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TECH TALK: Enterprise Software: The Enterprise Software Factory

March 28th, 2001 · No Comments

Today, installations of enterprise software and consulting services cost upwards of USD 100,000, and in most cases, run into millions of dollars. This has limited the installed base of the big enterprise software systems to a few thousand. It is estimated that SAP has 13,000 installations, Oracle 8,500, PeopleSoft 4,700 and JD Edwards 6,000. Add all of them up and one gets about 33,000 installations. Of course, there are many smaller players also in the market.

What would happen to the market if the enterprise software suite cost a fraction of the USD 500,000 average that most of the “best-of-breed” enterprise software solutions cost? There are perhaps 25 million companies in the world. Can the market be expanded dramatically if the price were dropped dramatically? Can the software entry point be used to offer additional services to these enterprises, thus dramatically expanding the market?

How can Indian companies target the enterprise software space? To search for answers, we need to learn some lessons from both Cipla and Microsoft. Cipla used price as its weapon as it took on the established companies in the African AIDS market. Microsoft integrated the desktop productivity applications into a suite (MS-Office) to take up companies like Lotus and Borland. This is what companies entering the enterprise software space need to do: create an integrated e-business suite and offer it at a fraction of the price of the bigger players.

To build the enterprise software products, developing companies need to build a software factory, which takes specifications from the best-of-breed offerings available in the various enterprise software verticals (CRM, SCM, ERP, EIP and eCommerce), focus on perhaps 20% of the features that are most important to begin with, and build the software.

[Note: CRM stands for Customer Relationship Management, SCM for Suppy Chain Management, ERP for Enterprise Resource Planning, EIP for Enterprise Information Portals. In simple words, CRM manages the interactions with customers, SCM with suppliers, ERP takes care of the back-office (finance, admin, HR and operations), EIP offers employees an integrated and personalised view of the information they need.]

Here then is the product opportunity: create scaled-down version, black-boxed, re-engineered versions, at a fraction of the price, and offer enterprises an integrated e-business suite, built out of Lego-like components. There needs to be a single enterprise model, a single data model, a single customer model, so that data needs to be entered only once across the enterprise.

The bigger enterprise software vendors’ cost structure will not enable them to compete because this will be at least one-tenth their possible price point. This will be a disruptive technology for the existing players. This solution can thus10-10-10 the industry: 10x cheaper, 10x faster (built using the 3-tier architecture and for the Internet) and 10x reliable (built bottom-up using the latest software tools and methodologies).

Tags: Tech Talk

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