Executive Summary
This paper presents a comparative case study of two companies that had adopted an enterprise resource planning (ERP) system.
Companies were evaluated based on their ERP integration process. Both companies had to overcome integration issues of three kinds: those linked to the design of the enterprise resource package, those linked to the integration of new work applications, and those linked to the user interfaces.
The paper identified the systems via which companies tried to overcome each kind of integration issue. The integration issues linked to each of these strategies were found to be different.
Introduction
Enterprise resource planning (ERP) systems have become admired options for both small and big firms to prevail over the drawbacks of disjointed and disparate legacy systems.
Enterprise resource planning structures are designed as an incorporated set of system components, all connected to a common databank, managing a host of company tasks like human resources, inventory control, sales and finance (Monk & Wagner 2007).
Most ERP systems in addition offer many language and currency competencies, enabling activities in various nations to become more incorporated. In a period of globalisation, these aspects are very appealing for firms focusing on expanding their operations international without losing control over them.
The attractiveness of enterprise resource planning is verified in a new research that indicated that approximately 20% of firms across all sector industries have installed enterprise resource planning software, with the processing industry leading the trend (Magal & Word 2012).
The research in addition indicated that the popularity of enterprise resource planning continues to increase, with 35% of the reviewed firms exploring, testing, or applying enterprise resource planning packages.
Anderson and Larocca (2005) termed enterprise resource planning as the most critical establishment in the business utilisation of information technology in the world.
The expanding significance in enterprise resource planning systems may be defined their expected benefits.
Enterprise resource planning packages allow organisations to implement completely incorporated packages to substitute their disparate legacy packages, which are extremely hard to maintain due to their nature, size, work-based condition, and recurrent absence of records.
Enterprise resource planning packages are valuable as they are incorporated rather than disjointed, implant supposedly best corporate routines within system applications, and provide managerial staff with direct access to synchronised data (Magal & Word 2012).
Enterprise resource planning undertakings are frequently linked to basic managerial enhancement attempts, such as enterprise process restructuring (EPR). Since an ERP system supports business assimilation, it potentially represents more than an alteration in technological infrastructure.
In fact, the key benefits resulting from enterprise resource planning installations may essentially originate from modifications in the administrative structure, production processes, the responsibilities and abilities of managerial staff, and knowledge management projects (Whitten & Bentley 1998).
The effects of enterprise resource planning project letdowns are significant, given the money and time that such projects usually need. Overall, high threats come with the high payoffs potentially achievable via utilising an enterprise resource planning system.
The acquisition of an enterprise resource planning system comprises not only an enormous and sophisticated technological undertaking for a company but also bears the outlook of key alterations in administrative structure and business applications.
Given the expanding importance of enterprise resource planning in the modern age and beyond, it is necessary that studies concentrate on means of improving the past performance of enterprise resource planning undertakings.
Project risks have to be lowered, and companies must find means of making the huge investments in enterprise resource planning system pay off.
The paper utilises a comparative case study approach to investigate the activities by which two organisations implemented ERP packages supplied by a number of vendors and supported by a number of consulting firms.
Drawing upon Magal & Word’s (2012) theoretical assessment of administrative change, the paper considered ERP implementation as an integration activity that aims at the interaction between forces supporting and forces fighting change.
The research aimed particularly at the integration process and demonstrated various ways in which the two organisations addressed the integration issues in ERP implementation.
Integration Issues
An enormous body of literature on ERP integration has been generated in the last 3 decades (Whitten & Bentley 1998; Sprott 2000).
However, the knowledge of the aspects and procedures that result in enterprise resource planning integration successes or failures is still inadequate as ERP integration is comparatively novel and is different from conventional information platforms establishment projects (Sprott 2000).
Here, the paper focuses on a number of the unique features of enterprise resource planning systems and identify the integration issues associated with such features.
People
One key issue lies with the fact that enterprise resource planning platforms are packaged systems. Sharma and Gupta (2011) compared the initiation procedures of packaged systems with legacy information platforms at the sector, development, socio-cultural environment, and team stages.
