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ERP Systems: Factors Contributing To Benefit Realization Add in library

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Question - Prepare research report which discusses the issues related to ERP Systems ?

 

 

Table of Contents

Introduction.

Implementing ERP in businesses.

Benefits of ERP Implementation.

Factors Influencing ERP systems Benefit Realization.

       Expected versus actual ERP implementation Benefits.

       ERP benefits realization barriers and challenges.

Case study of ERP systems in Institutes for Higher Education.

       Process of ERP Implementation in the University.

Conclusion.

References.

 

 

Introduction

Large investments are being made by organizations in systems of ERP based on packages. There are some organizations who have manage to achieve improvement in their business from the systems of ERP but still there are many which have failed to acknowledge the identified benefits of ERP at the outset of a project. Package customization is one of the recommended approach by which ERP systems improvisation is possible and hence it also helps in realization of benefits but reaching an efficient system that caters to the desires is achieved hardly (Bingi et al, 2009). The customization degree can also be essential for influencing the benefit realization levels from the systems of ERP. A better strategic fir may be provided by an enhanced tailoring system which is in alignment with the processes of an organization and so it tends to increase the probability of realizing benefits related to ERP systems. There has been very less research related to understanding the relationship that exists between customization ERP systems and realization of benefits (Beheshti, 2006). This report will also add to this gap in literature with the help from current framework on benefits management and will examine explicitly ERP projects customization role as it is an important factor that leads to benefit realization. The method of research in this paper will not only be investigative and argumentative but also exploratory with regard to case studies. However there are several factors that affect a firm’s performance when applying ERP systems which this paper will briefly discuss.

Most organizations throughout the globe have started to implement the System of ERP known as SAP. Even though these organizations use similar systems of ERP but still they have the tendency of achieving several value levels and advantages along with several disadvantages as well when factors affecting the system are not tackles appropriately (Balderston, 2008). Benefit realization from ERP systems can only be gain when specific factors contribute towards the process (Bruce, 2008). The significance of ERP systems also cannot be sidelined especially because of the important purpose they serve and so this paper has been developed in order to identify the characteristics along with significance of ERP systems along with those factors that can help contribute to realization of benefit (Bajwa, 2004). The purpose of this report is support by different arguments and several perspectives to either compare or contrast several systems of ERP and the factors affecting them. The report also addresses different case studies for illustrating ERP systems related important considerations.

Implementing ERP in businesses

There is no doubt that various advantages are present when ERP systems are implemented in an organizations but for most of the organizations implementing such a system would have helped in solving various technologically related issues such as the issue of Y2K; by crediting such frameworks with diminishing inventories, cutting down the duration of processes, reducing expenses and developing administration hones for inventory network (Chaudhuri et al, 2001). However, these organizations have now moved father from this simple implementation are looked for methods that can help them achieve investment optimization. This is inclusive of implemented functionality extension of systems of ERP and is known as the implementation of second wave, for example warehousing data, managing relationship with the customer or even optimizing through consistent planning. Most researches such as by Mark et al, 2005, have illustrated that implementation of ERP systems mainly attain failure because the expected and attained benefits vary. The cost of Information technology and reduction of personnel are 2 prominent issues which led towards expected versus actual benefits disparities (Dillard et al, 2006). Issues related to people also dominate the challenges to attain benefits realization with issues of managing change considered to a prominent barrier as well. Issues of software, hardware and integration are other issues but not as significant. Inadequate discipline, training inadequacy and change management inadequacy with poor team performance are also essential considerations in the implementation process without with benefits cannot be appropriately realized. Even though the organizations have experienced gained across specific implementation related to ERP, they still face problems such as management of change which persists to dominate the organizations from attaining benefits realization (AMR Research, 2002). The core of SAP R/3 and implementing up gradation involve extensively building-in the procedures of change management.

 

 

In order to develop facilitation of an effective process of implementation, engineering the processes’ of businesses was started especially to understand the gap that helps in determining what modifications are required within the ERP systems of an organization. According to ERP literature related comprehensive review, Schlickter et al 2010, illustrated that prior studies of ERP focus mainly on 8 concerning areas inclusive of tools of ERP, management of supply chain with ERP systems, market of ERP and its industry. Implementation of ERP, according to the study of Parr and Shaks, 2000, the most effective implementation strategy and advocating the ERP projects partition in various small processes of projects as implementations of vanilla systems. Post implementation on the other hand has been comprehensively studies by Staehr, 2010 wherein the author focused on investigation which ERP systems business benefits are present and can be experienced by organizations in the period of post ERP implementation and it was found by them that management agencies were specifically essential in the consideration of benefit realization. Rikhardsson et al, 2006 on the other hand focused of ERP systems related change which structure of organization and the management has to face during the ERP systems implementation process. They depicted that accounting processes coordination requirement, requirement of integrating processes of business and maintenance of competitive position with regard to a particular organization were important barriers faced by organizations when implementing ERP systems (Brynjolfsson, 1993).

