Day 2 Articles

The ERP Purchase Decision: Influential Business and IT Factors

The objective of performing the research was to determine a set of business and IT factors that influence the purchase of ERP systems.

In the research a literature review on the potential ERP package capabilities was completed.

Five major vendors of the ERP (SAP, Oracle, PeopleSoft, Baan, J.D. Edwards) have occurred since 1997. SAP holds the largest market share.

Vendors are developing faster implementation methodologies and specific industry solutions to provide easier and less costly service for mid- and small-sized firms which will provide larger market spectrum.

In early 1990s, the ability to better meet various competitive goals, the desire to reengineer business processes, and access to integrated data were three influencing business capabilities of the ERP purchases. In these years, many businesses started BPR initiatives to achieve the results that will support their current system is inadequate in performing their BPR efforts.

Currently the experiences have shown that the business should be matched to the software rather than matching the software to the business. Therefore, implementing an ERP simultaneously results into reengineering business processes and replacing legacy systems.

In the second half of the 1990s, replacing the aging mainframe systems with modern enterprise-wide client-server architectures, replacement of legacy systems that no longer meet the firm’s needs, reducing the information systems costs by buying rather than building software were the three influencing IT capabilities for the ERP purchases.

And also between 1996 and 1999 avoiding year 2000 problems by adopting an ERP seemed reasonable for some companies. And at the same time they could improve their information systems capabilities.

As a conclusion, the results from the factor analyses are as; the four business factors are, data integration, new ways of doing business, global capabilities, flexibility/agility; and the four IT factors are IT purchasing, IT cost reduction, IT expertise, and IT architecture. And the Y2K problems affected the purchases before 2000.

Day 2 Articles (Serkan Kocak)

1- ERP Software
Enterprise Resource Planning (ERP) systems are formed to integrate information from several sources (departments) into a unified system. And the software of ERP allows collection and consolidation of this information across the enterprise.
An application of ERP; to eliminate paper based information system, to have efficient vendor relations, is given as an example to application areas. Tracking transactions brought very important advantage to the firm “consistency” by the implementation of ERP.
However, there are also some drawbacks; legacy paper based systems to single enterprise level program will take long time, duplication of data, not having management functions in storing data (to define the meaning of data stored).
The cost of the system can not be predicted because it depends on how many people will use it and how big is the company.
And the future step is to have a more intelligent program which has more managerial analysis inside.

2- Decision Making in the Evaluation, Selection and Implementation of ERP Systems
ERP projects can be thought as one of the most important projects which’s success or failure has a great impact on organization. So that evaluation, selection and implementation are very important for these project which’s methodologies are discussed in this paper.
After having some information (advantages) about ERP systems paper continues with the decision making models:
1) The Classical Model: to maximize goal achievements best alternative should be chosen
2) The Administrative Model: the ones who meet minimum requirements can be chosen
3) The incremental Model: the small incremental changes by making successive limited comparisons done
4) The Adaptive Model: mix of administrative and incremental model to find best
5) The Irrational Model: Decisions are not done according to a problem; decisions are product of organizational events.
6) The political Model: the decision making when the organizational goals become politics.

3- The ERP Purchase Decision: Influential Business and IT Factors
In this paper authors focuses on the influences of set of businesses and IT factors that are associated with the purchase of ERP systems.
After having brief information about ERP, the importance of business characteristics and ERP Package Capabilities is searched in literature. It is claimed that the ability to better meet various competitive goals, desire to reengineer business processes, and access to integrated data, are the three business capabilities that affects ERP purchases. And also IT capabilities such as: replacing with aging main frame systems with more modern, and reduction of information flow costs, and lastly Y2K kind of special problem solutions, are shown as IT factors that affect purchase.

4- Assessing the ERP Software
Larson Company, which are using an ERP system, wants to get something integrated to manage their supply chain totally in one system. Larson realized that SAP, Oracle and PeopleSoft are the major players in this market, which are ranked highest degrees in supply chain management modules. And also the other players of supply chain management market are analyzed. The existence of third-party software providers are mentioned and their expanding, partnering with specific ERP vendors are highlighted. At the end the weakness of ERP as not meeting the needs or inefficient functionality is stated.

Day2 Articles

Decision Making in the Evaluation, Selection and Implementation of ERP Systems

-Brief History on evolution of ERP from MRP

- Business Strategy, Business Processes, Different stakeholders are dominant

- ERP is not only a IT upgrade

- Decision making models are used now primarily to evaluate an ERP project to be applied.

- HSP case was investigated, in team selection, project implementation.

