Business Information Systems - Enterprise Systems

Enterprise System Implementation Failures

  • System implementation can require expensive solutions.
  • Examples of major enterprise system implementation project failures:
    • Hershey (SAP R/3 ERP software):
      • Failed technology implementation caused major supply chain problems.
      • Missed delivering 100100 million worth of Kisses for Halloween.
      • Stock dipped 8%.
    • MillerCoors (SAP ERP systems consolidation):
      • Replaced seven different instances of their SAP ERP systems with one consolidating instance in 2014.
      • Hired an IT services firm for rollout.
      • First phase resulted in 8 “critical” defects and 47 high-severity ones.
      • Sued the consulting company for 100100 million; consulting company counter-sued.
      • Settled the case at the end of 2018 after a long “negotiation process”.
    • Revlon (SAP HANA):
      • Needed an enterprise-wide system after acquiring Elizabeth Arden, Inc.
      • Disastrous rollout cost millions in lost sales due to lack of effective implementation controls.
      • Led to a decline in stock value and a suit by stockholders.
  • Statistics on ERP Implementations:
    • Twenty-one percent of ERP implementations worldwide were judged to be failures (Panorama, an ERP consulting firm).

Challenges to Successful Enterprise System Implementation (Table 10.6)

  • Cost and disruption of upgrades:
    • Integration of multiple systems (financial analysis programs, e-commerce operations, etc.) adds time and complexity.
  • Cost and long implementation lead time:
    • The average ERP implementation cost is in the millions with an average project duration of over a year.
  • Difficulty in managing change:
    • Companies must radically change operations to conform.
    • Drastic changes can cause experienced employees to depart.
  • Management of software customization:
    • System customizations can become extremely expensive and further delay implementation.
  • User frustration with the new system:
    • Requires changes in work processes.
    • Users may resist and require extensive training and encouragement.

Tips for Avoiding Failed Enterprise System Implementations

  • Assign a full-time executive to manage the project.
  • Appoint an experienced, independent resource for project oversight and to verify and validate system performance.
  • Allow sufficient time to transition to the new system and processes.
  • Allocate sufficient time and money for training staff (30–60 days per employee recommended).
  • Define metrics to assess project progress and identify risks.
  • Keep the scope of the project well defined and contained to essential business processes.
  • Be wary of modifying the enterprise system software to conform to firm’s business practices.
  • Focus on documenting existing workflows before implementing and working directly with key stakeholders, so they understand and buy into the changes that will ultimately be implemented.
  • Keep in mind that the best systems require little change to existing workflow as it relates to user input/effort while eliminating the biggest pain points.

Hosted Software Model for Enterprise Software

  • Vendors are migrating to a hosted software model to help customers acquire, use, and benefit from new technology while avoiding complexity and high start-up costs.
  • Examples of vendors: Applicor, Intacct, NetSuite, SAP, and Workday.
  • Cost: 5050 to 200200 per month per user.
  • Three types of hosted software:
    • On-premises
    • Cloud-based
    • Hybrid (combines on-premises and cloud-based applications).
  • Pay-as-you-go approach:
    • Organizations can experiment without major financial investment.
    • Can dispose of software if it fails to provide value.
    • Reduces the need for a full-time IT person.
    • Savings from reduced hardware costs and maintaining a computer environment.

Advantages and Disadvantages of Hosted Software (Table 10.7)

  • Advantages:
    • Decreased total cost of ownership
    • Faster system start-up
    • Lower implementation risk
    • Management of systems outsourced to experts
  • Disadvantages:
    • Potential availability and reliability issues
    • Potential data security issues
    • Potential problems integrating the hosted products of different vendors
    • Savings anticipated from outsourcing may be offset by increased effort to manage vendor

LoneStar Heart Case Study

  • California company researching restorative therapies for advanced heart failure.
  • Initially used a paper-based approach to document control.
  • Implemented a cloud-based PLM (Omnify Software) to gain efficiencies and free up time for research and development.
    • Offered a secure, accessible centralized product information database.
    • Maintained compliance with FDA regulations.
  • Result: Estimated 80,00080,000 in savings.

Application SalesTeam Case Study

  • Mid-sized company providing outsourced sales resources.
  • Salespeople prospect, cultivate, and close new business for clients.
  • Salespeople submit documentation on calls, meetings, and sales prospects.
  • SalesTeam compiles information in Excel spreadsheets for clients.
  • Problem: Clients find the information difficult to upload or incomplete, missing sales opportunities.
  • Solution: Determined the need for a more sophisticated and automated way to track and report on employees’ activities.

