ERP Implementation at BPCL

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The BPCL-ERP Story Contd...

In the pre-ERP era, companies were largely confined to local markets and all managerial functions were managed by a single set of people. However, as businesses became global companies' activities grew beyond local boundaries and more people were brought in to manage the businesses. While the departments within the companies grew, they also set up their own procedures and hierarchy. Within departments, information moved upward. Due to the upward movement of information, it was shared between departments at the top level only. ERP thus aided in effectively managing the resources of the organization. The ERP market was widely spread with the top 10 players accounting for almost 48% of the total market, the rest of the market was occupied by small and regional players. The ERP market witnessed substantial growth during 1998-2000 worldwide, driven mainly by the Y2K issue6. ERP companies like SAP, PeopleSoft, Oracle, JD Edward and Baan recorded a steady growth in their revenues.

However, after 2000, there was a slowdown in the ERP market. By 2001 the global ERP market was valued at $ 23 billion. SAP was the market leader with a 20% market share, followed by Oracle with 7.5% marketshare. In India, the need for ERP implementation was felt soon after the liberalization of the economy in the early 1990s. Indian companies realized the importance of customer focus, improving speed of delivery and cost competitiveness to compete with MNCs. It became increasingly important to provide improved quality at lower prices. The decision to implement ERP systems for improving business processes and gain the competitive edge in the new global environment thus had become essential.

Manufacturing firms were the earliest to implement ERP, followed by FMCG, automotive, steel, oil, textile and pharma companies. The most popular modules were Finance and Accounting, Sales and Distribution, Material Management/Purchase and HR. Companies such as TISCO, TELCO, Nestle, Reliance, Godrej, Larsen & Toubro, HLL, Maruti, BPCL, IOCL, ONGC, Coke, Pepsi, ITC, Colgate-Palmolive, P&G, Shopper's Stop and M&M were some of the major companies that decided to implement ERP. The ERP market grew substantially with a CAGR of 70% during the late 1990s (Refer Table I), because of the large extent by a large number of medium and small scale enterprises adopting ERP.

Table I
The Indian ERP Market

* estimates
Source: Express Computer India, October 2001.

However, a majority of ERP implementation exercises in India proved to be failures. There were reports of small scale companies even being driven to bankruptcy. Analysts attributed the failure to poor understanding, planning and implementation of the system, and not to the inherent problem in the software. A research analyst at Frost & Sullivan said, "Most CIOs we spoke to said that ERP packages cost the earth, take ages to implement and at the end of the day deliver nothing." According to a Gartner study⁷ in 2001, it was found that the average cost overrun in Indian ERP implementations was 178%, the average implementation time overrun was 230% of original expectations and the average decline in productivity was 59%.

BPCL's successfull implementation of ERP thus came as a major relief to ERP vendors and industry watchers. However, analysts commented that BPCL had not implemented ERP as a stand-alone system, but had integrated with the overall IT initiatives, which it had initiated in 1996 after the restructuring.

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6] Y2K problem referred to three main issues: two digit date storage and date conversion, leap year calculations and special meanings for dates.
7] Gartner is a research and advisory firm providing research services to its clients in the field of technology.