Enterprise Resource Planning as an Integration Method for Business Integration - Essay Example

?ERP as an Integration Method for Business Integration Before I start talking about Enterprise Resource Planning (ERP), I would like first to start with business integration in which ERP is used as a means to achieve integration in business. Business integration manifested itself in bringing together all the business data and process that will shared across the company and allow easy access to them which will provide accurate and real-time information. This kind of accurate information is an important requirement needed by many companies today and also by top management as an important element in their strategic planning. The competitive advantages that are gained by such integration could be profitable and could offer opportunities to expand and dominate the market. In terms management business integration can also lead to firmed grip on their internal and external control process. Also, the globalization is considered to be one of the factors behind in the adaption of business integration to compete with others in order to succeed in their business and prove their existence in the market. As the company or business gets bigger, the need for integration becomes a demand in order to ensure the smooth flowing of information between different departments and units to operate sufficiently and effectively with regard to quickly and reliability of this kind of information flow. In fact, as the integration process bring so many advantages and benefits it also bring with it some challenges too. The integration process between people, technology and process holds real challenges that need to be overcome in order to have successful integration process. At the process level, the challenge may materialize within the company itself, let me explain how. In general, companies despite their size have various numbers of units and therefore that means they may have various numbers of autonomous and heterogeneous applications or systems for particular purpose. During the integration process which is often a result of strategic plan these systems that could cause integration problems thus inability to co-operate together. Another dimension of the problem is the construction of metadata. In order to integrate business processes there is a need to understand the meaning of metadata and their use in the existing system or applications to figure out how they can be integrated. The challenge here is that collecting these data is difficult especially if the people who defined them or familiar with are not available anymore. Metadata hold information like purpose, specification and context of the data which helps to understand the meaning of data. Another challenge is that in order to integrate process there is a need to understand precisely what the current system and applications are used for. That would include their functionality and the means by which they can be integrated. The challenge here is that many companies do not have this information. At people level or socio-technical level, there is the challenge between people and technology therefore the organizational change aspects need to be considered in the integration process, some may resist using the new system or find it difficult to accept it or use it therefore implementing organizational change practices could be of help through training and support. Another challenge is that the lack of people intervention in integrated process to deal with and exception handling in case they appear. At implementation level, the integration process would be complex and the cost of available methods for business integration is expensive also the process would take time and efforts to be completed while some could perceive that the cost of implementing might overweigh the benefits or the return on investment would take time to be achieved. There are cross organizational challenges like the connectivity to suppliers, service providers, and customers and so on and all security issues related to that. There are a number of companies that were able to achieve the benefits of adapting an ERP. These companies experience increase in productivity and reduction of cost, but the level of adaption of ERP could differ between companies. In fact, there are different factors contributing to the breadth of implementation or the comprehensiveness in which the ERP will be implemented. As I discussed above, the importance and benefits that companies can gain by integrating all their processes despite that challenges of implementing is essential thus the challenges needs to be overcome by them. I will start talk now how we can implement the integration process by using ERP. ERP is defined as ‘an IT-based method of integrating the various functional areas of company into a unified system’ (Gleen,G., 2008) and according to the survey of IT executives in the U.S. it was the second important investment in a company ( Romero et al, 2010). ERP is an information system that integrates and support all business units, aspects, and process to ensure efficiency. There are a number of literature that are rich with success cases and stories of ERP implementation (Romero et, al., 2010). An increase in profitability, productivity, and capacity, Chen & Liu (2009) found that companies who adapted ERP have better performance than others. While others argued that ERP while it is efficient it is unable to achieve some of anticipated benefits and users expectations (Themistocleous et, al., 2001) due to its complexity of the usability of the user interface (Signh &Wesson, 2000). For me, instead of choosing two case studies from the literature to investigate and analyze the success and failure of ERP implementation under two different situations, I chose to have one case study. In this case study the company’s