History Singapore ERP Learned

History of Singapore ERP – Lessons for ERP Users and Vendors

Introduction

This is the first part of a 3-part article that starts with my recollections of the history and development of Enterprise Resource Planning (ERP) in Singapore since the 1990s.  In the later parts of this series of articles, I will cover my observations and the lessons learned from the Singapore experience, and how the users and vendors in the developing ERP markets can benefit from the lessons I learned over my nearly 30 years of career in the ERP industry.

I started my Enterprise Resource Planning (ERP) systems career in Singapore as an end-user project manager in 1996 when I evaluated and implemented an ERP System for a manufacturing company.  Later, I joined the ERP industry as an ERP consultant, pre-sales consultant, business development manager, country manager of a Multi-National ERP, and start-up of a successful ERP company.  I dealt with ERP professionals and users from various regions of Asia, Europe, and the USA  throughout my career in the Enterprise Resource Planning (ERP) industry.  I also taught Enterprise Resource Planning (ERP) subjects in education institutions as an adjunct lecturer for Polytechnics and Universities for many years.  

Those from developing countries may find my descriptions of the early days of Enterprise Resource Planning (ERP) and Singapore’s economic situation exhibiting some similarities to what they are experiencing now.  Lessons can be drawn from the past Singapore experience.

ERP Market in the 1990s

The Economic Situation in Singapore

Early 1990s Boom

High Growth: Singapore enjoyed an incredible growth period, averaging around 9% GDP growth between 1990 and 1997. This placed it among the high-flying “Asian Tiger” economies alongside South Korea, Taiwan, and Hong Kong.

Focus on Exports & Investment: The success stemmed from its open economy that relied heavily on exports and attracting foreign direct investment (FDI).

Financial Hub: Singapore was already a well-established regional financial center, and continued to be a strength.

Asian Financial Crisis (1997-98)

Sharp Downturn: The entire region was hit hard by the Asian Financial Crisis, and Singapore was not spared. The export-driven economy and financial sector took a beating, leading to a recession.

Government Response: The government implemented measures to address the crisis, focusing on restructuring the economy and attracting new industries.

Overall

The late 1990s marked a turning point for Singapore’s economy as a transition period. The initial boom years were disrupted by the crisis, forcing the government to re-evaluate its growth strategies.

Singapore was officially declared a developed country in 1996 by the International Monetary Fund (IMF) and the World Bank based on its high levels of economic development, infrastructure, and per capita income.

3-Tier ERP Market

ERPs during that period were traditionally defined into one of the three tiers, though it’s important to note that this categorization can be a bit outdated now. Originally, these tiers were defined by the size of the vendor company that made the software, but these days a more useful way to think about them is by the size and needs of the customer that the software is designed for.

Tier 1: Enterprise Resource Planning for Large Businesses

This tier is aimed at global enterprises with significant budgets. Tier 1 ERP systems are complex and feature-rich, offering a wide range of functionality to manage all aspects of a large organization, especially those with multiple entities.

Examples of features might include in-depth financial management, advanced supply chain controls, and global manufacturing support. JD Edwards (JDE), Baan, Oracle, PeopleSoft, and SAP (JBOPS) were considered the leading tier 1 ERPs. 

Tier 2: Mid-Market ERP

This tier targets mid-sized companies and potentially some multinational corporations with moderate budgets.

Tier 2 ERP systems offer a balance between functionality and affordability. They’ll have many of the same core features as Tier 1 systems but may be less configurable or have limitations on global capabilities.  Symix SyteLine, QAD, Epicor, and others are considered tier 2 ERPs.

Tier 3: Small Business ERP

This tier caters to small businesses and startups that have limited resources.

Tier 3 ERP systems are typically easy to use, implement quickly, and are priced affordably. They may focus on core functionalities like accounting, inventory management, and customer relationship management (CRM).  Most local ERPs and accounting software with some ERP functionalities are considered tier 3 ERPs.