What You Need to Know about ERP software

- Brief information

- Drawbacks are mostly highly time taking conversion of legacy paper based systems

- Vendors are listed as oracle, peoplesoft, SAP

- Cost is hard to lower, mostly dependant on the size of the company

- With the help of the Winnipeg city implementation, next era is processing the data gathered by ERP

Assessing the ERP Software

- Integration is important

- Sap is known for Compatibility

- Oracle is known for Supply Chain

- Peoplesoft is human resources applications

- There are still room for third party applications regarding business processes

- Companies may choose to integrate different addons to ease their operations such as schedule programs for production.

The ERP Purchase Decision

- Purchase decision depends on ERP characteristic and multipal organizational characteristics

- Second half of the 90’s have 3 criteria of IT for purchase decisions: reduce Information system costs, replace old systems, requirements not met

- Study is conducted as below:

- 35 ERP package capabilities are defined

- Competitive Goals

- Business Processes

- Architecture

- Legacy Systems (including Y2K)

- Buy vs. build

- Data Access

Day 2 articles by Tolga YILDIRIM

Assessing ERP Software

Corporate decision-makers put great emphasis on integration of IT systems. The shift of demand from supply-chain management solutions to ERP solutions is a clear example of this fact. ERP vendors have improved their solutions and added new capabilities such as better supply chain management features. Decision makers in companies have favored integrated ERP solutions with supply chain management capabilities over pure SCM solutions.

ERP Purchase Decision: Influential Business and IT Factors

There are business, as well as technical reasons for implementing a specific ERP solution. The ability to better meet various competitive goals, the desire to reengineer business processes and access to integrated data are the business capabilities affecting decision process. In addition, the desire to replace mainframe systems, replace systems that do not meet needs anymore, and reduce IT costs by purchasing, rather than in-house development.

Decision Making in the Evaluation, Selection and Implementation of ERP Systems

Decisions during different phases of ERP implementation are not purely financial. There are six models of decision-making in implementation lifecycle, which are

The classical model
The administrative model
The incremental model
The adaptive model
The irrational model
The political model

Buyers’ insider ERP Software

ERP allows the collection and consolidation of information across the enterprise. It acts as a transactional system for capturing business information. The data conversion at the very beginning of the ERP implementation is a necessary and takes long time. In addition, the article emphasizes on the customization issue. Off-the-shelf products which are not customized can decrease the time needed to implement and are more agile for upgrades. However, since these are not customized, such solutions are too generic to solve the information problems of an organization in general.

Why ERP? A Primer on SAP Implementation

First of all, this book is a poor imitation of the classic ‘The Goal’.

The book summarizes some of the aspects of SAP applications, in addition to factors that affect decision-making in ERP implementations.

There are factors other than rational factors, in an ERP implementation. The success and failure of ERP projects depend on these factors. The key point of the book is that it lays out the fact that companies should thoroughly investigate their processes and their needs and try to match these with specific ERP solutions.

Many companies, unfortunately, choose a specific ERP solution just because others have implemented it. A company should not bet its operational effectiveness on its competitors’ choices. Each ERP implementation should be taken into hand separately and individually.

In the decision-making process, there are different roles. An important role revealed in the book is the information gatekeeper. Information gatekeeper is the person who has a perceived ‘expertise’ related to the decision. In this case, the key information gatekeeper is the so called ‘computer guy’. The computer guy has taken role in implementation of ERP system of the sister company. He was perceived to be the ‘expert’ and his words have influenced the way decision-makers act. Companies should understand the information gatekeepers can lead to wrong decisions, despite their perceived ‘expertise’. In addition, the second learning revealed by the information gatekeeper role, is the fact that an ERP system is a business project, rather than a traditional IT project.
In ERP implementations, the issues of people, organization, functions and business objectives that need to be addressed before the ERP system can be used. With Accelerated SAP methodology, the aim is to accelerate the implementation phase while evaluating the business processes, objectives and activities. This methodology strongly raises the chance of success in the implementation, especially for small and medium size businesses that do not completely reengineer their processes.

Day2 - Article Key Points by Basak Tektemur

Buyers' Inside ERP Software by Marlene Orton

ERP => Enterprise resource planning software allows the collection and consolidation of information across the “enterprise”, allows for tracking and running of basic reporting.

Capturing business information
All data from various sources; such as HR, finance, marketing department, is collected at a central location.
Giving reports
Drawbacks:
* It may take time to convert all legacy-paper based data and legacy computer systems into a single program.
* Duplication of data is a common problem.
* An ERP program is not analysis or management software, it is just a tool.

