8012 - Enterprise Systems and Business Analysis

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Chapter 1: Introduction to
Enterprise Systems for
Management

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Learning Objectives (Week 1)
 Understand the information systems evolution and its historical role in the
organization leading to systems integration and Enterprise Resource Planning
(ERP).
 Learn about ERP systems and evolution, components, and architecture;
understand the benefits and drawbacks of implementing ERP systems and
how they can help an organization improve its efficiency and worker
productivity.
 Gain an overview of the implementation process (e.g., the ERP life cycle,
business process reengineering project management, and change
management). Understand the role of people, vendors, consultants, and the
organization in making the ERP implementation process successful.
 Comprehend the ethical, global, and security challenges while implementing
an ERP system, and look at the ERP vendors and industry trends.
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What is an Enterprise System?
 Sawyer and Southwick (2002, p. 264) define enterprise
systems as “characterized by a suite of integrated software
modules and a common database used to help manage a
company’s human resources, financials, and the service
and/or manufacturing processes”.
 Enterprise systems are commercial software packages that
include Enterprise Resource Planning (ERP), Customer
Relationship Management (CRM), Supply Chain Management
(SCM), and others (Markus & Tanis, 1999).

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What is an Enterprise System?
 The enterprise system implementation process is
considered to be a complex process that impacts
organisations, processes, tasks, knowledge and skills, and
relationships with clients and suppliers (Wognum et al., 2004
).
 Organisations that implement an enterprise system are
required to make changes in their business, modify their
business processes, and restructure their organisations to
obtain the benefits of the new system (Davenport, 1998).

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Enterprise System
 The implementation of a new enterprise system is a major
change event for end-users. In addition, organisations need
to modify organizational processes and structures to support
the new enterprise system.
 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.

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 Enterprise Systems in Organisations
 Business organisations have become very complex and their
business needs can no longer be supported by one single
information system.

 Information Systems are a critical component of a successful

organisation today.

 Information Systems provide a high level of computer automation

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

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Management Pyramid with Information
Requirements
• The pyramid shape in Figure 1-1 illustrates the information needs at each level of
management.
• The quantitative requirements are much less at the strategic level than they are at the
operational level; however, the quality of information needed at the top requires
sophisticated processing and presentation.
• The pyramid should assess and display the performance of the entire organization.
• For example, the CEO of a company may need a report that quickly states how a particular
product is performing in the market vis-à-vis other company products over a period of time
and in different geographical regions. Such a report is not useful to an operations manager,
who is more interested in the detailed sales report of all products he or she is responsible for
in the last month.
• The pyramid therefore suggests that managers at the higher level require a smaller quantity
of information, but that it is a very high quality of information.
• On the other hand, the operational-level manager requires more detailed information and
does not require a high level of analysis or aggregation as do their strategic counterparts.
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Management Pyramid with Information
Requirements
The pyramid
shape in Figure
1-1 illustrates
the information
needs at each
level of
management.

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 Information Silos and Systems
Integration
• As organizations become larger and more complex, they tend to break
functions into smaller units by assigning a group of staff to specialize in
these activities.
• This allows the organization to manage complexity as well as some of the
staff to specialize in those activities to enhance productivity and efficiency.
• The role of information systems has been and always will be one of
supporting business activities and enhancing the workers, efficiency.
• Over time, however, as business changes and expands, systems need to
change to keep pace (speed). The result is sometimes a wide variety of
information systems and computer architecture configurations, which
creates a hodgepodge (mixture) of independent non-integrated systems.
These systems ultimately create bottlenecks and interfere with productivity.
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 Information Silos and Systems
Integration
In today’s globally competitive environment, an organization will find it very difficult
to operate and survive with silo information systems.
Organisations need to be agile and flexible and will require their information
systems to have integrated data, applications, and resources from across the
organisation.
These systems need to have integrated data, applications, and resources from across
the organization. Integrated information systems are needed today to focus on
customers, to process efficiency, and to help build teams that bring employees
together that cross functional areas.
 To compete effectively, organisations have to be customer focused and cost
efficient.
This requires cross-functional integration among the accounting, marketing and
other departments of the organisation.
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Enterprise Resource Planning (ERP)
Systems
WHAT IS AN ERP SYSTEM?
• Enterprise resource planning (ERP) systems are the specific kind of enterprise systems
to integrate data across and be comprehensive in supporting all the major functions of
the organization.
• Enterprise Resource Planning Systems are the first generation of enterprise systems
meant to integrate data and support all the major functions of organisations.
• ERP systems integrate various functional aspects of the organisation as well as systems
within the organisation 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.
• ERP systems are comprehensive software applications that support critical
organizational functions. As shown in Figure 1-2, they integrate both the various
functional aspects of the organization and the systems within the organization with
those of its partners and suppliers.
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Integrated
Systems - ERP

