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Gartner: SaaS-based ERP can help with IT governance

A Japanese company that used SaaS-based ERP at an Indian subsidiary to lower costs and speed deployment found that the project also helped with IT governance.

One of the biggest surprises from Olympus Corp.’s decision to deploy SaaS-based ERP at a new Indian subsidiary is that it helped with global IT governance, according to Koji Motoyoshi, an analyst with the Stamford, Conn.-based research firm Gartner Inc. and author of a case study on the deployment.

“Historically, many companies in Japan don’t have strong IT governance globally. Companies tend to allow independent IT governance in each region,” Motoyoshi wrote in an email from Japan. “Olympus uses SaaS-based ERP to strengthen their IT governance,” he said.

The problem

Based in Tokyo, Olympus makes products ranging from cameras to microscopes and medical imaging devices. To bolster its medical business in Asia, Olympus opened a sales office in India in the spring of 2010.

The project faced many challenges, including the need to open the office in a short nine months. In the past, Olympus subsidiaries in the Asia-Pacific region more or less implemented whatever ERP they wanted, which led to a hodgepodge of systems throughout the company’s global operations. 

This time, however, Tokyo decided to take the lead on the project.

Since the new subsidiary would be tasked with supporting sales and repair services in India, the new ERP had to include purchasing, order management and inventory management, as well as financial management capabilities. It also had to be deployed quickly and inexpensively.  

The project team included six IT members and four from the business staff. The 10 oversaw tasks that progressed from fulfilling the basic requirements for the Japanese headquarters to India-specific needs.

The options for on-demand ERP

Olympus looked at several options but limited its search to vendors it was already using; it had enough ERP systems to begin with.

The company evaluated Tally, an Indian-made package for small and medium-sized businesses (SMBs); BANDS, another local SMB package, which is used in Olympus’ Singapore office; SAP ERP 6.0, used by several of Olympus’ offices in the Asia-Pacific region; and NetSuite, deployed in the North American subsidiaries.

In the end, Olympus chose NetSuite ERP for its sales and accounting functions and because it compared favorably to the competitors’ packages in quality, cost and delivery.

Integration with the Tokyo headquarters’ SAP ERP wasn’t much of an issue, Motoyoshi wrote. Olympus used comma-separated values (CSV) files for basic data exchange.

Olympus never considered using SAP Business ByDesign because the product wasn’t generally available in 2009, when the company was in its early planning phase, Motoyoshi said. Although Business ByDesign has been generally available in India since July of 2010, it’s still not offered in Japan, so few Japanese companies know much about it.    

“Olympus may migrate from NetSuite into Business ByDesign if they need to do so,” Motoyoshi said, adding that at the time of the interview with Olympus, the company was satisfied with NetSuite. 

"Good enough" ERP features, fast deployment

Thanks to out-of-the-box functionality that was "good enough” for the subsidiary’s needs, Olympus was able to get NetSuite running in roughly six months at a relatively low cost, the report states. Initial concerns over the stability of Internet access and the power supply never materialized. Olympus remains concerned about the risk of monthly subscription fees soaring over time as users are added and more licenses are needed.

NetSuite doesn’t have the breadth of features of SAP, including the ability to address things like fixed asset management. However, Olympus has found that because the system is simpler than an on-premises ERP, it’s easier for the company’s IT staff to learn how to customize it, according to the report.

The project succeeded because Olympus used a local consultant in India that provided low-cost localization services, a necessity because Olympus had never done business in the country. “Olympus was able to complete the local requirement definition efforts in a short time,” Motoyoshi wrote.

It also helped that Olympus acknowledged that it wouldn’t get the same kind of functionality as from its main ERP. As a result, it stuck with NetSuite’s standard processes except when it came to localization requirements, such as tax-related provisions.

Better IT governance

The project provided some valuable lessons learned, according to Gartner. One of the most important is that SaaS (Software as a Service) applications can reinforce IT governance policies.

SaaS-based applications are generally seen as IT governance risks because subscription fees may be paid out at the subsidiary level and not reflected in the IT headquarters budget, and because subsidiaries sometimes go their own way for implementations and upgrades. 

However, SaaS-based software can actually reinforce IT governance because subsidiaries are less likely to deviate from the standard features, thanks to the software’s typically more limited scope. SaaS-based applications are also easier for the head company to monitor, and there is little danger of “instance sprawls,” according to the Gartner report.

Olympus also realized the importance of preparing for the automatic upgrades that are  part of the appeal of SaaS-based ERP, but which can cause slight disruptions if a company doesn’t plan for them.

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