Ramco Systems: Going beyond ERP
- 26 February, 2013 19:07
Late last year, when I was meeting A.V. Dharmakrishnan of Madras Cements, I was hardly prepared to meet a CEO who runs his business literally off an iPad.
Madras Cements is the flagship company of Chennai-headquartered $1 billion Ramco Group. The Ramco group has interests in textiles, cement, fibre cement products, software, surgical cotton, and bio-tech.
As impressions go, being operational in a traditional line of business-cement-one would hardly expect its CEO to be so high-tech. Using a wi-fi connection, Dharmakrishnan demonstrated to me how he could track almost all critical aspects of his company on a real time basis: What is the financial health of the company? Who is late or absent in office today? What is the stock situation in different locations? How are the windmills doing? He could even track the live transportation of his (cement) stock working with an antiquated Indian Railways system (live movement of wagons).
And he was showing me all this on his iPad-a demonstration of enterprise resource planning (ERP) on cloud. Later on, I came to know that Dharmakrishnan has banned paper, PowerPoint and Excel in his company and he demands everything to be live on his system. And he gets it.
How did he achieve such a high level of technological automation and sophistication (data on the go) for his company?
Of course, it did not happen overnight. Madras Cements started operations in 1957 with a cement manufacturing plant in the southern Indian state of Tamil Nadu. The company expanded to include seven manufacturing facilities with a combined capacity of 11 million metric tonnes per year. Besides cement manufacturing, the company operated several wind power sites with combined capacity of 185 MW that provided it with a cheaper power supply.
Manufacturing Portland cement is an extremely competitive business. To achieve efficiency in a market like this, the company's management needed to standardise processes across plants and establish the technology infrastructure to monitor and control costs effectively. Different systems and processes at its plants created difficulties for the management to create efficiencies and get that competitive edge. For example, there was a lack of a connecting infrastructure between locations (forcing each plant to develop its own independent identity) and a lack of standardisation of systems and processes. It hampered the management in making accurate operational decisions.
Things had to change.
Ramco Systems, a sister company of Madras Cements, came to its rescue. This company had started operations in 1989 and it specialised in the development and deployment of enterprise resource planning (ERP) solutions. It is the first ERP product company in India.
As the story goes (documented in a case study by Ross School of Business, Michigan, USA) by mid-1990, Ramco Systems had just finished the development of its e.Applications ERP suite. The fledgling company was in search of a client where it could showcase its new solution package. Ramco Cements, its sister company, looked like the perfect guinea pig for this. They offered to assist Madras Cements and solve its problem by deploying the recently completed e.Applications ERP suite.
A Reluctant Guinea Pig
But the guinea pig was cautious about this offer, even though it couldn't have come from a more credible provider. The proposition was fraught with risk as many companies had gone out of business because of failed ERP implementation. In addition, the proposed ERP system, e.Applications 1.0, while being a completely developed system, had never been tested in a production environment and also not customised.
However, the fact of the matter was that both firms needed each other badly-like the dramatic need of the two characters in a narrative. Ramco Systems needed to demonstrate a successful implementation at Madras Cements in order to be able to successfully compete in the ERP market. And Madras Cements needed to put its house in order in terms of its ERP requirements.
After the initial vacillation, when Madras Cements agreed to the offer, things didn't work out fine as feared. The first attempt to implement ERP failed and after facing opposition from the old guard, the e.Applications 3.0 system by Ramco Systems was finally implemented.
Having tasted success in the implementation of ERP Version 3.0, the company continued to use the application till 2008, when a need was felt for improvements in the system. That is when the company decided to upgrade the ERP to the version 4.2, which was a Web-based and centralised system.
This was a big leap for Madras Cements. When Dharmakrishnan first set forth on the ERP exercise, he did not even have a computer at his desk, let alone having computerised processes to track his business. Today, he is running his company off an iPad.
But this dramatic turn was only one side of the story.
The Emergence of Ramco Systems
On the other, the success of ERP implementation at Madras Cement gave the Ramco System's solution a validity that mattered in the market.
With this validation, it was time for Ramco Systems to spread its wings. According to a report in The Business Today, Ramco Systems had hardly any income between 1994 and 1997 but it spent more than Rs100 crore (about US$18.5 million), employed over 1,000 people, and designed Marshal 3.0, which was launched in 1997. It was Ramco Systems' first full-fledged ERP product. Microsoft founder Bill Gates launched it in India, which was quite unusual. It created good buzz for the product and the initial sales of Marshal 3.0 were brisk and impressive.
In 1999, the company became a separate entity and was led by P.R. Venketrama Raja, its current vice chairman and MD with the dream of fighting like an underdog in a market ruled by biggies such as SAP, Oracle and Microsoft, who together controlled almost 80 percent of the global business in ERP.
"Many years ago when we started this, we said there must be something which we can create and take to the world market," he tells MIS Asia. "In software we have enlisted many years of R&D with the sole aim of trying to create a fundamentally unique and powerful architecture which will dramatically simplify the creation and execution and running of enterprise solutions. An enterprise solution does not only consist of transactions. It consists of master data management, it consists of analytics, it consists of decision-making processes, it consists of optimisation systems.
"So all these things, how do you bring it all together into one simple platform so that the customer can benefit from all these things simultaneously? It's basically a mission and I think that's what we worked on for about more than a decade - to bring this architecture out into the market. Today I am proud to say that the whole product is fairly complete and working with hundreds of customers and now is the time to really take it to a larger scale."