Vendor: Oracle, PeopleSoft, SAP

Cost:
Cost depends on size of the organization, its database and number of users; implementation costs such as consultancy and building infrastructure; and customization.

Decision Making in the Evaluation, Selection and Implementation of ERP Systems by Maha Shakir

The evaluation, selection and implementation (ESI) of ERP system involve multiple decisions which can be categorized in 6 models.
ERP implementation costs exceed $100000 but decision is not just financial.
ERPs are application software that integrate information across the entire organization as we mentioned several times. Systems remove the inconsistencies and help to have consolidated reports.

Decision Making Models:
The classical model: best alternative to maximize goal achievements
The administrative model: alternatives that meet minimum standards
The incremental model: incremental changes by making successive limited comparisons starting from the present situation with no set of clear objectives
The adaptive model: mix of administrative and incremental model
The irrational model: decisions are product of organizational events
The political model: policies replace organizational goals

Classical model is based on the economic theory and is difficult to implement since it is difficult to evaluate all possible alternatives. The administrative model is more practical and depends on the principle to find the alternative that meets the minimum standards. Incremental model is used for complex and uncertain problems. The adaptive model is mix of administrative and incremental model where objectives are defined in advance but decisions are made incrementally. The irrational model is used where the uncertainty levels are high. The political model depends on personal objectives rather than organizational ones.

Initiation => The political modelRequirement Analyses (RA)/ definition of KBP => The adaptive modelRA/ inviting vendors to bid => The political modelRA/ vendor shortlisting => The administrative and political modelDesign & implementation => The adaptive modelPost implementation => The administrative and political model

The ERP Purchase Decision: Influential Business and IT Factors by Carol V. Brown, Iris Vessey, Anne Powell

IS professionals started to implement large-scale, cross-functionally integrated, packaged systems known as ERP rather than specific solutions for a single enterprise.
Support ERP purchases => involve HR and/or finance/accounting modules, alone.
Value-chain ERP purchases => involve materials management, production and operations, and/or sales modules, but may also include purchase of one or more support ERP purchases.
Three business capabilities that influence ERP purchases => the ability to better meet various goals, the desire to reengineer business processes, and access to integrated data.
Three IT capabilities that influence ERP purchases => the desire to replace aging mainframe systems with more modern, enterprise-wide client-server architectures, replacement of legacy systems that no longer meet the firm’s needs, and desire to reduce information systems costs by buying rather than building software.
As a result, the authors identified four business factors: data integration, new ways of doing business, global capabilities, and flexibility/aging; and four IT factors: IT purchasing, IT cost reduction, IT expertise, IT architecture as decision inputs.

Assessing ERP Software by Brian Albright

The ERP vendors such as SAP, Oracle and PeopleSoft developed and improved supply chain management modules that became better than services of companies that are specialized in supply chain management, warehouse management and so on. And therefore they have higher market share and better functionality.
Enterprise software vendors offer a greater degree of integration with back-office applications.
ERP systems provide solutions for more complex and industry-specific problems. However they fail to integrate the back-office applications with supply chain management applications which is a big problem for the customers.
In mid-market with lower IT budgets small vendors have the advantage of serving to a niche by specialization in that industry or vertical industries and ability to integrate their supply chain offerings.
ERP systems lack the ability to handle returns or reverse logistics. Also, there are still integration problems even within an ERP suite which is supposed to be complete as we defined in class. However, ERP vendor are good at identifying their gaps and problems and most of them have partners to help them to complete implementations. For customers, it is unavoidable to work with a third-party if their ERP vendor cannot meet the requirements of your complex functions and do not have a partner to solve this problem.

Day 2 Key Points of the Articles

After all the in class discussions and reading the book the article readings were more a summary and review of what we have covered so far. There were not many key new learning for me in these readings. However below I sum up the main points discussed in the articles under the titles of each.

1) Decision Making in the Evaluation, Selection and Implementation of ERP Systems

The article explains different methodologies that can be used to evaluate select and implement ERP Systems. An example is given and the approaches applied are discussed.
As discussed in the class the implementation of an ERP system has a major benefit of removing inconsistencies in a company and achieves consolidation of all the data however this process is costly and might take from 6 months to 2 years. Another point that is mentioned is that the reason for implementation is not always financial but may be strategic or political.
The evolution of ERP is briefly mentioned, that it started with manufacturing based MRP systems and grew throughout the organizational units, now evolving to include CRM and SCM. The still growing market is promising.
The six different models in decision making discussed in the article are;
1) The classical model; the best alternative is chosen which maximizes goal achievement. This approach requires and extensive research and evaluation of all the possible alternatives.
2) The administrative model; the selection process is done among alternatives that meet the requirements.
3) The incremental model; the objectives are clear and the small incremental changes with limited comparison is made.
4) The adaptive model; incremental decision making for existing policy.
5) The irrational model; the decision is not due to a problem; the solution is found and applied when a problem occurs.
6) The political model; organizational goals are replaced by politics
There is not just one single model applied in the decision making process as seen in the example given while at some stages a political model might be observed in other stages administrative, incremental models might be used.


