Agenda/Sylabus

Organizations and information systems (T1, Chapter 1)

Introduction to Enterprise systems for Management (T2, Chapter 1)
Enterprise Systems Architecture (T2, Chapter 3)
Entensions of ERP: SCM (T2, Chapter 11), CRM (T2, Chapter 12)
Organizational change and Business process reingineering (T2,
Chapter 9)/Enhancing Business Processes Using Enterprise
Information Systems (Valacich, Ch7)
Business Processes : Procurement process (T1, Chapter 3), Production
process (T1, Chapter 5), Integration process (T1, Chapter 6)
Global, ethics and security management: BPO, SAAS,Ethics, Green
computing (T2, Chapter 10)

Introduction to
Enterprise
Systems for
Management

Learning Objectives

IS evolution & its historical role in the organization

ERP systems and evolution, components, and architecture; benefits

and drawbacks of implementing ERP systems

Overview of the implementation process (ERP life cycle, business

process reengineering, project management, and change
management); the role of people, and 3rd parties for a successful
ERP implementation process.

ethical, global, and security challenges of implementing an ERP

system, the ERP vendors and industry trends.

Enterprise Systems in Organizations

Business organizations ->very complex
IS/ES -> high level of computer automation to support
business functions such as:
Accounting

Finance

Human Resource Management

Customer Service

Marketing

Operations

Management is generally categorized into three levels:

Strategic, Mid-Management and Operational.

Figure 1-1 Management Pyramid with Information

Requirements

Small amounts of
information: highly
qualified

3 management levels:

More detailed info;

less qualified

5 Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Information Silos and Systems Integration

Information systems create a mixture of independent
nonintegrated systems:
create bottlenecks and
affects productivity.

To compete effectively, organizations have to be

customer focused ->cross-functional integration on
Organizations departments: ACC, MK and others.

Enterprise Resource Planning (ERP) Systems

WHAT IS ERP?

ERP ->1st generation of ES:

integrate data and
support all the major functions of Organization.

ERP systems Goal - to make Enterprise information

flow dynamic and immediate -> increasing its usefulness
and value.

ERP and Systems Integration

Enterprise Resource Planning (ERP) systems are

integrated, multi-module application software packages
designed to serve and support several business
functions across an organization.
ERP systems are typically commercial software
packages that facilitate collection and integration of
information related to various areas of an organization.

ERPs Role in Logical Integration

ERP Systems:
require organizations to focus BP rather than on
functions.
come with built-in processes for a wide variety of
common business functions.
implements best practices via specific built-in steps for
processing a customer order in terms of:
order entry.
routing through departments.
communication of output to various parties.
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ERPs Role in Physical Integration

Before installing the ERP system, an organization may
have to upgrade or install middleware* or get rid of their
legacy** systems hardware and software.
Integration is also required at the Data level, Client level,
and at the Application level.

Improved efficiency with a paperless flow and electronic

data interchange (EDI) or business-to-business (B2B)
commerce environment with partners.
*Middleware is a computer software that provides services
to software applications beyond those available from
the operating system.
**In computing, a legacy system is an old method, technology,
computer system, or application program
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Figure 1-2 Integrated Systems - ERP

ERP
integrate departments and functions into a single infrastructure
replace an assortment of systems from an Organization
integrates information from different sources and makes it available in real-time.

?
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Evolution of ERP
Timeline

System

1960s

Inventory Management & Control

1970s

Materials Requirements Planning (MRP)

1980s

Manufacturing Requirements Planning (MRP-II)

1990s

Enterprise Resource Planning

2000s

Extended ERP (xERP) or ERP-II

A legacy system:
- old method, technology, computer system,
- old application program
- it often implies that the system is out of date or in need of replacement.
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Business Processes and ERP

A crucial role of ERP in business is to better position the
organization to change its business processes.
ERP software have hundreds of business processes
built into the logic of the system which may or may not
agree with current processes of an organization.
When implementing an ERP system, organizations have
two choices:
Change business processes to match the software functionality.
Modify the ERP software to match the business processes.

