PPTTEST 10/8/ :13 1 IT Ron Williams Business Innovation Through Information Technology ERP, CRM, & SCM

PPTTEST 10/8/ :13 2 IT Ron Williams The Holistic View of IT Strategy Organization Bus. ORG IT Processes JobsBeliefs Incentives Processes Task Relationship Architecture Business Needs Policies Technology IT Investment Portfolio Technology Hardware Software Information Network “Emerging” IS Management Own Source Manage IS Development SDLC Project Mgn’t Business Technology

PPTTEST 10/8/ :13 3 IT Ron Williams Value Chain Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Technology & Development Human Resource Management Firm Infrastructure Support Activities Primary Activities Source: Michael Porter 1985 Processes: Activities that the firm has value enabled Reduce cost & cycle time Improve quality Improve service

PPTTEST 10/8/ :13 4 IT Ron Williams What’s the core of ERP? It’s not resources, it’s not planning, but it is enterprise It is back office software It’s a common platform for taking the customer order and processes through invoice and revenue –Order processing with customer history, inventory levels, and credit info. –Manufacturing planning –Inventory Management –Purchase order processing/management –Cost accounting –Financials –Human resources Integrated set of software programs that run off a single database Enables internal departments to better share information and communicate Started in discrete manufacturing and moved on. Other industries –Some have implemented modulus like order management or finances –Other have their own industry specific back office systems

PPTTEST 10/8/ :13 5 IT Ron Williams Enterprise Resource Planning (ERP) Source: Davenport Focus on cross-functional activities Task-driven processes Common operational database Reducing legacy systems

PPTTEST 10/8/ :13 6 IT Ron Williams ERP Implementation & Issues Who has done it –60% of multi-national firms had implemented ERP by –General survey - 38% had implemented, 26% were implementing according to CIO survey of 10/07/01 Implementations cost & time –Average cost $15 million (can run as high as 2-3% of revenue) 13 Highest - $300 million Lowest - $400,000 Total cost of ownership for heads-down user - $53,000 –Takes on average 21 months to install with benefits starting to accrue after 31 months 3 –Why so long and cost so much? Simultaneous process redesign of multiple functional areas within the firm Need to adapt processes to the capabilities of the software Median annual savings - $1.6 million 13 Many reported problems –Hershey Foods, Nike, Whirlpool –Agilent Technologies, August 19, 2002 Reports that ERP installation problems cost them $105 million in revenue for the quarter $70 million in operating profit 3. Hitt, Wu, Xiaoge 13. Meta Survey of 63 companies in 1998 reported by Hitt, Wu, Xiaoge and CIO Magazine

PPTTEST 10/8/ :13 7 IT Ron Williams Application Heterogeneity Built over The Years Some Shared Infrastructure Some Servers, Possibly a data center or two, Network? Desktop platforms, Sales Marketing Mfg. Dist. Data Warehouse AS/400 Unix 390 PC Server 390 PC Server AS/400 Unix 390 PC Server AS/400 Unix 390 PC Server Unix 390 Many point to point connections (only 2 sources shown here) Change one - Broad impact on internals of many other systems Systems are complex and increasingly fragile

PPTTEST 10/8/ :13 8 IT Ron Williams ERP was also a Technology Fix Shared Infrastructure Network, Some Servers, Possibly a data center or two Sales Marketing Mfg. Dist. Data Warehouse AS/400 Unix 390 PC Server 390 PC Server AS/400 Unix 390 PC Server AS/400 Unix 390 PC Server Unix 390 New ERP Application becomes extension to Infrastructure Reduce # of Legacy Systems Build Common Operational Database Reduce Maintenance and Future Development

PPTTEST 10/8/ :13 9 IT Ron Williams General ERP Benefits 12 Improved information flow across sub-units through standardization and integration of activities Enable centralization of administrative activities such as account payables and payroll Reduced IS maintenance costs and increased the ability to deploy new IS functionality Enable a transformation from inefficient business processes toward accepted best of practice processes Often resulting in –Improved information to customers –Reduced cycle times –On-time completion rates 12. Gattiker and Goodhue (2000)

PPTTEST 10/8/ :13 10 IT Ron Williams ERP Suppliers Enterprise Customers Value Chain ERP Enterprise

PPTTEST 10/8/ :13 11 IT Ron Williams What is CRM? CRM is a technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers 17 Typically includes –Data Warehousing – capturing and management of customer information –Automating front-office functions – typically including Sales(force automation) – Lead/opportunity identification & tracking, access to information, analysis and reporting, configurators Marketing – campaign management & e-marketing Customer service (Call center effectiveness) – Voice response units, call routing, linking caller info with call, link to ERP system, problem resolution eCustomer service Channel linkage Hard to separate CRM front-office functions from e-business –ERP built a base before the Web –CRM is growing along with the Web When discussing CRM it is very important to understand the functions being discussed, where the investments are being made, and associated returns or lack thereof 17.The CRM Forum

PPTTEST 10/8/ :13 12 IT Ron Williams ERP & CRM Suppliers Enterprise Customers Value Chain ERP CRM Enterprise

PPTTEST 10/8/ :13 13 IT Ron Williams Customer Relationship Management Who has or is implementing 1 –40% of high tech, aerospace, retailing, & utilities (US & Europe) –66% of US telecom –>50% of US financial services, pharmaceutical, & transportations Highly complex installations can cost $100 million and take 3 years Results –35% of respondents said met expectations 2 –20% of US retail banks have raised profitability as a result 3 1.AMR Research IDC Study Mc Kinsey Productivity Study 2001

MGI Study

PPTTEST 10/8/ :13 15 IT Ron Williams Supply Chain Management (SCM) Supply chain planning –Forecasting –Materials & capacity planning –Transportation planning –Facilities planning –Scheduling –Sourcing Logistics coordination - Execution –Forward –Reverse Software focus –Complex analytical tools –Inter-organizational transactions –Collaboration

PPTTEST 10/8/ :13 16 IT Ron Williams Enterprise Systems Suppliers Enterprise Customers Value Chain ERP SCMCRM Enterprise

PPTTEST 10/8/ :13 17 IT Ron Williams SCM Benefits and Issues Benefits –Costs – inventory, people, prices paid, returns, physical assets –Cycle time – design, order fulfillment –Quality Issues – Same as ERP & CRM

PPTTEST 10/8/ :13 18 IT Ron Williams What’s Behind the Problems with Enterprise Systems? Business ownership Process changes Software complexity Long cycle times Clean-up vs. new value Managing inputs vs. outcomes

PPTTEST 10/8/ :13 19 IT Ron Williams Enterprise Systems - Where They fit, What They Fix from an IT Viewpoint Shared Infrastructure TCP/IP Network, Web Application Servers, Middleware, Security, Pervasive PCs, Rationalized Information, Collaboration Capabilities, Analytics, Privacy Management Sales Marketing Mfg. Dist. Data Warehouse AS/400 Unix 390 PC Server 390 PC Server AS/400 Unix 390 PC Server AS/400 Unix 390 PC Server Unix 390 New ERP Application becomes extension to Infrastructure CRM SCM Customers Vendor Process breakage Labor intensive Slow and Time intensive Fragile Difficult to integrate Slow, Hard, & Expensive to change

PPTTEST 10/8/ :13 20 IT Ron Williams Legacy Application Application Processing DBMS Database Server Distributed computing Server Client Networking: Three-Tier Client/Server

PPTTEST 10/8/ :13 21 IT Ron Williams Legacy Applications ERP Applications Browser Web Application Server DBMS ERP Database Server Distributed computing Server Client Front-ending Enterprise Systems User Friendly Applications