Their assessment proposes that vendors of packaged systems must convince various clients with differing desires and needs with a view of capturing the required market share and profitability to justify the project.
At the same time, there are great time-to-market pressures on the merchants to develop their novel systems to remain competitive.
Also, packaged systems manufacturers are disjointed from the customers organizationally, in addition to naturally and they generally do not contribute to the integration of the ERP package.
Agents like sales and client personnel and specialists frequently provide the link between end-users and system developers (Scott & Kaindl 2000; Sharma & Gupta 2011).
As a result, unlike conventional system development projects where a system is customised to fit the current enterprise needs and infrastructures, packaged system integration involves the clients (people) modifying processes and enterprise procedures with a view of utilising the integrated system, changing a number of the modules in the system to suit their specific needs, and depending on system merchants for updates and support to the ERP system.
The misfit between a company’s process and data needs and the benefits offered by enterprise resource planning is particularly evident because of the compound nature of the enterprise resource planning applications (Sawyer 2000).
In their research of enterprise resource planning integration in Singapore, Sambamurthy and Kirsch (2000) illustrate that the alleged sector best applications entrenched in enterprise resource planning applications is barely complete.
They indicate that disconnect between ERP capabilities and enterprise needs can be business-based, sector-based, or country-based and may be grouped into 3 classes: information, process and outcome. Rouse (2006) emphasised the socio-cultural effects of disconnects in ERP integration.
Process
Another issue between conventional data system creation project and enterprise resource planning is that an ERP project, which tends to be enterprise-based, is characteristically bigger in scope than a conventional system development project, which frequently focuses on one or more sections or enterprise procedures.
The threats linked to enterprise resource planning undertakings are comparatively greater than those conventional projects (Robey & Ross 2002).
A business-wide project affects many more users and such consumers may have various and perhaps inconsistent requirements and desires.
Also, an ERP project requires the integration of information, applications, and processes throughout the organisation, frequently on an international level, which makes enterprise resource planning projects far more composite than conventional software development undertakings (Monk & Wagner 2007).
To attain assimilation, different parts and separate enterprise processes require to be fixed together by matching to an identical principle. For instance, assimilation may be achieved by modifying each enterprise process to fit with the software utilising the enterprise resource planning system as a paradigm.
The adjustment of the enterprise resource planning software involves the modification of the ERP software to fit current or restructured enterprise processes.
Gefen (2002) identified enterprise resource planning system integration as program collection, system organisation, and system adaptation into organisation, expansion, and adaptation.
Davison (2002) presented a more thorough classification of enterprise resource planning system adaptation, which comprises eight kinds of configuration: customisation, fixing, screen masks, expanded coverage, workflow encoding, customer exits, enterprise resource planning encoding, and interface improvement.
Each kind may need modifications to be carried out at various levels of the enterprise resource planning system.
As a result, these changes may influence the preliminary enterprise resource planning implementation, in addition to future repair, upgrading, and renovations. It is worth understanding that such models are only focused on the configuration of systems to suit enterprise processes.
Application
When integrating ERP systems, organisations have many options regarding how to configure and adapt the system package (Magal & Word 2012).
Most enterprise resource planning systems are created in a modular form, where each program includes unique functionality and customisable alternatives (Kumar & Hillegersberg 2000).
Also, a proprietary or non-closed encoding milieu is frequently presented by enterprise resource planning vendors to their clients for configuring the software. Hence, organisations have three kinds of technological adaptation alternatives: program choice, table customisation, and system change (King & Malhotra 2000).
In program choice, organisations select to apply one or more projects utilising the default system determined by ERP merchants. In this case, technological configuration is accomplished through the organisation’s decision as to which projects to adopt.
This kind of technological configuration makes minimum changes to the software and, by itself, is barely adequate in an enterprise resource planning project. A number of small enterprises, however, may prefer this low threat and less expensive strategy.
