2Core enterprise data: Mapping to application types OrdersPurchasesCustomersShipmentsMarketingPlanningServiceSupply ChainManagementCustomerRelation shipmanagementBillingInventoryProject managementAssetsERPAccountingHRAs an alternative to pure integration for some classes of application consolidation is chosenIn some cases, the solution is a mix of integration and consolidationCRM, SCM and ERP are common examples of enterprise applications
4What is ERP?ERP stands for Enterprise Resource Planning, which is a software system that:Takes an enterprise approach to integrating and optimising business processes across departments (finance, HR, sales, etc).Provides consistent information for timely decision-making and performance measurement
5ERP vendors and marketThe ERP market consolidated considerably leaving SAP and Oracle as leaders.Oracle acquired PeopleSoft who had acquired JD EdwardsTypical of maturing technology markets which have 2 leaders and a few niche playersThere are also specialised vendorsInfor (GEAC, SSA) – consolidator/vertical nichesMicrosoft Dynamics - SMEOpen source projects are not widely usedUnclear if they will gain groundThis lecture will cover general ERP issues but focus on SAP as an example.This is not an advert for SAP!
6Example Requirement: Customer service Provide agent with a single point of access from which they can complete the orderCheck information (availability of items, pricing and credit)Request initiation of internal processes (manufacturing, delivery)Provide reliable information to the customer (delivery date, price)But associated data and processes relate to different functions within the organisation which may be in different systems.
7Potential Solutions Integration of existing function based systems EAI is the solutionConsolidation into a single application with a consistent set of process and data modelsERP is the solutionIn most cases, an enterprise will combine both approachesConsolidate in some placesIntegrate in other places
8Enterprise Resource Planning An ERP deployment consists ofIntegrated modulesCommon process and data models and definitionsCommon databaseUpdate one module, automatically updates othersERP isMore about business process change than technologyAn approach to managing all resources and their use in the entire enterprise in a coordinated mannerA set of integrated business applications, or modules which carry out common business functions such as general ledger, accounting, or order managementAn approach to supporting business through optimizing, maintaining, and tracking business functionsFocused on value chains, rather than individual functions
9Typical Technical Architecture N-tier architectureDatabase server with a single data model (multiple servers hosting a distributed database )Application logic servers with process models (multiple servers, distributed )Web/Internet serverPresentation level (browsers)Provides an integration layer to enable integration of external systems into the ERP system.
11Functionality of an ERP e.g. mySAP Integrate SAP systemsPortalData WarehouseTechnology to integrate people, information and business processes across technologies
12Functionality of an ERP e.g. mySAP Management of travel costs and expense claimsHR: Workforce compensationManaging corporate liabilityManagement of property etcTraditional ERP: Controlling areas of most expense
13Functionality of an ERP e.g. mySAP Traditional ERP: All the well-known value chain processes: Order to cash etc.
14Functionality of an ERP e.g. mySAP Human Capital Management: support of line management, retention/recruitment, global HR planning and management
15Functionality of an ERP e.g. mySAP Financials: Automation of finance functions to minimise costs. Speed up the preparation of financial information. Compliance, better management of free cash resources
16Functionality of an ERP e.g. mySAP Analytics: Optimisation and automation of planning, analysis of performance, management accounting support.
17mySAP Business Suite Solutions Cross-Industry SolutionsmySAP WorkplacemySAP CRMmySAP SCMmySAP MarketplacemySAP E-ProcurementmySAP BImySAP PLMmySAP HRmySAP FinancialsmySAP Mobile BusinessIndustry SolutionsmySAP Aerospace & DefensemySAP AutomotivemySAP BankingmySAP ChemicalsmySAP Consumer ProductsmySAP Engineering & ConstructionmySAP Financial Service ProvidermySAP HealthcaremySAP High TechmySAP Higher Education & ResearchmySAP InsurancemySAP MediamySAP Mill ProductsmySAP MiningmySAP Oil & GasmySAP PharmaceuticalsmySAP Public SectormySAP RetailmySAP Service ProvidersmySAP TelecommunicationsmySAP UtilitiesInfrastructure and ServicesmySAP TechnologymySAP ServicesmySAP Hosted SolutionsMany variants of the horizontal ERP package are available for specific industy needs.There are also some niche ERP vendors focusing exclusively on individual industries.