Differentiated ERP

ERP software was more distinctly differentiated and specialized.  You have SAP and Oracle, designed for MNCs, SyteLine ERP for discreet make-to-order manufacturing, QAD for batch manufacturing, etc.

Government Support

Enterprise Resource Plannings (ERPs) were initially only used by large multinational corporations operating in Singapore.  These ERPs were usually complex and expensive to maintain.

Singapore government started to support local Singapore SMEs to adopt ERPs by subsidizing Small-and-Medium-Sized Enterprises (SMEs) with grants for their ERP projects.

MRPOnline

Besides grants, the Singapore government initiated the first Cloud ERP in the world called MRPOnline in 1996.  It was a publicly hosted platform using Symix SyteLine ERP delivered through thin-client technologies (Citrix) designed to assist Manufacturing SMEs in streamlining their business operations, particularly in areas such as inventory management, production planning, and supply chain management.  It was a heavily subsidized monthly subscription of SGD 3,000 that included implementation services for manufacturing companies.

By providing SMEs with access to cloud-based Enterprise Resource Planning (ERP) tools through MRPOnline, the Singapore government aimed to enhance the competitiveness and productivity of these businesses. The platform likely offered features such as real-time tracking of inventory, automated order processing, and data analytics capabilities to help SMEs make informed business decisions.

MRPOnline was part of the Singapore government’s broader strategy to support SMEs and promote economic growth through the adoption of technology. By providing SMEs with access to advanced ERP solutions via the cloud, MRPOnline aimed to level the playing field and enable smaller businesses to compete more effectively in the digital age.

Accounting Software turning ERP

Catching on the popularity of Enterprise Resource Planning software, many accounting software started adding inventory and other ERP functionalities to rebrand themselves as ERP.  This allowed their customers to claim government ERP grants and to boost their sales.

Focus in Manufacturing

ERPs were relatively expensive and mainly focused on manufacturing industries during those periods.

ERP Technologies

Wide Arrays of Databases and Servers

Many active ERP solutions in Singapore then ran on different databases such as Oracle, Progress, SQL, IBM DB2, etc.  They ran on operating systems such as DOS, Windows, IBM AS400, Sun System Unix, etc.

Integrations

Integration with other systems was commonly done through the import and export of flat (text) files.

Remote Access

Remote access to the ERPs was done using thin-client technologies such as Citrix and Remote Desktop.

Consulting Resources

ERP consulting resources were limited and highly paid as compared to today. There was a joke at that time about how to know that SAP or Oracle consultants had arrived for the meeting.  The answer:  “When you see many BMWs and Mercedes parking at the company parking lots.”

High Project Costs

Tier 1 ERP consultants were charged USD 1000 per man-day.  That was about SGD 1800 with the exchange rate at that period.  Tier 2 ERP consultants were charged around SGD 1500.  Surprisingly, the consulting rate has not increased but even reduced over the years until today.

Developing Country License Pricing

It is important to note that foreign ERP Licenses were priced in USD when Singapore was designated as a developing country.  As Singapore was declared a developed country in 1996, most of these lower developing country license prices were retained instead of increased to higher developed country prices.

Branding

During this growing phase of ERP when there was relatively less awareness of ERP and knowledge, branding by the ERP vendors was very crucial to their success.  ERP vendors put up more advertisements during that period to create awareness.

Consulting Philosophies

As a young ERP consultant from a manufacturing background, I was treated as a business process consultant.  Only less than 1/4 of my fellow functional consultants were IT graduates, my fellow functional consultants were mostly experienced in accounting, logistics, and manufacturing. 

We consistently discouraged customizations through the use of coding.  So, we became very creative in using workarounds and our operation expertise to provide solutions and advice to our clients.

ERP Vendor Profitability

With the high consulting rate and fewer competitors, ERP vendors enjoyed high profits. The license-to-service ratio of ERP projects was typically 1:1 without considering the additional costs of coding customization services.

