IS373Large Systems Implementation

Olayele Adelakun (Ph.D)Assistant Professor CTI Office: Room 735 CTI 7th FloorPhone: 312-362-8231Fax: 312-362-6116Email : yele@cs.depaul.eduWeb: http://facweb.cs.depaul.edu/yele

Agenda

Course Overview

Expectation

Introduction to Large Scale Systems

Course Overview

Objective Course Materials Grading Group Assignment

Course Objectives Understand ERP implementation

challenges

Key success factors in implementing large scale systems

Impact of large scale system implementation on organizational success

Course Material The Enterprise Resource Planning Decade

: Lessons Learned and Issues for the Future by Frederic Adam and David Sammon ISBN:1591401887 Idea Group Publishing © 2004 (302 pages)

ERP: Making It Happen: The Implementers' Guide to Success with Enterprise Resource Planning by Thomas F. Wallace and Michael H. Kremzar ISBN:0471392014 John Wiley & Sons © 2001 (372 pages)

Grading

Participation  10%

Homework 1 10% due 2nd week

Homework 2  20% due 4th week

Mid-term Paper 30% due 6th week

Group presentation  15% due 8th week

Group project paper 15% due 10th week

Total 100%

Group Project ?

Question

Agenda

Course Overview

Expectation?

Introduction to Large Scale Systems

Expectations?

Agenda

Course Overview

Expectation?

Introduction to Large Scale System

Information Technology Challenges

Regulated

Monopoly

Organization

Productivity/ Efficiency

Free Market Individu

al

Individual/Group

Efficiency

Collaborative

Enterprise and Industry

Integration

Value Creation

Era I

Era II

Era III

Administrative

Framework

Primary Target

Justification/ Purpose

?

?

?

Application

Challenges

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?

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Integrating Changing Technology Platforms

Large Systems / ERP Definitions

… complex megapackages (Gable et al., 1997) designed to support the key functional areas of an organization.

The American Production and Inventory Control Society (APICS) defines ERP as “an accountingoriented information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders” (Watson & Schneider, 1999).

An ERP system can be thought of as a company-wide Information System that tightly integrates all aspects of a business. It promises one database, one application, and a unified interface across the entire enterprise Bingi et al., 1999 .

Large Systems / ERP Definitions ERP links all areas of a company with external

suppliers and customers into a tightly integrated system with shared data and visibility. ERP systems are designed to solve the problem of the fragmentation of information over many legacy systems in large business organizations (Chen, 2001, p. 374; Chen, 2001, p. 379)

ERP plays a critical role in improving or reengineering outdated infrastructures, gaining tighter control over internal operations, and driving down costs

enterprise systems” (Davenport, 1998; Chen, 2001) and “enterprise-wide Information Systems”

The Value Chain

Supportactivities

Primary activitiesInbound logistics Materials receiving, storing, and distribution to manufacturing premisesOperations Transforming inputs into finished products.Outbound logistics Storing and distributing productsMarketing and Sales Promotions and sales forceService Service to maintain or enhance product valueCorporate infrastructure Support of entire value chain, e.g. general management planning,

financing, accounting, legal services, government affairs, and QMHuman resources management Recruiting, hiring, training, and developmentTechnology Development Improving product and manufacturing processProcurement Purchasing input

RATIONALE FOR ERP SYSTEMS One of the key reasons why managers have

sought to proceed with difficult ERP projects is: to end the fragmentation of current systems, to allow a process of standardization, to give more visibility on data across the entire

corporation, to obtain competitive advantage (Sammon &

Adam, 2000).

A seamless integration is essential to provide visibility and consistency across the enterprise.

Goals for Implementing Large Systems e.g. ERP

1. Integration of financial data

2. Standardization of manufacturing processes

3. Standardization of human resource information

Myth and Reality of ERP Benefit Realization

Business Benefits

A Framework of Business Benefits

Dimension Subdimension Explanation

[1] Operational 1.1 Cost reduction1.2 Cycle time

reduction1.3 Productivity

improvement1.4 Quality

improvement1.5 Customer

services improvement

Because ERP systems automate business processes and enable process changes, one would expect ERP systems to offer all of these types of benefits.