21The user view of an ERP: Create a requisition (II) ERP implementations may contain 1,000s of screensERP embeds knowledge of the organisation’s and industry’s terminology, processes and data
22Benefits of ERP Common set of data Removes consistency and synchronisation issuesReady integration for decision support systemsInter-department integration for all departments using the ERPLibrary of available standard template processes and modules make integration easierForces Business Process Reengineering
23Potential Limitations of ERP Global ERP can be a never-ending project for large organisationsNo organisation exists in isolationThere are always suppliers and clients who use different data models.This means that the need for integration cannot be removed.Inter-department integration relies on using the global ERPCauses problems with anomalous departments, recently required, geographically isolated or with different business processes.The software can drive the business rather than the other way aroundTemplates tend to impose the standard business process rather than your organisations business process. This is okay for commoditised processes but not for all.Note: ERP requires similar types of organisational readiness as EAIOnly technology readiness is not relevant as technology is being replace
24ERP and organisational readiness ERP requires similar types of organisational readiness as EAIOnly technology readiness is not relevant as technology is being replaceIssues are more significant becauseCost and impact of the project is greaterDegree of process change is much more significantUser interface and interaction is totally changedImpact on organisational and individual roles is greater
25ERP Implementation Options Green fieldCreate IS architecture from scratchERP by FunctionDeploy one or a few ERP modules across all Business UnitsRisk: May never extend beyond original function.ERP by Business UnitDeploy fully integrated ERP suite in one or more Business UnitsFully Integrated ERPFull scale deployment across the enterprise
26ERP and integration capabilities All ERP implementations require integration with other systemsSupplier or customer systemsLegacy systems which cannot be retired.As part of an incremental transition to a global ERP systemERP Integration layersProvide SOA or EAI type capabilitiesTypically tightly coupled to the ERP and focus on integration into the ERPE.g.SAP NetWeaverOracle Fusion
27Example: SAP XI SAP Exchange Infrastructure (SAP XI) An integration server (EAI)Integrates SAP applications and 3rd party applicationsIntegration serverMessage routingMessage mapping/transformationIntegration adaptersProtocol and data format conversion (into/out of XML)
29Impact of an EAI project on the organisation ERP projects typically completely replace the existing applicationsChange the user interface and workflowsImplements redesigned business processes impacting all aspects of the business using the new systemERP systems change the way the organisation operatesERP systems significantly impacts the work duties undertaken by individuals using the new systemERP systems change the reports and information available to senior managementERP systems replace existing ‘working applications’While the new system should be an improvement, there is significant risk and inconvenience associated with the roll out of any new system
30Implementing an ERP system ERP is always a major projectAny ERP project requires significant time and cost.It is likely to be disruptive and result in business process changes across the organisation.To be successfulThe project must have high priority and visibility within an organization.Senior management commitment with regular progress reviews at the appropriate levels of management.RisksMany companies are unclear on the likely total project cost or return.As with any enterprise level project, scope creep, organisational politics and change regularly cause failure.
33SAP‘s ASAP – Rapid Implementation Methodology Phase 1: Project PreparationProvides initial planning and preparation for project.Gather requirementsRequirements workshopsRequirements documentation and control processesProject success requires requirements gathering whichIs inclusive with representation and engagement from all participants.Has clear and effective approval processes at senior management level.Phase 2: Business BlueprintCreate the Business Blueprintdetailed documentation of the results gathered during requirements workshops.documents the business process requirements of the company which creates a common understanding of how the company will operate.