2) ERP Software
ERP is a transactional system that collects and consolidates information throughout an organization. In the article an example is given and with this example costs, benefits, etc of an ERP system are evaluated.
The example of the City of Winnipeg who installed an ERP system is given. Their main goal was to eliminate paperwork, to be able to track transactions, and to be able to put pressure on vendors knowing how good a customer they are to them.
However besides these benefits there were still drawbacks; legacy paper work had to be done in parallel to store some data and therefore there was still duplication in information, which is very likely to occur in an institution that requires paper based information storage.
Also there was a lot of information stored but the software does not really analyze it.
The price is difficult to predict and is dependent on the number of users.
To be on time and on budget one should be very careful and success is usually achieved if a company has lower customization.
The next step in enterprise wide software is predicted to be as business intelligence software which will provide management analysis.


3) Assessing ERP Software

Larson Manufacturing was using an ERP program which could not keep up with the company’s growth. They wanted to integrate the supply chain actions and found out that there are different ERP packages to manage supply chain execution/planning. PeopleSoft Enterprise is one of them. There are major players in terms of market share and functionality that are SAP, Oracle and PeopleSoft.
In the article mainly the providers are described.
People usually are aware of their needs but they want best breed solutions however they don’t ensure a good supply chain management. The ERP vendors who lack in discrete functions have a broad vision to make up for that shortcoming.
As a final point it is said that the ERP software is regarded as a seamless integration but there is a misperception.

4) The ERP Purchase Decision: Influential Business and IT Factors

This article does not provide much information different from what we have discussed in class and learned so far from the other articles.
Briefly the article mentions purchase reasons of ERP software are; to be competitive, reengineer business processes, and access integrated data. Then it continues with the capabilities of ERP, what it can do for a company.
A survey was done on the ERP capabilities affecting purchase decisions however the results which would have been interesting are not presented in the article.

Day 2 - Article key points - Seçil Akdemir

Assessing ERP Software
Supply chain planning vendors lost a lot of market share both due to the decrease in the market size with the economic downturn and the increase in ERP software share in the market.

For instance, SAP had given high importance on developing and improving the supply chain modules developed for different industries.

The most important development in SAP is the NetWeaver which is an integration platform that enables the integration and coordination of both SAP and non-SAP applications.

Most of the ERP vendors have still have weaknesses in some types of applications or integration and in order to deal with this problem they have established partnerships with other companies that provide these services to the customers.

ERP Software

ERP is a kind of software which enables the integration and collection of data within the enterprise in a single database.

Since ERP systems are very complex, they have some shortcomings. One of the most important drawbacks is that when a company decides on passing to ERP, all of the duplicated and misaligned data will also go with it. Moreover, ERP systems do not provide analysis on data by itself, so the main thing is to be able to use that organized and single data in management analysis efficiently. The most critical point is also the difficulty in converting the legacy paper-based system into a single program.

ERP implementation cost depends on the size of the organization, the number of users and its database. An implementation trick if possible could be going generic and using the out of box version because when the vendors come with an upgrade, it is very easy to upgrade. However, in case of customization firms should spend time in checking the suitability with their system.

ERP Purchase Decision: Influential Business and IT Factors
· Four business factors that are influential in deciding on ERP purchase are data integration, new ways of doing business, global capabilities and flexibility.
· Four IT factors on deciding ERP purchase are IT purchasing, IT cost reduction, IT expertise and IT architecture.
· IS professionals are now more reluctant to develop and maintain customized frameworks for single entities. So, they have started to implement ERP systems which are more large-scale, cross-functionally integrated, packaged systems.
· ERP implementation and consultancy costs are very expensive so vendors have some solutions to make their products easier and less costly for mid and small sized firms.
· Current view is matching the business with the software rather than vise versa so ERP will enable to reengineer the business processes. Moreover, ERP systems have best practices in mind which will be beneficial for designing business processes. In addition to these features, ERP businesses supply one single enterprise data for the enterprise since it uses a single database for all of the data.

