Enterprise Resource Planning
Transcript of Enterprise Resource Planning
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Enterprise Systems
ES
Enterprise Resource Planning (ERP)
Enterprise Resource Management (ERM)
P.Pille, Ryerson Polytechnic University
School of Information Technology Management
P.Pille, Ryerson Polytechnic University
School of Information Technology Management
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Enterprise Systems
• Early Automation
• What is ERP
• ERP Implementation
• Beyond ERP
• ERM
• SAP
• Electronic Marketplace
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Early Automation• Automation of tasks within departments
• Therefore, each dept had its own system(s) – Functionality for tasks for that department only
– Systems weren’t powerful enough to attempt broader range of tasks
– Usually single vendor for all parts of system (e.g. IBM)
• All hardware and network components
• All operating system and application software
• Result: Generally communication between departments remained largely manual– IS/IT was often at the mercy of single vendors
Antony Upward,CGIAntony Upward,CGI
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• Open Systems– Application vendors built applications to support the tasks in specific
departments (Finance, Billing, Workforce Management, HR etc.) -- “Best of breed”
– Better technology allowed automated interfaces between systems
• But… Interfaces – Have difficulty with different data definitions– Often don’t eliminate re-keying– Are expense to build and maintain– Are visible and get in the way of the end-users
• Result: Functional organizations systems landscape are usually a mess and can’t support end-to-end processes
Antony Upward,CGIAntony Upward,CGI
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Business Processes• Cross functional boundaries• simple example
– Customer orders a product– deals with salesperson– warehouse picking– out of stock?
• purchase order to vendor• manufacturing order
– shipping– accounts receivable– effect on demand forecasting (marketing, manuf.)
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• In Classical / Functional / Hierarchical organizations business processes exist… but– No single point of accountability– No single source of consistent, timely, information
about a process• Multiple incompatible systems poorly connected via
multiple expensive interfaces
• Result: In a functional organization a process – is very hard to change– is very hard to e-enable
Business Processes
Antony Upward,CGIAntony Upward,CGI
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ERP - What is it?
• Process view of business vs. functional “silos”
• Integration of systems, one database
• Support most of co.’s info needs• Transaction oriented systems (OLTP)• Accounting, payroll, invoicing, supply
chain optimization, sales force automation, customer service,…
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ERP - What is it?
• Leads to improved performance, better decision making, competitive advantage
• Lays foundation for electronic commerce
• Replaces a multiplicity of different systems and databases– one integrated system
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Evolution to ERP• MRP - Material Requirements Planning
– what material needed?– when & how purchased?– how managed?– maximize efficiency of physical, financial assets
• MRP 1960's– master production schedule– material requirements planning– capacity requirements planning
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• MRPII 1970's– sales & operations planning– simulation – forecasting
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• ERP 1990's– sales and distribution – material management– plant maintenance– quality management– financial accounting– controlling– investment management– human resource management– ...
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ERP Requires
• Strong executive support to implement
• Process approach rather than “silos”
• Change in business procedures (BPR)
• Change in organizational structure, culture, strategy
• Technology change
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ERP
• Difficult to install
• Very large and complex software
• Provides info about all aspects of the business -- worldwide
• Reduces inventory, waste
• Easy communication with customers, suppliers
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Before ERP
• Multiple systems, different interfaces, difficult to extract info about customers, sales,...
• Hard to maintain, many languages, databases, inconsistencies
• Can take weeks or months to obtain info about customers, or where systems changes are needed
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After ERP
• Integrated systems
• Consistent interface
• One database
• Access to current data
• Improved planning capabilities
• Multinational capabilities
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Example: Order Processing
• Salesperson generates a quote for computer equipment overseas
• System immediately creates product configuration, price, delivery date, shipping method,...
• Customer accepts quote over Internet
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System automatically:
• Schedules shipping
• Reserves material
• Orders parts from suppliers
• Schedules assembly
• Checks customer credit limit
• Updates sales & production forecasts
• Creates MRP & bill-of-material lists
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• Updates salesperson's payroll– commission– travel account
• Calculates product cost & profitability
• Updates accounting, financial records
System automatically:
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ERP Implementation
• Need business exec in charge, not IT
• Make a business case– long term benefits
• inventory reduction, customer service,….
