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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 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
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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;
world’s 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 SAPCultural 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 (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
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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
Benefit Expected Actual
Shorter cycle time 19% 31%
Improved productivity
24% 31%
Lower IT costs 24% 11%
Better cash management
24% 13%
Personnel reduction
43% 33%
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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 (cont’d) 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