It has been made to sound almost transcendental: "Order out of chaos. . . . . Worshipping the data. . . . Replace visions of orderliness with visions of empowerment."

But also like an ordeal: "In the second phase, productivity usually suffers. This part of the journey is like drowning. ‘I’m terrified,’one CEO confessed."

Or like data nirvana: "We replace inventories with information" . . . . . "It’s the new mantra for competitive edge."

What is it?

ERP. Enterprise Resource Planning.

As described by the leading vendor, ERP is "the ability to deliver customer-centric, open, personalized and collaborative inter-enterprise solutions on demand." It is a window of opportunity for printer vendors. But an intimidating one, since for the non-IT professional, this movement tends to be described in somewhat arcane terms.

A QUIZ Which of these business organizational structures is seen as the most appropriate for the information-centered organization of tomorrow? For the answer, read on.

I.T. Strategies consultant Patti Williams has the knack of cutting through the fluff to the heart of the matter and relating it to the concrete concerns of our industry. "What it is basically about is enabling parts of your company that didn’t talk together in the past to talk together now. For example, making sure that marketing can talk to manufacturing. Not just verbally, but with data, making data accessible throughout the organization and, if desired, by outside organizations.

"To get more specific, let’s look at digital printing. For it to move deeper into industrial applications there has to be a common data stream including both data and graphics. For example, if you’re making widgets, you need to know how many to make, and the marketing group will need to know pricing and timing and the data needed for sales literature for these widgets. Packaging. Point of sale signage. Product support will need the images and the data for instruction manuals and the files or documents needed by those who staff their help lines. But right now each of these functions tends to be a discreet unit within most companies. ERP is essentially defined as an integrated set of software modules that shares data across key organizational applications."

As explained by Patti, ERP puts the infrastructure of an organization into a common platform. It allows improved processes within a company and also much more visibility of all the data that gets generated and processed within a company. Some people see it as a subset of data mining. By whatever term, the goal is to create easy company-wide access to all the information.


Opportunity

One of the remarkable aspects of ERP is that companies are going out and spending huge amounts of money to implement enterprise-wide systems, often causing intense organizational stress throughout the whole company, yet they have no way to gauge whether it is working. The impacts are so sweeping and so ephemeral that the metrics to measure success are simply not there.

"The impression I’m getting is that ERP is at least partly about trendiness," Patti concludes.
But trendiness is real, in that it is really prompting many major corporations around the world to restructure their companies, to undertake an in-depth self-examination, and to budget large sums to implement new processes and lines of communication. This means the opportunity is also real.
ERP presents an opportunity for the vendors of digital printing on at least four levels—

• companies attempting to implement ERP are rethinking their systems and have budgeted major sums to the process, so tend to be open to new initiatives;
• more specifically, accessing all the data throughout a company creates a demanding but realistic market opportunity for networkable digital printers, ranging from decentralized PC printing to high volume production printing, to labels and barcode printing, and to wide format and color printing;
• enterprise software may well be appropriate for the internal operations of companies in the printer industry;
• finally, for the printer company which has networkable printers and takes the initiative, there may be an opportunity to partner with the ERP software vendors to have them integrate hooks within their offerings to allow their customers easy integration of specific printer models.
  

ERP, or at least ERP-like software products, are not new. The leading vendor, SAP, introduced the concept in 1988 which gave them a jump on its competitors. Now SAP is under fire as late in relating their widely used enterprise products to the Internet and are engaged in a somewhat frantic catch-up effort.

Software that can be part of ERP or from which ERP has grown includes supply chain and customer relationship software, digital asset management (DAM), meta-directory software (described as consolidating islands of information), and data mining and warehousing. ERP has been described as building on decades old programs such as Manufacturing Resource Planning (MRP) and Just-in-Time (JIT) inventory control.