• Costs– software– hardware– people (by far the most expensive)
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• Software – ERP, database licenses– maintenance– support fees– add-on packages
• Hardware– new client/server architecture– network capability– backup– multiple servers -operations, testing
ERP Implementation
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ERP Implementation
• People - for system configuration – internal, consultants
• Managers– can require time commitment for several
years
• Continual support from senior execs• Change management
– almost all personnel will be affected
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• ERP system configuration– thousands of parameters to set
• Need stability, but business constantly changes
• Difficult to implement, difficult to change– but is a non ERP collection of poorly integrated
systems & databases any easier?
• Change is never ending
ERP Implementation
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ERP Implementation
• Training needed – technical staff– business staff
• 20-50% of project budget on educational and skills development
• Results in less people needed, but more skills, understanding of the organization
• 4 months to 5 + years to implement
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ERP Implementation• Options:
– add-on systems where ERP is lacking?– keep good legacy systems, build interfaces to
good legacy systems?– more than one ERP instance?
• different divisions, subsidiaries
• but more than one increases complexity, reduces benefits
– interconnect consistent, distributed ERP systems (one logical system)
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ES Implementation
• DOW Chemical– global SAP implementation– great transformation of DOW– common processes, info in finance, admin– substantial customer service improvements– info support - better management decisions– more integrated organizational structure– 15% ROI
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CEO Survey - why ERP?• 67% Improve info accuracy, availability• 61% Improve management decision making• 51% Reduce cost/improve efficiency• 38% Upgrade technology• 31% Resolve tactical issue (e.g. Y2k)• 24% Grow revenue• 15% Haven’t done it yet• 4% Other
Davenport,T.H., Mission Critical
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ERP Package Selection
• Major packages are similar
• Some packages suited to specific industries– e.g. JDA, Richter Systems for retail
• PeopleSoft - strong in HR
• SAP - financial, supply chain
• Baan - flexible manufacturing software
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ERP Package Selection
• ERP appropriate for $25 US million and up
• Mid-tier $25 to $1 billion
• SAP - typically largest global firms– (but can be done for smaller co. also)
• J.D.Edwards - smaller firms
• Oracle, PeopleSoft, - middle
• Baan - mostly middle customers
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ERP Market
• $15 US billion ERP hardware, software worldwide market
• Plus professional services $10 billion
• High growth rate
• Large co. e.g. Intel expect to spend $1 billion on ERP (can never finish)
Davenport,T.H., Mission Critical
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SAP R/3 ERP• Market leading ERP product• Extensive functionality• Used by mid to large companies• International features• Can be run over internet/intranet• 10 million users, 30,000 installations• 13,000 companies, > 100 countries• SAP AG $5 billion, 5,000 developers, 15-20% on
research
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SAP R/3
• SAP’s core transaction system– Logistics– Financials– Human Resources
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Logistics
Accounting
Human Resources
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R/3 Logistics
• Sales and Distribution
• Production Planning
• Materials Management
• Plant Maintenance
• Quality Management
• Procurement
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R/3 Financials
• Financial Accounting– general ledger, accounts receivable,
payable,...
• Controlling– costing, profitability, planning,…
• Treasury– Cash, funds management,…
• Capital Investments
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R/3 Human Resources
• Administration
• Payroll accounting
• Shift management
• Employee attendance
• Trip costs
• Training
• Recruitment
• Personal management
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Industry Specific R/3 Solutions• Aerospace & Defense • Automotive • Banking • Chemicals • Consumer Products • Engineering &
Construction • Healthcare • High Tech & Electronics • Higher Education &
Research • Insurance
• Media • Mill Products • Mining • Oil & Gas • Pharmaceuticals • Project Oriented Manufacturing • Public Sector • Retail • Service Provider • Telecommunications • Utilities
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SAP R/3 Architecture• Processes written in ABAP/4 language
• 1000’s of switches for package configuration
• Multiple platforms
• Client server - multi tier
– database server (multiple servers, distributed database )
– application server (multiple servers, distributed )
– Internet server
– presentation level (browsers)
• User exits - Java, C++,...
• Communication interfaces with other packages
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Multi tier client / server architecture
Multiple database, application servers
Technology Infrastructure 4.0 at http://emedia.sap.com/usa/default.asp
•Presentation
•Internet / intranet
•Application
•Database
Layers:
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SAP R/3 Platforms• OS
– NT– AS/400– UNIX– OS/390
• Database 20-30GB initially– Oracle– Informix– AS/400– DB2– MS/SQL
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Ryerson Academic R/3 Configuration• SAP R/3 version 4.6B• IBM Netfinity 8500R server equipped with
– 4Gb RAM– P!!! Xeon 550Mhz processor– 20 - 9.1 Gb HDDs in a Raid 5 array– 40/80 DLT tape drive– CD-ROM– APC smart UPS 5000
• NT 4 • Oracle 8.0 database• 100 GB in use for NT, R/3, IDES-TS training database
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Implementation Options• Hosted solutions
– hardware & software outsourced to an Application Service Provider (ASP)
– minor configuration, no license– major configuration, need license– user access through Web browser
• In house– hardware & software on site– optional maintenance by SAP partners– user access through Web browser
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The Alpha NZ Case
• Larsen,M.A., Myers, M.D., 1999. When success turns into failure: a package-driven business process re-engineering project in the financial services industry. Strategic Information Systems, 8 (1999) 395-417.
