Inc. and QED Inc.

"People are finding that ERP vendors cannot do this fast enough," says Fourthchannel president Jonathan York. "Also, when you extend these business systems beyond the firewall, the user interface and the usability become much more important."

Self-service ERP may launch users well beyond convenience. A recent study by Cambridge Technology Partners found that many IT executives expect these ERP systems to drive new revenue and business.

Cambridge calls this new-wave ERP Extended Resource Planning (XRP), a label that aptly reflects fresh research it released this month that reveals customers believe they will derive value from their expensive ERP installations.

"Our study shows users are implementing ERP backbones and are now extending them," says Sandy Strauss, a vice president in Cambridge's ERP practice. Significantly, a majority of these users think they will derive new revenue from XRPs.

Some 64 percent plan to integrate their ERPs with e-commerce systems. And while streamlining business processes will continue to be the lifeblood of ERP, a striking 65 percent expect these systems to drive new revenue after 2000, not just save costs.

"Overall, the ERP market boom is over," says Strauss. The focus now will be on e-commerce systems and decision support systems that will use ERP back ends.

The front-end solutions will come from the traditional ERP vendors and an exploding market of Internet-savvy entrepreneurs.

"You're going to see a lot of start-ups taking advantage of this. There's a huge third-party market," Strauss says.

In fact, a burgeoning third-party industry of Web-centric add-ons for traditional ERP systems has emerged, with firms offering systems ranging from e-commerce, supply-chain automation, sales-force automation and customer relationship management. All interface with ERP back ends.

The emergence of these new companies simply makes sense, says Geoffrey Bock, a senior consultant at Patricia Seybold Group.

"ERP is fundamentally internally focused on complex activities where you're trying to expedite the operations of the firm," Bock says.

Food For Thought
According to Bock, a good way to understand what's changing with ERP is to think of a food warehouse that invites grocery store customers in to shop.

"If you open the warehouse to customers, you find that the warehouse is organized for efficient processing of orders through to the loading dock, not grocery shopping," Bock says. "Simply providing Web access to an ERP system does not create a customer-facing environment."

Moreover, there's a widespread perception that rapid-application deployment, a fact of life for enterprises trying to stay competitive on the Internet, may not be the forte of the mainline ERP vendors, many of which consider "fast track" a deployment that runs 13 months.

SAP's Buchheit dismisses the criticism that big vendors like SAP aren't able to put Internet applications in place fast enough.

"We have 25 years of experience. We understand the process of invoice/payment and all the steps in between,'' Buchheit says.

"We actually believe we're ahead of everybody," says Peter Heller, senior director of product marketing for Oracle Applications, which redesigned its entire portfolio to take advantage of browsers, Web servers and server-side Java code.

Heller argues that ERP vendors like Oracle are, in fact, better positioned to deliver the promise of self-service ERP because they already have an intimate understanding of and experience with complex process models and process streamlining-the heart and soul of an ERP system. They haven't just landed on a foreign planet. "We understand the approval process," Heller says.

But many companies, especially firms ranging in size from $250 million to $1 billion in revenue, are looking elsewhere. At virtual staffing management company Ambrose Employer Group, for example, the front end to the Great Plains Software Inc. accounting system is iClickHR, from iClick (formerly Interactive Corporate Communications Inc.)

The tool lets 600 to 800 employees across dozens of client companies access their pay stub and HR data, offloading routine requests formerly handled by Ambrose personnel.

"In our industry, you generally need one person internally to manage every 100 to 120 service employees," says John Iorillo, co-founder of Ambrose. "We think that ratio is going to change to one per 200 or one per 250."

What's more, because the iClick system is built in Java, Iorillo is investigating the possibility of granting access from non-PC devices, such as next-generation pay phones.

"All the ERP [vendors] say they're doing this, but they're not yet," says iClick president Rosalia Bacarella, speaking from the viewpoint of many of the start-ups in this space. "We come from an Internet background, the Web world, and so we've got a good understanding of what it takes to make Web applications."

And one of the things these start-ups clearly understand and exploit is Internet time.

"Our typical installation is 12 to 16 weeks," says Bacarella, who stressed that HR self-service is just the first of several self-service apps the company will exploit under the brand name ActionNet.

Detecting this trend, some of the traditional ERP providers are electing to partner with these so-called "customer-facing'' providers rather than build this functionality themselves.

This month, for instance, SSA, maker of the AS/400-based BPECS ERP, announced its "e-BPECS" strategy, which calls for integration with existing infrastructures, including Lotus Domino.

"We're building a Domino connector to BPECs, which means anyone in the Domino developer book will be able to do things via Lotus to expand the BPEC footprint," says SSA's senior director of product management Chris Lesar.

The Real World
Back in the real world, the most pervasive kind of self-service ERP remains self-service HR apps over an intranet.

At The Principal Financial Group-one of the nation's largest financial institutions, with revenue of $8.6 billion-managers have used an extension to the PeopleSoft HR applications since July 1997.

"Last fall, we added functionality for salary planning, and we're looking at integrated budgeting" says Diana Near, assistant director of information services.

In a PeopleSoft 7.5 app that runs over an intranet, an employee can check his or her paycheck history and W-4s, modify direct-deposit instructions and adjust voluntary deductions. "Just these four [HR] apps are among the most expensive processes-they are labor intensive, and involve a lot of paper shuffling and phone calls," Near says.

Another organization looking at HR self-service is Central Michigan University, which went live with SAP's human resources modules last January.

"We're looking at it, later this year or the beginning of next," says Becky Pifer, manager of business affairs systems and part of the University's SAP support team.

"Now, enrollment is centralized yearly for health care," says Pifer. She expects the deployment will offload the routine health-care enrollment functions for the school's 4,000 employees.

"If a large company doesn't use self-service, you're using college-educated HR professionals to push paper around," says Nick Messerschmidt, director of Global HRIS for $1.9 billion Boston Scientific Corp. The company is using Interlynx Techology's InterAction as a front end for an HR system for some 14,000 employees and figures it will save at least $1.5 million a year over its previous paper-based system.

Since ERP systems are increasingly accessed via browsers, it's now possible to manage them as outsourced services.

Last month, SAP America Inc. became the latest and largest of the ERP vendors to endorse the concept, announcing a deal with Electronic Data Systems Inc. to provide SAP's R/3 to small and midsize companies over networks. The service, EDS Keysource, will be charged on a per- user, per-month basis, ranging from $425 to $660.

SAP rival PeopleSoft has a similar plan, announcing alliances with application-hosting providers Corio Inc. and USinternetworking Inc. Oracle announced an outsourcing strategy, but it won't be available for months. All these vendors are targeting the middle market.

Whether ERP outsourcing will be a hit among enterprise customers is unclear. What is clear is that a universe of possibilities has opened up for ERP. Are you ready for the next frontier?