Furthermore, an enterprise resource planning system has been credited likewise with helping organizations to enhance their esteem by incorporation of activities within a firm by making it actualize the appropriate practices for each methodology in business, understanding the standard techniques, making single information source resulting in lesser diversion. Research suggests that there was an expansion of 40% within connection robotics whilst executing ERP along with a reduction of approximately 65% in creating control work (Weil, 1999). Hence, for this reason, various associations across the globe are showing keen interest in such big frameworks for business purpose. It seems that current organizations prefer to acknowledge the importance of convenient and exact data since it allows their work force to effectively and efficiently maintain their role when choosing their viable choices during practices. 163 administrators of various endeavors were approached by the Accenture as an attempt to understand the use of enterprise resource planning frameworks by organization and how they use it for the purpose of enhancing the execution of their business along with their practices that allow them to maintain their worth of creation (Davenport et al, 2003). It was found that due to their implementation of such venturous framework of data resulted in quality creation, though certain other organizations confirmed equivalent profits than most other organizations. One study of 2006, included 450 administrators from approximately 370 organizations, simply worked on studying the distinguished elements of their ERP framework that improved their esteem; they also identified their use of frameworks so as a means of improving separation and intensity (Harris and Davenport, 2006).

In other for organizations to amplify their profits from the activities regarding business intelligence, analysts have come up with a guide that discusses use of business intelligence and allow oganisations to advance their business intelligence; the methodology for such a guide the involves development of Business Intelligence Maturity Models (Rayner & Woods, 2011). This model effectively guides and organization so as for them to enhance their process of administering corporate information along with amplifying the profits that their organization acquires from their use of business intelligence. On a yearly basis, organizations are recognized for their use of business intelligence and are awarded Business Intelligence Awards of Excellence by Gartner. For this reason, one can expect an organization that has received such a grant to be highly developed as per the model. The following report is now focuses on an investigation discussing the BI venture of an organization (Carlino et al, 2000); this very organization was later awarded with the Business Intelligence Award of Excellence by Gartner (false name Acme Manufacturing). In brief however it can be said that service platform of distinct nature is offered by enterprise information systems for improving the working efficiency of a specific firm. These systems of information have a wide usage in several fields and enhance the enterprise activities efficiency improvisation. The implementation of ERP systems however do challenge the organizations but realizing actual rather than expected benefits of the process can help in catering to the challenge.

Benefits of ERP Implementation

 

 

In order to recognize the benefits of ERP implementation, one needs to understand that ERP frameworks are rather confuse bundles of programming that provide a back up to most authoritative exercises being carried out within an organization. For this reason, it can be said that several components affect the relationship between an hierarchical gainfulness and the interest in ERP. The following discusses the impression of a director regarding their profits due to their utilization of ERP frameworks.

In order to acquire full advantage of a product, the ERP merchants suggest that organization’s should execute their bundles of products with insignificant changes. For this reason, most organizations have adopted the best-of-breed approach that allows them to separate the bundles of programming for every procedure or capacity that is chosen (Rayner & Woods, 2011). In other words, they use a coordinated approach of corporate framework that allows them to sort all important capacities of business for the organization.

Factors Influencing ERP systems Benefit Realization

In regards to the significant growth that ERP has experienced since the 1990s, organizations have come across several challenges when applying the ERP framework. Research suggests that not only most of the international organizations but also several other medium and small organizations have now begun to implement and use ERP. Though, it is necessary to understand that despite of ERP’s promising advantages such as organizational profits and considerable investment of capital, ERP implementation may not necessarily always be successful (Al-Sehali, 2010). One downside to it would be the delay in schedule due to its implementation along with increased financial budget. Similarly, theories suggest that ERP implementation have often failed to provide organizations with their expected results or outcomes and achieve their own targets.

When comparing ERP to other information systems, one major problem emerging in the use of EP is complexity of the nature of the technology being used along with its compatibility and standardization. This is further augmented by problems caused by human participation such as the culture within an organization, resistance of workers towards change, the incompatibility of the business processes, any type of project mismanagement, the commitment towards the project by the top management and many others; these are stated to be among the most common risk factors that may lead to failed implementation of ERP (Al-Mashari, 2003). One famous system within business management is ERP, that not only provides an organization with the benefits of maintaining and achieving time capabilities but as also allow them to maintain beneficial communication. Apart from the above research that has specifically focused on the benefits and factors of the ERP system, the following consists of some research on implementation of the “second wave” (Australia).

Some of the factors that will allow organizations to clarify their organizational consideration include software system design, user involvement and training, skill mix, technology planning, organization fit and project control & management.

In order to research the risk factors deteriorating benefits realization related to ERP systems, a multileveled approach was adopted for collecting data with the help of primary stages of exploration prior to starting a more significant in-detail investigation of a selected case study (Davenport, 1998). The adoption of this approach is justified because when attempts are made for operationalization of research questions then several practical issues can develop which can present a strong case of argument for some exploratory research conduction for further developing an refining the reference terms for this report.