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The Alpha NZ Case• 9 New Zealand banks merged, same core financial services
• BPR project to centralize Accounting at head office– re-engineer recording & reporting– automate routine accounting– improve access to financial info– create new corporate accounting team - highly skilled, motivated
• Timeline– July 1993 - preliminary report - goal to integrate the banks– Dec 1993 - key areas identified for improvement– Aug 1994 - consultant appointed– Feb 1995 - contract with SAP, hardware, software installed, training– Jan 1996 - go live
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The Alpha NZ Case• Accounting staff reduced from 75 to 24• Consultants consider system a great success• No original project team members remained• All in-house expertise disappeared, low skills remain• Management reporting deficiencies in the system
– no skills to enable implementation of needed reports– lack of expertise in the system– low moral, poor management
• Users consider the system a failure• Oct 1996 Alpha merges with Beta Ltd.• Alpha SAP system to be scrapped, Beta Oracle Financials
system to be implemented
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OLTP e.g. SAP R/3• Highly normalized data• Many tables represent an object and are connected
with foreign key relationships to one another– Database tuned for writing records
• Problems– Reporting
• Difficult to combine data from different applications• Performance issues with reporting• SAP R/3 Includes Limited Operational Reporting,
updated in Real-time from the transactional data
– Integrating external data
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ERP and beyond
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• Data Warehouse
• Electronic Marketplace
ES or ERMES or ERM
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ERP and beyond• Supply Chain Management
– planning and optimization– supply planning, demand planning, plant scheduling,
transportation & warehouse management– more integration with trading partners
• Customer Relationship Management (CRM)– marketing, sales, service
• Data Warehouse– On line Analytical Processing (OLAP)
• Internet access– for employees, customers, suppliers
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ERP and beyond
• Buy, sell products and services on-line• Collaborate with suppliers
– planning, forecasting, customer demand needs (collaborative forecasting)
• Collaborate with distributors and resellers
• Auction off excess inventory
• Publish or bid on requests for proposals
• ….
Electronic (Internet) Marketplace
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mySAP.com
• R/3 ERP• Supply Chain Management (SCM)• Business to Business Procurement (BBP)• Strategic Enterprise Management (SEM)• Customer Relationship Management (CRM)• Business Information (Data) Warehouse (BW)• ….
E-business platform for inter-enterprise collaboration between a company, its suppliers and customers.
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R/3 BasisDatabase
R/3 Applications
Logistics HR
Accounting
R/3
Industry Solutions
Internet / Intranet
Business to Business
Consumer
Employee
Business Information (Data) Warehouse
Logistics Advanced Planner & Optimizer
Strategic
Enterprise
Management
Knowledge
Warehouse
Automotive, ...Utilities,...
Customer
Relationship
Management
SAP AG
mySAP
Business to Business Procurement
Corporate Finance Management
Environment,
Health &
Safety
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mySAP Workplace
• Single point of access to all applications– SAP– non SAP
• Customized for each employee
• Roles on left
• Applications on right
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SAP Components Beyond R/3
• Supply Chain Management (SCM)– planning, optimizing, scheduling– suppliers, agents, production planners, purchasers,
customers
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SCM -APO Solvers
• Demand Planning• Supply Network Planning• Production Planning & Scheduling• Heuristic Methods• Linear Programming /Mixed Integer Linear Programming• Genetic Algorithms• Constraint- based Programming• Exponential Smoothing• Holt Winters• Multiple Linear Regression
APO - Advanced Planning & Optimization
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Business to Business Procurement
• Requisitions
• Purchase orders
• Approval, rejection
• Payments
• Status
• By end users from the desk top
• Internet, EDI, ALE
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CRM Roles• Sales
– Sales Manager
– Global Account Manager
– Sales Representative
– Sales Assistant
– ...
• Service
– Service Manager
– Hotline Specialist
– External Service Engineer
– Contact Center Agent
• Marketing
– Marketing Manager
– Marketing Analyst
– Product/Brand Manager
– ...