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ERP Systems Components

An ERP system consists of:
Hardware Servers and peripherals eqp.
Software Process OS and DB sys.
Information Organizational data from I&E sources

Process BP, procedures and policies

People End users and IT staff

ERP goal -> serve the Org by converting data into useful info
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Figure 1-3 ERP key Components:

work together seamlessly for a successful implementation

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Figure 1-4 ERP Components Integration

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ERP Architecture
The architecture of an ERP system influences the cost,
maintenance, and the use of the system.
A flexible architecture is best it allows for scalability as
needs change and grow.

If purchased, ERP architecture is often driven by the

vendor but other IT architectures are driven by
organizational strategy and business processes.

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There are two types of ERP architecture:

-Logical (fig 1-6) focus on supporting the requirements of the end users and
-Physical/tiered (fig 1-7) focuses on the efficiency of the system

Figure 1-7 Tiered Architecture Example of ERP System

Figure 1-6 Logical Architecture of an ERP System

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System Benefits of an ERP System

Integration of data and applications across functional
areas
Improvements in maintenance and support as IT staff is
centralized.
Consistency of the user interface across various
applications -> less employee training, better productivity,
and cross-functional job movements.
Security of data and applications is enhanced due to
better controls and centralization of hardware -> DB
unique, centralized.
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System Limitations of an ERP System

Complexity of installing, configuring, and maintaining the
system increases, thus requiring specialized IT staff,
hardware, and network facilities.
Consolidation of IT hardware, software, and people
resources can be cumbersome and difficult to attain.
Data conversion and transformation from an old system
to a new one can be a tedious and complex process.
Retraining of IT staff and end users of the new system
can produce resistance and reduce productivity.
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Business Benefits of an ERP System

Increasing agility of the organization.
Information sharing helps collaboration between units.
Linking and exchanging information in real-time with
supply-chain partners improves efficiency.
Better customer service due to quicker information flow
across departments.
Efficiency of BP are enhanced due to the re-engineering
of BPs.

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Business Limitations of an ERP System

Retraining of all employees with the new system can be
costly and time consuming.
Change of business roles and department boundaries
can create confusion and resistance to the new system.

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ERP Implementation (ERP Life Cycle)

ERP system implementations are very risky, and using a

well-defined project plan with a proven methodology will
assist in managing&diminishing those risks.
There must be a strong well-communicated need to
make the change from the existing information
systems/applications to an ERP system.

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ERP Implementation
One of ERP Mistake : Underestimating the importance
of accurate data.
If you want your ERP implementation to succeed, it is
imperative that proper programming and procedural
parameters are put in place, right from the start, to
minimize the likelihood of errors.

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ERP Implementation strategies

In choosing new enterprise resource planning systems,
implementation is every bit as important as finding the right
program.
Well cover the three most widely discussed ERP
implementation strategies:
Big bang - Implementation happens in a single instance.
All users move to the new system on a given date.
Phased rollout - Changeover occurs in phases over an
extended period of time. Users move onto new system in a
series of steps.
Parallel adoption - Both the legacy and new ERP system
run at the same time. Users learn the new system while
working on the old.
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Big Bang
Just as the name implies, a big bang ERP implementation
happens in a single, major event.
All modules are installed across the entire organization all at
once, more or less.
Of course the changeover from the legacy system doesnt
happen without proper planning.
There are many pre-implementation activities that need to be
carried out prior to the big bang.
A.k.a Single-Step Implementation:
Is ideal for smaller operations and businesses that may have
few users, single-step ERP implementation offers a simple and
straightforward way to handle the process so you can more
easily focus on your project scope and implementation
parameters. But its not for everyone.
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Big Bang

After the planning activities have been successfully executed, the

old system will be turned off, and the new system will be launched.
At this point there is no turning back. However, there should be fallback scenarios prepared just in case the initial changeover is a
failure.

The big bang implementation strategy has supporters on both sides

of the fence. The most common criticism is the risk factor; there are
a number of things that could go wrong in an instant changeover.
However, the implementation is quick and less costly than a long,
drawn-out phased approach.

Here is a list of other benefits and drawbacks of big bang

implementation:

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Big Bang

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Phased Rollout
In keeping with the theme of cosmological evolution, phased rollout would
be analogous to the Steady State theory: instead of an implementation
happening in a single instance, small changes occur over time.
An organization moves off the legacy system and onto the new ERP
system in a series of predetermined steps. This can be achieved in several
different ways.

