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320 ● Module III / Business Applications

SECTION II Enterprise Resource Planning:

The Business Backbone
Introduction What do Microsoft, Coca-Cola, Cisco, Eli Lilly, Alcoa, and Nokia have in common? Un-
like most businesses, which operate on 25-year-old back-office systems, these market leaders
reengineered their businesses to run at breakneck speed by implementing a transactional
backbone called enterprise resource planning (ERP). These companies credit their ERP
systems with having helped them reduce inventories, shorten cycle times, lower costs, and
improve overall operations.
Businesses of all kinds have now implemented enterprise resource planning (ERP) sys-
tems. ERP serves as a cross-functional enterprise backbone that integrates and automates
many internal business processes and information systems within the manufacturing,
logistics, distribution, accounting, finance, and human resource functions of a company.
Large companies throughout the world began to install ERP systems in the 1990s as
a conceptual framework and catalyst for reengineering their business processes. ERP
also served as the vital software engine needed to integrate and accomplish the cross-
functional processes that resulted. Now, ERP is recognized as a necessary ingredient
that many companies need in order to gain the efficiency, agility, and responsiveness
required to succeed in today’s dynamic business environment. See Figure 8.7.
Read the Real World Case on the next page. We can learn a lot about some of the
challenges faced by ERP adopters from this case.

What Is ERP? ERP is the technological backbone of e-business, an enterprisewide transaction framework
with links into sales order processing, inventory management and control, production and
distribution planning, and finance.
Enterprise resource planning is a cross-functional enterprise system driven by an
integrated suite of software modules that supports the basic internal business processes
of a company. For example, ERP software for a manufacturing company will typically
process the data from and track the status of sales, inventory, shipping, and invoicing,
as well as forecast raw material and human resource requirements. Figure 8.8 presents
the major application components of an ERP system. Figure 8.9 illustrates some of the
key cross-functional business processes and supplier and customer information flows
supported by ERP systems.
ERP gives a company an integrated real-time view of its core business processes, such
as production, order processing, and inventory management, tied together by the ERP
application software and a common database maintained by a database management sys-
tem. ERP systems track business resources (such as cash, raw materials, and production
capacity), and the status of commitments made by the business (such as customer orders,
purchase orders, and employee payroll), no matter which department (manufacturing,
purchasing, sales, accounting, and so on) has entered the data into the system.
ERP software suites typically consist of integrated modules of manufacturing, dis-
tribution, sales, accounting, and human resource applications. Examples of manufac-
turing processes supported are material requirements planning, production planning,
and capacity planning. Some of the sales and marketing processes supported by ERP
are sales analysis, sales planning, and pricing analysis, while typical distribution appli-
cations include order management, purchasing, and logistics planning. ERP systems
support many vital human resource processes, from personnel requirements planning
to salary and benefits administration, and accomplish most required financial record-
keeping and managerial accounting applications. Figure 8.10 illustrates the processes
supported by the ERP system that the Colgate-Palmolive Company installed. Let’s
take a closer look at Colgate’s experience with ERP.
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Chapter 8 / Enterprise Business Systems ● 321

