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Agile Workforce, Agile Company

Companies like Clarent Corp. often find themselves in a bind. Clarent is a mid-market company that has seen explosive growth since its inception in July 1996. And the voice over IP technology company expects to see even more growth into the next millenium. Growth is never a bad thing, but finding ERP solutions for a company as dynamic as Clarent can be.

"We grew from very small to a mid-sized company practically overnight," says David Blumhorst, director of information technology at Clarent. "So we started looking at mid-tier packages and they probably would have worked satisfactorily for now, but they don't necessarily scale very well."

Blumhorst was not worried about the database side of scalability because most ERP companies that cater to mid-market companies use databases like Oracle, which scale rather well. Instead, he was worried about the business process side, which he claims can not be broken down into fine pieces when a company gets really big.

"So, in a few years we would outgrow the mid-tier packages and have to convert to a tier one package like PeopleSoft," he says. "That becomes a huge project, which typically involves millions of dollars and a lot of pain in migrating data across to the other system."

The telecom equipment provider began looking at larger packages, but it couldn't afford them at this particular time. Installing them onsite would mean a lot of overhead costs for hardware and software and the need to hire additional IT staff for the implementation and ongoing operation. "We had five IT people at the time I didn't want my two person help desk to have to handle customer service calls for our people who were trying to resolve problems with the new system," Blumhorst says.

Making a Choice

Clarent decided to rent the process through a new technology that allows mid-market companies to bypass intensive implementation and instead tap into ERP applications through the Internet. A company needs little more than an Internet browser and four months and it is up and running. Also renting the software makes it a monthly bill, instead of one lump sum up front. And the scalability problems disappear because companies that outsource this technology use top-notch ERP applications like PeopleSoft.

"Using this technology allows us to build our business processes from the start in the same way that a big company would," Blumhorst says.

For example, take a business process like order administration. When a company takes an order it processes the order, sends it to production, releases it to the floor, builds the product, fulfills the shipping order and ships it out. This is a long process. For small companies there may be a handful of people that work the entire process, but as a company grows these business processes become more granular, so more people will do more specialized functions.

"One of the interesting things about PeopleSoft is that you can take these individual processes and group them together, and then as we grow we can split them apart again," he says. "It allows our business processes to scale with the company and allows us to take advantage of some of the controls and processes inherent in a tier one package."

Clarent chose Corio Corp. to provide the applications from a good lead from Excite, another growing company that was already using Corio's services and was getting great results. The contract with Corio is ongoing with two pieces, the implementation piece and the ongoing rental of the software. Talks began in February and the project was officially kicked off on April 1.

Getting the System Up and Running

Before implementation, Corio had a team of consultants that worked with Clarent to define the business processes. Corio then implemented PeopleSoft applications in several areas: order of administration, production, financials and purchasing, and will probably add budget and fixed assets soon. Corio also installed the communications lines between Clarent and the data center and the application servers. Corio did the initial rollout to the client's desktops and then showed Clarent's IT team how to do those rollouts to the client desktops so they could do it themselves in the future. They also provided training to the entire staff before going live.

"It is classroom style training with people at the machines being taught their particular function," Blumhorst says. "The courses were taught by the implementers that actually put the system in, which meant they were very familiar with our implementation as opposed to generic PeopleSoft."

Choosing Not to Customize

Before the implementation Clarent, like most small companies, used a hodgepodge of QuickWorks and custom-written Access and Excell spread sheets customized to the company's needs. With the new applications, Clarent tried to customize as little as possible, which Blumhorst says, is Corio's way of doing things. Corio wants to be able to support the applications and have the ability to upgrade without worrying about where to change the code. So how do the old applications compare with the new ones?

"In terms of comparing it to our old systems it is much more complex; there are more steps you have to go through and there is a lot more information that is available, which is probably a good thing" he says. "It means that everyone has to perform all of their steps in the system or the next person down the line can't do their job. It is a discipline that we need as we move forward as a growing company."

Before the implementation employees had to hand carry paperwork to the next step because the system wasn't integrated, but now everything is intertwined. The Clarent employees are getting used to the checks and balances that are inherent in an integrated system like Corio's , which makes the process and the data cleaner.

"It takes the right kind of company to use this service. If I were a mid-size company that was mature and stable, and wasn't going to grow much, I would go with a mid-tier package." He says. "This sort of solution is really geared towards the high growth companies and so it was a perfect fit for us."

Lessons From the Outsourcing Primer:

• Customizing the ERP applications makes it harder for the supplier to support and upgrade.
• ERP applications instill discipline into a company because of the steps that have to be followed in order to move the process forward.
• Installing ERP applications onsite creates a lot of overhead costs for hardware, software and the hiring of additional IT staff.

Publish Date: October 1999

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Copyright © 1999 - Everest Partners, L.P.

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