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Phased Rollout
Here are three well-known techniques:
1. Phased rollout by module - This is the most common phased rollout strategy. ERP
modules are implemented one at a time. Typically you begin with core business
functions those necessary for daily operations then add in more modules and
functionality with each phase.

2. Phased rollout by business unit - Under this approach implementation is carried out
in one or more business units or departments at a time. Some organizations may put
together an implementation project team that travels between each department during
implementation phases. As the team gains more experience with each
implementation, subsequent phases become more efficient.
3. Phased rollout by geography - For organizations with multiple locations, a phased
rollout by geography is a frequent approach. The new ERP system is introduced at
one or more company locations at a time.

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Phased Rollout

Just like big bang, a phased rollout strategy has advantages and
disadvantages. This table includes several common viewpoints:

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Parallel Adoption

The third generic though less talked about ERP implementation

plan is the parallel adoption approach. This has also been referred
to as parallel conversion, parallel running, or parallel cutover.

Parallel adoption is thought to be the least risky implementation

process. It includes running both the old and new ERP system at
the same time. This way users can learn the new system while
performing regular work activities on the old system. After
requirements for the new system are met, then the legacy system is
decommissioned.

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Parallel Adoption

Parallel adoption can be considered the middle road between big

bang and phased adoption. For example, the pace of the
changeover is slower than big bang, but faster than phased
adoption. Similarly, user adaptation is easier than big bang, but
more difficult than phased adoption.

The major trade-off is cost. Parallel adoption is the most expensive

implementation method. Additionally, having employees enter data
in both systems is not efficient. However, if the extra costs are less
than costs incurred after a backfired big bang adoption, then its a
reasonable plan. Still, organizations cannot predict cost overruns of
big bang, so parallel adoption has become decreasingly popular
because of perceived high costs.

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Parallel Adoption: Pro & Con

Pro

Least risky

Users learn the new system while working on the old

Slower pace than the big bang but faster than a

phased roll-out
Con

Most expensive

Employees have to enter data in both systems- this

can be inefficient and breed data-entry problems
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http://blog.softwareadvice.com/articles/manufacturing/erp-implementationstrategies-1031101/
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Which ERP Implementation Strategy is Best for Your

Business?
There certainly is no one-size-fits-all when it comes to
implementing an ERP system.
Every company has unique goals, and an implementation
requires careful planning and analysis.
Some companies may choose a combination of strategies,
like a mini big bang mixed with phased rollouts (i.e. big
bang the important modules, then add in the peripheral
modules later).
Others may choose to implement a mid-market ERP
system (e.g. Microsoft Dynamics, Epicor) at the plant-level,
while keeping a major ERP system (e.g. SAP, Oracle
running at headquarters).
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Software and Vendor Selection

It is best for an Org that does not have the experience in
developing ERP systems to purchase one on the
market.
Before selecting a vendor, the Org must carefully
evaluate its current and future needs in enterprise
management systems.
Review the organizations existing hardware, network,
and software infrastructure, and the resources available
for the implementation.
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Vendor Evaluation sys analysis

Business functions or modules supported by their
software.
Features and integration capabilities of the software.

Financial viability of the vendor as well as length of time

they have been in business.
Licensing and upgrade policies.
Customer service and help desk support.

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Vendor Evaluation - costs

Total cost of ownership.
IT infrastructure requirements.
Third-party software integration.

Legacy systems support and integration.

Consulting and training services.
Future goals and plans for the short and long term.

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Cost of ERP - What does ERP really cost?

The total cost of ERP ownership includes the costs of packaged software, hardware, professional services (for ongoing
maintenance, upgrades and optimization) and internal costs. Based on the ERP survey conducted by Meta Group in 2002, the
average cost of ERP ownership was $15 millions ranging from half millions to $300 millions. The average cost per user per year
could be as high as $20,000.
Costs of Software
The cost of packaged ERP software depends on the scope of implementation (the # of ERP modules and the number of end users),
complexity of software and ERP vendors. ERP software that involves the integration with external business entities generally costs
more. ERP vendors offer discount for organizations who invest in a suite of ERP software systems. Mid-sized organizations typically
commit a few million dollars to packaged ERP software.
Costs of Hardware
Implementation of ERP systems routinely requires purchase of new computer hardware, systems software, network equipment and
security software. The costs of hardware varies in a wide range dependent on the scope of implementation and platforms. The
hardware typically costs about half million dollars for mid-sized organizations that implements ERP systems.
Costs of Professional Services
Customization The big chunk of costs of Professional Services is customization. The cost of customization can easily out-run the
cost of packaged ERP software, but it is the customization of ERP software that makes an ERP a success or a failure.