For instance, Rolls-Royce decided to adopt SAP’s finance software utilising the default graphs of descriptions without any alterations (Hong & Kim 2002).
Because most enterprise resource planning platforms are table-based, another kind of technological configuration is to choose customisation alternatives in the tables in order that the software satisfies organisational requirements.
A major need for table customisation is that of understanding the implications and effects of each customisable alternative in each system.
Because there are many applications in a standard enterprise resource planning system, this can be an extremely composite and time-consuming work, particularly when interconnections among alternatives across different systems and projects need to be taken into account.
For instance, General Electric spent over 12 months on system customisation alone (Gefen 2002). The advantages of this kind of technological configuration comprise the capability of modifying the system without programming, the entire support from the merchant, and the ease of potential improvements.
ERP Solution
In an international enterprise viewpoint, firms are aggressively growing outside of their original region with a view of seeking chances worldwide.
Whereas the active and rapid shifting external milieu has put enormous demands on organisations’ decisions and activities, how to react rapidly to such shifts and how to participate efficiently in the international milieu turn out to be an important concern.
Inside a scattered business, it needs developing integrated ERP system, which allows information exchange across the various departments. Additionally, the business requires more efficient communication between departments and main office.
Even within a region, firms need to develop business systems via which various sections can link more effectively to each other. Generally, firms need to develop an integrated enterprise process, which can considerably promote the link and communication among active divisions.
With a view of achieving this goal, active integration is needed, which is the function of incorporating all enterprise tasks to work together, for example a company’s distribution or logistics tasks have to work together with supply chain section, production, and information system before the active incorporation can be expanded to other firms in the supply chain (Davison 2002).
From the perspective of technology, ERP design has been shifting from a 2-tier to a 3-tier customer care. Aged legacy designs require to be changed to modern, more flexible and strong systems, and aged information require to be transferred into latest forms.
Faced with such requirements, organisations are seeking harmonised technology and enterprise solutions. The resolution would fall into enterprise resource planning, which fundamentally integrates enterprise operations with modern technology with a view of providing solutions for the entire company.
ERP focuses on improving internal competence through integration of the various components in the enterprise. In fact, the explosion of ERP systems forces enterprises to offer communication and data exchange among supply-chain representatives, conquering physical limits.
Therefore, integrating ERP is an ordinary and required function in organisational and strategic consideration.
Technically, enterprise resource planning is said to be the backbone of supply chain management. Since the two depend on almost related infrastructure like extranet and electronic information exchange, it is especially expected and realistic for their assimilation.
Most enterprise resource planning system vendors have been improving their software to comprise sales-force computerization, information storage, after-sales service, and record management.
In this sense, enterprise resource planning software modules initially connecting back-office operations into a distinct system would expand beyond their main tasks to comprise not only information storage, record management, after-sales service, and sales-force computerization but also supply chain management to improve effectiveness and production for the core clients (Brown & Vessey 2003).
Benefits of Addressing Integration Issues
The integrated enterprise resource planning can network mechanically with suppliers and clients by data exchange thereby improve the effectiveness of whole procurement and client relationship management, at the same time associate with third party websites, implement E-enterprise, and then cut the costs of intermediate connections and improve business competiveness in the industry.
Whichever technique is utilised, so long as the back-office and front-office of businesses is integrated flawlessly, system implementation of order entry and quotation will be easier.
So long as the current clients or future clients of firms can access the following data from the system interface, such as product records, department costs, discount levels and stock data, the customers can choose whether or not to place a new order.
The order request by clients on the system is the same as the order request by agents, and the data regarding orders can be directly transferred to Enterprise Resource Planning at the background. Then the enterprise resource planning system will perform computing after receiving the orders.
Finally, the outcomes information on the order cost, order specification and the level of discount will be communicated back to the system centre. If clients document the data, they can follow these orders at any time via the customer care, or through communicating to agents.
The company utilising ERP can be completely responsive of the interface information and transaction information regarding clients, and then it will assess client inputs to the enterprise and choose whether or not to improve the quality of products (Akkermans & Helden 2002).