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SAP Business Warehouse (BW)• On-line Analytical Processing (OLAP)
– De-normalized data• Diverse data is combined into large aggregated data sets • Logistics Information System,...
– Used for decision support and investigation
• Future– SAP is using BW as the base for many analysis products– SAP will likely move from batch to on-line updates of BW in
future releases (small scale this is already in place with current release)
Antony Upward, CGI.Antony Upward, CGI.
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Strategic Enterprise Management (SEM)
Integration of strategic, financial and operational information
Internal & external business information sourcing
Financial and non-financial Key Performance Indicators (KPI)
Business Planning and Simulation
Business simulation
Operational Planning
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Knowledge Management
• SAP Knowledge Warehouse
• All standard SAP training courses
• 20 languages
• Glossary
• Can be modified by customer
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Integration Also Means...Linking Transactions, Analysis and
Planning
Analyze
Analyze
PlanPlan
TransactionTransaction
TransactionTransaction
TransactionTransaction
ActAct
Operational
Operational
Process
Process
(OLTP)(OLTP)
Management Management ProcessProcess(OLAP)(OLAP)
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ERM Systems• Trust the vendor to embed and continually
improve their support for best business practices into their product– Leverage vendors R&D spending via upgrades– …But only if no modifications to core code
• Actively work with vendor to identify opportunities for improvement– User Groups (ASUG, T-SIG)– SAP Industry Business Units (IBU’s)
• Joint development of industry specific functionality– SAP Account Executives
Antony Upward,CGIAntony Upward,CGI
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ERM Systems
• Assume vendor solutions embed best business practices and you will change business practices, not vendors core code
• Leverage package to gain lowest total cost of ownership advantages - maximize use of product before considering alternatives
Antony Upward,CGIAntony Upward,CGI
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ERM Systems• Within organizations -greatest strength - ability to
facilitate end-to-end business processes through integration– Shared Database for all Users
– On-line Real Time
– Shared, Integrated Functionality and Process Designs
– Web based Portal to allow access anywhere anytime
– Roles Based, to focus Functionality and Security for Users
Antony Upward,CGIAntony Upward,CGI
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ERM Systems
• Between organizations ERM’s greatest strength is their ability to facilitate end-to-end business processes using the Internet– Database Shared via Marketplaces– Shared, Integrated Functionality and Process Designs– Portal to allow access to Business Partners (Customers,
Vendors, etc.)– Roles Based to focus Functionality and Security for Users
• Gartner calls this Collaborative Commerce – or c-Commerce
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Collaborative-Commerce• c-Commerce achieves the dynamic collaboration of people,
applications, and corporations in all aspects of business• Customers, employees, suppliers, and business partners
work together as if they were all one company• Examples
– Collaborative buying and selling– Public bidding– Collaborative forecasting– Collaborative planning– Collaborative engineering– Collaborative invoicing/billing– …
Customer
Partner
Employee
Supplier
Collabo-ration
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SellerSellerBuyerBuyer
c- Commerce MarketplacesThe “Old World”
• Individual connection to each business partner
• Different technologies (EDI, Edifact, FAX, XML, cXML, …)
• Constant maintenance
• Need to buy the technologySellerSellerBuyerBuyer
The “New World”
• Only one connection to the marketplace to connect to all business partners
• The marketplace deals with issues like technology, security, search tools, catalog, etc.
• Enables ad-hoc buying from all participants in the marketplace.
Marketplace
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Sell
Internet Selling Internet Selling
Buy
Internet BuyingInternet Buying Search
Select
Register
Offer
mySAP.com Marketplace
Receive Collect
!Operational Systems
(Financials & Logistics)Operational Systems
(Financials & Logistics)
Transact
Othersystems
Buyer Seller
c-Commerce Example: Buying and Selling
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Kinds of Marketplaces
Content Community
Commerce
Collaboration
• Buying/selling goods and services
Infrastructure
• General content• Business-specific
content • Interaction• Communication• Discussion
Vertical(industry-specific)
Horizontal(Cross industry)
Regional(USA, France, ..)
