ERP, componentization, and e-commerce

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October 1999

ERP is growing and changing to meet interest in e-commerce and demands for more managaeable, scalable modules.

By Alan Radding

When it comes to e-commerce, why reinvent the wheel? That’s the thinking of many IT organizations in their scramble to create e-commerce applications. As they look around for the transaction processing and order fulfillment piece behind their e-commerce storefront, many think they have found it right under their nose — in their workhorse ERP systems. By extending the existing ERP system to support e-commerce, organizations not only leverage their investment in the ERP solution, but can speed the development of their e-commerce capabilities.

ERP systems, however, have proven difficult to change and extend. Barricaded behind complex, proprietary APIs and based on complex, nearly indecipherable relational database schemas, ERP systems do not readily take to e-commerce. However, IT managers are finding an increasing set of options for not only extending these systems to support the Web and e-commerce but for other key activities, such as decision support.

Shifting focus of applications Source: 1999 SG Cowen/Datamation Networked Computing Survey

ERP penetration is high Source: 1999 SG Cowen/Datamation Networked Computing Survey

E-commerce applications are booming across the board Source: 1999 SG Cowen/Datamation Networked Computing Survey

Underlying the new options are ongoing initiatives to break ERP systems into separate components (componentization), open up the core databases and proprietary application interfaces, and provide tools for customization. Not all these changes, particularly capabilities to customize the systems, are equally welcomed by IT. Similarly, IT views componentization as something that benefits the vendors more than directly benefiting the user organization.

However, most of the efforts to extend ERP, particularly in the direction of the Web, are finding strong IT endorsement. “The Web is exactly what we want, and beyond the Web, the whole e-commerce thing,” declares Dan Spaulding, director/management reporting, Halliburton Company, a Houston-based diversified energy company. Halliburton operates a single instance of SAP worldwide.

Similarly at Colgate-Palmolive Co., New York, which runs an extensive SAP implementation, the Web and e-commerce are pivotal in the company’s future plans. “We are counting on the Web for things like employee self-service,” reports Chester Gittleman, director/human resources information systems. Using a browser over a corporate intranet, employees could update and change basic HR information, as when new dependents arrive for tax reporting purposes.

Peoplesoft user Metropolitan Insurance Co., New York, also is counting on the Web. If nothing else, Web-enabling Peoplesoft will eliminate the nightmare of installing client software on desktops across the global company, insists Victor Berrios, business systems consultant at the company.

If users want the Web and e-commerce from their ERP solutions, the vendors certainly are trying to oblige. SAP revealed a slew of Web and e-commerce solutions at its recent SAPphire conference. Since then, SAP introduced mySAP.com, a suite of e-commerce components for SAP. Oracle has numerous initiatives, including one that will allow its ERP and e-commerce solutions to share the same database. Baan and JD Edwards are both preparing to roll out e-commerce modules. Finally, Peoplesoft’s newest version includes a number of e-commerce capabilities, including support for online procurement and eStore, PeopleSoft’s online sales and customer management solution.

By extending the existing ERP system to support e-commerce, organizations not only leverage their investment in the ERP solution, but can speed the development of their e-commerce capabilities.

Despite the hoopla around the new ERP Web/e-commerce initiatives — each announcement accompanied by a blizzard of press releases and slick presentations and demos at a user conference — some long-time observers don’t see much that is fundamentally different. “Very little of the code underneath has changed,” observes Jim Shepherd, senior vice president, AMR Research, Boston. “The vendors are still selling the same applications to the same buyers to solve the same problems.”

The first stage in the ERP march to the Web is to allow browser access through support for HTTP, HTML, and Java. This stage is pretty much complete, reports Steve Bonadio, senior analyst with Hurwitz Group, in Framingham, Mass. The next stage, which has just begun, is to extend the ERP applications themselves to the Web, where they can be accessed and run by outside partners and customers, he notes.

