News Feature

Faster, Cheaper ERP for the Mid-Market

By Lee Pender

May 15, 2001 — CIO — James mccullough remembers back when he had a $500 million IT budget and teams of IT professionals. By last year, though, all of that was a distant memory.

McCullough, the former CIO of Delta Air Lines, found himself reshaping his new company’s IT infrastructure without the benefit of a large budget or staff. As CIO of eCompanyStore, an Alpharetta, Ga.-based company that builds online stores to fill promotional product needs for its clientele, he had to figure out how to deploy big-company technology?specifically, ERP applications?without spending big-company money.

"We knew we were going to have to go [the ERP] route if we were going to become scalable," McCullough says. "We didn’t want to come back in 18 months or two years and say we can’t handle [transaction] volume."

McCullough decided to explore a relatively new option in enterprise applications: fast-track ERP. Fast-track ERP gives smaller businesses (with revenues between $200 million and $500 million) access to functionality similar to what their Fortune 500 counterparts have had for years. When all goes well, fast-track ERP implementations are measured in thousands of dollars instead of millions, and months instead of years. The vendors promise up-front, guaranteed agreements on schedule and price, fully functioning applications and a lot fewer headaches than traditional ERP.

The fast track isn’t without its speed bumps, however. First, there is a greater need to stick to the plain vanilla version of the package, with as little customization as possible. There are also unexpected costs that pop up outside the scope of the fixed-price contract. Although they are simpler than their bigger brethren, the systems are still at the mercy of people?it’s essential to manage expectations and resistance to change, and provide thorough training.

McCullough started down the fast-track ERP path with Walldorf, Germany-based SAP. He and his team of 20, composed of SAP consultants and eCompanyStore employees, installed the R/3 system with modules for materials management, function planning and finance, and an online store to replace the Pandesic application. They started in mid-December 2000 and applied the finishing touches in early January 2001. They did it without spending big-company money or time. "I’m sitting on an engine that’s capable of taking our company into the stratosphere with the same suite of applications," McCullough says.

Survival of the cheapest

not long ago, the only things "stratospheric" about ERP were the cost and implementation time. The stories are legendary?botched ERP implementations delaying critical product shipments, projects spiraling out of control and companies spending years and millions of dollars to set up systems. Hershey, the famous candy maker from Hershey, Pa., was among the companies hardest hit by ERP snafus. The chocolate maker reported a 19 percent drop in profits year over year in the third quarter of 1999. Hershey CEO Kenneth Wolfe attributed lost sales and costly inventory backups to a failed implementation of "new business processes" based on R/3. The Hershey dilemma wasn’t the only ERP failure to cripple a company’s bottom line, but the press it received made it a poster child for the consequences of botched ERP efforts and helped jolt ERP vendors into developing cheaper and easier applications (see "ERP Moves into the Fast Lane," Page 132).