Figure 1-2 shows basically integrated

information systems that support such
enterprise functions as accounting,
financial, marketing, and production
requirements of organizations.
This allows for real-time data flows
between the functional applications.

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 Enterprise Resource Planning (ERP)
Systems
• Another goal of ERP is to integrate departments and functions across an
organisation into a single infrastructure that serves the needs of each
department.
• This is a difficult, if not an impossible, task considering that employees in the
procurement department will have very different needs than will employees in the
accounting department.
• In summary, ERP systems are the mission-critical information systems in
today’s business organization. ERP systems replace an assortment (variety)
of systems that typically existed in organisations. (Accounting, HR, Materials
Planning, Transaction Processing, etc.).
• ERP solves the 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
Inventory Management & Mainframe legacy systems using third generation
1960s software-(Cobol, Fortran)
Control

Materials Requirements Mainframe legacy systems using third generation

1970s software-(Cobol, Fortran)
Planning (MRP)
Mainframe legacy systems using fourth
Materials Requirements
1980s generation database software and manufacturing
Planning (MRP-II)
applications.
Mainframe client-server systems using fourth
Enterprise Resource
1990s generation database software and package
Planning
software.
Client-server systems using Web platform, open
2000s Extended ERP or ERP-II source with integration to fifth generation
applications like SCM, CRM, SFA.
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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 (a business process is a
series of tasks or activities grouped to achieve a business function or
goal).
 ERP software has 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
Hardware Servers and peripherals
Operating systems and
Software Process
database
Organisational data from internal
Information
and external sources
Business processes,
Process
procedures, and policies

People End users and IT staff

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 ERP Components
Hardware (i.e., servers and peripherals), Software (i.e., operating systems and
database), Information (i.e., organizational data from internal and external
resources), Process (i.e., business processes, procedures, and policies), and
People (i.e., end users and IT staff) to perform the input, process, and output
phases of a system.

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 ERP Components Integration
• Each component must be layered
appropriately and each layer must
support the efficiency of the other
layers.
• The layered approach also provides the
ability to change layers without
significantly affecting the other layers.
• This can help organizations lower the
long-term maintenance of the ERP
application because changes in one layer
do not necessarily require changes in
other layers. 19
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.
 A system’s architecture is a blueprint of the actual ERP system
and helps the implementation team build the ERP system.
 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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 Example of Architecture of ERP at Large
•
University
The architecture sets the stage for
modifications or customizations to
support an organization’s policies and
procedures, data conversion, system
maintenance, upgrades, backups,
security, access, and controls.
• Many organizations often make the
mistake of ignoring the system
architecture stage and jumping directly
into ERP implementation because they
have planned a “vanilla” or “as-is”
implementation. This can be disastrous
because the organization will not be
prepared for long-term maintenance
and upkeep of the system. 21
Logical Architecture of an ERP System
• The two types of architectures
for an ERP system are logical
and physical or tiered. 
• The logical
architecture, focuses on
supporting the requirements
of the end users, whereas the
physical architecture focuses
on the efficiency (cost,
response time, etc.) of the
system.  22
 Tiered Architecture Example of ERP
System

• ERP system
architecture is
organized in layers or
tiers to manage
system complexity in
order to provide
scalability and
flexibility.

