CHAPTER 1: Enterprise Systems for Management
CHAPTER OBJECTIVES:
Understand the information systems evolution and its historical role in organization
leading to systems integration and Enterprise Resource Planning (ERP).
Learn about ERP systems and its evolution, components and architecture;
understand the benefits and drawbacks of implementing ERP systems and how it
can help an organization improve its efficiency and worker productivity.
Get an overview on the implementation process such as the ERP life cycle, business
process reengineering, project management, change management and others.
Understand the role of people, venders, 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.
CHAPTER OUTLINE:
I. Opening Case: Hershey’s Enterprise 21 Project
II. Chapter Preview
a) Information Systems in Organizations
b) Role of IS in the Enterprise
c) Information Silos and Systems Integration
d) Enterprise Resource Planning (ERP) Systems
III. What is an ERP?
a) Evolution of ERP
b) Role of ERP in Business
c) ERP System Components
d) ERP Architecture
e) E-Business and ERP
f) Benefits and Limitations of ERP
IV. ERP Implementation
a) ERP Life Cycle
b) ERP Implementation Strategies
c) Software and Vendor Selection
V. Operations and Post-Implementation
a) People and Organization
b) Project Management
c) Role of Consultants
d) Change Management
, e) Business Process Reengineering
VI. Other ERP Issues
a) Global, Ethical and Security Management
b) ERP Vendors
c) Key Vendors
d) Software Extensions and Trends
VII. Implications for Management
VIII. Chapter Summary
IX. Review Questions
X. Discussion Questions
XI. Real World Case: Rolls Royce’s ERP Implementation
CHAPTER OVERVIEW
This chapter provides a quick overview of the Enterprise Resource Planning (ERP)
implementation process and the various topics covered in the remaining chapters of the
book. It begins with an overview of the information systems field and defines ERP systems a
few different ways, explaining their origin and evolution, and describes important
components and basic implementation options. In addition, it discusses the evolution and
role of IS in the enterprise and provides reasons for the popularity of ERP systems in
organization.
ERP systems are comprehensive applications that support and connect all aspects of
an organization’s business processes. When discussing business processes, one means such
departments as Accounting, Human Resources, Marketing, Purchasing, Manufacturing, etc.
ERP systems appeared in the 1990s as a way to provide accessibility, flexibility and
consistency across all the major business functions, unlike its predecessors. Organizations
that use ERP systems have a better chance of sustaining competitive advantage in an ever-
changing business environment.
The evolution of ERP started during the early 1990s after decades of using silo-
based information systems within business organizations. ERP is a software-based system
that is responsible for making information, reporting and functions widely available and
centrally located within business organizations. In addition, the chapter continues to
explain that ERP implementation is not as easy as selecting and installing packaged
software. The opening Hershey case shows how a business went about the process the
wrong way, and then corrected their mistakes the second time around. Hershey went live
with their ERP implementation via the “Big Bang” method. Their initial problem was trying
to implement too much, too fast. The case provides a good example of what to avoid.
, The five important components have to work together in order to create an ERP
system. These components are: hardware, software, information, processes and people.
Hardware consists of the physical equipment such as servers and peripherals. Software is
the operating system and/or database that the company or specific department uses.
Examples of software today are Windows XP or Vista. The information component is
basically the data that is input to the system by internal or external organizational
resources. Processes consist of policies and procedures that create the ways of conducting
their business. The people of an ERP system are the end-users and IT staff. End-users can
be anyone from the employees to the suppliers of a company.
Another interesting aspect of ERP systems covered in this chapter is how they are
implemented in organization. Just like homes and large scale buildings, ERP systems have
an architecture that the implementers must follow. Most of the time, a vendor is the one
who creates the ERP architecture when an organization wishes to purchase outside the
company. The two types of architecture for an ERP System are logical and physical. Logical
architecture supports the needs of the end-users while physical architecture focuses on the
efficiency of the actual ERP system. With logical ERP architecture, one must carefully
examine what will make up the layers, or tiers, in the blueprint.
The different facets and features of an ERP system are explained throughout much
of the chapter. Vanilla and chocolate architectures are explained in terms of their strengths
and weaknesses. Package-driven (vanilla) ERP architectures are “off-the-shelf”
implementations that are generally much quicker to get up and running. Chocolate
architectures are customized options. Both architectures have their ups and downs. Vanilla
implementations are quicker and less expensive; yet do not fully conform to the
organization’s business procedures. Chocolate architectures take more time and money to
configure, and may be more difficult to upgrade; but they can result in a more ideal ERP
system for the organization.
