Tuesday, June 17, 2008

Lessons Learned v1.0 by Tolga YILDIRIM

ERP is a software system that makes sure the right information is delivered to the right people at the right time in an organization. With this definition, an ideal ERP solution acts as a digital nervous system, where information flows naturally so that related parties can make sound decisions and tackle problems, just like the nervous system in a human being.

SAP’s ERP solutions are modular, where businesses can implement different sets of modules, such as Financials, Human Resources, Controlling, Sales & Distribution, and Materials Management and so on. Such modularity has benefits, as well as shortcomings. A company may choose to implement several of the modules, and choose not to implement the others. One benefit is iterativeness. For example, you may implement the Sales & Distribution and Materials Planning first, after some time, you add the Financial module to that, and after some time, you add another module. However, what if a business chooses not to implement all the modules that it actually needs? Suppose a business implements only Materials Management and Sales & Distribution modules. Then, can we state that the company is planning its ‘enterprise’ ‘resources’? I don’t think so, because such case contradicts with the digital nervous system concept.

Another issue we mentioned in the class was the very interesting example of a factory implementing ERP while building the factory. This is a real issue. A company’s strategic positioning gives it sustainable competitive advantage. Companies are in search for unique strategic positions which will deliver them sustainable competitive advantage. However, sustainable competitive advantage requires a company’s activities ‘fit’ strategic positioning. It is therefore, the unique and consistent sets of activities that matters. Ideally, ERP systems should be aligned to serve for business’ processes. ERP is a tool, not the end. It is perfectly sensible for a company to first analyze its processes before implementing an ERP. By analyzing and re-engineering business processes, a business eliminates what we call ‘waste’, which is anything that does not add value to the customers. However, that’s not the case here.

The four aspects of IT implementation failures, inability to meet requirements, inability to meet the budget, the time, and inability to diffuse and eliminate resistance, make perfect sense.

A business can get an ERP solution in the following four ways:
Purchase from a major vendor
Purchase from a small vendor
Use Open Source
Use On-Demand ERP

Each model has benefits and shortcomings. However, in order to elaborate the discussion in class, I’ll mention a couple of ones that have not been mentioned.
If you are a middle-sized company, it is more likely that a major vendor will not care about you as much as a small vendor would.
In the traditional ERP models (the first two), you don’t receive patches quickly. Plus, it takes time to upgrade your ERP. The ERP vendor may deliver upgrades each year, however, an on-demand service provider continuously delivers patches and upgrades that effect you instantly.
Lastly, time to implement an ERP system usually takes 6+ months; however, on-demand solutions take 10 minutes.

The book we read, “Why ERP, a primer on SAP installation” reminded me of the following AMR Research.

ERP vendors specialize their solutions to industries, so that they can become experts in industries by understanding their distinct processes. SAP has specialized its solutions to 25 industries, mainly manufacturing industries. However, in the next years, it is expected to increase its efforts in service industries such as retailing, insurance and education.

No comments: