Enterprise Resource Planning Systems (ERP) Prof. Dale L. Goodhue MIS @ Terry Terry College of Business September 13, 2000
What is ERP? <ul><li>“ A  packaged  business software system that lets a company automate and  integrate  the majority of ...
Sales Force Automation Order Entry Materials Management Production Scheduling Cost Accounting Accounts Payable  If the who...
Supply Chain Management Application Systems and Data Sales Force Automation Order Entry Materials Management Production Sc...
Answering Managerial Questions about Supply Chain Operations Production Sched. Data Forecast Demand Machine capacities Bil...
How quickly will a new order show up in production scheduling?  How much trouble will it be to answer a CEO’s question:  “...
Data Access Tools Data Warehouse A data warehouse solves the data access problem by copying all data to a single database....
Sales Force Automation Order Entry Materials Management Production Scheduling Cost Accounting Accounts Payable  ERP system...
Data standards:  data defined the same way across all business functions / applications  Process standards: Uniform “best ...
ERP -- Why it is so attractive?   Solves the Data Integration Problem.  The “Silo Problem” where incompatible silos of dat...
What is ERP? <ul><li>A technological solution to a technical problem of  </li></ul><ul><li>“ dis-integrated” information s...
ERP Problems <ul><li>Survey of IT managers (1998) named ERP systems most difficult to install </li></ul><ul><li>90% of ins...
ERP -- How Risky is it and why?  Change in business processes and technology Affects many key business processes and emplo...
 
What is ERP? <ul><li>An information technology implementation that invariably requires significant consultant assistance, ...
Organizational Structure and the Corporate Culture Management Processes Individuals and Roles Technology Organizational St...
What is ERP? <ul><li>A technological solution that must be combined with at least some level of organizational transformat...
ERP may be better in some organizations than in others <ul><li>Standardization </li></ul><ul><ul><li>Best practice to the ...
Interdependence among sub-units Global Effects Improved coordination.  Better corporate-wide mgmt. info.  IS development &...
Strategic Importance Degree of  Customization Fit IS Success Other Success Factors drives System Component
What is ERP? <ul><li>A technological solution that works very well in some organizational situations, and not very well in...
Major Players SAP 16% Peoplesoft 5% Oracle 5% Baan 3% J.D.Edwards 3% Consulting/System Integration Revenues about twice th...
2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems Without Y2K
2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems Without Y2K With Y2K, Some S...
2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems The Y2K Bubble Extra Softwar...
ERP is (still) huge <ul><li>$10 Billion worldwide, net of consulting </li></ul><ul><li>Moving into midsize and non-profit ...
ERP’s Future? <ul><li>In the 90s, seriously over-hyped, a major FAD. </li></ul><ul><li>In the very late 90s difficulties s...
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  • One database On-line system. Real time access to data; no traditional batch interfaces Packaged “Configurable” by manipulating control tables Modular, sort of Architecture GUI Applications Database (and data dictionary) Definition of ERP Integration across two dimensions: business functions and “entities.” ERP provides unprecedented levels. ERP must have a single logical database and middle ware.
  • One database On-line system. Real time access to data; no traditional batch interfaces Packaged “Configurable” by manipulating control tables Modular, sort of Architecture GUI Applications Database (and data dictionary) Definition of ERP Integration across two dimensions: business functions and “entities.” ERP provides unprecedented levels. ERP must have a single logical database and middle ware.
  • One database On-line system. Real time access to data; no traditional batch interfaces Packaged “Configurable” by manipulating control tables Modular, sort of Architecture GUI Applications Database (and data dictionary) Definition of ERP Integration across two dimensions: business functions and “entities.” ERP provides unprecedented levels. ERP must have a single logical database and middle ware.
  • One database On-line system. Real time access to data; no traditional batch interfaces Packaged “Configurable” by manipulating control tables Modular, sort of Architecture GUI Applications Database (and data dictionary) Definition of ERP Integration across two dimensions: business functions and “entities.” ERP provides unprecedented levels. ERP must have a single logical database and middle ware.