first ERP implementation failed, then by changing their practices and processes to handle the implementation better, led to the successful implementation later. This paper shall help shed light on the reasons that contributed to the failure and success of the first and second implementation for the same company. The management process of ERP implementation is an art by itself which could determine ERP success or failure. Chen et, al. (2009) investigated ERP implementation at a California-based multinational company. The company specialized in industrial and building control systems and spare parts. They have multiple locations in Hong Kong, Korea, United States and more .They decided to adapt ERP to replace their legacy sales and distribution systems to integrate and enhance business process. The level of adaption ERP could be different depending on company size and the number of processes that will be converted into the ERP system. Unfortunately, they failed to have a successful ERP implementation at first time, then, they decided to redesign the ERP and business processes to align them together and implemented it again for the second time. The second implementation was successful. The company learned from the failure of the first time and the lesson learned by other companies in implementing an ERP system through the consultants. In the first ERP implementation, the management mishandled the ERP implementation. The company underestimated the importance of the ERP implementation and have considered it to be similar to any implementation of another information system projects by delegating the implementation responsibility to the IT department. As I mentioned before, ERP is an information system but its implementation is completely different and even more difficult. ERP is not a single roll-out implementation. When an ERP is implemented it becomes an integrated part of the business and thus require ongoing ERP management as described by Avital & Vandenbosch (2000) as ‘lifelong journey’. They also mishandled the project management process itself through a poorly defined scope, by ignoring the lack of project resources, by ignoring the importance of experienced staff needed to be involved since IT staff does not have enough experience, and by ignoring the user requirements as input for ERP customization process. They ignore too the differentiation of user requirements in different regional areas since some of headquarters demanded more features beside the core features of ERP. Because of the poorly defined user requirements and not consider all functional departments’ requirements, the users started to come up later with their requirements and asked to be met. Some regional offices decided to add more features to current ERP independently but hat lead to serious integration problems ending with failure of the integration process. The selection criteria for ERP have indirect influence on ERP success through the quality of the system and information provided by it. The selection process of the ERP was based only on the preferences of the management. In fact, there are some criteria that needed to be considered in ERP selecting process rather than preferences. They should have formed selection team or ‘delta team’ from different department and ensure that all functional departments have input in the selection process to capture all the requirements needed by users in different departments and locations, the role of this team is to establish the selection criteria of ERP to ensure the user requirements are met. Tsai et, al. (2009) conducted a survey of 5000 largest companies in Taiwan in 2006 and as a result of that survey suggested 13 criteria which can have positive influence on ERP success. These criteria are ease of integration with other systems, with a complete mechanism of internal auditing, the capacity of integrating different platform and data, the integrity of module framework, ease of maintain, providing best practice, ease of use, constant’s suggestion, real-time online inquiries and reporting function, the rate of return in this investment, providing several successful examples, flexibility in adjusting demands according to business requirements and with a test-passed high stability system. The situation was such a mess and the level of user resistance with implemented ERP and dissatisfaction was high. The top management was not involved enough before to support and supervise the ERP implementation, but later they had to take some serious decision to face this crisis. As a result the management information system director and some staffs were replaced. At second ERP implementation, with the arrived of new MIS director, he started to take some serious actions to overcome the problems that resulted from the failure of the ERP. Leadership play an important role to ensure the success of any project. Sarker & Lee (2000) studied the importance of leadership in related to the success of ERP implementation and they found that strong and committed leadership at all level is critical for successful ERP implementation project. The new MIS director started the second ERP implementation by forming a committee to prioritize the definition of the user requirements that will be considered in the second ERP implementation. This time, they manage the ERP project management effectively by ensuring all resources were available and they defined three milestones to control the progress of ERP implementation. Business process and practices were redesigned to be aligned with ERP functionality. The result was a standardization of the business processes across all company in all different location. Because of inexperienced IT staff, they had to work so closely with the external consultants of ERP to gain more knowledge and developed needed skills for support and maintenance. Furthermore, in the