2
REAL WORLD Kennametal, Haworth, Dana
Holding, and Others: ERPs Get a
CASE Second Lease on Life

K ennametal, a $2 billion maker of construction tools,

has spent $10 million on ERP maintenance contracts
during the past 13 years and not once could the
company take advantage of upgrades, says CIO Steve Hanna.
The company’s implementation was too customized: The
decade ago. But just as you had to adapt your approach to
managing mainframes in order to maintain their value in an
age of faster, cheaper Web-based apps, you now need to do
the same with ERP. So it’s time to rethink business proc-
esses, drive a harder bargain on maintenance fees, and find
time and effort needed to tweak and test the upgrade out- ways to marry ERP to emerging technologies. Achieving an
weighed any benefits, he says. But Hanna kept trying. Re- ERP system that delivers future value means managing it
cently, he priced the cost of consultants to help with an ERP differently here and now.
re-implementation and was shocked by estimates ranging New ERP license revenue dropped by about 24 percent,
from $15 million up to $54 million. according to Forrester Research—one effect of the general
The major ERP suites are “old and not as flexible as decline in software spending during 2009. This means ven-
some newer stuff, and they can’t build flexibility in,” Hanna dors are hungry for new business. They’ll offer software deals
says. “Modifying it takes our time and money and training.” to tempt CIOs who had put off upgrades or who want to in-
His ears practically steam from frustration. “You tell me: stall completely new systems to get the latest capabilities.
What am I missing here?” Yet CIOs need to tread carefully: What used to be a
Kennametal is like many companies when it comes to ERP. good deal may not be anymore. Steve Stanec is vice presi-
The software is essential but, unlike when it was new, it now dent of information systems at Piggly Wiggly Carolina, a
offers scant opportunity for a business to set itself apart from its privately held supermarket chain with 105 stores, most in the
competition. It certainly doesn’t help bring in new revenue, and southeast United States. Stanec says he and other CIOs must
running it eats up an increasing share of the IT budget. Yet depart from the traditional ERP script, where, after lengthy
longtime ERP users aren’t pitching the technology. negotiations, vendors hand over software and charge hefty on-
Companies still need it for managing supply chain, fi- going fees. CIOs must avoid falling into the same ERP traps
nancial, and employee data. they once did, he says.
As Hanna and other CIOs are finding, however, behemoth Buying and installing ERP was never a cakewalk. Today,
ERP systems are inflexible. Meanwhile, high-priced main- though, ERP is the Jack Nicholson of software: With a
tenance plans and vendors’ slowness to support new techno- hackneyed repertoire, the old and expensive dog finds it hard
logies such as mobile and cloud computing mean that, without to learn new tricks. It’s become a legacy technology, and CIOs
careful management, the ERP technology woven through are now finding new ways to manage ERP projects and the
your company can become a liability. ongoing upkeep. Their best advice: Draw a clear project
Your ERP system probably won’t collapse if you do map and modify the software only as a last resort.
nothing; it’s not like legacy mainframe applications were a Haworth, a $1.7 billion office furniture manufacturer, will
use tools from iRise to visually plan its rollouts of SAP sys-
FIGURE 8.7 tems in its major offices on four continents. To get employees
accustomed to changes before rollout, the iRise tools simulate
how the finished SAP system will look. The company also
uses a sales compensation application from Vertex because
SAP doesn’t support the complicated, multitiered compensa-
tion model Haworth uses to pay its salespeople, says CIO Ann
Harten. These choices stem from Harten’s decision to make
no custom changes to the core SAP code. The idea is to
streamline the implementation project, which started in 2006,
and to make future upgrades easier.
Modifying the core is expensive both when you do it and as
you live with it, she says. “Next time the vendor does a version
upgrade or a patch, your testing requirements are increased
several fold,” she says. “You want to avoid this at all costs.”
ERP of the future is as plain-Jane as possible, agrees
Hanna, the Kennametal CIO. The fact that it can take an
army of developers to build new features into ERP suites
Companies are starting to question the value of slows the vendors down. But it’s also an obstacle for custom-
ERP customization and maintenance fees. ers. The 6,446 customizations—Hanna counted them—that
Kennametal made to its ERP software over the years pre-
vented the company from taking advantage of new technology
Source: Patrice Latron/Corbis.
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322 ● Module III / Business Applications

