The Search Continues for the Elusive Integrated "Solution"
Levinsohn, Alan, ABA Banking Journal
Banking looks ripe for makers of "enterprise resource planning" software and their consultant/implementer cousins, and none too soon with mergers, the Euro, e-banking, and Y2K looming
"Reengineering the Corporation," Michael Hammer and James Champy's pithy 1992 manifesto that rocked corporate America with its siren call for outcome-based product development, triggered alarm bells among Fortune 100 execs, except perhaps bankers.
With that book, managers of companies who make tangible products "got religion"--a gospel whose bible is the business "process classification framework," In other words, their departmental and subsidiary walls came tumbling down. No more functional fiefdoms at staff and line levels. Everyone now marches to the same set of rules, i.e., do ABC first, then XYZ, organized around a common 26-letter alphabet. The result: people now talk--even communicate--cooperate--between business units and staff departments.
So, how did they do it? Massively complex database software known as "enterprise resource planning" (ERP) systems from companies like SAP, Oracle, Peoplesoft, J.D. Edwards, Baan, and others. The software runs on client/servers in Windows NT or Unix and replaces, or is connected to, so-called "legacy" systems (which got the name legacy because of the IBM mainframe legacy).
ERP systems maintain, mix, and match accounting, purchasing, customer, and other types of information to be manipulated and--this is key--integrated with stand-alone, functional, product specific applications--from the "front office" where transactions occur, to the back where they're posted, marched. reconciled, to the "middle," where financials and product usage data are analyzed. And that's just internally. Externally, they're "end-to-end" when they stretch back into the supply chain to connect seamlessly with suppliers, and forward to distributors and end users.
To date, banks have trailed manufacturers, distributors, and retailers in adopting ERP systems. But that may soon change.
In just the last three months, several of the software companies have introduced banking-specific and risk management software modules, and inked allegiances with ERP consultant/implementers--like Andersen Consulting and KPMG Consulting--to pool their expertise and jointly develop and market products aimed at the banking and financial services market.
These high-tech duos evidently see banking as unmined turf, perhaps because elaborate information technologies may be the magic bullet to make bank mergers work, not to mention function after January 1,2000. Also. ERP systems. when connected to analytical, risk management, data mining, and other types of software, may be the exact tool product managers need to make electronic banking truly pay off.
ERP is a segment of the software industry that's still-fragmented and growing at a 35%-a-year clip, says industry analyst Erik Keller of the Gartner Group, Stamford, Conn. But the makers are dependent on the implementers. And competent implementers are in short supply.
SAP AG, a German concern whose U.S. subsidiary is in Wayne, Pa., outside Philadelphia, is the granddaddy of ERP. Founded in 1972 by five former IBM engineers, SAP dominates the $10.9 billion global market for ERP software with about a 31% share, according to Advanced Manufacturing Research, Boston. …