aspect of organizational change was considered through training support for users. Mastering the project management process is one of the key success factors for implementing successful ERP with all what included from defining the scope, use requirements, planning, monitoring and control. The challenge they faced was how to integrate all company process in all different countries, since there was differentiation in some functionalities and business process in how the work is done. Also there were political differences in different countries. Therefore they pay attention and significant importance to analyze the user requirements in different countries to know exactly the extent of ERP customization they need. This was ignored at first phase ERP implementation but considered in the second. So that was why they tended to maintain low level of ERP customization to minimize the risk of integration to accommodate the common business process and practices then for whom need more functionalities beside the core ERP, they decided to add to them some add-bolts. To maintain on higher level of common process they changed some process and practices to be standardized in all different countries to be able to integrate. Since with all the differentiation before it was impossible to integrate them, the main purpose of integration was to have higher level of transparency and visibility on business process and therefore enforce to have common process and practices to be integrated with ERP. At first the integration of data and business process from different systems in different countries with different formats was a real challenge in the integration process. By applying the ERP system success framework, adopted from Ifinedo & Nahar (2006), on the ERP implementation of the multinational company. We found that the framework consist of six dimensions that determine the success of ERP. These dimensions are system quality, information quality, consultant or vendor quality, individual impact, workgroup impact, and organizational impact. By applying the framework on the case study above we founded that in the first ERP implementation there was no quality of system and information because of poor system designed and the system failed to serve users needs and business process. The impact on all levels including users, and organizational was negative because of problems arose after the implementation and users was completely unsatisfied and the level of resistance was high. Therefore the system considered as a failure and officially ended. On other hand, in second ERP implementation the system was successfully designed and implemented with higher information quality and the impact at all levels was positive, users were satisfied and their needs met. Therefore according to the framework all dimensions are achieved then we can considerer the ERP system as a successful case. As I said before, integration of all or some aspects of business by using any of the available methods is an art by itself. That means using integration method should be done correctly and precisely. The integration process may seem to be a challenge and kind of difficult but it is not impossible. The integration process may take time and may consume resources but it really deserving of that. The benefits, profits, and the strategic advantages to compete and survive in the global market, all that will come with the integration process. The secret to have successful integration process like ERP or any other integration method is to do it right by mastering the customization and implementation process, and before that everybody should know precisely the business process and practices and define business scope. That would help to align the business process with the integration method functionalities. By having this aligned between business process and integration method (ERP in this essay) you can ensure the success. From the recipe of success (Jain, 2010) Sanjay Jain emphasised the importance of governance structure that will assign the responsibilities of all involved in the project implementation. Control Change is also an important element for the success, in implementing ERP it is easy to be waylaid by newly discovered problems that needs to be solved by the ERP at once. Controlling the Change in the parameters of the terms of reference of the ERP implementation project plan is a win-win situation for all concerned. Reporting lines and project update, was determined to be an essential factor in ensuring that all the stakeholders and decision makers are updated to ensure their continued involvement in the project. Lastly, developing a risk management system that will ensure that the critical path of the project is managed through their risks can resolve problems even before they occur. But (themistocleoul et, al.) argues that ERP fail in some aspects and suggest use of EAI (Enterprise Application Integration) to overcome ERP problems. However the most notable of these problems are the problems that involve its actual assimilation into the culture of the organization. That frustrates its use and eventually could lead to the failure of the ERP. The most important aspect of the Enterprise Resource Planning System implementation is the integration of the modules in the workflow of the employees. It also includes the acculturation of the Enterprise Resource Planning System into the culture of the organizations where the module of the system will be used, installed and made a part of the work flow process. This can be achieved by extensively training the employees of the proper use of the modules and its importance to the work flow process of the business unit. Bibliography Jain, S. (2010, March 05). ERP: Recipe for Success. Retrieved February 18, 2011, from Computerworld India: http://www.computerworld.in/articles/erp-recipe-success Read More