Enterprise Resource Planning Systems Break Down Data Silos
One growing pain many construction companies endure comes from a need to shift business and project management processes to a system that integrates data across all processes. Enterprise resource planning (ERP) systems do just that, and there is an upsurge of interest in them. But vendors and companies aren’t consistent when they use the term, and excessive claims are made.
As an idea, ERP, when used to unify data and processes and efficiently address well-defined business-management issues, is spot-on, convinced adopters say. Further, with improvements in hardware and software, the transition to ERP is getting more manageable all the time.
“When they use the term ‘ERP,’ it means different things to different people,” says Scott Fairgrieve, CFO at Shimmick Construction Co. Inc., Oakland, Calif. “The attraction is the ideal of having a fully integrated system at your company, rather than having an estimating system, a scheduling system, plus job costing, human- resources and equipment-maintenance systems. It’s having as much [integration] in the same system as possible.”
The phrase “enterprise resource planning” comes out of the manufacturing sector, in which software was applied to automate the process to make sure the flow of materials and resources continuously matched the needs of production and that the accounting system was keeping up.
Manufacturing is a big market, and many big companies have revenues in the billions. Many of those manufacturers’ ERP needs, as well as those of some of the larger construction firms, are addressed by major foundation-technology vendors like Microsoft, SAP and Oracle, with its JD Edwards Enterprise One suite of applications. These are commonly referred to as “Tier 1” vendors. Industry and sector-specific variants are crafted by resellers and partners and then specially customized to a firm’s needs by integrators and internal IT departments.
“Microsoft, Oracle and SAP all have grand ERP strategies. They all want to be the ERP solution for everyone,” says Christian Burger, president of Burger Consulting Group Inc., a Glen Ellyn, Ill.-based firm focused on information systems in the construction industry. “They are powers of industry, and they see this as one untapped market,” Burger says.
The demarcation of tiers quickly begins to blur, but the “Tier 2” vendors generally serve customers with an annual revenue of $500 million or lower. There is a range of costs, features and customizability, but Tier 2 includes most of the products designed for a particular industry’s use—like construction. These products can share adaptation capabilities and even software architecture with the Tier 1 products, but they are built more around bolt-on modules and out-of-the-box functionality than their more sophisticated siblings. Further, Tier 2 products require significantly less care and tending, although that varies depending on how detailed the customer wants the tailoring to be.
Market leaders vary by sector served, according to the results of the Construction Financial Management Association’s “2010 Information Technology Survey for the Construction Industry,” released on March 5. The more widely used products—job cost, accounting and payroll—can be integrated with project management; CMiC, Viewpoint, Penta, Computer Guidance Corp., Sage Timberline and Maxwell Systems all offer such products. “There is huge variation in the capabilities in project management and in the size of the companies [the vendors] would be able to support,” says Angus Frost, managing director at Burger Consulting.
“The Tier 2 companies offer out-of-the-box functionality in the tier they own,” says Burger. Some things that...