18 Chapter 18: Packaged Software and Enterprise Resource Planning Systems Analysis and Design in a Changing World, 3 rd Edition

18 Systems Analysis and Design in a Changing World, 3rd Edition 2 Learning Objectives u Discuss three major analysis and design issues associated more often with packages than with custom-developed software u Name the three types of package customization and explain when each would be necessary u Identify and explain the four major characteristics of ERP systems and discuss several reasons for adopting ERP u Identify and explain several critical success factors for ERP implementation

18 Systems Analysis and Design in a Changing World, 3rd Edition 3 Learning Objectives (continued) u Distinguish the three major approaches to ERP system development u Discuss how methods used for ERP systems deployment differ from those used for conventional systems development u Identify and explain the four major steps to ERP package selection u Discuss the major areas of expansion for ERP

18 Systems Analysis and Design in a Changing World, 3rd Edition 4 Learning Objectives (continued) u Identify the four high-level work areas of SAP R/3 u Identify and discuss the five types of master data in SAP R/3 u Describe the function of R/3 Basis software u Describe how transactions are entered in SAP R/3

18 Systems Analysis and Design in a Changing World, 3rd Edition 5 Overview u Information system needs of many companies could be addressed with stand-alone or ERP software, instead of custom-developed software u This chapter looks at: l Key issues of working with application packages l Why ERP is an option for system improvement l How ERP is procured and implemented u SAP R/3 is examined to improve understanding of ERP

18 Systems Analysis and Design in a Changing World, 3rd Edition 6 IS Components Serving Multiple Business Functions

18 Systems Analysis and Design in a Changing World, 3rd Edition 7 Key Components in Enterprise Computing

18 Systems Analysis and Design in a Changing World, 3rd Edition 8 Packaged Software u Traditionally focused on isolated business functions u ERP focuses on integrated software solutions u Current trends show increase in packaged software and decrease in in-house software development u Customization, integration, and upgrades of packages must be considered

18 Systems Analysis and Design in a Changing World, 3rd Edition 9 Three Critical Issues of Packaged Software Spanning All Phases of SDLC

18 Systems Analysis and Design in a Changing World, 3rd Edition 10 Customizing Packages u Desire is to minimize customization l Best practices already built-in l Unique business requirements may exist u Customization types l Configuration – selecting options l Modification – changing program code to alter processing l Enhancement – adding functionality

18 Systems Analysis and Design in a Changing World, 3rd Edition 11 Integrating Packages u Standardize data so all functions can access it in real time u Enterprise application integration (EAI) – process of linking applications to support flow of information across multiple business units and IT systems l Middleware l ERP with built-in middleware

18 Systems Analysis and Design in a Changing World, 3rd Edition 12 Obstacles to Integration

18 Systems Analysis and Design in a Changing World, 3rd Edition 13 Upgrading Packages u Upgrades can be challenging l Vendors frequently upgrade packages l Existing level of customization l Integration within organization u Must be planned and documented during system development

18 Systems Analysis and Design in a Changing World, 3rd Edition 14 Enterprise Resource Planning u Using integrated application software to improve effectiveness and efficiency of entire enterprise u Objectives of ERP l Provide best practice functionality within departments and high level of integration across all enterprise functions l Bridge gap in value chain l Includes transaction processing system (TPS), management information systems (MIS), decision support systems (DSS)

18 Systems Analysis and Design in a Changing World, 3rd Edition 15 Non-integrated IS and Integrated IS

18 Systems Analysis and Design in a Changing World, 3rd Edition 16 Major Characteristics of ERP

18 Systems Analysis and Design in a Changing World, 3rd Edition 17 ERP Vendor Packages u Began as integrated packages for core business: l Finance, Manufacturing, Human resources u Expanded to extended business functions l Customer relationship management l Supply chain management l Sales-force automation l E-commerce l Business intelligence

18 Systems Analysis and Design in a Changing World, 3rd Edition 18 Why Consider ERP? u Reduces workforce in core transaction processing systems by eliminating tasks and duplication u Supports global business operations u Achieves economies of scale u Improves communication and information exchange among departments

18 Systems Analysis and Design in a Changing World, 3rd Edition 19 Why Consider ERP? (continued) u Reduces information systems development staff u Improves customer service through better logistics u Improves data integrity u Improves decision support

18 Systems Analysis and Design in a Changing World, 3rd Edition 20 Costs and Benefits u ERP may cost up to $5 million for a mid-sized firm and up to $50 million for a large corporation u Cost competitive among major vendors u Implementation can take up to 2 years u Payback usually 6-30 months u Savings based on 30% reduction in administrative and IS costs u Consider operating costs