Decision Making in the Evaluation, Selection and Implementation of ERP Systems

ERP implementation projects are strategic ones so the result of the strategy is very important for the company. The main reason is that ERP projects are very expensive and time consuming and they may lead to changes in the efficiency of the business processes.

They are expensive but the decisions on these projects are not purely financial because it affects the way the business done.
The market for ERP business is growing very rapidly and one of the triggers is the growing electronic commerce business.

There are 6 different types of decision making models which are classical, administrative, incremental, adoptive, irrational and political models. In classical model, decision markers are seeking for the best alternative that is achievable. Administrative model is looking for the alternatives that meet minimum standards. Incremental model is used for complex and uncertain problems. For irrational model, decisions are a product of organizational events. In the case of political model, politics are more important than the organizational goals.

Day 2 Articles

Assessing ERP Software
Generally companies seeks complete integrated ERP packages. This papers has some focus on Supply Chain Management and identifies some key issues such as lack of looking as a whole process to supply chain. another problem is when the sector is specialized some ERP vendors has shortages. That is supply chain contributors has already enterprise IT solutions, and these must be integrated with ERP solutions. The article mentions about SAP NetWeaver solution. In middle market some specialized vendors comes into picture. They have modern software packages that have full extension capabilities running on platforms like Microsoft .NET. The paper ends with explaining some new challanges like returned products or reverse logistic applications that current ERPs are not capable of.


Buyer's Inside ERP software
This article tackles ERP software identification, benefits, drawbacks, vendors, costs and future prospects with the help of an example "The City of WinniPeg".
The main drawbacks it encounter are interesting.

• Legacy system integration or replace is much much harder than it is supposed to be
• Duplication of data can not be easily figured out, so, ERP system can also have duplicate data.
• Information that is available after ERP implementation does nothing todo with ERP system, there is a need for huge managerial effort here.
• The implementation cost varies according to size of company and number of users, time to implement an ERP system generally takes longer than 2 years.

An interesting solution that article points is to implement ERP package as it comes out of package. That means not to configure it but use generic functionality. This can help to get familiar with software.
The future improvement for this example will be to implement a business intelligence application that will help data mining purposes.

Decision Making in the Evaluation, Selection and Implementation of ERP Systems
The article is about ESI (evaluation, selection, implementation) of ERPs. It mentions how costly (over $100000) time consuming (6 to 24 months) an ERP implementation is. The article gives 6 decision making tools.

1. The Classical model
2. The Administrative Model
3. The Incremental Model
4. The Adaptive Model
5. The Irrational model
6. The Political Model

From these alternative classical model is not applicable, as it requires implementation of all alternatives which is totally not acceptable. The irrational model for my point of view brings unsuccessfull implementation as this process is used when great uncertainity is in place. The political model is somehow familiar for us where political, close relational benefits are preferable to rational choices. among these administrative and incremental models and their composition adaptive model is widely used for evaluating a project. The article examines an example of ERP decision which is from HSP ltd. The main reason was Y2K problem which is totally unrelated for an ERP implementation. A war team is acquired for selection purposes. Article mapped the selection process to mentioned models.

Initiation --> The political model
Requirement Analyses --> The adaptive model
Inviting vendors --> The political model
Vendor shortlisting --> both administrative and political
implementation --> adaptive model
post implemetation--> administrative model.


The ERP Purchase Decision: Influential Business and IT Factors
The article is about decision factors for ERP selection. There are four business factors (data integration, new ways of doing business, global capabilities, flexibility/agility) and four IT factors (IT purchasing, IT cost reduction, IT expertise, IT architecture) are defined.
The article reports the results of the first stage of the study, the identification of ERP package capabilities that influence ERP purchase decisions. There are mainly two categories, Business capabilities of ERP packages, IT capabilities of ERP packages.

The main business capabilities are ability to make faster responses to business change, reduced cycle times, consolidated ordering, improved marketplace agility, and workforce empowerment.

In this category article figures out that the business should be matched to the software rather than vice verse. And for me that is totally an It depends situation, and generally the other way is chosen for many companies. Best practices mentioned to replace current business processes are to general to rely on and totally eliminates company specific processes which are a great competitive advantage for a company.

The main IT capabilities mentioned here are desire to replace mainframes or legacy systems which is understandable. It mentions here current modern approaches of SAP system. The other factor mentioned is time and cost savings due to upgrade process. but that is also an "IT depends" situation. Because upgrade itself need a huge IT and managerial effort.

At the end article defines main categories and selection process, but it fails to give the results which was totally interesting and unexpected for such an article. To read all of the staff without acquring the main honey was a great suprise for me.