its vendor did build in. “We couldn’t implement one single Dana’s vendor didn’t lie down. To try to persuade Tracy
enhancement pack ever,” he says. that maintenance fees are valuable, the vendor analyzed
So even if Hanna could pay up to $54 million for inte- Dana’s use of its support, he says. The findings: Dana made
grators and consultants to help Kennametal move to the lat- 21,000 requests to the vendor between January and Septem-
est version of the ERP suite, he doesn’t want to. Instead, he ber 2009. About 98 percent of them didn’t involve human
plans to turn Kennametal’s old ERP management strategy intervention; they were automated lookups on the vendor’s
on its head by putting in as vanilla a version of SAP as pos- knowledge base. “We’re not getting much,” Tracy concluded.
sible. Hanna and CEO Carlos Cardoso are willing to change So Tracy stopped making maintenance payments to his
Kennametal’s internal business processes to match the way main ERP vendor as of December 31, 2009. “That’s a risky
SAP works, Hanna says, rather than the other way around. strategy, though not as risky as vendors would have you be-
Kennametal will also take on the implementation itself. lieve,” he says. One result of the move away from provider
Hanna hired IBM to consult about requirements defini- support is that Dana’s internal IT people have to be more
tions and to identify business processes that must be re- savvy about the ERP systems the company relies on—and
vamped to conform to SAP’s procedures. Meanwhile, able to fix what may go wrong. But, he says, there have been
Kennametal staff will do the legwork. Hanna and Cardoso no technological show-stoppers in years because ERP, like
have committed to the board of directors to have the job other legacy systems, is mature and reliable. Plus, there’s
done in eight months, he says, implementing at least 90 per- plenty of ERP talent.
cent of the SAP software unmodified. The project is so im- Eliminating maintenance saves money, because Dana is
portant to Kennametal that it must succeed in order for the no longer paying for a service of questionable value, and it
company’s leaders, including Hanna and Cardoso, to achieve sets a precedent with the company’s other ERP vendors.
their performance goals for the year. “I’m going to make it “You have to show value every step of the way,” Tracy tells
work,” says Hanna. his suppliers. “If you try to hold us hostage, I will call what I
Because Kennametal’s ERP system has been unable to see as a bluff and just stop payment.”
keep up with changing technologies, Hanna says the company CIOs have to take charge of what the future of ERP is
never benefitted from the millions in maintenance fees it paid going to be. Treating ERP as legacy IT may be hard for
to cover upgrades. “We paid maintenance for nothing.” some who have invested so much time and energy in plan-
Doug Tracy, CIO at Dana Holding, researched analyst ning, implementing, and tweaking these systems.
firm estimates about where maintenance money actually But adopting this mindset will help CIOs move ERP—
goes and found that 90 percent of those fees are pure profit and their companies—ahead. Modifying the base applica-
for the vendor. For Tracy, there is no more time or tolerance tions judiciously, if at all, will minimize expense and time
for vendor games. devoted to software that now provides the most basic func-
The $8.1 billion auto parts supplier has in recent years tionality. Everyone does accounts payable, notes Stanec at
fought a hostile takeover attempt as well as been in, then Piggly Wiggly, so don’t waste time customizing it.
emerged from, Chapter 11 bankruptcy protection. Then the Further out, Stanec, for one, dreams of seeing ERP ven-
auto market tanked, and Dana’s sales reflected the 30 percent dors develop packages that help companies generate reve-
to 70 percent decline. The company had to scale back some nue. “Then,” he says, “we’d have something interesting to
ERP projects, and Dana wanted its vendors to work with negotiate.”
them to reduce fees. Tracy declines to name Dana’s main ERP Source: Adapted from Kim S. Nash, “Reviving ERP,” CIO Magazine,
vendor but says he wasn’t getting the deal he was looking for. February 1, 2010.

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

1. Why does ERP customization lead to so many head- 1. What offerings are available in the ERP marketplace
aches when it is time to upgrade? today that were not available when the companies men-
2. Why were the systems customized in the first place? tioned in the case first started investing in the technol-
ogy? What new functionality do these offerings have?
3. Cutting payments outright to ERP vendors may not be Research current ERP alternatives and prepare a report
possible for smaller companies without the in-house re- comparing their major features.
sources that larger organizations have. Are they at the
mercy of the software providers? What other alternatives 2. Should companies scrap their existing ERP implemen-
do small companies have? Provide some recommendations. tations and start from scratch again, or should they keep
trying to make their existing investments pay off? What
4. Kennametal CIO complains that they “paid mainte- are the advantages and disadvantages of each approach?
nance for nothing.” Who do you think is responsible Break into small groups to discuss these issues.
for that state of affairs? Kennametal? The ERP vendor?
Both? Justify your answer.
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Chapter 8 / Enterprise Business Systems ● 323

FIGURE 8.8
The major application Production
components of enterprise Planning
resource planning Sales, Integrated
demonstrate the cross- Distribution, Logistics
functional approach of Order Customer/
ERP systems. Management Employee

Accounting and
Human
Finance
Resources

FIGURE 8.9 Some of the business process flows and customer and supplier information flows supported by
ERP systems.

