Course: Enterprise Applications and Open Source Systems for e-governance implementation Day 3 Session 3: Introduction to ERP Applications
Agenda Introduction to ERP Applications Benefits of ERP Applications Comparison of ERP applications with the custom developed/bespoke software systems Challenges in ERP system implementations and measures for addressing the challenges
Introduction In today's environment, there is a much greater interaction between the citizens and Governments. Governments are more closely linked to Citizens, internal staffs and its suppliers. Governments seek to obtain operational efficiencies that will lower costs, improve citizens relations, increase revenues etc. All units of an organization must work together in a goal congruence to achieve maximum operating effectiveness and efficiencies. The pre-requisite is that the information must be accurate and timely managed.
Historical system architectures Historically, organizations created islands of automation / information. A hodge-podge of various systems that operated or managed various divergent business processes. Sometimes these systems were integrated with each other and sometimes they weren t. Sometimes they were loosely interfaced and sometimes they were more tightly interfaced.
IT Scenario Before ERP Finance department decides to implement IT software.calls IT expert.develops IT solution for Finance department Purchase Department decides to implement IT software.calls IT expert.develops IT solution for Purchase department HR team decides to implement IT software..do.. Develops Human Resource Software Production Planning team decides to implement IT software..do.. Develops Planning Software Result Too many home grown, independent, standalone and non-integrated software systems in the organization
Traditional File System Each system uses its own programs and files When systems are not integrated Inability to share data Difficult to maintain data duplication (i.e. redundancy) System 1 Program 1 Program 2 File 1 File 1 System 2 Program 1 Program 2 File 1 File 1 File 2 File 2 File 2 File 2 File 3 File 3 File 3 File 3 6
Disadvantages of multiple systems Data in too many systems and hence manual compilation Duplication of data entry Non Standard procedures Variations in information formats Only few people has access to key information
Delay in getting simple information Getting quick and accurate information is almost impossible Sales Marketing Service Warranty Finance Costing HR / training Product Engineering Purchase Quality Production Stores
Database Systems Systems share the same database Database allows systems integration Systems share the same data Systems are easy to maintain No (or less) redundancy System 1 Program 1 Program 2 System 2 Program 1 Program 2 DBMS 9
Business Integration? V e r ti c a l I n t e g r a ti o n Production Department Suppliers Sales Department Logistics Department Horizontal Integration Citizens 10
So can we integrate existing systems to make our own ERP? Integration of existing system is technically very complex and expensive Need dedicated IT team System can become very unstable after addition of new functionalities Maintenance of system is expensive Solution Readymade Software with built-in integration called as ERP
Enterprise Resource Planning (ERP) systems Enterprise Resource Planning (ERP) systems integrate all the business processes through a common information system (or an integrated set of info systems) Production Department Process1 Process2 Warehousing Process1 Process2 HR Department Common Database Logistics Department Process1 Process2 Process1 Process2 Legal Department ERP system Accounting Department Process1 Process2 Process1 Process2 12
Enterprise Resource Planning Integrate all departments and functions across an organization / department onto a single computer system that can serve all those different departments' particular needs.
Enterprise Resource Planning Systems ERP systems integrate all the functions and departments within an organization through a common information system At the heart of ERP systems is a common database When a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system 14
Entreprise Resource planning Internal department Human resource Enquiry Hiring/training Citizen / Customer Enquiry status Legal req, candidates Training schedule Payroll Benefits Expense s RM&components orders Cost / profitability analysis Production & Materials management Production plan Materials inventory Finance & accounting
What is an ERP? Enterprise-wide system that integrates the business functions and processes of an organization Integration of business functions into one seamless application Usually runs on a relational database Replaces countless departmental and workgroup information systems
What is an ERP? Links business processes Maintains audit trail Utilizes a common information system Implementation normally involves BPR: Business Process Reengineering
Before/After ERP
ERP Enterprise Architecture
ERP Architecture Two-tier Implementations In typical two-tier architecture, the server handles both application and database duties. The clients are responsible for presenting the data and passing user input back to the server. While there may be multiple servers and the clients may be distributed across several types of local and wide area links, this distribution of processing responsibilities remains the same.
ERP Architecture Three-tier Client/Server Implementations In three-tier architectures, the database and application functions are separated. This is very typical of large production ERP deployments. In this scenario, satisfying client requests requires two or more network connections. Initially, the client establishes communications with the application server. The application server then creates a second connection to the database server.