34Strengths/Weaknesses of Business Blueprints Share a common understanding with everyone on the projectFormalises the agreement betweenThe IT project team and businessDifferent business departmentsReduced level of communication required during implementationSupports impact analysis when requirement change occurs.WeaknessesProcesses can be difficult to modelBusiness process can be poorly definedNeed to distinguish between real business process requirements and legacy “way we do business”Must balance need to perfect definitions and need to complete the project.Business processes can change rapidly
35SAP‘s ASAP – Rapid Implementation Methodology Phase 3: RealizationImplement all the business and process requirements based on the Business Blueprint.Configure the system step by step in two work packages, Baseline and Final configuration.Phase 4: Final PreparationComplete testing, end user training, system management and cutover activities to achieve go-live readiness.Final Preparation phase requires resolution of all critical open issues.
36SAP‘s ASAP – Rapid Implementation Methodology Phase 5 Go Live and Support:Transition from a project-oriented, pre-production environment to live production operation.Continuous Change:Provide on-going support and assistance for post go-live.Provide solutions for standard minor tweaks and changesProvice solutions for evolution of the solution to support:Business changesTechnology changesChanges in the user community orNew business content.ASAP covers these activities
39Comparing EAI and ERP:EAI App1App 3App2App1App 3App2EAI integrates primarily behind the scenesMost of the user interaction is unchangedProcess changes occur only for the integrated process
40Benefits of EAI based process automaton Integrates with existing process and data models – handling incompatibilities when necessaryAllows the high value integration problem to be addressed without disrupting the other applicationsMinor/moderate changes to the user interaction causes minor/moderate changes to the business as a whole
41Comparing EAI and ERP: ERP App1App 3App2Module2Module1Module3ERP changes both user interaction and applicatonAll user interaction, data/process models are changed
42Benefits of ERP based process automation Creates a set of processes and associated data models which are mutually compatible and comprehensiveEqually effective at automation within a single department or across multiple departmentsERP vendor typically provides ‘standard’/template processes already proven for a particular industry
43Penguin’s Global ERP Strategy – an example of a consolidation strategy
44of Supply Chain Systems 28th International Supply Chain Specialist MeetingThe Globalizationof Supply Chain SystemsAnne NaramoreVice PresidentInternational Technology StrategyPearson plcFrankfurt Book Fair
462005 Adjusted Operating Profit: £509M / $875M PEARSON A Good ReadPearson is a world leading education and information company, helping people of all ages to live and learn.2005 Sales: £4,096M / $7,045M+9%2005 Adjusted Operating Profit: £509M / $875M+22%
48Interesting Facts18MU.S. school students learning English and Math with a Pearson programme3.5MProfessionals who qualified in our testing centres250New authors published by Penguin around the world
49Interesting Facts 4.5M 0.5BN 3.6M People learning English with Longman materials3.6MCollege students in America using a Pearson online service4.5MReaders reached by the Financial Times in print and online
50Supply Chain: Environment Today Pearson’s business strategy and organization culture has yielded a relatively diverse, decentralized portfolio of ERPs implemented at the region/operating company level.Business process standardization within Pearson occurs largely at the region/operating company level due to market demands.Consequently, Pearson has adopted a decentralized IT strategy, with implementations occurring at the region/operating company level.Business processes: The life cycle of a product/titleEditorial & ProductionSales & MarketingInventory ManagementSales Order ProcessingFinancialsDistribution and WarehousingeCommerceHuman Resources/PayrollBusiness Intelligence (analysis and reporting)