It is fairly a big challenge that they have thrown to themselves. Why did they go into ERP solutions and not providing IT services like most Indian IT companies chose to do? "It's because of the vision we had. Otherwise, we could have easily done software services and other things which are also very important arms of this whole sector. We wanted to create something that is of fundamental difference and importance."
Such a Long Journey
For Ramco Systems, it has been a long journey of errors, failures and successes. Marshal 3.0 was designed on client server architecture, and was developed entirely on a Microsoft platform but when technology changed, the product again became obsolete. To become relevant again, Ramco Systems launched VirtualWorks in 2002, which allowed the company to "develop products that are technology-agnostic, easily adaptable and rapidly scalable with less manpower."
In 2008, the company launched a new product, Ramco On-Demand ERP (RODE), a "unique ERP product that taps an all-new market-small and medium-sized companies." It was a pay-per-use solution, and it offered ERP solution without demanding companies to invest heavily in hardware, software licences and engineers for maintenance. The company earned the trust of more than 300 RODE clients in India.
While Ramco was fiddling with its ERP offerings, success came from unexpected quarters. Ramco Systems had released a niche product called Ramco Aviation Solutions in the 1990s and it proved to be an unqualified success. The product became a blockbuster in the aviation maintenance sector (maintenance, repair and overhaul business)-20 percent of US airlines are maintained by Ramco. It accounts for 25 percent of the company's revenues. Ramco Systems is a world leader in Helicopter maintenance. It serves 40 percent of the commercial helicopter market in the US and its software is used to maintain about 1200 helicopters worldwide.
However, the Web-architected ERP product still struggled in the market. What was the reason?
"We've been in all the markets for many years, for 15-20 years, even the US market," says Venketrama Raja. "Those were the traditional ERP products but in the meanwhile, if you really want to be something big, you can't compete with traditional companies like a me-too product. We have to be fundamentally different.
"So while we were continuing to serve various markets like Singapore, Australia, USA and Europe and so on, we kept that fairly low key but put a lot of effort on creating this completely new platform. That has been mature and ready and has been in the market already; what I have been talking about at least for the last four or five years, so it is truly tested out. It is not something on paper or something that we are dreaming about today. It is truly tested, available today because an enterprise software also has to be truly tested and cannot be experimental and that is also done with hundreds of customers."
Is being low key and neglecting the power of brand building the reasons behind the challenges for Ramco's success in the ERP market? "I think ultimately a brand will represent a particular standpoint or point of view of the company in the customer's mind and we've got to create that point of view," agrees Venketrama Raja. "So a brand has to create a particular point of view in the customer's mind and that is what we have attempted to show that we bring value and we bring joyful experience. We bring something that was never thought possible in enterprise solutions. That is what we want to bring and that is what we are attempting."
ERP on Cloud
In May last year, Ramco Systems hired Virender Aggarwal as CEO who was formerly the president and Asia Pacific region head of HCL Technologies, one of India's top IT services company. This shows the company's hunger for more success and its serious intention to make its presence felt at a global level.
The evidence on the ground is that the plan is inching towards success. Its Ramco ERP on Cloud, and other products are gaining popularity in markets such as US and Australia. The company employs 1500 professionals across 15 offices spread across US, Canada, Europe, India, APAC, Middle East and Africa and has key customers such as Avaya, Caterpillar, CitiGroup, Eurocopter, GE, Henkel, and Intel, among others.
The company recently announced the results for the third quarter of financial year 2012-13 and reported that its global income including revenues from subsidiaries in USA, Canada, Switzerland, Singapore, Malaysia, South Africa and Dubai stood at US$12.36 million for the quarter ended 31 December 2012.
During the third quarter of financial year 2012-13, Ramco saw good traction for Ramco ERP on Cloud in Americas and added SPATIAL capability to its ERP product line with Google Maps.
With the success of its aviation software and some recognition of its ERP product worldwide, Venketrama Raja sees his company broadening its appeal. "We are not just an ERP product company," he says. "ERP forms only part of a complete solution for a company. We are a complete enterprise platform which brings together all the pieces. Just to give you a few examples, ERP is about transaction processing so transaction processing gathers all the data together. Then you have the analytics which brings all the things together and analyses something. Based on analysis you've got to make decisions so you need the business intelligence and all those sorts of things. You also need a product to be based on to optimise and make on-time decisions. Then you need something to extend beyond the enterprise. You call it the extended ERP. Then you also need to bring in other product lines like human resource management and extended ERP and distribution management which will make it a very powerful eco-system for an enterprise to truly get the vision of what ERP originally set out to be. So we are a complete enterprise solution and ERP is only a small part of what we do."
In his opinion, what his company is trying to do is something which is beyond ERP. "The problem here today is the industry is messaging that it is beyond ERP," he says. "I don't think the language is there yet in the market. So we have to bring people and say, "Okay, we are ERP" and then show them it's beyond. I think the language is not there; that's where we struggle because we cannot say, "We are ERP plus BI plus this, this and this." We can't keep saying that altogether. What does this all mean? It's an enterprise platform, which makes an enterprise's life far simpler and far more valid. How do you bring that message out? It's difficult when you have to implement a language to describe this."
With time, Venketrama Raja's ambitions have only grown bigger and it seems his team's efforts are finally going to pay off.