General Electric – Case Study 1
General Electric (GE) has a competitive edge in technology of its main products. But its key competitor, 3M, does better at cost control, effectiveness, and supply chain management. With a view of competing with 3M and other companies, GE chose to adopt an enterprise resource planning system.
The other factor was because of the growing sales and strategies to enter the Chinese market, GE chose to implement an enterprise resource planning to supervise its branches in China, particularly its capability of communicating across the company with its various currencies and languages.
The ERP project analysis team manager was the head of the information department selected by the CEO.
With a view of ensuring evaluation appropriate for the entire company procedure, the implementation team comprised first class managers from sections which utilise an enterprise resource planning software the most like procurement, finance, and sales.
Senior management fully authorised and supported the ERP implementation team and demonstrated interest and articulated anticipations for the work at all company meetings. General electric has been in operation for more than 10 years, and established 5 branch firms in China.
Before the branch firms were established, GE had already prepared to implement ERP system with a view of improving its competitive edge.
There are two key issues that happened after the adoption of the ERP system. One is technological, and the other is about user interfaces. General electric found a number of issues in the production organising and work in progress sections.
For instance, one of the true instances of the enterprise resource planning system was that a number of production orders were not utilised; completed and half-completed goods which were left in production room.
But during stock check in the end of each month, the enterprise resource planning system could not differentiate between the completed and half-finished goods which were not developed in the stock of the system records.
The ERP system makes financial and procurement departments hard to confirm the stock if such completed and half-finished items are not on the system records.
The reason why the system could not locate these goods on the check list was due to the fact that the system failed to take into account the unfinished products separately.
The other issue is the undue involvement of the CEO in the implementation process. Because of consolidating the power in him, the CEO controls most of the decisions of the organisation. Indeed, the CEO has inadequate skills regarding ERP.
But, in the implementation, when dealing with situation like the consultant proposes that enterprise process has to change to suit the enterprise resource planning system, the CEO refuses to alter initial process but he uses add-on projects with a view of solving such issue.
This is the critical aspect that causes the failure of the system and increases the cost of production.
Rolls-Royce – Case Study 2
Rolls-Royce is a chemical distributing firm started in 1980, it makes $160 million yearly turnover and has 39 workers. The top management comprises the CEO, finance person, and technology specialist. Middle management involves production manager and departmental heads.
All of the top managers have worked in key positions in the firm for over 10 years with enormous reliability and are especially acquainted with organisation culture. The common feature of the managers is that they understand fairly little regarding enterprise resource planning.
The timing of the enterprise resource planning system execution is when the enterprise is expanding with vast profitability. Because of lack of qualified workers of ERP execution, Rolls-Royce hired a consultant. The consultant was well trusted and entirely authorised by the top management.
The critical effect for the ERP system choice originates from the senior management relatives. Facing the various alternatives is the most frustrating moments for the consultant. The outcome to give way to such unprofessional decisions is the biased limitation of the ERP development.
Thus, in the conventional research of enterprise resource planning system adoption the assistance of senior managers play an extremely critical task.
The same state occurs in the family based enterprise, the assistance for the consultant from the senior management was influenced by the resistance of relatives, particularly when the senior management is unfamiliar with enterprise resource planning system.
The other issue originates from the departmental heads lack of adequate skills for ERP implementation. This is so called the emotional conflict of ERP adoption.
Conventional studies in the last 10 years mainly focus the discussion on the senior managers and the ERP users but not middle management. But in this case, ERP consultant found that it plays a critical task which would strengthen the resistance of ERP system users.
Conclusion
The paper presented a comparative research about two organisations that had implemented an ERP system. The firms were analysed based on ERP integration process. The two firms had to conquer integration issues of three kinds: user interfaces, process incompatibility, and incompatible technology.
The paper identified the systems via which firms tried to overcome each kind of integration concern. It also identified various ERP implementation strategies. The integration concerns associated with each of these strategies were found to be different.
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