At the Turn of the Millenium

Singapore Economy

Singapore’s economy during the first 10 years of the millennium (2000-2010) was characterized by impressive growth and continued development. Here’s a breakdown of some key points:

Strong GDP Growth: The economy saw significant expansion, with an average GDP growth rate exceeding 7% per year. This growth was driven by factors like:

Focus on Exports: Singapore continued to be a major exporter, particularly in electronics, manufacturing, and financial services.

Foreign Direct Investment (FDI): The government actively attracted foreign investment, which provided capital and expertise for businesses.

Knowledge Economy: There was a push towards a knowledge-based economy, with investments in education, research, and development.

Challenges: Despite the growth, there were challenges as well:
Dot-com Bust (2000): The early 2000s saw a global tech bubble burst, impacting Singapore’s tech-reliant economy.

SARS Outbreak (2003): The Severe Acute Respiratory Syndrome (SARS) outbreak negatively affected tourism and related businesses.

Overall, the first decade of the 2000s was a period of significant economic progress for Singapore. The country emerged stronger and more diversified by the end of the decade.

Cloud ERP and CRM

This was the period of Cloud.  Salesforce, founded in 1999, was the first to offer a Software as a Service (SaaS) CRM solution.

Cloud ERP is credited to have emerged in the late 1990s, with NetSuite being one of the first companies to offer it in 1998. This new approach revolutionized ERP systems by making them accessible over the web instead of requiring on-site servers.

MRPOnline

In the early 2000s, the MRP Online scheme was terminated.  All the customers migrated to the on-premise deployment.  This was because after the government subsidized period ended, the ERP vendor (Symix) could not provide attractive pricing of the cloud ERP with sustainable profitability.

Technologies

Consolidation of Databases and Servers

Many ERP solutions attempted to rewrite their solution to run on cheaper and more popular databases such as SQL and operating systems such as Windows.  This reinvestment was expensive, some of them fell into financial difficulties and became acquisition targets.

Integrations

XML was becoming a more common integration protocol.

Remote Access

HTML web-based ERP was becoming more common although thin-client was still used for legacy ERP systems for web access.

Merger and Aquisitions

There were very active mergers and acquisitions among ERP vendors.  Oracle acquired JDE and PeopleSoft.  Infor acquired Baan.  That spelled the end of the JBOPS era.

Some ERP companies acquired other ERP companies and later were acquired by different companies.  Some examples were the ERP solutions under Infor (NxTrend Technology, SSA Global, Lawson Software, MAPCIS, SyteLine ERP, etc).  These acquired ERP solutions were often rebranded and milked for their customer base.

Non-ERP companies like Microsoft entered the ERP market by acquiring Great Plains, Navision, and Axaptor.

Diminishing of Less Popular Platforms

With all the mergers, acquisitions, and consolidations, there were fewer active ERPs in the market.

Consultant Resources

There were slow changes in ERP consulting resources.  More and more IT graduates comprised the bulk of ERP functional consultants.

Countries such as India started providing off-shore and outsourcing services for ERP.

This drove the consulting rate down from SGD 1,800/1,500 per man-day to as low as SGD 600/800 per man-day.

Reducing Project Costs

The implementation cost started to drop due to more low-cost off-shore and foreign consultants.

Branding

When ERPs became more common, some users began to see ERP as IT software instead of business process applications.  Those acquired ERPs by Microsoft slowly evolved from business process solutions into a commoditized software business much like Office 365.

ERPs that were acquired went through extensive rebranding exercises.  Some of them lost their original identity after they were rebranded.

Knowledge of Users

Polytechnics started teaching subjects about ERP.  More publicity of horror stories of big ERP project failures created negative perceptions about big ERPs.  As users become more experienced and knowledgeable, the branding effect of ERP reduces.  Companies are becoming more price-sensitive and looking for the ROI of the ERP project.