TPS - Transaction Processing Systems

  • Principle: An organization must have information systems that support routine, day-to-day activities and that help a company add value to its products and services.
  • TPSs are at the heart of most information systems.
  • Definition: An organized collection of people, procedures, software, databases, and devices used to capture fundamental data about events (transactions) and update official records.
  • Methods include batch and online processing.
    • Batch processing: Collection of transactions into batches entered at regular intervals.
    • Online transaction processing (OLTP): Transactions processed as they occur.
  • Objectives of TPSs:
    • Processing data generated by and about transactions
    • Maintaining accuracy and information integrity
    • Compiling accurate and timely reports and documents
    • Increasing labor efficiency
    • Helping provide increased and enhanced service
    • Building and maintaining customer loyalty
    • Gaining a competitive advantage
  • Types of Systems:
    • Order processing systems capture and process customer order data.
    • Accounting systems track cash flows.
    • Purchasing systems support inventory control, purchase order processing, receiving, and accounts payable.
  • Integrated TPSs: Organizations implement an integrated set of TPSs from a limited number of software vendors.
  • Basic activities of TPSs:
    • Data collection: Capture of source data.
    • Data editing: Checks for data validity and completeness.
    • Data correction: Provides feedback and enables users to change data.
    • Data processing: Calculations, sorting, categorizing, summarizing, and storing data.
    • Data storage: Placing transaction data into one or more databases.
    • Document production: Outputting electronic or hard-copy records and reports.

ERP - Enterprise Resource Planning

  • Principle: An organization that implements an enterprise system is creating a highly integrated set of systems, which can lead to many business benefits.
  • Definition: Software that supports the efficient operation of business processes by integrating activities throughout a business.
  • Advantages:
    • Allowing access to data for operational decision making
    • Eliminating costly and inflexible legacy systems
    • Providing improved work processes
    • Creating the opportunity to upgrade technology infrastructure
    • Creating access to data for generating insights through analytics, AI, and machine learning.
  • Disadvantages:
    • Time-consuming, difficult, and expensive to implement
    • Difficult to integrate with other systems
  • No one ERP software solution is “best” for all organizations.
  • Examples: MIE TRAC PRO and Plus & Minus.
  • Use: Most manufacturing organizations use ERP to support supply chain management (SCM).

SCM - Supply Chain Management

  • Activities: Planning, executing, and controlling all activities involved in raw material sourcing and procurement, conversion of raw materials to finished products, and warehousing and delivery of finished product to customers.
  • Process:
    • Sales forecasting: Estimate of future customer demand.
    • Sales and operations plan (S&OP): Takes demand and current inventory levels into account and determines specific product items to be produced and when.
    • Demand management: Refines the production plan by determining the amount of weekly or daily production needed.
    • Detailed scheduling: Uses the production plan to develop a detailed production schedule.
    • Materials requirement planning: Determines the amount and timing for placing raw material orders with suppliers.
    • Purchasing: Places purchase orders for raw materials and transmits them to qualified suppliers.
    • Production: Uses the detailed schedule to plan the logistics of running and staffing the production operation.
    • Sales ordering: Activities to capture a customer sales order.
  • ERP systems are designed to support best practices.

CRM - Customer Relationship Management

  • Definition: Systems to manage all aspects of customer encounters.
  • Goal: Understand and anticipate the needs of current and potential customers to increase customer retention and loyalty while optimizing the way products and services are sold.

PLM - Product Lifecycle Management

  • Definition: Software to manage the data and processes associated with the various phases of the product lifecycle.
  • Phases: Sales and marketing, research and development, concept development, product design, prototyping and testing, manufacturing process design, production and assembly, delivery and product installation, service and support, and product retirement and replacement.
  • Used by internal and external users to collaborate and capture best practices and lessons learned.

Challenges to Enterprise System Implementation

  • Cost and disruption of upgrades
  • Cost and long implementation lead time
  • Difficulty in managing change
  • Management of software customization
  • User frustration with the new system

Hosted Software Model

  • Business application software vendors are experimenting with the hosted software model.
  • Types: On-premises, cloud-based, and hybrid.
  • Appealing to SMEs due to low initial cost.

Centralized Data Repositories

  • Principle: An organization must have access to data across all corporate functions and enterprise systems to help drive decision making.
  • Systems include: CRM, TPS, PLMs, social analytics tools, and more.
  • Creating centralized repositories increases potential for better operational effectiveness and efficiency.
  • Tools: Birst and Domo.
  • Machine learning and AI are playing an important role in making sense of all this data and in bringing insights to decision makers to act on automatically.