• Business-oriented communities/forums
• Specialized inter-enterprise applications & services
Human Resources
US Home-building
Oil & Gas,
Chem/Pharma
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Likely End-point – “Federations” of Marketplaces
Vertical Marketplace
Vertical Marketplace
HorizontalMarketplace
Horizontal Marketplace
Local/vertical Marketplace
Horizontal Marketplace
e.g. Chemical Marketplace
Buyer
Seller
Marketplace as a Product
www.mySAP.com Marketplace
Joint Venture Marketplaces
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ERM Implementation• Very Little Analysis / Design / Programming
Required– Typically 10-20% of Total Effort– Interfaces– Conversions– Bolt-ons (via Published User Exits)
• Configuration Replaces Programming– Table Driven– Master Data– Enables substantially automated upgrades
Antony Upward,CGIAntony Upward,CGI
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ERM Implementation
• Business People Normally Configure (with some Training)– Largely removes non-value added activity of
translating business requirements to technology requirements
• Result:– Implementation focuses on realizing business
value not getting the technology to work
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ERM Implementation• ERM makes technology less “visible” during
implementation – allowing project teams to focus simultaneously on all aspects of delivering business value– Business Process Design; Organization Design; Application
Configuration– This is a good thing!
• Typical ERM implementation project teams are cross functional:– End-users 50-75%, frequently including project leadership– ERM configurators (usually ex-business people) 15-30%, – ERM and legacy technicians / programmers 5-25%
Antony Upward,CGIAntony Upward,CGI
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ERM Implementation
• Typical ERM implementation projects have a different mix of tasks– Delivering business value requires significant focus on
Business Change Management, typically 10-30% of team tasks
– Technology is no longer the prime driver of ERM implementations (only 10-40% of team tasks)
• Less program specifications and programming• Little or no data design
• ERM Specific Implementation Methodologies Required– Still learning how to do ERM implementations well
Antony Upward,CGIAntony Upward,CGI
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ERM & Re-engineering• Re-engineering typically started with a “blank sheet of paper” for the process
designs– Equivalent to asking “What are the requirements?”
• Numerous re-engineering efforts failed – Analysis paralysis– Huge software projects– Customizing ERP systems
• Today ERM packages can support so much of so many processes can now ask:– Not what do you want, but:– Which process designs can the ERM system support
• Leverages the massive R&D spending of ERM vendors– SAP spends 15-20% of Revenues on R&D – Need to do regular upgrades to get benefit of this R&D
Antony Upward,CGIAntony Upward,CGI
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Implications of ERM for IT Strategy• Can no longer ask the question of the end-users
– What is your requirement?
• This question was fundamental to I.T. strategy from the 1970’s to the mid-1990’s
• I.T. practitioners made the following assumptions that– The business knew what they needed– Requirements would stay still long enough for I.T. to build systems to support them– I.T. could use open systems to make each department’s systems work together
without a lot of effort or expense
• Recent business trends, particularly the increasing pace of change, have made all these assumptions false
• Now we must ask what business process designs can a package support out of the box– Assumes ERM vendor has done their home work
Antony Upward,CGIAntony Upward,CGI
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ERM Job Opportunities• Account executive - SAP support
• Business consultant - system solutions
• Sales manager - ERP solutions
• Instructor - SAP products
• Software developer - ABAP/4, C++,...
• Systems analyst
• MIS manager
• SAP administration.
• SAP installation, support
– OS, database, SAP Basis knowledge
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Sources• Antony Upward, Director, Business Architecture, CGI Group Inc.• Davenport ,T.H., 2000, Mission Critical - Realizing the Promise of Enterprise
Systems, Harvard Business School Press• Watson, E., Schneider, H., 1999, Using ERP Systems in Education, Communications
of AIS Volume 1, Article 9• The AMR Research SAP Advisory Alert for June 15, 2000:
http://wwwext03.sap.com/usa/press/2000/amrreport.asp#com1
• SAP info and links: http://www.ryerson.ca/~ppille/sap/• SAP: www.sap.com www.mySAP.com• SAP USA home site: http://wwwext03.sap.com/usa/• SAP emedia file Technology Infrastructure 4.0 at:
http://emedia.sap.com/usa/default.asp• SAP emedia file mySAP Frequently Asked Questions at:
http://emedia.sap.com/usa/default.asp
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Sources• SAP R/3 Functionality Overview, Wednesday, September 15,
1999, Jim Kelly, Curriculum Development Manager - ERP, SAP America: http://wwwext03.sap.com/usa/education/alliance/whatsnew.asp
• Central Michigan University: http://sap.mis.cmich.edu/
• International Demo and Education System (IDES)– www.sap.com/ides
– Go to site and register for a user id and password
– Can trial pretty much the whole SAP product over the internet (HTML GUI)
• America’s SAP User Group (ASUG) - www.asug.com
• Other Web Sources - www.sapinfo.net