Manufacturing Order-Fulfillment
Production Materials Delivered Orders
Process Process

Forecast
Planning Processes Customer Forecast
Requirements

Returns & Repairs

Purchase Procurement Order Capture
Requirements Process Process
Customer Orders

F IG UR E 8.10 The business processes and functions supported by the ERP system implemented by the Colgate-
Palmolive Company.

Demand Manufacturing Logistics Distribution Order

Planning Planning Planning Planning Entry

Enterprise Resource Planning

Customers
Suppliers

MRP
Purchasing Manufacturing Inventory Distribution
Inbound
& Accounts & Production Control & & Accounts
Inventory
Payable Scheduling Warehousing Receivable
Plant Mgmt.

Finance and Accounting

Human Resources
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324 ● Module III / Business Applications

Colgate-Palmolive: Colgate-Palmolive is a global consumer products company that implemented the

SAP R/3 enterprise resource planning system. Colgate embarked on an implementa-
The Business Value
tion of SAP R/3 to allow the company to access more timely and accurate data, get
of ERP the most out of working capital, and reduce manufacturing costs. An important factor
for Colgate was whether it could use the software across the entire spectrum of the
business. Colgate needed the ability to coordinate globally and act locally. The im-
plementation of SAP across the Colgate supply chain contributed to increased prof-
itability. Now installed in operations that produce most of Colgate’s worldwide
sales, SAP was expanded to all Colgate divisions worldwide. Global efficiencies in
purchasing—combined with product and packaging standardization—also pro-
duced large savings.
• Before ERP, it took Colgate U.S. anywhere from one to five days to acquire an
order, and another one to two days to process the order. Now, order acquisition
and processing combined take four hours, not up to seven days. Distribution
planning and picking used to take up to four days; today, they take 14 hours. In
total, the order-to-delivery time has been cut in half.
• Before ERP, on-time deliveries used to occur only 91.5 percent of the time, and
cases ordered were delivered correctly 97.5 percent of the time. After R/3, the
figures are 97.5 percent and 99.0 percent, respectively.
• After ERP, domestic inventories have dropped by one-third, and receivables
outstanding have dropped to 22.4 days from 31.4. Working capital as a percent-
age of sales has plummeted to 6.3 percent from 11.3 percent. Total delivered
cost per case has been reduced by nearly 10 percent.

Benefits and As the example of Colgate-Palmolive has just shown, ERP systems can generate sig-
nificant business benefits for a company. Many other companies have found major
Challenges of business value in their use of ERP in several basic ways:
ERP
• Quality and efficiency. ERP creates a framework for integrating and im-
proving a company’s internal business processes that results in significant
improvements in the quality and efficiency of customer service, production,
and distribution.
• Decreased costs. Many companies report significant reductions in transac-
tion processing costs and hardware, software, and IT support staff compared
to the nonintegrated legacy systems that were replaced by their new ERP
systems.
• Decision support. ERP provides vital cross-functional information on business
performance to managers quickly to significantly improve their ability to make
better decisions in a timely manner across the entire business enterprise.
• Enterprise agility. Implementing ERP systems breaks down many former de-
partmental and functional walls or “silos” of business processes, information
systems, and information resources. This results in more flexible organizational
structures, managerial responsibilities, and work roles, and therefore a more agile
and adaptive organization and workforce that can more easily capitalize on new
business opportunities.