51Complex Environment: North America ERPEditorial & ProductionSales & MarketingInventory MgmtOrder MgmtFinanceDistributioneCommerceHR/PayrollBusiness IntelligenceOracleAssessmentSAP 4.6PenguinSAP 3.1iSchoolVistaCanadaCustom System- Higher EducationSupported by ERPNot supported by ERPLegend:
52Complex Environment: Europe ERPEditorial & ProductionSales & MarketingInventory MgmtOrder MgmtFinanceDistributioneCommerceHR/PayrollBusiness IntelligenceVista - DutchJDE - SpainInfos - GermanyExact - PolandLibris - FranceOracle - ItalySAP UKVista - UKSupported by ERPNot supported by ERPLegend:Not in scope for business
53Complex Environment: Latin America ERPEditorial & ProductionSales & MarketingInventory MgmtOrder MgmtFinanceDistributioneCommerceHR/PayrollBusiness IntelligenceJDE - MexicoSiscorp - BrazilStradivarius - ArgentinaJDE - ColombiaSaab - ChileFigaro - UruguaySupported by ERPNot supported by ERPLegend:
54Complex Environment: Pacific Rim ERPEditorial & ProductionSales & MarketingInventory MgmtOrder MgmtFinanceDistributioneCommerceHR/PayrollBusiness IntelligenceIBS Bookmaster - Hong Kong- SingaporeMalaysiaEpicor - TaiwanKoreaCustom System - JapanIBS Bookmaster - AustraliaSupported by ERPNot supported by ERPLegend:
55Exercise What should Pearson do? Identify three strategies Identify business risks with each strategy
56Supply Chain Technology: Strategy Pearson has adopted a decentralized strategy, with implementations occurring at the region/operating company level.While supporting all the operating companies from a single ERP is desirable, the cost to consolidate is high and difficult to justify, and the process standardization required could inhibit business performance.Pearson’s Roadmap sets a course to:Maintain a decentralized approachAllow ‘scope’ to meet regional /operating company requirementsUpgrade as versions go end-of-lifeGovern introduction of new systemsConsolidate and standardize when cost justified
57Case Study: Asia Goals: Scope (Locations): September 2004: Consolidate business units into a single ERP instanceNPV: $954.9K | IRR: 37% | Payback: 1.3yearsGoals:Standardize business processes & operating procedures across the regionReduce long-term costs (IT, Customer Service, Finance)Improve utilization of IT systems & resourcesProvide standard system platform for operationScope (Locations):Hong Kong, Taiwan, Korea, Japan, Singapore and MalaysiaHong Kong hosting location and support centerMPLS connectivity for each country access
58Case Study: Asia Functionality: Consolidate business units into a single ERP instanceFunctionality:Editorial & Production processingAcademic adoption managementSales Order processingInventory managementProcurementDistribution & warehousingFinancials (GL, AP, AR)Royalty managementBusiness intelligence (analysis and reporting)
59Taiwan (delayed 6 months) Case Study: AsiaConsolidate business units into a single ERP instanceRollout Timeline:MalaysiaSingaporeKoreaTaiwan (delayed 6 months)JapanApr 2006May 2006Jun 2006Jul 2006Aug 2006Sep 2006Oct 2006Nov 2006Dec 2006Jan 2007Feb 2007Mar 2007Apr 2007May 2007Jun 2007Jul 2007Aug 2007Sep 2007Hong Kong20062007
60Case Study: Asia Solution Provider: IBS Bookmaster Consolidate business units into a single ERP instanceSolution Provider: IBS BookmasterBuild upon existing implementation in SingaporeBuild upon existing relationship with vendorSingapore and MalaysiaPearson AustraliaSouth Africa (MML)Most cost effective solutionMet majority of functionality needs
61Case Study: Asia What We Learned: Replicate Success and Learnings: Consolidate business units into a single ERP instanceWhat We Learned:Partnership with vendorStrong executive sponsorship and project governanceThorough functionality requirementsFunctionality gaps always found – accept it and manage closelyDedicated and skilled project managers (internal & vendor)Contingency: money, time and resourcesDon’t underestimate language barriers and cultural styles: slows process downReplicate Success and Learnings:Taking approach to Europe