ERP Overview

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ERP Overview
Ronald E. Giachetti, Ph.D. Associate
Professor Industrial and Systems
Engineering Florida International University
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"Any sufficiently advanced technology is
indistinguishable from magic."   (Arthur C.
Clarke)
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Agenda

• ERP
• ERP Benefits and Costs
• ERP Market
• ERP Implementation

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ERP

• A packaged application that supports and
  automates business processes and manages data.
• Characteristics of ERP are
• Modules are integrated, application designed
  based on business process.
• Reflect best business processes.
• Large and complex.

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ERP Drives Business Change

• Enables high levels of integration across
  business functions and units ? new way of
  business for many organizations.
• Provides for widespread sharing of data from a
  single information repository
• Drives extensive business transformation and
  change management efforts ? since organization
  must change to match processes supported by ERP
• Requires high levels of implementation effort and
  support

ERP
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ERP
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ERP Functionality
Human Resources
Finance
e-Business
-eProcurement - Employee Self Service -
e-Recruiting/e-Hiring - e-Filing - Citizen
Access - Web-enabled transactions - e-Commerce
-General Ledger -Accounts Receivable -Accounts
Payable -Procurement -Fixed Assets -Treasury
Mgmt -Cost Control -Grant Management
-HR/Benefits Administration -Payroll -Self-service
HR
Transaction Engine
Core software that manages transaction flow
among applications and handles tasks like
security and data integrity
Customer Relationship Mgt
Data Analysis
Supply Chain Mgmt
-Consistent user experience - Personalization of
services - Realtime access- enterprise info
Decision support software that lets senior
executives and other users analyze transaction
data to track business performance
Planning, scheduling and fulfillment applications
that address all procurement requirements across
the enterprise
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Evolution of ERP

• 1960s software packages with inventory control
• 1970s MRP systems
• Production schedule with materials management
• 1980s MRPII systems
• Adds financial accounting system
• 1990s MRPII
• Integrated systems for manufacturing execution
• Late 1990s ERP
• Integrated manufacturing with supply chain

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Enterprise System Software

• Enterprise Resource Planning (ERP)
• Customer Relationship Management (CRM) (SAP now
  market leading, 6 sales from CRM).
• Supply Chain Management (SCM)
• Product Data Management (PDM)
• Enterprise Application Integration (EAI)
• Data Warehousing (DW)
• eMarketplace / eProcurement

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Expected ERP Benefits
OPERATIONAL MANAGERIAL STRATEGIC IT INFRASTRUCTURE ORGANIZATIONAL
Reduction Cost Cycle time Improvement Productivity Quality Customer service Improve Access to information Resource management Decision making Planning Performance Supporting business growth business alliance Building business innovations cost leadership external linkages Generating product differentiation Building business flexibility IT cost reduction increased IT infrastructure capability Supporting organizational changes Facilitating business learning Empowering and building common visions
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Six primary reasons emerged for package selection
decisions
Why did universities pick a particular vendor?
Respondents were asked to pick all that apply
Note that this does not necessarily mean that
these were the most important reasons packages
were selected just that they played a role in
the decision
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ERP Solution Components
rule of thumb based on consultant experiences.
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Software License Costs to Services
(implementation) Ratios
Source OMB 2003
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ERP Hidden Costs

• Training usually underestimated. Employees
  must learn new process not just software.
• Integration Testing Testing links between ERP
  and other systems. Add-ons from vendor.
• Customization All consultants recommend plain
  vanilla but be realistic some customization is
  needed.
• Data Conversion need to clean and filter data
  in legacy systems and transport it.
• Data Analysis ERP stores transactional data,
  often need to integrate with other data for
  decision support.
• Consultants need to plan disengagement of
  consultants.
• Replacing best and brightest employees need to
  staff ERP project with best employees,
  backfilling a cost.
• Implementation team stays in place cannot just
  disband team, need to keep in place since they
  now know ERP in-and-out.

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High-end ERP Software

• Sales from 500 million (92) to 3.3 billion
  (97)
• Fastest-growing software company worldwide
• more than 84,000 installations, in more than 50
  countries

• 2nd biggest
• (now 1st after acquisition?)
• Most open package

• Was Baan, bought by SSA (System Software
  Associates) in 2003
• Now targeting SME besides Large companies

• Bought by PeopleSoft in 2003
• WorldSoftware and OneWorld

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Mid-level ERP Software

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ERP Market (2004)
Source AMR Market Report 2004.
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ERP Market

• ERP Extensions are applications that increase the
  functionality of ERP.
• Customer Relationship Management (CRM)
• Supply Chain Management (SCM)
• E-business
• Business intelligence tools
• ERP extensions are becoming a greater part of the
  overall ERP market.

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ERP in Government
Estimated 2009 Federal Market for ERP (Billion )

• Services for integration very important.
• Department of Defense and Department of
  Homeland Security expected to be largest
  consumers.

Source Input Inc. Reston VA, 2004.
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Trends in the ERP Marketplace

• Speed, Speed, Speed
• Templates
• Rapid Implementation Methodologies
• Cost Effective Implementations for Large
  Enterprises
• Product expansion (tax collections, fleet
  management)
• Internet/Intranet and Electronic Commerce
• Outsourcing and Application System Providers
• Application Management Services

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Trends in the ERP Marketplace

• ERP Market
• Most of Fortune 500 companies have already
  installed ERP systems
• Expanding rapidly into new markets
• Small and medium sized enterprises (SME)
• Developing countries

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ERP Projects are Different

• IT projects
• Other
• Decided how they wanted to do business
• Choose a software package
• Rewrote large portions of the software code
• ERP
• The business often must be modified to fit the
  system
• More complex and failure prone

• Tight Fit
• Misfit

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ERP Project Over-runs
Implemented functionality 41 of what was
desired
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Summary

• ERP remains complex, but knowledge about
  implementation has developed substantially over
  the past few years.
• ERP systems drive organizational change.
• ERP market moving towards extensions (addressing
  weaknesses of ERP) and towards mid-market and
  smaller enterprises.