With the Web, the vendors are falling into line with what their customers actually want and need. By contrast, a number of the other recent bandwagons the ERP vendors have jumped upon recently — componentization, open interfaces, database access, and customization tools — were leading to problematic destinations at best. It is not that such initiatives were bad or wrong, but they often promised more than they delivered, or they delivered capabilities relatively few customers could or should use.

Componentization Componentization refers to the act of breaking up large, monolithic ERP systems into individual modules or components that would work together. By breaking up the large applications into components, vendors would be able to more quickly fix or add functionality. The accounts payable component, for example, could be enhanced without having to touch any other the other financial components or any of the other components, such as planning or logistics. And once the ERP vendor has established a component architecture, it becomes easier and safer for IT to customize the systems.

“Componentization is absolutely essential to enable ERP systems to support e-business activity,” asserts Vic Muschiano, director/enterprise applications, ARC Advisory Group, Dedham, MA. Componentization also helps the vendors extend the core ERP system with supply chain, CRM, and SFA solutions. The new e-commerce capabilities are being delivered as individual components.

Interest in componentization, however, began long before e-commerce. “The perception at the time was that these applications were too big and unwieldy. They needed to be more flexible,” explains Joshua Greenbaum, principal, Enterprise Applications Consulting, Berkeley, Calif.

With componentization, a customer could selectively upgrade — upgrading some components without having to upgrade the entire ERP solution, which usually entails a substantial effort.

Componentization would not only make it easier for the ERP vendors to enhance their solutions but make it easier for customers to upgrade the software. With componentization, a customer could selectively upgrade — upgrading some components without having to upgrade the entire ERP solution, which usually entails a substantial effort.

Selective upgrade still appeals to some customers. “HR might have requirements that Finance doesn’t so we might want to apply an upgrade independently,” says Marcus Brigance, SAP HR implementation manager, Reliant Energy Inc., Houston. But in practice, the company discovered, the ERP system is so intertwined that “we would have to take a hard look before we try to upgrade one module without upgrading the others,” he continues.

Componentization has proven a hard sell with ERP users. “It runs contrary to the whole idea of ERP solutions,” says Spaulding. Adds Colgate-Palmolive’s Gittleman, “We’re not interested in components. We want to leverage the integration of the whole thing.”

Componentization, however, is critical for vendors to move these systems into e-commerce and to provide other capabilities and most vendors insist they remain fully committed to it, although progress has been slow. The reason: componentization is enormously difficult to achieve even when the commitment is solid. At best today, some vendors have succeeded in creating large-grain proprietary components, which are simply large function modules.

SAP, Shepherd reports, has made progress in breaking its core offering into large-grain components and all new pieces are being added as components. JD Edwards was embarking on a rewrite of its ERP offering when the component craze broke, so the company incorporated componentization into its redesign. Oracle also rewrote large amounts of code and has managed to componentize to a large extent. Baan, cash strapped, talked a component game and developed plans, “but its plans are a long way from reality,” notes Shepherd.

Open Interfaces If ERP customers aren’t demanding componentization, they are embracing the more open interfaces and improved integration capabilities that the vendors are providing, capabilities intended for the componentization effort. SAP, for example, has created over 1,000 business APIs (BAPI) for use in integrating third-party products with the core ERP system.

“We can’t stress openness enough,” insists Spaulding, who chairs the Business Information and Analysis Group, a 300-member group that focuses on management reporting for SAP. This requires open APIs to enable the integration of third-party data reporting and analysis tools as well as other tools.

The problem isn’t solely an SAP issue. Metropolitan Life wanted to let managers see workers by their title and position, who they reported to, and other basic information necessary for managing staffing. What the company needed was a basic organization chart. Simple enough, but Peoplesoft by itself couldn’t produce an organizational chart although all the necessary information resided in the HR modules.

Instead, the company turned to Org Publisher, an add-in that easily integrates with Peoplesoft and other leading ERP systems. Because of the published APIs, the company could easily integrate Org Publisher with Peoplesoft by itself, notes Berrios, saving the time and cost of calling consultants to do the job.