Implementation strategies and the product life cycle are discussed. Both sections
stress the importance of taking it slow during this process. It is important to stay on track
and follow the initial implementation plan through completion without getting bogged
down by minor issues or changes. Preparing for implementation is one of the most crucial
times for an organization when replacing their current system with a new ERP system. It is
important that the organization create an implementation committee in order to
communicate necessary changes. These members should be knowledgeable enough to
understand and plan for the implementation process itself. Another key decision a
company must settle on is whether or not they should change their business processes to fit
the ERP system. If they decide to do so, this is known as “vanilla implementation.” It
minimally modifies the ERP system that is purchased from the chosen vendor. This
implementation committee needs to also understand the ERP life cycle and methodology
during this process. With a well-defined methodology, a company is able to take one step at
a time, define objectives, and plan a budget for the ERP implementation.
, The following sections deal with vendor selection, “going live”, and post-
implementation. The chapter gives good advice about what criteria should be considered
when trying to decide upon a vendor. After a vendor is chosen and testing has been
completed, it is time to “go live” with the software. This section warns that this can be the
riskiest stage, and also provides examples of implementation disasters. Guidelines and tips
for maintaining the system after the “go live” stage are also discussed.
Beyond the architecture and implementation process, this chapter compares the
technologies of e-Business and ERP. During the 1990’s, there was speculation that e-
Business and ERP would compete as technologies. However, the technologies have
developed more, and now work together to provide a wider range of business support. Also,
the Microsoft example presented in the middle of the chapter exemplifies the optimal
outcome of a successful ERP implementation. Microsoft utilized the ERP vendor SAP to
restructure its systems which resulted in annual savings of eighteen million dollars, and a
greatly improved information system with significantly decreased data redundancies.
Towards the end of the chapter is an exploration of the people involved with the
implementation of ERP Systems. People are the most important factor for success. There is
advice on choosing project managers and vendors, how to deal with change management,
and finally, some of the key vendors on the market. Most organizations purchase ERP
systems through outside vendors such as Oracle or SAP. Vendors need to fulfill certain
criteria of a company in order to be considered. Project management and change
management help create trust among the people involved in overseeing the new ERP
system, and closely monitor objectives of the implementation plan.
The chapter ends with some implications for management in the ERP process. In
sum, it gives a good step-by-step introduction to key information about ERP. It explains its
development, components, limitations, successes, risks and the process of establishing an
implementation plan. It also gives the reader so much information about ERP systems that
it acts as a summary for the rest of the book in itself. Additionally, tables in the summary
section provide a quick overview of benefits and limitations of ERP systems.
ADDITIONAL RELATED INFORMATION
1. http://en.wikipedia.org/wiki/Enterprise_resource_planning
2. http://www-03.ibm.com/solutions/businesssolutions/doc/jsp/indseg/
solutionarea/erp/index.jsp
3. http://www.centredaily.com/business/technology/story/496923.html
CHAPTER OBJECTIVES:
Understand the information systems evolution and its historical role in organization
leading to systems integration and Enterprise Resource Planning (ERP).
Learn about ERP systems and its evolution, components and architecture;
understand the benefits and drawbacks of implementing ERP systems and how it
can help an organization improve its efficiency and worker productivity.
Get an overview on the implementation process such as the ERP life cycle, business
process reengineering, project management, change management and others.
Understand the role of people, venders, 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.
CHAPTER OUTLINE:
I. Opening Case: Hershey’s Enterprise 21 Project
II. Chapter Preview
a) Information Systems in Organizations
b) Role of IS in the Enterprise
c) Information Silos and Systems Integration
d) Enterprise Resource Planning (ERP) Systems
III. What is an ERP?
a) Evolution of ERP
b) Role of ERP in Business
c) ERP System Components
d) ERP Architecture
e) E-Business and ERP
f) Benefits and Limitations of ERP
IV. ERP Implementation
a) ERP Life Cycle
b) ERP Implementation Strategies
c) Software and Vendor Selection
V. Operations and Post-Implementation
a) People and Organization
b) Project Management
c) Role of Consultants
d) Change Management
, e) Business Process Reengineering
VI. Other ERP Issues
a) Global, Ethical and Security Management
b) ERP Vendors
c) Key Vendors
d) Software Extensions and Trends
VII. Implications for Management
VIII. Chapter Summary
IX. Review Questions
X. Discussion Questions
XI. Real World Case: Rolls Royce’s ERP Implementation
CHAPTER OVERVIEW
This chapter provides a quick overview of the Enterprise Resource Planning (ERP)
implementation process and the various topics covered in the remaining chapters of the
book. It begins with an overview of the information systems field and defines ERP systems a
few different ways, explaining their origin and evolution, and describes important
components and basic implementation options. In addition, it discusses the evolution and
role of IS in the enterprise and provides reasons for the popularity of ERP systems in
organization.
ERP systems are comprehensive applications that support and connect all aspects of
an organization’s business processes. When discussing business processes, one means such
departments as Accounting, Human Resources, Marketing, Purchasing, Manufacturing, etc.
ERP systems appeared in the 1990s as a way to provide accessibility, flexibility and
consistency across all the major business functions, unlike its predecessors. Organizations
that use ERP systems have a better chance of sustaining competitive advantage in an ever-
changing business environment.
