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Introduction To ERP

Introduction To ERP. Evolution of ERP. 1960’s: Inventory Control Systems 1970’s: MRP: Material Requirement Planning 1980’s: MRPII: MRP & Distribution 1990’s: MRPII  ERP with introduction of other business functions  CRM’s

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Introduction To ERP

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  1. Introduction To ERP

  2. Evolution of ERP • 1960’s: Inventory Control Systems • 1970’s: MRP: Material Requirement Planning • 1980’s: MRPII: MRP & Distribution • 1990’s: MRPII  ERP with introduction of other business functions  CRM’s • Today: Web Enabled ERP – Connecting ERP Externally

  3. What is an ERP? • Enterprise-wide system which integrates the business functions and processes of an organization • Integration of business functions into one seamless application • Usually runs on a RDBMS • Replaces Countless Departmental and Workgroup Information Systems

  4. What is an ERP? • Links business processes • Maintains audit trail • Utilizes a common information system • Implementation normally involves BPR: Business Process Reengineering • Difficult to Implement Correctly • Total implementation cost – up to 2-3% of revenues ($100 million for a $5 billion company)

  5. Implementation Issues • Customization: Change the code or the process? • One vendor or best of breed? • 60% adopt best of breed (HBS, 2001) • Staffing model • Cultural issues • Big bang or phased approach? • Project duration • Centralization of data (ownership) • Data integrity • Politics and balance of power • Training • Outsourcing

  6. Implementation… success? • HBS survey: executives believe it at least moderately likely that: • ERP technology won’t support their business • Their organization can’t make changes needed to extract benefits • ERP might actually damage their business • The Robbins-Gioia Survey (2001) found that 51 % of companies felt their ERP implementation was unsuccessful HBS, 1998-2001

  7. Plus, upgrades are a significant investment • $1,839 per business user = half of original software license fee + 20% of original implementation cost, or $9.2M for a 5,000-user system. • One person-week of internal or consulting labor per business user. • Eight to nine months, with a team of one full-time employee per 35 business users. • Much more likely to finish on-time and on-budget. • Companies should build upgrades into expansion plans AMR Research, August, 2004

  8. So why do it? • Some firms recognize benefit in $10 to $100 million + • e.g. Competitive advantage in international supply chains • Standardize and improve processes • Davenport’s Federalism • Improve level of systems integration – replacement of outdated “legacy” systems • Improve IT responsiveness and information quality • Customer-driven • Year 2000 and the Euro • Reporting requirements of Sarbanes-Oxley and International Accounting Standards • Mergers and Acquisitions

  9. What is the State of the ERP Market? • Mature market in U.S. and parts of Europe - ERP Systems firmly entrenched in infrastructure • Continued growth in implementations worldwide • Implementing CRM, KM, SCM ERP Applications • Linking ERP’s to Web – Web Services • ASP’s = possible new market segments • Enterprise Application Integration (EAI) Tools • Open source

  10. What is the State of the ERP Market? • Portals • Public Sector Growth  laggards • Better Implementations Experience • Upgrades • Roll Up Projects • Microsoft Dynamics  Midmarket growth • Current Buzz: ERP II and c-commerce • Next: Web Services Integration • Business Process Management (BPM) • Niche ERP packages

  11. Business Process Management • Modeling, automating, managing and optimizing any business process. • Includes • Workflow Automation • Enterprise Application Integration • Business Process Modeling and analysis • Business Activity Monitoring • SOA – service oriented architecture • Focus on reducing cycle times and errors, increasing accuracy of pricing and cust sat

  12. Market in 2004 • In 1999, the five biggest ERP vendors--SAP, PeopleSoft, Oracle, Baan, and J.D. Edwards--accounted for 59 percent of the market. • In 2004, the five biggest ERP vendors--SAP, Oracle (which bought PeopleSoft and J.D. Edwards), Sage Group, Microsoft's Business Solutions group, and SSA Global (which bought Baan)--accounted for 72 percent of the revenues. (AMR Research)

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