The Journey

Implementing ERP can be a long and sometimes painful journey, according to Patti. "When you put in one of these systems, you begin with looking at productivity. This means you may be putting in a whole new process as well as the systems to do the process, for example, new accounting software as well as new processes for doing the accounting. Your people have been doing their job one way for years, and now new software comes in and suddenly everything has to be done the way the software is set up. The journey is invariably described as difficult, as stirring up resistance, and at least in the short run causing productivity to drop. Yet people are spending millions and millions of dollars to install these changes in their companies. I’ve talked with someone from a nuclear agency who says they spent $96 million dollars to implement a new PeopleSoft system for human resources."

Figure 1: The process of implementing ERP has been described by Jeanne Ross of MIT’s Sloan School in allegorical terms . There is the Approach (design), the Dive (implementation, a time of some confusion and loss of productivity), Resurfacing (stabiliz-ing), Swimming (continuous improvement), and, finally, Transfor-mation (a goal which so far has proven elusive).

Why is does it require such a large investment?

"Well, first you normally buy the software, and then you may have to hire consultants to come in and help you implement it. There are a couple of ways to do it and none seem easy.

"One ERP evangelist describes the process as being like a diver jumping off a cliff. Here you are contemplating the dive and here you dive off. Then you need to struggle to swim up to the surface—to where you were before you made the commitment—and try not to die. Then if all goes well you swim to shore and are so to speak ‘reborn.’ Right now, of course, I don’t know if there are any companies that have been transformed, but that is the goal. You would be ideally transformed into a company ready for the next millennium."


The Need

There is major financial investment. There is disruption of productivity. There is pain. And there are no clear metrics to gauge the effectiveness or whether the goal of "transformation" has been reached. What, then, is the need that drives companies to implement ERP?
Motivations for investing in ERP vary widely. Six reasons cited as most common by MIT consultant Jeanne Ross, based on a survey of users, include the following perceived needs:

• common platform;
• process improvement;
• universal data visibility;
• operating cost reductions;
• increased customer responsiveness; and
• improved strategic decision making.
  

One large corporation in the survey reported that they decided to invest $30 million in a SAP enterprise program since the cost was no more than it would have been for patching up existing systems for Y2K compliance. Johnson & Johnson is said to have spent $100 million on ERP in part because of customer feedback. They were highly decentralized, with some 160 operating companies. Yet many of them had common customers who found the company’s fragmented marketing approach a problem. In response, J&J developed ties to link its many operating companies, supported by enterprise software.

Other companies were heavily centralized, such as trucker

Schneider National. Changing conditions in the 1990s led them to push operating decisions out to the customer site in what looks like a form of facilities management—in effect, decentralization. The changes implemented by Johnson & Johnson and Schneider are both seen by Ross as examples of a movement toward what she terms a "federalist" structure—diagram B in the front page quiz.. This means that a lot of the decision-making is decentralized toward local sites and what had been the headquarters becomes the "core" or hub.

But corporate objectives such as these are not new and do not explain the power of the lure of ERP. Behind these specific triggers lies a major sea change which would seem to be the real driver—powerful enough, for example, to prompt Citicorp to invest a reported $750 million in a massive global database system.

The sea change is the exponential acceleration of computer and communications price/performance. One version of the oft-cited Moore’s Law holds that microprocessor price/performance doubles every eighteen months. The data capacity of fiber-optic cables is growing even faster. These capabilities have driven proliferation of information systems throughout business and industry.


The Fact Gap

Any such massive change gives rise to a period of disequilibrium. One observer has termed this effect in business management as "The Fact Gap" and has made an attempt to quantify it as shown in Figure 2. Available business data has grown exponentially, while analytical personal has dwindled. But decision-making demands have continued to rise.

ERP can be seen as an attempt to restore equilibrium by taking the computer and communications power which has created the fact gap problem and using this same power to deal with it. The cause can also be the cure. Or so those who invest in ERP hope.