The Costs of ERP An ERP implementation is like the corporate equivalent of a brain transplant. We pulled
the plug on every company application and moved to PeopleSoft software. The risk was
certainly disruption of business because if you do not do ERP properly, you can kill your
company, guaranteed.
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Chapter 8 / Enterprise Business Systems ● 325

FIGURE 8.11
Typical costs of
implementing a new Hardware
ERP system. 12%

Software
15%
Reengineering
43%

Training and
Change
Management
15%
Data
Conversions
15%

So says Jim Prevo, CIO of Green Mountain Coffee of Vermont, commenting

on their successful implementation of an ERP system. Though the benefits of ERP
are many, the costs and risks are also considerable, as we will continue to see in
some of the real-world cases and examples in the text. Figure 8.11 illustrates the
relative size and types of costs of implementing an ERP system in a company.
Notice that hardware and software costs are a small part of total costs, and that the
costs of developing new business processes (reengineering) and preparing employ-
ees for the new system (training and change management) make up the bulk of
implementing a new ERP system. Converting data from previous legacy systems to
the new cross-functional ERP system is another major category of ERP implemen-
tation costs.
The costs and risks of failure in implementing a new ERP system are substantial.
Most companies have had successful ERP implementations, but a sizable minority of
firms experienced spectacular and costly failures that heavily damaged their overall
business. Big losses in revenue, profits, and market share resulted when core business
processes and information systems failed or did not work properly. In many cases,
orders and shipments were lost, inventory changes were not recorded correctly, and
unreliable inventory levels caused major stock-outs to occur for weeks or months.
Companies like Hershey Foods, Nike, A-DEC, and Connecticut General sustained
losses running into hundreds of millions of dollars in some instances. In the case of
FoxMeyer Drugs, a $5 billion pharmaceutical wholesaler, the company had to file
for bankruptcy protection and then was bought out by its arch competitor, McKesson
Drugs.
The most recent example of ERP failure is Shane Co., the family owned jewelry
retailer and one of the 10 largest jewelry retailers in the world. In January 2009,
Shane Co. sought bankruptcy protection, attributing the company’s decline to delays
and cost overruns in their $36 million SAP AG inventory-management system. Shane
Co. claimed SAP took almost three years to install and implement the system instead
of one year, while costs “ballooned” to $36 million from a projected maximum of
$10 million. Shane, based in Centennial, Colorado, became “substantially overstocked
with inventory, and with the wrong mix of inventory” when Walldorf, Germany-
based SAP finished the system in September 2007, according to the bankruptcy
filing. The software “adversely affected sales” through the first nine months of 2008,
it said.
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326 ● Module III / Business Applications

American American LaFrance (ALF), a maker of emergency vehicles such as fire trucks and
LaFrance: ambulances, filed for Chapter 11 bankruptcy protection on January 28, 2008; in
court papers, it is claiming that their software vendor’s work installing and transi-
Botched ERP tioning to a new ERP system contributed to inventory and production problems.
Implementation Officials at American LaFrance, which has been in business making fire and emer-
Leads to Failure gency response equipment since 1832, stated that “this is a legal ‘reorganization’
process to make the company stronger.”
(and Bankruptcy) The bankruptcy filing was due to “operational disruptions caused by the installa-
tion of a new ERP system,” as well as obsolete inventory that American LaFrance’s
previous owner, Freightliner, did not properly disclose. A New York–based invest-
ment company, Patriarch Partners, bought American LaFrance in late 2005 for an
undisclosed sum.
“As a result of the unanticipated obsolescence of inventory and the ongoing ERP
problems, American LaFrance has incurred approximately $100 million in secured
debt since it purchased its business,” company officials said in a statement. “These
problems have resulted in slowed production, a large unfulfilled backlog, and a lack
of sufficient funds to continue operating.”
ALF had purchased Freightliner’s business in 2005. As part of the purchase
agreement, Freightliner had managed inventory, payroll, and manufacturing
processes until June 2007, according to news reports. “But American LaFrance,
which was preparing to take over those functions by creating its own in-house
system, fumbled the changeover,” wrote The Post and Courier of Charleston, South
Carolina.
Citing company statements, the newspaper added: “The two systems were not
entirely compatible, and a wide range of financial information was lost in the change-
over. Inventory was in disarray, and workers were unable to find the parts they
needed.” According to U.S. Bankruptcy Court documents, the new system ALF set
up with the help of a software vendor had “serious deficiencies” that had “a crippling
impact” on the company’s operations.
The multitude of business and IT problems “forced American LaFrance to seek
protection from its more than 1,000 creditors, who collectively are owed more than
$200 million,” the paper reported. Results from a recent CIO survey on ERP sys-
tems and their importance to twenty-first-century businesses explain how and why
technology disasters like American LaFrance’s can happen. More than 85 percent of
survey respondents agreed or strongly agreed that their ERP systems were essential
to the core of their businesses, and that they “could not live without them.”
Source: Adapted from Jennifer Zaino, “Modern Workforce: Capital One Puts ERP at Core of Work,” InformationWeek,
July 11, 2005.