ERP Vendor Profitability

With the introduction of more low-cost competitors for consulting services, the consulting rates were either reduced or stagnant.  When the license prices remained in the lower developing country pricing as costs of business increased, the profitability of ERP vendors dropped.

Among the countries in Asia, Singapore was perhaps the most challenging for international ERP vendors to make high profits.  Most international ERP vendors operated in Singapore were suffering from losses or low profits as compared to their other Asia countries businesses such as Australia, Japan, and even China.

In general, the ERP market in Singapore moves from the growth stage to the maturity stage of the product life cycle.

After 2010

Singapore Economy

Singapore’s economy after 2010 has been a story of continued growth with some periods of slowdown and challenges. Here’s a closer look:

Initial Strong Growth: Following the 2008 global financial crisis, Singapore rebounded quickly in 2010, experiencing its fastest annual growth (14.5%) in a decade. This was driven by the recovery of global trade.

Moderation and Diversification: As the economy matured, growth slowed down to a more sustainable rate of 3-5% per year. The government focused on diversifying the economy beyond traditional sectors like manufacturing, towards knowledge-based industries like finance and tech.

Periods of Slowdown: The Singaporean economy faced external shocks like the European debt crisis (2010) and China’s slowdown (2014), leading to temporary periods of slower growth.

Worst Recession in 2020: The COVID-19 pandemic caused the worst economic recession in Singapore’s history, with a contraction of 5.4% in 2020. Tourism, trade, and many other sectors were severely impacted.

Recent Recovery: Singapore has since experienced a strong rebound in 2021 (7.2% growth) as the global economy recovered and the country reopened.

You can read my article about why ERP is more important than ever which explains the impact of COVID on ERP (https://www.1st-erp.com/erp-important-history/).

Overall, Singapore’s economy after 2010 has been resilient, adapting to various challenges. The focus on diversification and innovation is crucial for its continued success in the future.

Technologies

Cloud ERP

By now, cloud ERPs with subscription schemes have been touted as the way for ERPs.  This is not just about the maturity of cloud technology with widely adopted HTML Web or web clients, it is also driven by the strategy for the ERP vendor to generate long-term predictable recurring revenue streams.

Extensions

With the maturing and wider adoption of multi-tenant cloud ERPs that run on single-core software code, the old practice of customizing the core ERP code presents a greater challenge.  ERP software develops technologies to allow minimum coding customization through “extensions”  technologies without touching on the shared code code of cloud ERPs.

Add-Ons

Traditionally, most ERP vendors developed all the functionalities and modules on their own.  This can be expensive and taxing on their limited resources.  To speed up their ERP functionalities and to leverage their implementation partners’ knowledge and resources, ERP vendors created the add-on technologies on their core ERP software.

ERP partners can create additional functional modules without altering the core ERP code.  Although this seems a win-win arrangement for the ERP vendors and their partners, it may pose hidden implications for the partners and users.

Integration with MS Office and External Systems

ERPs, especially those from Microsoft built integration with Microsoft Office.  APIs are becoming more common for ERPs to integrate with external systems such as e-commerce and Point-of-Sales often through Webservices and JSON protocol.

Lack of Differentiation

ERPs are maturing and building richer functionalities.  Some allow their partners to create add-ons to handle industries that they couldn’t address previously.  It is becoming more difficult for mature ERPs to differentiate through functionalities.

Resources

More ERP functional consultants are IT graduates instead of consultants from business or operation backgrounds.

With the inflation and tight labor market, consulting rates have increased slightly to SGD 1200/900 per man-day.

Open Source ERP

With more and more programmers in ERP functional consulting, open-source ERPs such as Odoo differentiated themselves as cheap and easily customized ERPs from the traditional ERPs and started to become more prominent.

Customizations

ERP implementation vendors are more willing to use coding customizations in their projects.  This is probably because more ERP consultants are from programmer backgrounds.  In addition, this approach creates additional revenue for the ERP vendors to improve their profit margin.

