Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk by Daniel E. O’leary


Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce, and Risk
by Daniel E. O’leary


Acknowledgments page vii
part one. introduction and background
1 Introduction 3
2 Systems and Technology Background 13
part two. erp systems
3 ERP Systems Background 27
Appendix 3-1 Geneva Steel: Changing theWay Business
Is Done 38
4 ERP Data Input 49
5 ERP Output Capabilities 61
Appendix 5-1 Quantum’s Virtual Data Warehouse 68
6 Technology Enabled versus Clean Slate Reengineering 73
part three. erp life cycle
7 Deciding to Go ERP 89
Appendix 7-1 ERP Choice – In-House or Outsourced 100
8 Choosing an ERP System 102
Appendix 8-1 Chesapeake Display and Packaging 113
Appendix 8-2 A CFO’s Inquiry 115
9 Designing ERP Systems: Should Business Processes or
ERP Software Be Changed? 117
Appendix 9-1 Microsoft’s SAP Implementation 130
10 Designing ERP Systems: Choosing Standard Models,
Artifacts, and Processes 141
11 Implementing ERP Systems: Big Bang versus Phased 151
Appendix 11-1 Quantum, I: Requirements, System Choice,
and Implementation Approach 162
Appendix 11-2 Quantum, II: Going with Big Bang 167
Appendix 11-3 Quantum, III: Collaboration and Competition 171
12 After Going Live 172
Appendix 12-1 A Case Study of XYZ Company: How Should
We Evaluate the ERP Project? 183
Appendix 12-2 Deloitte Consulting Post-Implementation
Checklist 184
13 Training 186
part four. electronic commerce and risk
14 ERP and Electronic Commerce 195
Appendix 14-1 Implementing J.D. Edwards OneWorld at
the University of Southern California’s Leventhal School:
An Interview with Professor Les Porter 206
15 ERP Risk: Success and Failure Factors 213
Index 225

This chapter initiates our dialogue into enterprise resource planning (ERP) systems, focusing on the following questions.

• Why investigate ERP systems?
• How does ERP create value?
• What is the purpose and scope of this book?
• What is the outline of this book?

Why Investigate Enterprise Resource Planning Systems?
Enterprise resource planning systems are a corporate marvel, with a huge impact on both the business and information technology worlds, including each of the following dimensions:
• ERP affects most major corporations in the world;
• ERP affects many SMEs (small and medium enterprises);
• ERP affects competitors’ behavior;
• ERP affects business partner requirements;
• ERP has changed the nature of consulting firms;
• ERP provides one of the primary tools for reengineering;
• ERP has diffused many “best practices”;
• ERP gave client server computing its first enterprise product;
• ERP has changed the nature of the information systems function;
• ERP has changed the nature of jobs in all functional areas;
• ERP cost is high;
• ERP has experienced huge market growth.

ERP Affects Most Major Corporations in theWorld (Bowley 1998). A single ERP system (SAP’s R/3) is used by more than 60% of the multinational firms. Further, according to Arthur D. Little’s global strategy leader, an ERP company (SAP) “is conquering the world. Almost every important company is more or less in its hands.”

ERP Affects Many SMEs (Foley and Stein 1997). The impact of ERP is not limited to large firms. In 1995, SAP generated 90% of their revenues from large global companies, but by 1997 SAP expected 50% of its revenues to come from SMEs (small and medium enterprises). Roughly 35% of SAP’s 1997 customers had revenues of under $200 million.

ERP Affects Competitors’ Behavior. On June 24, 1996, Oracle’s Application Division announced that “[s]everal companies went live with their Oracle Applications implementations during the quarter, including Silicon Graphics, Inc. and Quantum Corporation, both ofwhomsuccessfully deployed large-scale implementations.” In addition, at the same time, Oracle’s Application Division announced that “among the customers added that quarter included . . .Western Digital . . . .” Western Digital was a direct competitor of Quantum. When one corporation adopts ERP, should its competitors do the same? If the software provides a competitive advantage and/or would create value, then the answer is probably Yes. But which software should they choose and who should implement it for them? We might expect that, if one company successfully implements ERP for competitive advantage, then the same software and consulting team would be chosen to implement ERP for its competitors – after all, who would have greater experience with the industry? Yet how would the firm that originally implemented ERP react to such an occurrence?

ERP Affects Business Partner Requirements. Generally, adopting ERP makes firms more “information agile.” Those firms can better process information and integrate it into their business procedures and decision making. As a result, business partners need to adapt to the changes that will occur in ERPadopting organizations. For example, as ERP-adopting firms operate in real time, they will expect the same of their partners. Further, ERP-adopting firms may begin to integrate ERP systems along the supply chain, potentially pushing ERP to other parts of the supply chain, which in turn are likely to include their partners.

ERPHas Changed the Nature of the Largest ConsultingFirms. Enterprise resource planning systems have been critically important to the growth of consulting among the “Big 6” (recently the “Big 5”) and other professional service firms. According to Public Accounting Report (1998), services involving ERP packages generate one third to one half of the total consulting revenue at national professional services firms.

ERP Provides One of the Primary Tools for Reengineering. In 1990, Hammer’s highly influential article on reengineering sparked the corporate world’s interest in obliterating existing processes. Unfortunately, after things were obliterated many firms had no idea what to replace them with. Enterprise resource planning provides perhaps the primary tool for guiding those efforts, so much so that Gendron (1996) called ERP (particularly SAP’s R/3) the “electronic embodiment” of reengineering and Hammer (1997) commented that “SAP equals forced reengineering.”

ERP Has Diffused Many Best Practices. Enterprise resource planning systems are based on so-called best practices – the best ways of doing processes. SAP’s R/3 incorporates over a thousand of them! What this means is that any firm that installs R/3 has access to a wide range of best practices. Furthermore, new business practices are being added all the time. As new best practices are found and embedded in particular applications, they become available for inclusion in new versions of R/3; as they become available, other firms install them. Hence there is a cycle of finding best practices, building them into the software, and diffusing them out to new users.

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