ERP Functionality Finance -General Ledger -Accounts Receivable -Accounts Payable -Procurement -Fixed Assets -Treasury Mgmt -Cost Control -Grant Management Human Resources -HR/Benefits Administration -Payroll -Self-service HR e-business -eprocurement - Employee Self Service - e-recruiting/e-hiring - e-filing - Citizen Access - Web-enabled transactions - e-commerce Data Analysis Transaction Engine Core software that manages transaction flow among applications and handles tasks like security and data integrity Decision support software that lets senior executives and other users analyze transaction data to track business performance Supply Chain Mgmt Planning, scheduling and fulfillment applications that address all procurement requirements across the enterprise Customer Relationship Mgt -Consistent user experience - Personalization of services - Realtime access- enterprise info
Why implement an ERP System? To support Organization s goals / objectives Integrated, on-line, secure, selfservice processes for business Eliminate costly fragmented technologies Improved Integration of Systems and Processes Lower Costs Empower Employees Enable Partners, Citizens and Suppliers
What will an ERP do for your Institutions / departments? Integrate information across all functions (examples include registration, financial collections, human resources etc.) Support for G2G (Government to Government), G2C (Government to citizen) and G2B (Government to business) record keeping and work flow processes. Facilitate the flow of information among the Organization s functions. Information captured at source & Instant availability of information Track a wide range of Organizational events in an integrated fashion, and facilitate planning future activities based on these events. Support analysis and improve the performance of the department.
What will an ERP do for your Institution / department? Allow users or internal staff to: Input data into one system to enable it to be processed with other data Access data as information reports in a real-time environment Share common data and practices across the entire institution Re-engineer business practices
How does ERP create value? Integrates Activities Employ Use of "Best Practices Enables Organizational Standardization Eliminates Information Asymmetries
How does ERP create value?...cont d Provides On- Line and Real- Time Information Allows Simultaneous Access to the Same Data for Planning and Control Facilitates Intra- Organization Communication and Collaboration Facilitates Inter- Organization Communication and Collaboration
Advantages of ERP Tangible benefits: Improves the productivity of process and personnel Lowering the cost of products and services purchased Paper and postage cost reductions Inventory reduction Lead time reduction Reduced stock obsolescence Faster product / service look-up and ordering saving time and money Automated ordering and payment, lowering payment processing and paper costs
Advantages of ERP Intangible benefits: Increases organizational transparency and responsibility Accurate and faster access to data for timely decisions Can reach more vendors, producing more competitive bids ; Improved customer response Saves enormous time and effort in data entry ; More controls thereby lowering the risk of mis-utilization of resources Facilitates strategic planning Uniform reporting according to global standards
Advantages/Disadvantages of ERP Advantages: Information entered once into system Allows customization Provides functionality to interact with other modules Disadvantages: Implementation is expensive and lengthy Maintenance is costly and time consuming Data errors are replicated through the system
What is an ERP Key Characteristics Integrating all the business functions Integrating the systems running in all the locations Transparency of information using a single data source across the organization Software must be Responsive Modular Flexible Easy to add functionalities Provide growth path
What is an ERP Key Characteristics Integration Seamless integration of all the information flowing through an Organization financial and accounting, human resource information, supply chain information, and customer information.
What is an ERP Key Characteristics Packages Enterprise systems are not developed in-house Information Systems life cycle is different Mapping organizational requirements to the processes and terminology employed by the vendor and Making informed choices about the parameter setting. Organizations that purchase enterprise systems enter into long-term relationships with vendors.
Costs of ERP Costs to implement an ERP system is not just a one-time thing. Real costs are in constant training, upgrading, and maintenance. Benefits are not seen right away. Software cost: Purchasing the software. Consulting fees: Hiring external experts to help implement the system correctly. Process rework: Redefining processes in order to ensure the company is using the most efficient and effective processes. Customization: If the software package does not meet all of the company s needs, it may be required to customize the software. Integration and testing: Ensuring all software products, including disparate systems not part of the ERP system, are working together or are integrated. Testing the ERP system includes testing all integrations. Training: Training all new users. Data warehouse integration and data conversion: Moving data from an old system into the new ERP system.
Other Costs IT Infrastructure costs Cost of maintaining parallel Systems Opportunity cost for using Internal Resources during ERP Implementations Follow up service cost!!!
Why does ERP project fails Lack of sufficient top management support Inadequate definition of functional requirements Poor ERP package selection Incorrect time and effort estimates Insufficient expertise and resource for carrying out implementation
Why does ERP project fails cont d Misfit of ERP applications with company s business processes Resistance to change in business processes Unrealistic expectations of benefits and ROI Inadequate training and system handover Poor project management
Strategic Critical Success factors Top management commitment and support Visioning and planning Build a business case Implementation strategy and timeframe Project management & Change Management
Tactical critical success factors Balanced team Project team: the best and brightest Communication plan Empowered decision makers Team morale and motivation Project cost planning and management BPR and software configuration
Tactical critical success factors..cont d Legacy system consideration IT infrastructure Client consultation Selection of ERP Consultant selection and relationship
Tactical critical success factors..cont d Training and job redesign Troubleshooting/crises management Data conversion and integrity System testing Post implementation evaluation
Thank You