  • One database On-line system. Real time access to data; no traditional batch interfaces Packaged “Configurable” by manipulating control tables Modular, sort of Architecture GUI Applications Database (and data dictionary) Definition of ERP Integration across two dimensions: business functions and “entities.” ERP provides unprecedented levels. ERP must have a single logical database and middle ware.
  • Enterprise Resource Planning Systems (ERP)

    1. 1. Enterprise Resource Planning Systems (ERP) Prof. Dale L. Goodhue MIS @ Terry Terry College of Business September 13, 2000
    2. 2. What is ERP? <ul><li>“ A packaged business software system that lets a company automate and integrate the majority of its business processes; share common data and practices across the enterprise; [and] produce and access information in a real-time environment.” </li></ul><ul><ul><li>Deloitte Consulting </li></ul></ul>
    3. 3. Sales Force Automation Order Entry Materials Management Production Scheduling Cost Accounting Accounts Payable If the whole organization used a single integrated database for all its data. Data Customers/Prospects Orders/Quotes Product/Part Inventories Bill of Materials / Routings Machine capacities Production Schedules Vendors Economic Order Quants, Etc.
    4. 4. Supply Chain Management Application Systems and Data Sales Force Automation Order Entry Materials Management Production Scheduling Cost Accounting Accounts Payable Data Forecast Demand Machine capacities Bill of Materials Routings Data Bill of Materials Product/Part Inventories Vendors Economic Order Quants Data Prospects Quotes Sales Forecasts Data Customers Products/Configurations Employee Data Data Bill of Materials Machine Usage Labor Charges Cost Allocations Data Customers Orders Payments
    5. 5. Answering Managerial Questions about Supply Chain Operations Production Sched. Data Forecast Demand Machine capacities Bill of Materials Routings Materials Mgmt Data Bill of Materials Product/Part Inventories Vendors Economic Order Quants Sales Force Automation Data Prospects Quotes Sales Forecasts Order Entry Data Customers Products/Configurations Employee Data Cost Accounting Data Bill of Materials Machine Usage Labor Charges Cost Allocations Accounts Payable Data Customers Orders Payments
    6. 6. How quickly will a new order show up in production scheduling? How much trouble will it be to answer a CEO’s question: “Which category of customer is most profitable to us?” when the data maintained in the different divisions is not organized or defined the same way.
    7. 7. Data Access Tools Data Warehouse A data warehouse solves the data access problem by copying all data to a single database. [The operational problems are not solved.] Application Program Payroll Data Employee Data Time Clock Data Application Program Order Entry Data Order Data Customer Data Employee Data Application Program ESOP Tracking Data Employee ESOP Data Employee History Application Program Cost Accounting Data Bill of Materials Machine Costs Employee Costs Application Program Production Scheduling Data Bill of Materials Machine Capacities Employee Data Order Data Data Order Data Customer Data Employee Data Product Data Extract Translate and Clean
    8. 8. Sales Force Automation Order Entry Materials Management Production Scheduling Cost Accounting Accounts Payable ERP systems provide for operational coordination, in addition to the {potential} query capability of a Data Warehouse Data Customers/Prospects Orders/Quotes Product/Part Inventories Bill of Materials / Routings Machine capacities Production Schedules Vendors Economic Order Quants, Etc.
    9. 9. Data standards: data defined the same way across all business functions / applications Process standards: Uniform “best practice” business processes Process restrictions: some legitimate processes cannot be supported Business Integration What is ERP? Packaged Software Single Database ERP
    10. 10. ERP -- Why it is so attractive? Solves the Data Integration Problem. The “Silo Problem” where incompatible silos of data make it nearly impossible to answer cross functional managerial questions. Provides much tighter integration between functions. Actions at one end of the chain immediately visible at the other end. Allows global coordination. Provides a selection of carefully researched “best practice” business processes at every level. A catalyst for re-engineering. Provides a “packaged” solution so each individual IT shop does not have to reinvent a very complex wheel. Moves much of IT application programming out of the firm, reduces cost. Solves the Y2K problem.