Integration ERP systems won't demonstrate its full potentials unless they are properly integrated with other enterprise software
application:
the integration of various functional ERP modules,
the integration of ERP with other e-business software applications, and
the integration of ERP with legacy systems.
Data Conversion The cost of data conversion depends on the format and the media that store the historical data. Data conversion
from legacy systems to RDBMS is a time-consuming process. Data conversion may lead to further data gathering to fill the missing
links in data requirements.
Testing ERP systems are thoroughly tested before they go into production. ERP testing includes unit testing, component testing,
regression testing, performance testing and user acceptance testing.
Training Workflow and UI design in ERP software are more complex than average business software. ERP training is expensive
because workers almost invariably have to learn a new set of processes of doing their daily tasks besides learning how to use the
ERP software. To reduce the cost of ERP training and to ease the transitions from old processes to new, organizations often seek
the help from training companies which are specialized in coaching workers
46 on using ERP software from particular vendors.

Total Cost of ERP Ownership (in millions

of USD) - META Group Survey
System

Medium

Average

16.1

13.6

0.8

26.5

JD Edwards

3.9

5.7

0.8

21.6

Lawson

1.9

4.1

0.4

16.4

Oracle

5.4

11.2

1.4

42.8

PeopleSoft

7.4

15.5

1.3

58.6

SAP

13.9

52.2

0.8

308.2

SSA

1.7

7.6

0.7

29.6

Baan

Smallest

Largest

TCO can be 1-3% but can reach 4-5% annual turnover of the company
TCO includes: software licence(ERP, DB, OS, Office and other), hardware,
equipments, implementation&customize, integration with other apps
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How to Reduce the Total Cost of Ownership of Your SAP Implementation

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49 Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

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Ways to Developing ERP System

Method

Advantages

Disadvantages

Develop in-house

Best fit with organizational

needs

Most difficult to develop,

most expensive, Slowest

In house system with

vendor supplements

Gain commercial advantages

combined with organizational fit

Difficult to develop,
Expensive, slow

Best-of-breed

Theoretically gain best of all

systems

Difficult to link modules,

slow, potentially inefficient

Customized vendor
system

Retain flexibility while keeping

vendor expertise

Slower, usually more

expensive

Selected vendor modules

Less risk, relatively fast, least

expensive

If expand, long run time and

cost higher

Full vendor system

Fast, less expensive, efficient

Inflexible

Application service
provider

Least risk, least cost, fastest,

least subject to vendor change

At the mercy of the provider,

no control, and subject to
price increases

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People and Organization

Project Management
For an ERP system to be implemented successfully,
project management must provide:
strong leadership,
a clear and understood implementation plan, and
close monitoring of the budget.

Consultants
It is often the case for organizations without much ERP
implementation experience to use implementation
partners such as consultants.
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ERP Market Tiers

Link to updated market tiers

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54 Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

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ERP Vendors
SAP
SAP is the recognized global leader among ERP vendors
with over 12 million users. Its solutions are for all types of
industries and for every major market. www.sap.com
Oracle/Peoplesoft
As the second largest ERP vendor, Oracle provides
solutions divided by industry category and promises longterm support for customers of PeopleSoft- (acquired in
2004). www.oracle.com
Infor
The worlds third largest provider of enterprise software. It
delivers integrated enterprise solutions in supply chain,
customer relationship and suppliers management.
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ERP Vendors (Contd)

Microsoft Dynamics
Formerly Microsoft Business Solutions or Great Plains,
Microsoft Dynamics is a comprehensive businessmanagement solution built on the Microsoft platform.
Microsoft Dynamics integrates finances, e-commerce,
supply chain, manufacturing, project accounting, field
service, customer relationships, and human resources.
Lawson
Industry-tailored software solutions that include
enterprise performance management, distribution,
financials, human resources, procurement, and retail
operations. www.Lawson.com

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ERP Vendors (Contd)

SSA Global
Acquired Baan in 2004.They claim to offer solutions that
accomplish specific goals in shorter time frames and are
more efficient with time.
Epicor
This company provides enterprise software solutions for
midmarket companies around the world. Claims to have
solutions to a variety of needs, whether a customer is
looking for a complete end-to-end enterprise software
solution or a specific application.

