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    Little ERP in Big China: Options for Manufacturers
    Manufacturers establishing branch operations in China are faced with a variety of different Enterprise Resource Planning (ERP) options. They range from open-source applications to the "Big Two" - Oracle and SAP. Each option has strengths and weaknesses. Manufacturers should exhaust the opp [...]


    Little ERP in Big China: Options for Manufacturers

    Manufacturers establishing branch operations in China are faced with a variety of different Enterprise Resource Planning (ERP) options. They range from open-source applications to the "Big Two" - Oracle and SAP. Each option has strengths and weaknesses. Manufacturers should exhaust the opportunities presented by basic ERP packages before tackling expensive implementations of full-blown software.

    Options for Manufacturers with Operations in China

    1. Open-source ERP: it's disposable. Many enterprises are faced with rapidly expanding manufacturing operations in China. Unfortunately, China is not being considered as part of these enterprises' global ERP rollout plans. These enterprises need to implement a cheap and cheerful ERP solution that can be easily replaced in the future. Two open-source options have emerged as possible candidates:
      • Tiny ERP holds promise as a lightweight ERP solution, but currently lacks both Chinese language support and a network of implementation and support partners. Localization is, however, a key feature of the product roadmap and a partner network is emerging. Currently immature, Tiny ERP will be a viable option by 2008.
      • Compiere is a robust open-source ERP product supported by a wide variety of consultants and Independent Software Vendors (ISVs). ZOAP Consulting (based in Hong Kong, with offices in Shenzhen and Guangzhou) offers both a Chinese language pack for Compiere, and support and implementation services. The primary limitation of Compiere is its modules for manufacturing planning and scheduling. These features are currently on the development roadmap.
    2. Hosted ERP hits China. In March 2006, NetSuite released its corporate strategy. The vendor of hosted ERP solutions noted a planned IPO and an aggressive expansion into China. NetSuite currently has clients in China, but intends to further pursue growth in the market. As with Compiere, the NetSuite product is focused on distribution rather than manufacturing, so it lacks planning and scheduling modules. Third-party functionality is emerging through its NetFlex ISV channel. Despite the relative lack of features, the hosted nature of NetSuite's offering is attractive to many enterprises wary of large IT infrastructure investments. NetSuite's weakness in the Chinese market is a lack of local implementation and support partners.
    3. Homegrown flavors now available. China offers several ERP flavors that were developed domestically as a result of custom development projects with state owned enterprises:
      • Bamboo Networks is a boutique consultancy based in Hong Kong with a development center in Guangzhou. It has completed a variety of projects for international companies, including the creation of a custom .NET-based ERP solution.
      • CDC Corporation, parent of China.com, is a large provider of technology solutions to the Chinese market. Known primarily for its online gaming offerings, CDC has recently moved aggressively into enterprise applications by acquiring languishing Western entities such as IMI, JRG Software, Pivotal, and Ross Systems. It is also involved in ongoing negotiations to purchase Onyx Software. CDC's intention is to take the base functionality provided by these products and introduce them to the domestic Chinese market in a hosted Software-as-a-Service (SaaS) format. The delivery platform will be the broad infrastructure and support capability of its China.com division.
      • HAND Enterprise Solutions was established in 1996 as a consulting firm to support Oracle and SAP implementations in mainland China. It has since established its own product called MAS (not to be confused with the Sage Software MAS product line).
      • Kingdee International Software Group is based in Shenzhen and employs more than 2,800 people, including 1,000 consulting and customer-service personnel. The Kingdee BOS ERP platform includes typical modules such as HR and financials and was developed specifically for the Chinese market.
      • UFIDA was founded in 1988 and currently has over 50 offices in mainland China, Hong Kong, and Japan. It is listed on the Shanghai Stock Exchange. UFIDA's focus has always been on the development and delivery of ERP, Supply Chain Management (SCM), Customer Relationship Management (CRM), and HR packages for the Chinese market.
    4. The Big Two have market presence. Both Oracle and SAP have achieved considerable penetration in the Chinese market, particularly in state-owned enterprises and in operating units of multinational corporations. Implementations are supported by the large international IT consulting firms and by domestic consultants such as HAND Enterprise Solutions. Unfortunately, the cost of these solutions is often prohibitive given the relatively small revenue base of many Chinese manufacturing units.
    5. The mid-market is big. Perhaps in response to the high cost of Oracle and SAP, the mid-tier vendors have all attained some success in the Chinese market. Companies like Epicor, Glovia (via Fujitsu China), Infor/SSA Global, Lawson/Intentia, and SoftBrands have both clients and offices in mainland China. The most successful mid-tier manufacturing oriented vendor in China is QAD. To respond to demand from the Chinese market, QAD opened a research and development center in Shanghai during the first quarter of 2005.
    6. Microsoft steps up with some help from Satyam. Recognizing the opportunity for its Dynamics family of products, Microsoft signed an agreement with Satyam Computer Services to establish a Satyam Microsoft Adaptive Solution Center. The goal is for Satyam to provide implementation services and ongoing support for Microsoft's enterprise products. It will be impossible to measure the success of this strategy until at least the second quarter of 2007.

    Key Considerations for Extending ERP Support to China

    1. Ask, "Is ERP necessary?" Many manufacturers have centralized both purchasing and planning activities. In such a case, a full-blown ERP implementation may not be necessary simply to record cycle and inventory counts. Less sophisticated reports may provide the same level of functionality without the expense and hassle of a full implementation.
    2. Prices range widely. Oracle and SAP implementations in China cost as much as their Western cousins. The list prices posted by the mid-tier vendors may seem considerably more attractive, but consider that licensing typically only accounts for 20% of overall ERP implementation costs. With mid-tier vendors, the costs of consulting, support, training, and business discontinuity can be quite pronounced. Finally, the open-source products are available without license costs, but support and consulting are considerably more difficult to find.
    3. Planning modules are elusive. The most basic open-source and hosted ERP options offer only basic functionality. These products are primarily focused on service and distribution models. So while they offer support for basic accounting features, they lack advanced planning and scheduling, or supply chain optimization features. Enterprises that require this level of functionality must begin their search with mid-tier vendors.
    4. The SaaS options are immature. Viable hosted CRM and ERP options exist in Europe and the Americas. The Chinese options are still immature. The major service providers must establish both data centers geographically local to the Chinese market and a consulting ecosystem to facilitate implementation and customization.
    5. The market is evolving rapidly. The ERP market in China is very young and is evolving rapidly. The composition of vendors, consultants, and alliances changes very quickly so enterprises should take care to develop in-house support and development skills.

    Bottom Line

    Manufacturers expanding into China have a wide range of ERP options. Consider the alternatives to avoid over-buying unnecessary functionality.


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