Chapter 15: Packaged Software and Enterprise Resource Planning Systems Analysis and Design in a Changing World, 3rd Edition

IS Components Serving Multiple Business Functions

Key Components in Enterprise Computing

Packaged Software Traditionally focused on isolated business functions ERP focuses on integrated software solutions Current trends show increase in packaged software and decrease in in-house software development Customization, integration, and upgrades of packages must be considered

Three Critical Issues of Packaged Software Spanning All Phases of SDLC

Customizing Packages Desire is to minimize customization Best practices already built-in Unique business requirements may exist Customization types Configuration – selecting options Modification – changing program code to alter processing Enhancement – adding functionality

Integrating Packages Standardize data so all functions can access it in real time Enterprise application integration (EAI) – process of linking applications to support flow of information across multiple business units and IT systems Middleware ERP with built-in middleware

Obstacles to Integration

Upgrading Packages Upgrades can be challenging Vendors frequently upgrade packages Existing level of customization Integration within organization Must be planned and documented during system development

Enterprise Resource Planning Using integrated application software to improve effectiveness and efficiency of entire enterprise Objectives of ERP Provide best practice functionality within departments and high level of integration across all enterprise functions Bridge gap in value chain Includes transaction processing system (TPS), management information systems (MIS), decision support systems (DSS)

Non-integrated IS and Integrated IS

Major Characteristics of ERP

ERP Vendor Packages Began as integrated packages for core business: Finance, Manufacturing, Human resources Expanded to extended business functions Customer relationship management Supply chain management Sales-force automation E-commerce Business intelligence

Why Consider ERP? Reduces workforce in core transaction processing systems by eliminating tasks and duplication Supports global business operations Achieves economies of scale Improves communication and information exchange among departments

Why Consider ERP? (continued) Reduces information systems development staff Improves customer service through better logistics Improves data integrity Improves decision support

Costs and Benefits ERP may cost up to $5 million for a mid-sized firm and up to $50 million for a large corporation Cost competitive among major vendors Implementation can take up to 2 years Payback usually 6-30 months Savings based on 30% reduction in administrative and IS costs Consider operating costs

Implementing ERP / Critical Success Factors Realistic ERP budget and proper allocation of resources Education of all key management personnel about ERP Strong top management support Centralized project management with business leader in charge Strong IT management and staff support Selection of right approach to ERP

Implementing ERP / Critical Success Factors (continued) Heavy user involvement from all affected areas Standardized business process reengineering on software capabilities Retraining of existing software developers in ERP Extensive training of end users Use of consultants (knowledgeable in specific business functions and ERP modules) to lead implementation and training

Implementing ERP / Critical Success Factors (continued) Respected and effective champion of ERP within the organization Effective and continuous communication Top-notch systems analysts with excellent business knowledge and technical skills Retention of analysts throughout project and beyond Sensitivity to user resistance with new systems

Three Approaches to ERP

Organizational Structure for an ERP Project

An ERP System Development Methodology Phase 1: Planning ERP oversight committee Project team Phase 2: Analysis Collection of requirements from in-house work groups Identify business reengineering initiatives Select vendors Prototypes may be developed

An ERP System Development Methodology (continued) Phase 3: Design Interfaces determined Hardware design Middleware issues End users trained Phase 4: Implementation Installation Configuration into cohesive system

An ERP System Development Methodology (continued) Phase 5: Support Training Maintenance

Special Topics on ERP Development Select a comprehensive package Preliminary evaluation Detailed evaluation Vendor presentations On-site visits Final decision

Special Topics on ERP Development (continued) Linking applications to an ERP package Purchasing middleware Select software vendors that partner with ERP packages Vendor-provided or in-house link development Using ERP packages for application development Investigate vendor-supplied development tools Developers often become system integrators

Future of ERP Areas of expansion Supply chain management Business intelligence Application service providers (ASPs) Continued integration of various business functions Firms that use ERP system to full capabilities could gain significant competitive advantage

A Closer Look at One ERP Package: SAP R/3 SAP AG is a German software development firm SAP R/3 is current ERP system Logistics Accounting Human resources Business tools Designed to meet business needs across entire enterprise

SAP Industry Solutions SAP has created Industrial Business Units (IBUs) to provide “best practices” for specific industries Automotive Electronics Public sector Retail Other industries and IBUs include: insurance, telecommunications, aerospace and defense, banking, chemicals, consumer products, health care, oil and gas, pharmaceuticals, and utilities

Five Master Databases for SAP R/3

Implementing SAP R/3 Three-tier client-server architecture R/3 Basis Middleware that enables integration of R/3 applications on various computing platforms Accelerated SAP (ASAP) Small to mid-sized business applications of SAP Should require 6 months to implement RMO would be a good candidate

Three-Tier Architecture of SAP R/3

Summary Issue of how to best procure business application software – customer-developed versus packaged – critical for future of business organizations Equally important is how to best deploy business application software integrated versus stand- alone Most recent trend is deployment of integrated packages to increase efficiency and effectiveness of information technology development

Summary (continued) Major issues that differentiate application packages from customer software are customization, integration, and upgrades Major class of packaged software is comprehensive enterprise resource planning (ERP) system Current market leader in comprehensive ERP systems is SAP R/3 (Logistics, Accounting, and Human Resources)