18 Systems Analysis and Design in a Changing World, 3rd Edition 21 Implementing ERP / Critical Success Factors u Realistic ERP budget and proper allocation of resources u Education of all key management personnel about ERP u Strong top management support u Centralized project management with business leader in charge u Strong IT management and staff support u Selection of right approach to ERP

18 Systems Analysis and Design in a Changing World, 3rd Edition 22 Implementing ERP / Critical Success Factors ( continued ) u Heavy user involvement from all affected areas u Standardized business process reengineering on software capabilities u Retraining of existing software developers in ERP u Extensive training of end users u Use of consultants (knowledgeable in specific business functions and ERP modules) to lead implementation and training

18 Systems Analysis and Design in a Changing World, 3rd Edition 23 Implementing ERP / Critical Success Factors ( continued ) u Respected and effective champion of ERP within the organization u Effective and continuous communication u Top-notch systems analysts with excellent business knowledge and technical skills u Retention of analysts throughout project and beyond u Sensitivity to user resistance with new systems

18 Systems Analysis and Design in a Changing World, 3rd Edition 24 Three Approaches to ERP

18 Systems Analysis and Design in a Changing World, 3rd Edition 25 Organizational Structure for an ERP Project

18 Systems Analysis and Design in a Changing World, 3rd Edition 26 An ERP System Development Methodology u Phase 1: Planning l ERP oversight committee l Project team u Phase 2: Analysis l Collection of requirements from in-house work groups l Identify business reengineering initiatives l Select vendors l Prototypes may be developed

18 Systems Analysis and Design in a Changing World, 3rd Edition 27 An ERP System Development Methodology (continued) u Phase 3: Design l Interfaces determined l Hardware design l Middleware issues l End users trained u Phase 4: Implementation l Installation l Configuration into cohesive system

18 Systems Analysis and Design in a Changing World, 3rd Edition 28 An ERP System Development Methodology (continued) u Phase 5: Support l Training l Maintenance

18 Systems Analysis and Design in a Changing World, 3rd Edition 29 Special Topics on ERP Development u Select a comprehensive package l Preliminary evaluation l Detailed evaluation l Vendor presentations l On-site visits l Final decision

18 Systems Analysis and Design in a Changing World, 3rd Edition 30 Special Topics on ERP Development (continued) u Linking applications to an ERP package l Purchasing middleware l Select software vendors that partner with ERP packages l Vendor-provided or in-house link development u Using ERP packages for application development l Investigate vendor-supplied development tools l Developers often become system integrators

18 Systems Analysis and Design in a Changing World, 3rd Edition 31 Future of ERP u Areas of expansion l Supply chain management l Business intelligence l Application service providers (ASPs) u Continued integration of various business functions u Firms that use ERP system to full capabilities could gain significant competitive advantage

18 Systems Analysis and Design in a Changing World, 3rd Edition 32 A Closer Look at One ERP Package: SAP R/3 u SAP AG is a German software development firm u SAP R/3 is current ERP system l Logistics l Accounting l Human resources l Business tools u Designed to meet business needs across entire enterprise

18 Systems Analysis and Design in a Changing World, 3rd Edition 33 SAP Industry Solutions u SAP has created Industrial Business Units (IBUs) to provide “best practices” for specific industries l Automotive l Electronics l Public sector l Retail u Other industries and IBUs include: insurance, telecommunications, aerospace and defense, banking, chemicals, consumer products, health care, oil and gas, pharmaceuticals, and utilities

18 Systems Analysis and Design in a Changing World, 3rd Edition 34 Five Master Databases for SAP R/3

18 Systems Analysis and Design in a Changing World, 3rd Edition 35 Implementing SAP R/3 u Three-tier client-server architecture u R/3 Basis l Middleware that enables integration of R/3 applications on various computing platforms u Accelerated SAP (ASAP) l Small to mid-sized business applications of SAP l Should require 6 months to implement l RMO would be a good candidate

18 Systems Analysis and Design in a Changing World, 3rd Edition 36 Three-Tier Architecture of SAP R/3

18 Systems Analysis and Design in a Changing World, 3rd Edition 37 Summary u Issue of how to best procure business application software – customer-developed versus packaged – critical for future of business organizations u Equally important is how to best deploy business application software integrated versus stand- alone u Most recent trend is deployment of integrated packages to increase efficiency and effectiveness of information technology development

18 Systems Analysis and Design in a Changing World, 3rd Edition 38 Summary ( continued ) u Major issues that differentiate application packages from customer software are customization, integration, and upgrades u Major class of packaged software is comprehensive enterprise resource planning (ERP) system u Current market leader in comprehensive ERP systems is SAP R/3 (Logistics, Accounting, and Human Resources)