Enterprise Requirements Planning

1
Enterprise Requirements Planning
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Managerial Questions

• What is ERP?
• How will it help my business?
• What are its costs?
• What are the risks?

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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

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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

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Before/After ERP
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Evolution of ERP

• 1960s Inventory Control Systems
• 1970s MRP Material Requirement
  Planning
• 1980s MRPII MRP Distribution
• 1990s MRPII ? ERP with introduction
  of other business functions ?
  CRMs
• Today Web Enabled ERP Connecting
  ERP Externally

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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".

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SAP An ERP in Profile

• Flagship products are MySAP ERP and Duet (with
  Microsoft)
• The largest ERP company in the world worlds 3rd
  largest software company!
• 12 million users, 36,000 customers, 100,600
  installations, 1,500 partners world-wide

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Core Modules of SAP

• Finance
• Human Resources
• Corporate Services (asset management, project
  management, etc.)
• Operations (manufacturing, sales, service,
  logistics, etc.)

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Other SAP Modules

• Portals
• Supply chain/Supplier relationship management
• Customer relationship management
• Product life cycle
• Business intelligence

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ERP Vendor Landscape
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E-business Application Architecture
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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.

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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)

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ERP Enterprise Architecture
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How SAP Works
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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

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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"
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Costs of ERP (contd)
Average Cost To Install ERP  
Source CIO Magazine Oct. 15, 1999
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Benefits of ERP - Promised

• Shorter order cycle time
• Increased productivity
• Lower IT costs
• Better cash management
• Reduced personnel

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Benefits of ERP - Actual
Expected and Actual Benefits
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Reasons to Adopt ERP

• One face to the customer
• Knowing what is possible in terms of
  organizational inventory
• Eliminating redundancy
• Consolidation

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Reasons to Adopt ERP (contd)

• Handle growth
• Reduce stress on existing IT
• Avoid legacy systems
• Modernizing

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Reasons Not to Adopt

• Cost
• Loss of competitive advantage
• Resistance to change
• Poor cultural fit

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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

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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). 

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Before/After