Even with published and certified APIs, the integration job isn’t necessarily easy. Murdock Madaus Schwabe, Springville, UT, a marketer of herbs, vitamins, supplements, and minerals under the Nature’s Way label, looked at SAP’s certified APIs to integrate its third-party warehouse management system and a payroll system with the core ERP solution before deciding to write its own interfaces. “We would have spent more money trying to get the certified interfaces to work than to write one ourselves,” recalls Bill Waters, director/information services.

Database Access Similarly, the promise of open database access has proved elusive. The major ERP systems are built upon a relational database as the central data store. “It was a big selling point at the beginning that there would be easy user access to data; since it was relational, you could just go get it using SQL,” explains Shepherd. In truth, it is not easy and not just anybody can access the data, he continues.

First, the ERP databases are huge, consisting of 8000, even 10,000 or more tables. These tables have cryptic, highly abbreviated names. In addition, the way one designs a database for ERP transaction processing makes the data almost completely useless for business-oriented reporting and analysis, Shepherd points out. The normalization required to expedite transaction processing “makes even DBAs hard pressed to do ad hoc reporting. It is completely forbidding,” he notes.

Even independent vendors, who once expected a lucrative niche in ERP data access and reporting, find it difficult. Nature’s Way, for example, uses Crystal Reports for SAP reporting, but difficulties accessing the SAP tables led the company to build its own intermediate data warehouse. The company extracts SAP data to the data warehouse, from which it can access the data using Crystal Reports, Waters explains.

[T]he promise of open database access has proved elusive. … [I]t is not easy and not just anybody can access the data.

Increasingly, the ERP vendors themselves have had to provide the data warehouse. “In essence, the companies have to provide a parallel schema in which the data is organized in a friendly, useful way,” says Shepherd. Oracle, for example, offers integrated data access, but the data is organized as a separate set of tables inside the main Oracle ERP database. SAP provides its business information warehouse (BIW) as a separate module. Independent parties offer data marts that perform the same function.

Open database access, however, is not something in which customers are likely to lose interest. “It is very important that we access the information,” insists the ERP implementation manager at a large media company. The company opted for Oracle Financials in large part because it promised the easiest data access. “We can use SQL, and it doesn’t take an Oracle DBA just to run a query,” he reports. Still, it is not something just any manager can do. “The bottom line: You have to learn SQL and have some basic knowledge of table structure,” he says. Even then, the company gives selected power users two weeks of intense training before they can access data from the ERP system.

Customization While pressure to make data accessible will continue, the clamor to customize ERP applications is dying down. For a while, smaller ERP vendors built their products with 4GL tools and touted the ease with which those products could be customized using the underlying 4GL. Today, however, “there is a very broad awareness on the part of both IT and business managers that modifying ERP software is the wrong thing to do,” says Shepherd.

Still customers occasionally must modify the ERP system. “Customers need flexibility,” insists Muschiano. SAP provides ABAP, a proprietary programming language. Oracle has development tools for Oracle Financials. Of the major players, JD Edwards has the most flexible customization initiative, he continues.

The pitfalls, such as complications when upgrading, force organizations to customize with care. “Customization is pretty dangerous, but there are some processes that you just have to do differently,” says Brigance. When Reliant Energy has to customize SAP, it uses ABAP. “We are very careful. We tightly restrict what we do and we document everything very well,” he adds.

Others, like Colgate-Palmolive, steer clear of customization. “We use ABAP but only for data access, not customization,” Gittleman reports.

While the Web and e-commerce will continue as a major ERP direction, even more ERP trends are pushing onto the radar screens of industry observers and IT managers. Greenbaum identifies outsourcing (ASPs), analytical applications, and knowledge management as the best prospects among the next wave of ERP hot buttons. The lesson to draw, however, from the past few years as ERP fad after fad jumped into the spotlight and then receded almost as quickly, is to be selective. Some, but certainly not all, of these trends will prove worthwhile.