Adapated from Shang and Seddon (2000)

Business Benefits cont.[2] Managerial 2.1 Better resource

management

2.2 Improved decision making and planning

2.3 Performance improvement

With a centralized database and built in data analysis capabilities, it seems likely that ERP systems will provide informational benefits to management.

Business Benefits cont.

[3] Strategic 3.1 Support business growth3.2 Support business alliance3.3 Build business innovations3.4 Build cost leadership3.5 Generate product differentiation (including customization)3.6 Build external linkages (customers and suppliers)3.7 Worldwide expansion3.8 Enabling e-commerce

ERP systems, with their large-scale business involvement and internal and external integration capabilities, could assist in achieving these strategic benefits.

Business Benefits cont.[4] IT Infrastructure 4.1 Build business

flexibility for current and future changes4.2 IT cost reduction4.3 Increased IT infrastructure capability

ERP systems, with their integrated and standard application architecture, provide an infrastructure that could support this dimension.

Business Benefits cont.

[5] Organizational 5.1 Support organizational changes5.2 Facilitate business learning5.3 Empowerment5.4 Build common visions5.5 Change employee behavior5.6 Better employee morale and satisfaction

The integrated information processing capabilities of ERP systems could affect the establishment of organizational capabilities.

The ERP Market

Vendor Origin Salient Features

BAAN Holland An earlier ERP vendor

Oracle US A relatively newcomer, but quickly gaining share

PeopleSoft US Originally focused on HR management

SAP Germany The pioneer and largest firm

JDEdwards US Internet emphasis

Table 3: ERP Software Market Growth Rates

Growth Rate (%)

Annual Revenue Reference

32 US$66.6 billion by 2003 (e) Shakir, 2000

  US$70 billion by 2002 (e) Shanks et al., 2000

36-40 US$15–50 billion from 1999-2004 (e); eventual size of market to US$1 trillion (e)

Bingi et al., 1999

36 US$15.68 billion in 1997 (a) and US$72.63 billion by 2002 (e)

Holland et al., 1999 Holland & Light, 1999

40 20,000 companies paying US$10 billion in 1997 (a)

Markus & Tanis, 2000

  US$66 billion by 2003 (e) AMR Research, 1999

  ERP revenue hit $16.6 billion in 1998 (a) Oliver & Romm, 2000

Note: (e) = expected; (a) = actual

The ERP Market

SAP SAP R/3 is composed of four major parts — accounting,

manufacturing, sales, and human resources — containing more than 70 smaller modules

work for multinational corporations due to the fact that it has a strong international appeal, with capabilities to support multiple currencies, automatic handling of country-specific tax laws and regulations, and legal and language needs

The complete suite of SAP R/3 applications is available in 24 languages, including Japanese (Kanji) and other double-byte character languages

Furthermore, SAP software is available for all types of industries and for every major market (SAP, 2003).

R/3 is designed as an “open” standard (it can run on a variety of hardware and platforms and software environments), and it uses a thin client and a three-tier architecture, consisting of database, application, and presentation tiers

Three-Tier Client/Server Architecture

The ERP Market Support ERP supports about 70-95% of a large

organizational need

The remaining 5-30% Interfacing the ERP application with existing

legacy systems using middleware, which adds to the complexity

Interfacing ERP to third-party solutions. Writing custom software to extend functionality. Modifying the ERP source code directly.

Summary1. ERP systems create a framework that will improve

customer order-processing systems, which were neglected in recent years.

2. ERP systems consolidate and unify business functions, such as manufacturing, finance, distribution, and human resources.

3. ERP systems integrate a broad range of disparate technologies into a common denominator of overall functionality.

4. ERP systems create a foundation on which next-generation applications can be developed.

Agenda

Expectations?

Course Overview

Introduction to Large Scale Systems