This is especially so for open-source ERPs that tout their advantage in customizations through coding.

Knowledge of Users

Many users are experienced with ERP.  Some may even have evaluated and implemented ERP.  Those who experience ERP project failure or unpleasure experience became more critical about the implementation ability of the ERP vendors when evaluating Enterprise Resource Planning solutions.

ERP Vendor Profitability

Tightening of Labor Force

The increasing tightening of labor control in Singapore was coupled with high inflation and increased business costs.  Although the consulting rate increased slightly, the profitability of ERP vendors did not improve.  Singapore remains one of the most competitive ERP markets in Asia.

Higher Proportion of Services Costs

The license-to-service ratio of ERP projects has gradually changed to 1:2.  This was the effect of the developing country license USD pricing coupled with the exchange rate effect versus the increased consulting costs in SGD.

Impact of Cloud Subscription

The increasingly popular cloud subscription model greatly impacts the cash flow and profit margin of ERP vendors.  Cloud subscription pays lower margins to their partners/vendors versus license margins due to the additional costs involved in hosting.  I will follow this in later articles to elaborate on its impacts and recommendations.

USD to SGD Exchange Rate over 33 Years

The USD to SGD exchange rate variation since 1990 impacted the cost of ERP software and services.  It dropped from the peak of about 1.8 SGD to 1 USD to about 1.35 SGD to 1 USD now.

SGD USD Exchange Rate 1990-2023

As many ERP licenses are priced in USD, it effectively reduced the ERP license prices in Singapore by about 30% when converting to SGD.

Conclusion

In conclusion, the journey of Enterprise Resource Planning (ERP) in Singapore has been a dynamic narrative, reflective of the nation’s economic evolution and global technological advancements. Spanning over three decades, this retrospective analysis unveils the transformation of ERP from its inception in the 1990s to its current state in the 21st century.

The narrative begins with Singapore’s remarkable economic boom in the early 1990s, characterized by high GDP growth rates and a robust focus on exports and foreign investment. This period witnessed the emergence of ERP as a pivotal tool for large multinational corporations, ushering in a three-tiered market structure tailored to diverse business needs.

Government initiatives played a crucial role in democratizing ERP adoption, particularly through pioneering projects like MRPOnline, aimed at empowering small and medium-sized enterprises (SMEs) with cloud-based ERP solutions. This era also witnessed the convergence of ERP with emerging technologies, such as thin-client architectures and integrations with diverse databases and servers.

As Singapore transitioned into the new millennium, the ERP landscape witnessed seismic shifts driven by globalization, technological advancements, and market consolidations. Cloud ERP emerged as a disruptive force, offering scalable and accessible solutions, albeit accompanied by challenges such as vendor profitability and pricing dynamics.

The post-2010 era saw Singapore’s economy navigating through global uncertainties, leveraging innovation and diversification to sustain growth amidst external shocks like the COVID-19 pandemic. Technological advancements continued to redefine ERP paradigms, with a focus on cloud-based subscriptions, extensions, and integrations with external systems.

Throughout this journey, the role of ERP consultants evolved, reflecting shifts in skillsets, consulting philosophies, and market dynamics. The maturation of ERP markets brought forth challenges of differentiation, customization, and user expectations, driving ERP vendors to adapt and innovate.

As we reflect on Singapore’s ERP evolution, it becomes evident that the narrative transcends mere technological adoption; it embodies the resilience, adaptability, and innovation ingrained in the nation’s economic fabric. Looking ahead, the trajectory of ERP in Singapore underscores the imperative of continuous evolution, collaboration, and strategic foresight in navigating the ever-changing landscapes of technology and business.

My next two articles will cover my observations and recommendations for the ERP vendors and users.

Author: Raymond Yap.

1st ERP Consulting offers consulting services and advice to help you “Optimize your business through better ERP PracticesContact us today to schedule a discussion. We can help you strategize and optimize your ERP business, ensuring you are prepared for the challenges ahead.

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