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Software Extensions and Trends

As e-Business firms started growing bigger with advanced
needs in HR, accounting, and warehousing, non-ERP
vendors were unable to support their requirements.
ERP vendors were starting to expand their functionality to
the Internet and e-Business.
Intense competition and fluctuating sales have forced the
ERP vendors to expand functionality to add value.
The saturation of the demand in big business and the
lucrative nature of the small and midsized business
markets have led vendors like SAP and Oracle to enter
the small business market.
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Software Extensions and Trends

SOA implementation will continue to grow as a factor in
ERP purchase decisions because vendors are using
creative marketing around product strategies versus
buying what is currently available.
Another shift is toward recurring and variable revenue
models - Maintenance charges driving industry growth.
The other major revenue shift is toward software as a
service or hosted subscription-based applications.
Social networking and open-source software solutions
are also poised for significant growth.
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Implications for Management

ERP systems implementation:
is a complex organizational activity.
Important to evaluate and learn from the successes and
failures.

Managing risk is all about keeping project focus and clear

communications throughout the organization.
requires strong project management oversight.

ERP systems provide improved and added functionality

for an organization.
ERP systems are set to proliferate globally.
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Summary
Whereas the risks for implementing an ERP are greater,
the payoff is very high for organizations.
The integration of data helps an organization to better
meet the demands of a fast and dynamic business
world.
The use of ERP systems provides for integrated data
and business processes, thereby creating opportunities
for organizations to expand and change as their
business changes.

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Summary (Contd)
ERP components consist of hardware, software,
information, process, and people to perform the
fundamental phases of an information system: input,
process, and output.
ERP system architecture is a blueprint of the actual ERP
system. There are two types of architecture: physical
and logical.
The selection of a system must be based on the needs
of the organization and how well a vendor meets those
needs now or in the future.

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Summary (Contd)
To be successful in implementing an ERP system, an
organization and its management must clearly
understand the implementation process.
The key to this is the application of an ERP life cycle and
methodology throughout an implementation.

People and organizations are an important part of the

implementation process. Without in-house experts,
either the software vendor or a third party should be
hired and used to assist or lead the project.
Whereas ERP implementations are costly in time and
resources, the greater costs are in process change,
system maintenance, and remaining current.
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Top 10 Database Software Systems

The most powerful database systems running todays enterprise businesses around the world:
Oracle Oracle Enterprise Server, designed for grid computing, is the best RDBMS, running on
multiple platforms, with the latest version 11G.
DB2 DB2 is the database management system that delivers a flexible and cost-effective database
platform to build robust on demand business applications. The DB2 Universal Database (UDB)
Enterprise Server Edition 7 (ESE) is one of the best RDBMS.
SQL Server Microsoft SQL Server is a comprehensive database software platform providing
enterprise-class data management and integrated business intelligence (BI) tools.
Sybase Sybase Adaptive Server Enterprise (ASE) is a high-performance, mission-critical database
management system that gives customers an operational advantage by lowering costs and risks.
Teradata Teradata Database, currently on Version 2 Release 6.0, is the most powerful Very Large
Database (VLDB) system. Many largge scale data warehousing and business intelligence systems
are powered by Teradata.
ADABAS Adabas made by Software AG, once was the most powerful mainframe database, now
runs in multiple platforms, and provides superior reliability and performance.
MySQL A open source database, mySQL is the most popular database for web-based business
applications, and is moving to enterprise level.
FileMaker FileMaker Pro 8.5 is the #1-selling easy-to-use database software for Windows and Mac
OS. FileMaker Server 8 maximizes performance of shared databases while increasing security.
Access -Microsoft Access is the most used desktop database applicaiton in Windows.
Informix -Informix, now under IBM, once was the most promised object-oriented database.
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