Building better businesses
With the financial crisis at hand the question is: what are businesses going to do about it? The response many businesses in the region have is to look inwards and improve internal business processes in order to hold down the fort until the onslaught subsides. The next and perhaps more important question is: how will regional businesses restructure their organizations?
Despite the dismal undertone of the business news coming out of the region, there are a few encouraging signs. One sector that is doing surprisingly well as a result of the need for businesses to restructure and improve efficiency is the Enterprise Resource Planning (ERP) industry. According to the International Data Corporation (IDC), ERP growth within the GCC will range between nine and 12 percent, an enormous figure considering many regional states will not grow at all this year.
"We will probably have the best month we have ever had this month," says Bill Tomlinson, general manager of Dynamic Vertical Solutions, a multinational Microsoft partner that specializes in vertical add-on solutions to Microsoft Dynamics ERP platforms.
Much of this anomalous growth results from owners and managers realizing that ERPs can increase efficiency for them.
"Before the crisis there was more time and more money," says Sergio Maccotta, managing director of SAP Middle East and North Africa. "Now companies are taking the opportunity to change, through IT adoption, in order to improve their internal processes."
The industry itself is also experiencing a paradigm shift in relation to its operating environment. Before the crisis, many regional businesses were hesitant to adopt standard ERP processes, opting instead to fit the system to their businesses or not to adopt one at all. Today, however, the tables have turned.
"What we are seeing that we didn't see before is that many of the upper to mid-market organizations are coming to us, while we used to go to them and try to prove our solutions," says Tamer Elhamy, regional business solutions manager at Microsoft Gulf.
What's on offer?
The ERP companies in the region are increasingly being queried about how their systems can help companies save on the more costly elements of doing business and keep in touch with their customer base.
"People want to manage their [human] resources a lot better now so they are looking for payroll and HR solutions more than ever," explains Tomlinson. Maccotta adds that, "the money in the market is lower, so in order to secure your portion you have to execute better and stay closer to your customer."
It should be noted that internally, ERP solution providers are also benefiting from some of the more sinister effects of the global downturn, such as rising unemployment, decreasing real estate valuations and weakening currencies. Although there has been "no drastic change," according to Maccotta, in the resource pool for providers, there has been a decrease in the acquisition and retention costs of consultants for providers. "The [Indian] rupee rate is at 51 to the dollar, whereas it used to be 39 to the dollar and that cuts 25 percent of cost because I am on dollar fixed," says Tomlinson. "Another benefit of the crash is that all the rents are down by about half, so if you want to bring in some big people for a project then you can do it cheaper and it's making our job easier."
The argument within the industry, however, is centered around the size of the solutions on offer.
"Many of the customers are deciding to adopt an ERP to increase their efficiency but they are trying to start with the minimum number of users and functionalities and taking a step-by-step approach," says Elhamy. That approach is prompting many people in the industry to predict that smaller and less expensive ERP solutions will be the trendsetters in the future.
"In the global scheme of things, SAP and Oracle's figures are down because they are too expensive. People are more cash conscience now and are actually exposing the product for what it is," claims Tomlinson. Perhaps unsurprisingly, that assertion is being bitterly contested by the larger and more complex solution providers.
"I don't agree when you say we are more expensive because our solution is extremely flexible, as well as scalable, and can fit any kind of business," counters Maccotta. "We still see a lot of demand and having the vertical competence is putting SAP at a competitive advantage."
© Executive 2009