But that is theory. In practice, the results have been mixed. One problem has been stress created by what is usually a miss-fit between the software, which comes from outside, and existing company processes. In most cases, processes have to be changed to fit the software, and change triggers resistance. Also, people tend to be possessive about their information databases and resist seeing them opened more widely. The process is usually more far reaching and takes longer to see though than expected. The time from signing the contract to "go-live" ranges from one to five years. The cost of the software and consulting required may well be minor compared with the cost of the disruption and training needed to fully implement the program. Behavior changes may be required and the very culture of a company uprooted.

Information technology is now being elevated to the level of the other major company resources, sometimes referred to as "the four Ms"—money, materials, machines and men (or rather, people).

Figure 2: During the period from 1990 to 1996 the exponential growth in available business data has far outstripped management’s capacity to utilize it, as shown in this plot published by The Gartner Group. In the years since then the gap has continued to widen, with ERP seen as a way to use the technology that creates the gap to close it.

"A lot of this allows you to develop tighter relationships with your suppliers as well as your customers," Patti notes. "And ultimately your customer will talk with you about what they want and you can talk with your supplier. It allows you to streamline your whole supply chain. Your system would talk to your supplier’s system. It’s something like streamlined EDI, Electronic Data Interchange, which dates from the 1960s and 70s. But most of these were proprietary systems, so one system could not talk with another. What they are trying to do today is have all the systems linked by a structure so everyone can communicate, customers as well as suppliers.

"Another major shift that could result from ERP is the number of suppliers companies use. In the past, in efforts to streamline, supplier lists have been cut. Now a major manufacturer can just put out an RFP on the Web with the specs and anyone who finds it and can satisfy the specs will get the business. So it gives smaller companies greater chance to get the business. It should increase the number of suppliers. On the Web everyone looks the same."

All this leads to what is described as a totally new organizational environment with greater emphasis on process, strategic vendor alliances, and constant change. Rather than pushing products on customers, the emphasis is on responding to their perceived needs.

"Even a product-driven company such as Johnson & Johnson has been prompted by the process to redefine its mission," Patti reports with wonder. "One of their top managers says they are no longer in the product business. They are in the knowledge business. The 90s seem to have been the "solutions" decade. Maybe the 00s will be the ‘knowledge’ decade."


Printer Opportunities

Implementing ERP requires a team. Patti sees printer vendors as part of that team.
"Major changes are happening now and they impact digital printing," she observes. "It is a radical change in the way things are done. People are already looking at ways to make data common across all parts of their business. This would suggest that a digital printing capability is—or at least should be—a part of these sweeping innovations. Companies are already in upheaval, and people are looking, desperately in some cases, at ways to adapt to the changes and make them work. If they are showing a willingness to change the structure of their entire organization in order to conform to new ERP systems, they are certainly open."

As you go up the management ladder, Patti feels executives are likely to understand less and less of what digital printers can do for their business and how they can be integrated into systems and their corporate strategy. "When we see companies willing to spend hundreds of millions of dollars to have their systems talk together, there just has to be a role for digital printing. The job for us is to define the role of new generations of printers within these systems.

"Another effect of ERP is to elevate the role of the CIO as a major player in planning the strategy of a company. In the old days the CIO was just a person who put together the systems and took care of the problem when the system went down. Now, the role of IT has changed dramatically. The IT manager is playing an increasingly important role in setting directions for the company. The systems operation is no longer just a service bureau for the organization. This change in the structure of the company means it is the information systems management that will be controlling more and more of the hardware including printers. It used to be the CFO who was seen as in line to run the company. We can now look forward to an era in which it will be the CIO. It is the top information officer that needs to be educated as to the potential of digital printing to support the ERP-oriented restructuring. We need to be selling more to the world’s CIOs."


Printronix: ERP Friendly

Enterprise software as it stands does not lock in or lock out any specific printer vendors or printer technologies. However, at least one printer company has seized the initiative and partnered with an ERP provider.