Causes of ERP What have been the major causes of failure in ERP projects? In almost every case, the
Failures business managers and IT professionals of these companies underestimated the com-
plexity of the planning, development, and training that were needed to prepare for a
new ERP system that would radically change their business processes and information
systems. Failure to involve affected employees in the planning and development
phases and to change management programs, or trying to do too much too fast in the
conversion process were typical causes of failed ERP projects. Insufficient training in
the new work tasks required by the ERP system and failure to do enough data conver-
sion and testing were other causes of failure. In many cases, ERP failures were also
due to overreliance by company or IT management on the claims of ERP software
vendors or on the assistance of prestigious consulting firms hired to lead the imple-
mentation. The following experience of a company that did it right gives us a helpful
look at what is needed for a successful ERP implementation.
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Chapter 8 / Enterprise Business Systems ● 327

Capital One Just a few years ago at Capital One Financial Corp., it took 10 human-resources
(HR) specialists to sign off on one change-of-address form. With thousands of em-
Financial: Success
ployees worldwide, that’s a lot of paper-pushing. Today, address changes are done via
with ERP Systems a self-service application that has freed HR to devote time to strategic staffing, pro-
gram planning, and change management.
This example illustrates a big change that has taken place at the $2.6 billion-a-year
financial services company since it began to roll out PeopleSoft applications. “It’s a
cultural change that has freed people to not deal with minutiae but to deal with business
value,” says Gregor Bailar, executive vice president and CIO. “It really has been
transformative.” Bailar envisions more automation ahead, with financials following in
the footsteps of HR’s “lean-process” design to deal with the mountain of data re-
quests the financials team receives and processes within the group.
The PeopleSoft ERP system, which serves as Capital One’s backbone for
financials, HR, asset-management, and supply-chain processes, supports about
18,000 users, including Capital One’s 15,000 associates and some business partners.
The applications are accessible via a Web portal based on BEA Systems Inc.’s
technology.
Capital One is exploring the possibility of partnering with ERP application ser-
vice providers, now that the hard work of correcting data and linking processes is
done. Running the applications may be more of a commodity job at this point, but
the applications themselves serve as a pillar for the company’s future-of-work initia-
tive. Bailar describes this as “a very mobile, interactive, collaborative environment”
designed to support the requirements of the company’s biggest asset, its knowledge
workers. It’s characterized not only by extensive Wi-Fi access, VoIP-enabled laptops,
instant messaging, and BlackBerrys, but also by workflows that, for the most part,
come to users electronically. Says Bailar, “Everyone’s daily life is kind of drawn back
to this suite of apps.”
Source: Adapted from Jennifer Zaino, “Modern Workforce: Capital One Puts ERP at Core of Work,” InformationWeek,
July 11, 2005.

Trends in ERP Today, ERP is still evolving—adapting to developments in technology and the demands
of the market. Four important trends are shaping ERP’s continuing evolution: improve-
ments in integration and flexibility, extensions to e-business applications, a broader reach
to new users, and the adoption of Internet technologies.
Figure 8.12 illustrates four major developments and trends that are evolving in ERP
applications. First, the ERP software packages that were the mainstay of ERP imple-
mentations in the 1990s, and were often criticized for their inflexibility, have gradually
been modified into more flexible products. Companies that installed ERP systems
pressured software vendors to adopt more open, flexible, standards-based software ar-
chitectures. This makes the software easier to integrate with other application pro-
grams of business users, as well as making it easer to make minor modifications to suit
a company’s business processes. An example is SAP R/3 Enterprise, released in 2002 by
SAP AG as a successor to earlier versions of SAP R/3. Other leading ERP vendors,
including Oracle, PeopleSoft, and J.D. Edwards, have also developed more flexible
ERP products.
Web-enabling ERP software is a second development in the evolution of ERP.
The growth of the Internet and corporate intranets and extranets prompted software
companies to use Internet technologies to build Web interfaces and networking capa-
bilities into ERP systems. These features make ERP systems easier to use and connect
to other internal applications, as well as to the systems of a company’s business part-
ners. This Internet connectivity has led to the development of interenterprise ERP
systems that provide Web-enabled links between key business systems (such as inventory
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328 ● Module III / Business Applications