The evolution of ERP started during the early 1990s after decades of using silo-
based information systems within business organizations. ERP is a software-based system
that is responsible for making information, reporting and functions widely available and
centrally located within business organizations. In addition, the chapter continues to
explain that ERP implementation is not as easy as selecting and installing packaged
software. The opening Hershey case shows how a business went about the process the
wrong way, and then corrected their mistakes the second time around. Hershey went live
with their ERP implementation via the “Big Bang” method. Their initial problem was trying
to implement too much, too fast. The case provides a good example of what to avoid.
, The five important components have to work together in order to create an ERP
system. These components are: hardware, software, information, processes and people.
Hardware consists of the physical equipment such as servers and peripherals. Software is
the operating system and/or database that the company or specific department uses.
Examples of software today are Windows XP or Vista. The information component is
basically the data that is input to the system by internal or external organizational
resources. Processes consist of policies and procedures that create the ways of conducting
their business. The people of an ERP system are the end-users and IT staff. End-users can
be anyone from the employees to the suppliers of a company.
Another interesting aspect of ERP systems covered in this chapter is how they are
implemented in organization. Just like homes and large scale buildings, ERP systems have
an architecture that the implementers must follow. Most of the time, a vendor is the one
who creates the ERP architecture when an organization wishes to purchase outside the
company. The two types of architecture for an ERP System are logical and physical. Logical
architecture supports the needs of the end-users while physical architecture focuses on the
efficiency of the actual ERP system. With logical ERP architecture, one must carefully
examine what will make up the layers, or tiers, in the blueprint.
The different facets and features of an ERP system are explained throughout much
of the chapter. Vanilla and chocolate architectures are explained in terms of their strengths
and weaknesses. Package-driven (vanilla) ERP architectures are “off-the-shelf”
implementations that are generally much quicker to get up and running. Chocolate
architectures are customized options. Both architectures have their ups and downs. Vanilla
implementations are quicker and less expensive; yet do not fully conform to the
organization’s business procedures. Chocolate architectures take more time and money to
configure, and may be more difficult to upgrade; but they can result in a more ideal ERP
system for the organization.
Implementation strategies and the product life cycle are discussed. Both sections
stress the importance of taking it slow during this process. It is important to stay on track
and follow the initial implementation plan through completion without getting bogged
down by minor issues or changes. Preparing for implementation is one of the most crucial
times for an organization when replacing their current system with a new ERP system. It is
important that the organization create an implementation committee in order to
communicate necessary changes. These members should be knowledgeable enough to
understand and plan for the implementation process itself. Another key decision a
company must settle on is whether or not they should change their business processes to fit
the ERP system. If they decide to do so, this is known as “vanilla implementation.” It
minimally modifies the ERP system that is purchased from the chosen vendor. This
implementation committee needs to also understand the ERP life cycle and methodology
during this process. With a well-defined methodology, a company is able to take one step at
a time, define objectives, and plan a budget for the ERP implementation.
, The following sections deal with vendor selection, “going live”, and post-
implementation. The chapter gives good advice about what criteria should be considered
when trying to decide upon a vendor. After a vendor is chosen and testing has been
completed, it is time to “go live” with the software. This section warns that this can be the
riskiest stage, and also provides examples of implementation disasters. Guidelines and tips
for maintaining the system after the “go live” stage are also discussed.
Beyond the architecture and implementation process, this chapter compares the
technologies of e-Business and ERP. During the 1990’s, there was speculation that e-
Business and ERP would compete as technologies. However, the technologies have
developed more, and now work together to provide a wider range of business support. Also,
the Microsoft example presented in the middle of the chapter exemplifies the optimal
outcome of a successful ERP implementation. Microsoft utilized the ERP vendor SAP to
restructure its systems which resulted in annual savings of eighteen million dollars, and a
greatly improved information system with significantly decreased data redundancies.
Towards the end of the chapter is an exploration of the people involved with the
implementation of ERP Systems. People are the most important factor for success. There is
advice on choosing project managers and vendors, how to deal with change management,
and finally, some of the key vendors on the market. Most organizations purchase ERP
systems through outside vendors such as Oracle or SAP. Vendors need to fulfill certain
criteria of a company in order to be considered. Project management and change
management help create trust among the people involved in overseeing the new ERP
system, and closely monitor objectives of the implementation plan.
The chapter ends with some implications for management in the ERP process. In
sum, it gives a good step-by-step introduction to key information about ERP. It explains its
development, components, limitations, successes, risks and the process of establishing an
implementation plan. It also gives the reader so much information about ERP systems that
it acts as a summary for the rest of the book in itself. Additionally, tables in the summary
section provide a quick overview of benefits and limitations of ERP systems.
ADDITIONAL RELATED INFORMATION
1. http://en.wikipedia.org/wiki/Enterprise_resource_planning
2. http://www-03.ibm.com/solutions/businesssolutions/doc/jsp/indseg/
solutionarea/erp/index.jsp
3. http://www.centredaily.com/business/technology/story/496923.html
