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- 2. Managerial Questions What is ERP? How will it help my business? What are its costs? What are the risks? 2
- 3. What is an ERP? Enterprise-wide system that integrates the business functions and processes of an organization Integration of business functions into one seamless application Usually runs on a relational database Replaces countless departmental and workgroup information systems 3
- 4. What is an ERP? Links business processes Maintains audit trail Utilizes a common information system Implementation normally involves BPR: Business Process Reengineering Difficult to Implement Correctly – Railroad Tracks 4
- 5. Before/After ERP 5
- 6. Evolution of ERP 1960’s: Inventory Control Systems 1970’s: MRP: Material Requirement Planning 1980’s: MRPII: MRP & Distribution 1990’s: MRPII ERP with introduction of other business functions CRM’s Today: Web Enabled ERP – Connecting ERP Externally 6
- 7. Factors Along the Path to ERP The development of client-server architecture …and later the n-tier client-server architecture The rush to replace out-dated and non-Y2K compliant systems. The desire to have integrated systems within the firm. The desire to get out of the application development "business". 7
- 8. SAP: An ERP in Profile Flagship products are MySAP ERP and Duet (with Microsoft) The largest ERP company in the world; world’s 3rd largest software company! 12 million users, 36,000 customers, 100,600 installations, 1,500 partners world-wide 8
- 9. Core Modules of SAP Finance Human Resources Corporate Services (asset management, project management, etc.) Operations (manufacturing, sales, service, logistics, etc.) 9
- 10. Other SAP Modules Portals Supply chain/Supplier relationship management Customer relationship management Product life cycle Business intelligence 10
- 11. ERP Vendor Landscape 11
- 13. Interfaces… The goal in ERP is to sunset as many systems as possible But some systems will remain Need to build interfaces these systems More interfaces built/maintained more complexity of the ERP implementation higher cost. 13
- 14. …and “Bolt-ons” Core ERP functions may be augmented by “bolt- ons” (specialized functionality above and beyond that of the ERP) Four major areas: Supply Chain Management (SCM) Product Lifecycle Management (PLM) Customer Relationship Management (CRM) Business Intelligence (BI) 14
- 15. ERP Enterprise Architecture 15
- 16. How SAP Works 16
- 17. Issues with SAP Cultural Issues System designed in North America or Western Europe Embodies best practices from ‘home’ country – based on ‘home’ country assumptions Practices and assumptions may not transfer across borders 17
- 18. Costs of ERP Meta Group survey of 63 companies (small to large, range of industries) Average of $15 M per firm (range $400,000 - $300M) On average the TCO is $53,000 per user Media annual savings: $1.6M Requires two-years of implementation and integration Source: CIO.com: "The ABCs of ERP" 18
- 19. Costs of ERP (cont’d) Average Cost To Install ERP Expenditure Amount (millions) Percentage Hardware 1.46 13.8 Software 1.86 17.5 Internal Staff 2.46 23.2 Professional Services 4.82 45.5 Source: CIO Magazine Oct. 15, 1999 19
- 20. Benefits of ERP - Promised Shorter order cycle time Increased productivity Lower IT costs Better cash management Reduced personnel 20
- 21. Benefits of ERP - Actual Expected and Actual Benefits Benefit Expected Actual Shorter cycle time 19% 31% Improved 24% 31% productivity Lower IT costs 24% 11% Better cash 24% 13% management Personnel 43% 33% reduction 21
- 22. Reasons to Adopt ERP One face to the customer Knowing “what is possible” in terms of organizational inventory Eliminating redundancy Consolidation 22
- 23. Reasons to Adopt ERP (cont’d) Handle growth Reduce stress on existing IT Avoid legacy systems Modernizing 23
- 24. Reasons Not to Adopt Cost Loss of competitive advantage Resistance to change Poor cultural fit 24
- 25. Alternatives? Open Source ERP (+ Support Vendors) e.g. GNU Enterprise, Apache OFBiz ERP for SMEs less expensive systems with fewer "bells and whistles" ERP ASPs (Application Service Providers) ASPs will host and maintain the software for you 25
- 26. Post-ERP? Service-Oriented Architectures (SOA) hold some promise as the natural evolution from ERP The foundation of SOA is standardization based upon web services interoperability standards. SOA does not replace ERP provides the ability to “loosely couple” services (business functions). 26
- 27. Before/After 27
Editor's Notes
- #4: The keyword in Enterprise Resource Planning is Enterprise. This is the ambitious goal of an ERP, to integrate an organization into one information system. That is a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer system, each optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
- #7: Here you can see a general evolution of ERP systems. They started as customized and proprietary Inventory control systems in the 1960’s. In the 1970’s the focus shifted to Material Requirement Planning which provided raw materials and component management and procurement. In the 1980’s the model continued to grow by including distribution channel functions. In the 1990’s This model grew further into the fully defined business suites that we have come to know as Enterprise Resource Planning Systems. The development of these products was perpetuated by the desire to move programs off of customized mainframe programs, the development of new technologies, the decentralization of businesses, and the desire to implement BPR. CRM, which first gained prominence in the mid-1990s, was the logical progression of ERP, as it was designed to enhance a company's front-desk activities. Customer interaction entered a new era with the advent of call centers supported by CRM software, which allowed companies to direct marketing activities and build relationships with distinct groups of customers. CRM also promised to improve the profitability and effectiveness of the company by automating many processes, making better use of available staff and reducing overall costs. CRM offers a utopian answer to many challenges. With an integrated CRM solution, companies can detect changes in customer buying habits, understand their needs faster than the competition and respond to customer demands in double-quick time. Today, the model grows and ERP companies are trying to fully Internet Enable their products and redesign their products for the new business models. What was once internally focused is now externally focused.