FIGURE 8.12
Trends in the evolution of
ERP applications.
e-Business Suites

Interenterprise ERP

Web-Enabled ERP

Flexible ERP

and production) of a company and its customers, suppliers, distributors, and others.
These external links signaled a move toward the integration of internal-facing ERP
applications with the external-focused applications of supply chain management
(SCM) and a company’s supply chain partners. We will discuss supply chain manage-
ment in Section III.
All of these developments have provided the business and technological momen-
tum for the integration of ERP functions into e-business suites. The major ERP soft-
ware companies have developed modular, Web-enabled software suites that integrate
ERP, customer relationship management, supply chain management, procurement,
decision support, enterprise portals, health care functionality, and other business
applications and functions. Examples include Oracle’s e-Business Suite and SAP’s
mySAP. Some e-business suites disassemble ERP components and integrate them into
other modules, while other products keep ERP as a distinct module in the software
suite. Of course, the goal of these software suites is to enable companies to run most
of their business processes using one Web-enabled system of integrated software and
databases, instead of a variety of separate e-business applications. See Figure 8.13.
Let’s look at a real-world example.

F IGU RE 8.13 The application components in Oracle’s e-Business Suite software product.

ORACLE E-BUSINESS SUITE

Advanced Planning Business Intelligence Contracts

e-Commerce Enterprise Asset Management Exchanges
Financials Human Resources Interaction Center
Manufacturing Marketing Order Fulfillment
Procurement Product Development Professional Services Automation
Projects Sales Service
Training Treasury

Source: Adapted from Oracle Corporation, “E-Business Suite: Manage by Fact with Complete Automation and Complete Information,”
Oracle.com, 2002.
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Chapter 8 / Enterprise Business Systems ● 329

Visa International: Despite the innovations brought to global commerce by Visa’s sophisticated con-
Implementing the sumer payments processing system, Visa International had surprisingly outdated
systems managing some of its most critical internal business processes. “KPMG did
e-Business Suite an analysis of our business and found that our internal systems were becoming a risk to
our organization,” said Gretchen McCoy, senior vice president of Visa International.
“We were in the red zone.”
McCoy found that Visa’s internal systems were unnecessarily complex and uti-
lized few of the advantages that technology can bring to an enterprise. The financial
management infrastructure was fragmented, complex, and costly to maintain. Data
were not standardized, resulting in many different databases making disparate inter-
pretations of business data. Corporate purchasing, accounts payable, and asset
management were managed manually, resulting in time-consuming delays and dis-
crepancies. Fragmented internal systems are not unusual in a company that experiences
rapid growth. Visa experienced double-digit growth for 11 consecutive years. Visa
chose Oracle e-Business Suite to remedy the problems that come with a complex and
inefficient back office.
The resulting implementation turned Visa’s cumbersome, outdated desktop pro-
cedures into Web-based e-business solutions that met Visa’s demands for all roles and
processes. For example, Oracle Financials automated Visa’s old organization and cre-
ated a more agile system capable of accounting for the impact of financial activities on
a global scale. Accounts payable was transformed from a cumbersome manual process
into a streamlined system that automatically checks invoices against outgoing pay-
ments and requests review of any discrepancies via e-mail. And Oracle iProcurement
helped automate Visa’s requisitioning and purchasing system by streamlining the en-
tire purchasing process and implementing a self-service model to increase processing
efficiency, said McCoy.