The company is Printronix, the line printer company that pioneered impact line matrix printing in the 1970s. Ralph Gabai, VP of sales and marketing, tells us they have developed a unique relationship with SAP, the leader in ERP software products. "We’re working with ERP software suppliers to develop middleware to tie printer management with online global management of a business. SAP, for example, has hooks that provide for things like label printing. We have developed our own middleware that lets SAP provide data for our device types, viewable on a Web page. No one else offers this."

According to Reggie Twigg, the company’s software marketing specialist with responsibility for ERP and network software, they have developed their own SAP user interfaces to let SAP users integrate Printronix printers with minimal expense. They developed the capability, he says, out of their own experience integrating a SAP system for their company.

As explained by Twigg, SAP can integrate any printer, but there is no literal plug and play. The user normally needs to add interfaces to link the printer to the given application. This can require a SAP consultant to install the printers. In the case of a bar code or multipart form application (a Printronix specialty), it is still more difficult. To integrate most printers into a SAP network, according to Twigg, the user must install a SIMM (single in-line memory module) into their printers at around $350 each, plus appropriate software.

With Printronix, no SIMM or special programming is required, he says. "It’s a funny thing: people spend millions of dollars to install an ERP application—the average cost is a bit over ten million dollars—and then they say, ‘Wait a minute. I need to get all this stuff to print. It’s an afterthought! So then we at Printronix are asked to get involved as a consultant, to work with the ERP user’s consultants since we understand better than anyone how to get print out of the system. Our channel partners are happy to bring us in since they realize we have the expertise. We work with the channel and the customer to integrate print into the system."

Is Printronix uniquely positioned to interface with ERP software products? It no doubt helped that they learned by implementing enterprise software themselves and thereby had a customer relationship with SAP. Since manufacturing and inventory processes are an important part of ERP software, Printronix’s specialized labels and barcode printing niche no doubt also helped. It would seem that whatever the strength may be of given printer vendors, similar relationships could be built by virtue of the enterprise-wide nature of ERP.


Summary

ERP—Enterprise Resource Planning—is a loose term that has been defined as an integrated set of software modules that shares data across key organizational applications. In this month’s roundtable, I.T. Strategies consultant Patti Williams discusses the significance of ERP to the digital printer industry.
Despite the difficulties encountered in the long process of implementing ERP, over the past decade many major corporations around the world have been spending huge sums of money on ERP software. Johnson & Johnson reportedly has invested $100 million. Citicorp is said to have spent around $750 million for a massive global database system. One wonders what promises drive such large commitments.

Whether or not the benefits are worth the cost, or whether it is just the popular buzzword of the decade, ERP represents a very important opportunity for printer vendors. Because it leads to restructuring, prospective customers are open to new hardware to complement the new software. It may be productive to explore the applicability of ERP to your own company. It may also be possible to partner with ERP vendors to program hooks for your printers so users can plug and play without additional expense.

The process of implementing ERP has been described by Jeanne Ross of MIT’s Sloan School in allegorical, almost spiritual terms (Figure 1). There is the Approach (design), the Dive (implementation, a time of some confusion and loss of productivity), Resurfacing (stabilizing), Swimming (continuous improvement), and, finally, Transformation (a goal which so far has proven elusive).

The needs that drive a company to undertake such a journey vary. Besides triggers specific to given companies there is the very real sea change of exponential improvements in the cost/performance and capacity of microprocessor chips and data transmission channels. This has created The Fact Gap (Figure 2). ERP may be seen as an effort to close this gap with the technology that caused it, to restore equilibrium.

Results experienced by ERP users have been mixed. IT resources have been elevated in importance, relationships with customers strengthened, and orientation evolved toward a constant change and knowledge rather than structures and products.

It is suggested that to take advantage of this trend printer vendors need to reach the CIO, whose stature has been significantly elevated. One printer vendor, Printronix, reports developing a relationship with SAP, the leading ERP vendor, with the result that SAP customers can easily hook Printronix printers into their ERP applications.

In conclusion, Patti urges action: "Today, with companies budgeting so much money and attention to restructuring in response to this leap forward in IT capability, ERP looks like a wave we can’t afford to miss."