    11. 11. What is ERP? <ul><li>A technological solution to a technical problem of </li></ul><ul><li>“ dis-integrated” information systems. </li></ul>
    12. 12. ERP Problems <ul><li>Survey of IT managers (1998) named ERP systems most difficult to install </li></ul><ul><li>90% of installations wind up over budget or late (Standish Group, 1996) </li></ul><ul><li>Some companies have started implementations and stopped. </li></ul><ul><li>As much as 70% Failure Rate cited. Few are managing through to success and major benefits. Some spectacular failures! </li></ul>
    13. 13. ERP -- How Risky is it and why? Change in business processes and technology Affects many key business processes and employees profoundly. Extremely difficult organizational challenges Extremely complex system with relatively few high qualified consultants = high cost consulting Large in scale, long in time, high in cost ($10 or $100 of millions)
    14. 15. What is ERP? <ul><li>An information technology implementation that invariably requires significant consultant assistance, with the necessity of managing the consultants to get full value. </li></ul>
    15. 16. Organizational Structure and the Corporate Culture Management Processes Individuals and Roles Technology Organizational Strategy External Socio-Economic Environment: External Technological Environment: Conceptual Model of Technology Impact Rockart and Scott Morton, 1984
    16. 17. What is ERP? <ul><li>A technological solution that must be combined with at least some level of organizational transformation to achieve business benefits </li></ul>
    17. 18. ERP may be better in some organizations than in others <ul><li>Standardization </li></ul><ul><ul><li>Best practice to the software vendor may not be best practice to you </li></ul></ul><ul><ul><li>Tough to accommodate differences within the company </li></ul></ul><ul><ul><li>Tough to get competitive advantage when your competitors can buy the same system </li></ul></ul><ul><li>Inhibiting change? </li></ul><ul><ul><li>Innovations must originate with the software vendor </li></ul></ul>
    18. 19. Interdependence among sub-units Global Effects Improved coordination. Better corporate-wide mgmt. info. IS development & maintenance savings. Differentiation among sub-units Compromise costs: Misfits between system and local information needs of some units Fit between system and global information needs Local level effects: Diminished data quality & relevance. Decreased ability to adapt to locally changing conditions In the presence of these characteristics: ERP leads to: Which yields these outcomes: Model of ERP and Data Integration Costs and Benefits Higher Design costs: More Resources dedicated to ERP implementation Global Effect: More funds spend on implementation Either or Rapid Environmental Change For Some Sub-units
    19. 20. Strategic Importance Degree of Customization Fit IS Success Other Success Factors drives System Component
    20. 21. What is ERP? <ul><li>A technological solution that works very well in some organizational situations, and not very well in other organizational situations. </li></ul>
    21. 22. Major Players SAP 16% Peoplesoft 5% Oracle 5% Baan 3% J.D.Edwards 3% Consulting/System Integration Revenues about twice that! SAP Revenues in millions of EURO Q1, 2000 1999 1998 1997 (US Only) Total Revenue 5,110.2 4,315.6 3,021.8 Revenue Growth neg. 18% 43% 50%+
    22. 23. 2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems Without Y2K
    23. 24. 2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems Without Y2K With Y2K, Some Software Development that would have occurred in 2000 through 2004 was done early to make the Y2K fix free
    24. 25. 2000 2002 2004 2006 1998 1996 1994 Time Amount of Software Development to Upgrade Old Systems The Y2K Bubble Extra Software Upgrade Sales (primarily ERP) Due to Y2K Y2K Bubble Pops Trough in Software Upgrade Sales (including ERP) Due to Y2K
    25. 26. ERP is (still) huge <ul><li>$10 Billion worldwide, net of consulting </li></ul><ul><li>Moving into midsize and non-profit sectors </li></ul><ul><li>Moving into E-Commerce and CRM </li></ul>
    26. 27. ERP’s Future? <ul><li>In the 90s, seriously over-hyped, a major FAD. </li></ul><ul><li>In the very late 90s difficulties surfaced in trade press with a vengeance </li></ul><ul><li>In 2000, the FAD is over </li></ul><ul><li>Is there a need for integration across regions and functions in current competitive environment??? </li></ul><ul><li>Is there a need for packaged as opposed to in house development for very complex systems??? </li></ul><ul><li>Now ERP is under-hyped </li></ul>

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