Concepts in Enterprise Resource Planning
Enterprise Resource Planning (ERP) systems require huge investments that may range from hundreds of thousands to millions of dollars. Successful implementation of ERP helps an organization streamline workflow and reduce costs. However, poor planning and implementation of ERP can make an organization incur huge costs in terms of delays and lost productivity (Schiff, 2012). Therefore, it is critical for an organization to determine the right procedure for implementing ERP systems to ensure efficiency and overcome problems that the ERP system may face.
Prior to the implementation of the ERP system, the company must devise a road map for the implementation of the ERP system. Proper planning enables the company to anticipate several problems in implementation or determining the right ERP vendor, which makes it easy to solve any problems. A company should also vet the ERP vendors properly to determine the most suitable one. The company should use a combination of cost, quality, capability, and reliability in vetting the ERP vendor (Schiff, 2012). It is vital for the company to vet at least three ERP vendors. In addition, the company should understand the key features of various ERP systems in order to determine whether they tackle various issues that the company faces.
Understanding the features of the ERP systems would enable a business to automate its activities in line with the ERP system. It is critical for an organization to allocate enough resources to ERP implementation and not underestimate the resources that ERP implementation would require. From the outset of implementation of the ERP, an organization should ensure that it has the right people in the ERP implementation team. People in the implementation team should be from all departments of the organization, and not just the executives of the organization. During the process of implementation of the ERP system, an organization should strive to reduce multi-tasking various implementation issues, as this would only complicate the issues (Schiff, 2012).
The organization should undertake various implementation issues systematically by overcoming various problems as they arise. In addition, the implementation team should be comprised of internal members of the organization to facilitate organizational embracing of the ERP system (Overby, 2012). If the organization uses a large number of external parties in the ERP implementation team, it is bound to have various problems, as staff would not ‘own’ the system. An organization should also invest in training its staff on how to use the ERP system. This would make the staff of the organization embrace the system and use it efficiently.
The organization should ensure that it trains its staff prior to the ERP system going live (Schiff, 2012). Training the staff after the system has been put in place makes the organization incur huge costs due to loss of productivity. However, thre is no single procedure that an organization can use in implementing an ERP system. The organization should devise an implementation system that co-relates with its organizational culture and its unique needs. Choosing ERP package Choosing the right Enterprise Resource Planning (ERP) package is a daunting task. The choice of the ERP package determines whether the company will face years of suffering with high costs or smooth implementation and instantaneous Return of Investment.
Failure of the ERP package can create chaos in a company and lead to insurmountable losses. Choosing the right ERP package for small to midsized companies is compounded by the fact that these companies lack enough resources, such as time, money, and manpower. While there are many best practices for choosing the right ERP software, selection methods vary depending on the size of the company and the resources available to the company to undertake the task of sourcing for ERP software.Whereas it is critical for companies to use the right method of selecting the appropriate ERP software, the relations between the company and the software vendor are even more important. Choosing the right software vendor and establishing good relationship with the vendor determines whether implementation will be a success or failure (Juell- Skielse, 2006). Small to midsized companies should ensure that they maintain close relationships with the ERP vendor, since they heavily depend on the ERP vendor for implementation, as opposed to large companies that have more in-house resources and, therefore, do not rely so much on the vendor for implementation.
Challenges Due To Acquisition of ERP Vendor by another Party Vendors of ERP software face a myriad of problems. Vendors of ERP software post favorable revenues due to the quality of their software applications. The size of the ERP vendor determines the quality of products that it is capable of offering. In an agile software environment, being a big organization makes the ERP vendor unable to offer high-quality services to its clients. This is mainly due to bureaucracy in large organizations, whereas, the software development industry requires companies to make decisions quickly to overcome various problems that their clients face (Leon, 2007). Acquisition by another vendor increases the size of the ERP vendor and makes ERP vendors inefficient.
It also increases bureaucracy and forces the vendors to adopt a new business model, which poses various challenges to the vendor. This makes the ERP vendor less competitive. Acquisition may lead to the ERP vendor losing a sizeable number of clients to other companies that have more customer-friendly and cheaper software applications. Therefore, is would be prudent if a company discards the services of an ERP vendor after it has been acquired by another vendor. This wouuld enable the company to avoid problems that may arise due to inefficiencies of the ERP vendor caused by acquisition. Bureaucracy can also slow down the activities of the vendor and reduce efficiency.
Application Service Provider Companies engage in various activities, which are unique to the companies. This necessitates companies to have efficient tailor-made operations management systems that incorporate specific needs and activities of the company. Application Service Provider (ASP) helps in making tailor-made operations management applications to various businesses. ASPs are simply service providers whose specialization is implementation and continuing operations management of one or more networked applications on behalf of their clients (Lerner, 2000). ASPs place great emphasis on Internet-based e-business application management, as this class of services has a high growth potential.
The business world has embraced ASPs, since they provide vital services to companies and enable them to concentrate on their main activities. ASPs use state-of-the-art computer equipment and technologies that enable them to have round-the-clock monitoring. In addition, ASPs provides hardware management and maintenance to companies. ASPs also provide secure database management and maintenance to companies. Security of the database is usually the main concern of companies that seek the services of ASPs.
Therefore, companies ensure that ASPs meet certain security standards that guarantee the security of the company’s database and reduce the risk of external or internal leakage of information. ASPs tremendously improve the efficiency of business activities. Due to them, companies can achieve a significant reduction in operational costs. Fuego Tech is one of the ASPs success stories. Business Process Management applications of the company enable companies to significantly reduce their operational costs.
PRSOA, a Mexican firm, reduced its operational costs by 70 percent after automating its systems using Fuego Tech applications (O’Reily, 2000). Oracle ERP is a good example of ASP failure. Problems in rolling out the Oracle ERP forced a Pennsylvanian company to delay filling its fiscal annual report with the US Securities and Exchange Commission. The delay was caused by poor financial reporting of the system (Kanaracus, 2012). The main problem of Oracle ERP was due to implementation problems. Companies that handle huge volumes of data are eligible to seek the services of ASPs.
However, using ASPs exposes companies to serious security risks during data transmission over the Internet. Therefore, trust relationship between the customer and the provider is very critical. Building relationships usually takes a long time; therefore, companies are likely to seek the services of providers who offered them other services in the past (Muller & Ott, 2001).