New models create niche market

The mounting pressure to restructure business models and improve management offers a big opportunity for the enterprise resource planning market in Viet Nam, industry insiders say.

Enterprise resource planning, or ERP, integrates internal and external management information across an entire organisation, embracing finance and accounting, manufacturing, sales and service, and customer relationship management.

ERP systems automate this activity using software and facilitate the flow of information between all business functions inside the organisation and manage connections with outside stakeholders.

The country’s ERP market is rated as having massive potential since family-run businesses will eventually be pressured to restructure to improve management while private firms will also need to adopt global norms.

ERP is particularly relevant to businesses that need a modern management model to minimise risks and ease pressure to disclose information to shareholders.

Experts said the ERP market has already grown since Viet Nam’s accession to the World Trade Organisation when many ERP suppliers, consultants, and implementation partners began to enter the country.

Vo Hong Ky, general director of E&A Co told Sai Gon Tiep Thi that suppliers targeted medium and large-sized firms with annual revenues of more than VND500 billion (US$25 million).

This segment was under constant pressure to sustain growth rates and had ambitions to achieve a breakthrough in the market, he said.

Businesses of this size were generally aware that the use of information technology would help increase competitiveness and focused on optimising the chain of production, distribution, business, and customer care, he pointed out.

What concerned businesses most was not the cost but whether ERP application would yield the desired outcomes, he added.

Experts said the growth of the ERP market depended on the requirements of each business during a certain period of development, with the banking, financing, and insurance sectors embracing it in 2000.

It was not until 2007 that ERP spread to other sectors and expanded market size.

Sectors under pressure to manage cash flows and efficiently distribute commodities, like retail, real estate, steel, and foodstuff, have begun to invest in ERP.

Property giant Hoang Anh Gia Lai (HAGL) group recently reached a deal worth nearly US$1 million on the ERP licence with German-based SAP firm.

The initial costs for HAGL to apply ERP is estimated at $5 million.

Oil importer and distributor Petrolimex’s $13 million ERP project is the largest of its kind by a State-owned business.

Several other multimillion-dollar ERP projects are being undertaken in phases by the taxation, cement, electricity, and telecom sectors.

Sectors such as financing, banking, and insurance have taken the lead in using ERP, with each bank spending tens of millions of dollars on solutions to provide modern retail banking services.

It does not include the annual cost of billions of dong to operate and upgrade the system.

Experts said besides thousands of currently operational small-scale ERP projects, the launch of vast schemes would significantly enlarge the market.

Vu Dinh Thang, deputy general director of Global Cybersoft, said businesses buying ERP solutions were looking for best practices for an industry, adding that ERP’s effects are not limited to individual businesses but have expanded to entire industries. Since businesses have better recognised the role ERP plays in improving management, making preparations for an ERP project – from solution choice to consultancy – has become more professional, he said. — VNS

Tags: Vietnam ERP market