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E-Business and ERP
E-Business ERP
Focuses on linking a business with its Focuses on integrating the internal
external partners and stakeholders functional silos of the organisation into
an enterprise application
Disruptive technology—Totally Adaptive technology—Merged the early
transformed the way a business data processing and integration efforts
operates in terms of buying and selling, within an organisation
customer service, and relationships with
suppliers
Early focus of e-Business was on Focus of ERP systems was mainly on
communication (e-mail), collaboration data sharing, systems integration,
(calendaring, scheduling, group business process change, and
support), marketing and promotion (Web improving decision making
sites), and E-commerce (Front office through the access of data from a
functions) single source (Back office functions)
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e-Business and ERP

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 Benefits of an ERP System

The system benefits and limitations of ERP systems are as follows:

 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).
Maintenance and support of the system improves as the IT staff is
centralized and is trained to support the needs of users across the
organization.
 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 centralisation of hardware, software, and network facilities.
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 Benefits of an ERP System

The system benefits and limitations of ERP systems are as follows:

 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 business processes are enhanced due to
the re-engineering of business processes.

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28
 Benefits of an ERP System

The business benefits and limitations of ERP systems are as follows:

 Increasing agility of the organization in terms of responding to changes in the environment for
growth and maintaining the market share in the industry.
Sharing of information across the functional departments means employees can collaborate easily
with each other and work in teams.
Linking and exchanging information in real time with its supply chain partners can improve efficiency
and lower costs of products and services.
Quality of customer service is better and quicker as information flows both up and down the
organization hierarchy and across all business units.
Efficiency of business processes are enhanced due to business process reengineering of organization
functions.
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.
Reduction in cycle time in the supply chain from procurement of raw materials to production,
distribution, warehousing, and collection.
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Limitations of an ERP System
 Complexity of installing, configuring, and maintaining the
system increases, thus requiring specialized IT staff,
hardware, and network facilities.
 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.
 Retraining of all employees with the new system can be
costly and time consuming.
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 ERP Implementation Methodology (Strategies)

Implementing an ERP system is problematic without first considering current business

processes and changes to those processes based on the functionality of the new system. If
business processes are not analysed and compared with what the new system can do, it is
very likely the implementation will require significant system modifications after
implementation. 32
Business Process Management
• Business process management is the understanding, visibility, and
control of business processes.
• A business process represents a discrete series of activities or tasks that
can span people, applications, business activities, and organizations.
• BPM has a prescribed process or methodology that should be followed
to help an organization document their business processes and
understand where they are being used throughout their business.
• Improved business processes may result in:
• Improved customer satisfaction.
• Reductions in cost.
• Increased productivity by allocating resources to more value-added activities.

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Product Life Cycle

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Software and Vendor Selection
 It is best for an organisation that does not have the experience in developing ERP
systems to purchase one on the market.
 The selection of a vendor-developed ERP system is a challenging job because the
organization has to find both a system that is most appropriate for its operational needs
and a vendor to become a “partner” for quite some time.
Before selecting a vendor, the organisation 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 (i.e., money and people commitment) available for the
implementation.
The criteria developed from this needs assessment can help the organization narrow down the
vendors to a select few (i.e., three or four). These vendors should be invited to submit their
bids for the project. During this phase, vendors should be asked to install their application
(sandbox) on the company’s IT infrastructure and to have it made available to potential users
for testing. 35
Vendor Evaluation
The vendor needs to be evaluated on the following:
 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
 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. A lot of time and resources have been spent to get to this point.
 It is vital to focus the efforts of all project teams to ensure that task and
activities are completed before going live.
 This allows project management to address any outstanding issues
that may jeopardize the Go-live date.
 This involves a readiness process that needs to include as many
team members and appropriate users and managers as possible
because it helps the overall organization understand that the
implementation is near and that changes will be taking place.

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Five Areas of Stabilisation 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 organisation.

