Matakuliah: M0594 / Enterprise System
Tahun
: 2008
Concepts, Functionality, and Cost Effectiveness
of Internet-Oriented ERP Systems
Pertemuan 1 - 2
Concepts, Functionality, and Cost Effectiveness
of Internet-Oriented ERP Systems
• The Evolution from MIS and Logistics to ERP and
beyond
• ERP implementation at different level sophistication
• ERP Cost Effectiveness
• Internet Oriented ERP Project Definition
• How to Ascertain that Integrated Solutions Work Well
• The Synergy in Managing IT and Procurement
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The Evolution from MIS and Logistics to
ERP and beyond
• Evolution of Information Technology in 1960s and 1970s
• In 1960, DBMS
• In 1970, MIS effort that attracted attention, including the following
logistics operations: analytical accounting, order handling, and
inventory control
– At the origin of the word logistics (noun, singular) is a Greek term
meaning something logical, but also a calculator and accountant.
– Webster’s Dictionary defines logistics as the branch military
science having to do woth moving, supplying, and quartering
troops
• During 1980s, the concepts underpinning MIS were extended
beyond integrating discrete islands and providing some forms of
seamless access to database
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• Then a new agent of transformation came along in the 1990s.
• By the mid to late 1990s, the Internet spawned a wave of innovation
that required industry leaders to reinvent both internal and external
business partnership or overtaken by competitors
• By 2001 this wave had hit all sectors of the economy: automobiles,
aerospace, material systems, telecommunications, environmental
services, and of course, technology
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After the advent of MIS, it should be expected that:
– New integrative software systems are necessary
– New systems are much more sophisticated than those they
replace
– The software industry will come forward with valid solutions
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ERP can be implemented at different levels
of sophistication
• The effort that began a dozen years ago with ERP
programming products and associated tools providing an
off-the-shelf integrative solution has been long overdue.
• Looking at Exhibit 1.1 one sees that the functions shown
in the middle layers evidently existed well before ERP
software came into being
• The difference is that each way a discrete island, badly
connected to the others, which significantly increased
system complexity.
• One of the goals of ERP has been that of reducing this
complexity to help better understand the evolution of
business process and their new requirement in software
support
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ERP can be implemented at different levels
of sophistication
• The primary rule of system integration is that one should
be able to make use of software subsystems working
together without undue technical difficulties, a reduced
systems functionality, inordinate implementation costs, or
significant delays in deliverabes
• This is the principle, but not all vendors of ERP
packages respect this rule.
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ERP Cost Effectiveness
• Studies that have focused on the cost-effectiveness of
ERP implementation suggest that to make the system
work into their applications environment, user
organizations spend 200 to 800 percent more than they
paid for their off-the-shelf software
– The lower end of ratio (200 to 300 percent), more or
less homogeneous computer system solutions
– The higher end (700 to 800 percent) exactly the
opposite approach, heterogeneous platforms.
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Implementation
• The implementation of a core ERP system can take three
months or two years, depending on a number of reasons
internal to the user organization. For example, the:
– Effectiveness of project management entrusted with the
task of implementing ERP
– Existence of regular, rigorous design reviews and
subsequent corrective action
– Internal IT culture of working hard or taking it easy with
deliverables
– Attention given by top management to getting results, as
well as on return on investment
– Homogeneity or heterogeneity of the computer system
environment in existence
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Project Definiton for a successful
Internet-Oriented Implementation of ERP
• From the beginning, a project must be defined in an accurate
and comprehensive manner, both in technical and cost/benefit
terms.
• This requires a dual approach that includes a rich database
on costs and schedules and an interactive design
management definition process able to:
– Provide firm, properly studied solutions to functional, cost,
and scheduling challenges
– Reduce the risk of investing in new facilities and software
routines prior to having thought out of a valid solution
• A surprising number of companies do not abide by the
standard described by the above two bullets. Therefore, it is
not surprising that they have difficulty both in implementing
ERP and in taking advantage of the Internet.
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Project Definiton for a successful
Internet-Oriented Implementation of ERP
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Project Definiton for a successful
Internet-Oriented Implementation of ERP
• The multiplicity of Internet links increases the
challenges of the message that the two bullets above
have conveyed
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Project Definiton for a successful
Internet-Oriented Implementation of ERP
• Whether or not they targeted Internet links with their
suppliers to attack the limitations of their legacy systems
and processes, companies must use the best available
enterprise solutions that, when properly implemented,
can play the role of driver of organizational change. In
addition to the ERP systems and the critical path
method, examples of off-the-shelf software include:
– Supply Chain Management (SCM)
– Customer Relationship Management (CRM)
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How to ascertain that Integrated Solutions
Work Well in Daily Practice
• People and companies participating in my research pressed
the point that effective solutions to Internet-oriented ERP
challenges – from Manufacturing to Logistics – recast
business and industry in a new pattern.
• They also warned that factual and documented optimization
studies need far better information technology than has been
classically provided through legacy data processing and
mainframes or by means of client/server solutions done
primarily for “me-too” reasons
• Top Tier Companies suchs as TIAA/CREF dedicate two thirds
of their IT budgets to the service of management
• In contrast, the vast majority of companies spend no more
than 5 percent of their IT budget on management information
as well as on modeling and experimentation.
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How to ascertain that Integrated Solutions
Work Well in Daily Practice
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The Synergy in Managing IT and
Procurement
• Some companies have introduced into their organization a
new job: the Chief Web Officer (CWO).
• Others, such as General Electric (GE), have given the CIO
responsibility of looking after the synergy of IT and
procurement.
• Either way, job requirements must be met, and these include
overseeing information systems and Internet strategies,
creating and running the interwoven network of extrastructure,
and forging flexible Internet Commerce links with business
partners
• At GE, the CIO works closely with suppliers to get them
seamlessly online and manages all links connected to GE’s
massive procurement program. This synergy will, in all
likelyhood, increase in the coming years because technology
moves so fast. It will also become better focused because of
Six Sigma
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The Synergy in Managing IT and
Procurement
• The perspective of synergies continue to expand. As
computers and communications become increasingly
pervasive in our work, in our daily lives, and in our
transportation environment, many instances of
convergence are developing in the functionality of
products and processes and the accompanying
communications infrastructure
• There is no question that IT and internet solutions are
merging. Personal computers function as Web access
point, phones, entertainment outlets, and home
automation controllers all the same time.
• See some examples on IBM, Bell Atlantic, Borden and
Nike.
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