CHAPTER 1

Introduction to Enterprise Systems for

Management

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 LEARNING OUTCOMES

1.identify the information systems evolution and its historical role in organization;
2.explain benefits and drawbacks of implementing ERP systems;
3.discuss how an organization improves its efficiency and worker productivity using
ERP;
4.explain the implementation process of ERP in an organization;
5.compare the career opportunities in ERP to other IT professions;
6.comprehend the ethical, global and security challenges while implementing an
ERP system, as well as get an overview of ERP vendors and industry trends;
7.create a report that presents the product information of different ERP vendors;

2
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• In the early days of ERP implementation most

management did not understand the magnitude of
issues an organization has to consider before, during,
and after implementation.

• ERP systems are very different from conventional

packaged software, such as Microsoft Office and others.

• There are no shortcuts when it comes to implementing

an enterprise system.

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 Information Systems in Organizations

• Information Systems are a critical component of a

successful organization today.

• Information Systems provide a high level of computer

automation to support business functions such as:
– Accounting
– Finance
– Marketing
– Customer Service
– Human Resource Management
– Operations

• Information Systems play a major role in primary and

secondary activities of an organization’s value chain.

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 Information Systems in Organizations (Cont’d)

• Information systems include hardware, software, data

processes, and people.

• Information Technology includes only the hardware and

software components.

• The role of an information system is to process data into

information using information technology, business
processes, and people resources.

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 Information Systems in Organizations (Cont’d)

• Information Technology is thus a component of

Information Systems.

• Information systems generally use a three-phased

model of input, process, and output.

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Figure 1-1 Information System Components

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Figure 1-2 Phases of an Information System

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 Role of Information Systems in the Enterprise

• Business organizations have become more complex

due to increased layer of management hierarchy and
increased level of coordination across departments.
– Each department has different information needs.

• No single information system can support all the

business needs of an organization.

• Management is generally categorized into three levels-

Strategic, Middle, and Operational.
– Each management level has different information requirements.

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Figure 1-3 Management Pyramid with Information
Requirements

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 Information Silos and Systems Integration
• Over time, Information Systems create a hodgepodge of
independent nonintegrated systems ultimately creating
bottlenecks and interfering with productivity.

• Organizations need to be agile and flexible and will

require their information systems to have integrated
data, applications, and resources from across the
organization.

• To compete effectively, organizations have to be

customer focused.
– This requires cross-functional integration among the
accounting, marketing and other departments of the
organization.

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 Enterprise Resource Planning (ERP) Systems

WHAT IS AN ERP SYSTEM?

• Enterprise Resource Planning Systems are the first
generation of enterprise systems meant to integrate
data and support all the major functions of
organizations.

• ERP systems integrate various functional aspects of the

organization as well as systems within the organization
of its partners and suppliers.

• The goal of an ERP system is to make the information

flow dynamic and immediate, therefore, increasing its
usefulness and value.

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Figure 1-4 Integrated Systems - ERP

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Enterprise Resource Planning (ERP) Systems (Cont’d)

• Another goal of ERP is to integrate departments and

functions across an organization into a single
infrastructure sharing a common database and serving
the needs of each department.

• ERP systems replace an assortment of systems that

typically existed in organizations. Moreover, ERP solves
critical problem of integrating information from different
sources and makes it available in real-time.

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 Evolution of ERP

Timeline System Platform

1960s Inventory Management Mainframe legacy systems using third
& Control generation software-(Cobol, Fortran)

1970s Materials Requirements Mainframe legacy systems using third

Planning (MRP) generation software-(Cobol, Fortran)

1980s Materials Requirements Mainframe legacy systems using fourth

Planning (MRP-II) generation database software and
manufacturing applications.
1990s Enterprise Resource Mainframe client-server systems using fourth
Planning generation database software and package
software.
2000s Extended ERP or ERP- Client-server systems using Web platform,
II open source with integration to fifth generation
applications like SCM, CRM, SFA.

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Figure 1-5 ERP Components

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 ERP Systems Components
• An ERP system consists of:
Hardware Servers and peripherals

Software Process Operating systems and database

Information Organizational data from internal and

external sources

Process Business processes, procedures, and

policies

People End users and IT staff

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Figure 1-6 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.

• The ERP architecture helps the implementation team

build the ERP system for the organization.

• If purchased, ERP architecture is often driven by the

vendor (Package-Driven Architecture).

• There are two types of architectures.

– Logical focuses on the supporting needs of the end users.
– Physical focuses on the efficiency of the system.