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 Project Management
• Figure 1-12 depicts the fundamental balance
of project management. Any change to one
side of the triangle will require a change to
one or more sides.
• The role of the project manager is one of the
most exciting yet risky jobs in an
implementation.
• A successful project manager must be process
driven and understand the value of an
implementation methodology. The project
manager role is the single most important role
in an ERP system implementation. To be
successful one must be prepared to work long
hours in a highly charged environment.
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People and Organisation
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
Many organizations are quite sophisticated at implementing systems.
It is often the case for organisations without much ERP
implementation experience to use implementation partners such as
consultants.
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 People and Organization

Change Management
This helps prepare for changes to how business is done. In
implementing new systems, communicating, preparing, and setting
expectations is as important as providing training and support.
Effective communication of expectations will reduce risk and better
insure that the system is accepted once it is implemented.
Research has shown that many projects fail due to lack of
communication between technical staff and customers, and this one
factor is often cited as a component overlooked in implementations.
It is essential to develop, understand, and communicate the return on
investment, business processes, and the need for change. It is rare that
an ERP system implementation failure is based on hardware or software
not working appropriately. 42
 People and Organization

Business Process Re-engineering

• it is often the case that current business processes will need to be changed to use the functionality
of an ERP system fully.
• 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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 People and Organization

Global, Ethical and Security Management

• Outsourcing overseas, ethical issues, and problems with
system security have also attracted a lot of attention in ERP
implementation.
• Outsourcing is the business practice of hiring a party outside a
company to perform services and create goods
• There has been a widespread increase in corporate crimes
such as marketing practices, privacy violations, unauthorized
data sharing, spam mail, viruses, and identity theft. All these
unethical practices have indirectly impacted ERP systems due
to their centrality in organization and direct integration with
the database. 44
ERP Market Tiers

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ERP Vendors
SAP
SAP is the recognised 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
Microsoft Dynamics
Formerly Microsoft Business Solutions or Great Plains, Microsoft Dynamics is a
comprehensive business- management 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
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 which was originally the target of Microsoft and
Epicor.
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Software Extensions and Trends
 Service-oriented architecture (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
Managers implementing ERP systems in their company should remember the following:
 ERP systems implementation is a complex organizational activity.
 Mistakes will be made in any ERP system implementation, and these will usually not be on
technology.
 Important to evaluate and learn from the successes and failures.
 Managing risk is all about keeping project focus and clear communications throughout the
organisation.
 ERP systems implementation requires strong project management oversight.
 ERP implementation projects must be continually evaluated for project status, effectiveness, and risks to the organization.

 ERP systems provide improved and added functionality for an organisation.

 ERP systems create an advantage by strategically cutting costs, increasing profit margins, and growing the enterprise.

 ERP systems are set to proliferate globally. 51

Questions
1. Can an ERP system support all levels of management?
2. Among all the ERP components, which component is most critical in
the implementation process and why?
3. Discuss the role of ERP in organizations. Are ERP tools used for
business process reengineering (BPR) or does BPR occur due to ERP
implementation?
4. Discuss the criteria for selecting ERP vendors. Which is the most
important criteria and why?
5. What are the critical success or failures?

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Answers
Can an ERP system support all levels of management?
An ERP system is different in that it brings all departments within an
organization together. It seeks to unite all departments, open
communication and consolidate all databases into one accessible
database. Previous information system models did not have this focus or
ability. ERP can support all levels of management, because it allows each
level to utilize information in a customized manner. Upper-level
management can utilize reports suited to their positions as overseers,
while operational management can utilize detailed reports for their
specific functions.

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Answers
Among all the ERP components, which component is most critical in the
implementation process and why?
People, including all levels of employees and management, are the ones
that will use and be affected by the ERP system. It is critical that all are on
board with the decisions that are made, and willing to give feedback
during all stages. An ERP system cannot be successful unless the people of
an organization are willing to accept the possibility of change and business
reform.

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Answers
Discuss the role of ERP in organizations. Are ERP tools used for business
process reengineering (BPR) or does BPR occur due to ERP
implementation?
Implementing an ERP often means BPR will take place. Organizations
should realize that the purchase of ERP software requires some changes
to business practices in order to run smoothly. Vanilla implementations
will require the most amount of BPR, while chocolate implementations
(although more difficult to get up and running) will likely require less BPR
in the long run.

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Answers
Discuss the criteria for selecting ERP vendors. Which is the most
important criteria and why?
The criteria to consider are what industry the ERP vendors specialize in
and what sizes of organizations their software supports. Also important to
consider is the reputation of the vendor, how successful their
implementations have been and their outlook in terms of longevity. Other
items to seriously consider are their customer support services, total cost
of ownership, IT requirements for the software and the ability to integrate
thirdparty software.

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