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 E-Business and ERP

E-Business ERP

Focuses on linking a business with Focuses on integrating the

its external partners and internal functional silos of the
stakeholders organization into an enterprise
application

Disruptive technology—Totally Adaptive technology—Merged the

transformed the way a business early data processing and
operates in terms of buying and integration efforts within an
selling, customer service, and organization
relationships with suppliers

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 System Benefits of an ERP System
• Integration of data and applications across functional
areas (i.e., data can be entered once and used by all
applications; thus improving accuracy and quality of the
data).

• Improvements in maintenance and support as IT staff is

centralized.

• Consistency of the user interface across various

applications means 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.

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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 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

• Agility of the organization in terms of responding to

changes in environment for growth and maintaining
market share

• Sharing of information across functional areas helps

collaboration between employees.

• Linking and exchanging information in real-time with

supply-chain partners improves efficiency leading to
lower costs.

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 Business Limitations of an ERP System

• Better customer service due to quicker information flow

across departments.

• Efficiency of business processes are enhanced due to

the re-engineering of business processes.

• Retraining of all employees with the new system can be

costly and time consuming.

• Change of business roles and department boundaries

can create upheaval and resistance to the new system.

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 ERP Implementation
• Before implementing ERP, an organization has to plan
and understand the life cycle of these systems.

• The key to a successful implementation is to use a

proven methodology, take it one step at a time, and
begin with an understanding of the ERP life cycle.

• ERP system implementations are very risky, and using a

well-defined project plan with a proven methodology will
assist in managing 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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Figure 1-11 ERP Life Cycle

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Figure 1-12 ERP Implementation Methodology

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 Software and Vendor Selection

• It is best for an organization that does not have the

experience in developing ERP systems to purchase one
on the market.

• Before selecting a vendor, the organization must

carefully evaluate its current and future needs in
enterprise management systems.

• Review the organization’s existing hardware, network,

and software infrastructure, and the resources available
for the implementation.

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 Vendor Evaluation

• 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
• 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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 Operations and Post-Implementation
• Going live (“Go-live”) is one of the most critical points in
a project’s success.
• It is vital to focus the efforts of all project teams to
ensure that task and activities are completed before
going live.
Five areas of stabilization are important:
• Training for end-users
• Reactive support (i.e., help desk for troubleshooting)
• Auditing support to make sure data quality is not
compromised by new system
• Data fix to resolve data migration and errors revealed by
audits
• New features and functionalities to support the evolving
needs of the organization

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Figure 1-14 Project Management

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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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 People and Organization (Cont’d)
Change Management
Role is essential because it prepares for changes to
how business is done. In implementing new systems,
communicating, preparing, and setting expectations is
as important as providing training and support.
Business Process Re-engineering
Business processes will need to be changed,
adjusted, or adapted to the new system to use the
functionality of an ERP system fully.
Global, Ethical and Security Management
Outsourcing overseas, ethical issues, and problems
with system security have also attracted a lot of
attention in ERP implementation.

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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 long-
term support for customers of PeopleSoft- (acquired in
2004). www.oracle.com

Infor
The world’s 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 (Cont’d)

Microsoft Dynamics
Formerly Microsoft Business Solutions or Great Plains,
Microsoft Dynamics is a comprehensive business-
management solution built on the Microsoft platform.

Lawson
Industry-tailored software solutions that include
enterprise performance management, distribution,
financials, human resources, procurement, and retail
operations. www.Lawson.com

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.
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 Implications for Management

• ERP systems implementation is a complex

organizational activity.
– It is important to evaluate and learn from the successes and
failures.

• ERP systems implementation requires strong project

management oversight.

• ERP systems provide improved and added functionality

for an organization.

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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 (Cont’d)

• 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 these

needs and how well a vendor meets those needs now or
in the future.

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 Summary (Cont’d)

• To be successful in implementing an ERP system, an

organization and its management must clearly
understand the implementation process.

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 Review Questions

1. How is the role of ERP system different from traditional

TPS, MIS, DSS, and others? Can an ERP system
support all levels of management?
2. Discuss the evolution of information systems in an
organization. How can the use of ERP systems remove
information or functional silos in organizations?
3. From all the ERP components listed in the chapter,
which component is most critical in the implementation
process and why?
4. Discuss the role of ERP in organizations. Are ERP tools
used for business process reengineering (BPR) or does
BPR occur due to ERP implementation?

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 Review Questions (Cont’d)

5. Why is the design and selection of ERP architecture

crucial for the implementation project? What are the
long-term implications of selecting a wrong
architecture?
6. Discuss the criteria for selecting ERP vendors. Which is
the most important criteria and why?
7. From the examples provided in the chapter on ERP
success and failure stories, what are the critical
success failures?
8. What are the critical steps of the ERP project cycle?
Discuss the critical success factors?

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Publishing as Prentice Hall

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