According to an exploratory research conducted by Miles and Huberman, 1994, it was evident that the industry of ERP is categorized broadly under 3 prime groups which are inclusive of vendors supplying the software for ERP, the integrators of system facilitating the software implementation and the organization related clients. In this study, the interviewees from all these mentioned groups of stakeholders were approached to conduct 17 interviews in total (Davenport, 2000). From this study it was evident that the ERP systems higher investment was confirmed by all these groups implying that benefit realization is of elaborative significance to various companies but still the benefits deliverance from various implementations related to ERP were low in a disappointing manner. IT was further reported by a study performed by Panorama Consulting Group 2011 that approximately 85 percent of studies of ERP examine customization of ERP and several other authors believe in examining the advantages delivered through this customization.

The definition of benefits management is that process by which an organization is able to organize and manage in a manner that the IT usage in the most appropriate manner is observed (Deloitte Consulting, 1998). There have been several studies developed to address models and frameworks that can help in managing the whole benefit from ERP process of management inclusive of Benefits realization from the model of Cranfield process, Benefit realization through active model and the Benefits identification mode. Even after these tools are available, still various organizations have not gained the ability of translating them into working practices effectively. According to a survey performed by Ward et al, 2007, best practices of management depicted to appear that only participating organizations in minority adopt an approach of comprehensiveness to manage advantages from the investments of IS or IT (Gartner, 1998). This was an evidence that helped the Ashurst et al 2008 concluding that realizing benefits remained an excellent example for consistent gaps existing between theories of management and practices (Birnbaum et al, 2009).

Benefits realization Cranfield process model is the most known and widely used model in the literature of benefits management. The main element of this model for realizing benefits lies in the network of beneficial dependency. This model has been chosen to realize benefit by considering associated factors (Gefen et al, 2002). The framework of BDN is designed for allowing the objectives of investment and to acknowledge the benefits resulting from it to link it in a structures manner to the operations of a business as per the requirements of an organization (Gartner, 1998). The figure of this network is provided below:

model of benefits

According to several studies such as Park et al, 2010, there are various barriers to realize benefits effectively under ERP systems which can be obtained by using Benefit management models inclusive of factors such as discipline inadequacy, change management lacking, improper training, poor procedures of reporting, inadequate engineering of process, misplaced advantages of ownership, inadequacy of Internal staff, resources poor prioritization, functionality poor software, inadequacy in consistent support, poor performance in business, project team with under performance, managing applications poorly and even modifications performed in a poor manner (Al-Sehali, 2010).

Expected versus actual ERP implementation Benefits

A range of benefits both tangible and non-tangible are available for companies implementing ERP. Reducing in finance cycle closure was the primary benefit that companies expected achieving. High rating is also given to management and their evidence is provided in the following figure which has been illustrated by a study performed by Clarke et al, 2010 (Al-Sehali, 2010):

table

Also, there has been evident discrepancy existing between those companies expecting for achieving something through ERP systems and those which actually are achieving through implementation of ERP. Organizations realize usually various benefits unexpectedly associated with improving performance (Kalling, 2003). These can be negated because of the maturing companies and the ERP system associated experience with industrial benchmarks availability.

ERP benefits realization barriers and challenges

 

 

Benefits realization barriers are inclusive of obstacles related to inadequate software functionality. Most of the issues however have a relation to issues of people in the organization. Change management however is the crucial barrier which requires appropriate management. It has been identified by several researchers such as Hammer that programs establishing positive behavior towards information systems introduction are important factors of success to their implementation successfully (Olson, 2004). This has made companies to focus in enhanced manner on strategies of managing change. This has been referred by Hammer as the re-engineering process of organizations and he further argued that an important precedent for any strategy related to managing change is cultural change being fostered first in the organization. The methodology of ASAP implementation of SAP focused considerably to focus on strategies of managing change and inclusive of various resources supporting the process (O’Leary, 2000). Enhanced research is needed in the complicated issues that involve management of change and resources evaluation for assisting in the process of change.

Case study of ERP systems in Institutes for Higher Education

In the initial years of 20th century, the well-known Cambridge University known as MIT or the Massachusetts Institute of technology was reaching towards its success with total faculty members approximately 8000 and with more than 10000 students. These students and faculties had to face pressure from people living outside and an important challenge of operational budget management came in front of the Institute. It seems that due to the federal growth and expenditure in US, there is a downfall in the expenditure for research while an increment in MIT’s tuition fee leading to admission blockade for several students (Balderston, 2008). Such problems may become responsible for the increment gap which will eventually increase the difficulties faced by MIT in attracting stakeholders.

Hence, for this reason, MIT intends on changing its current financial system and process by improving their system of main-time financial information. For this purpose, MIT came across two options; one includes developing single improved system while the other includes purchasing such a system from the market (Beheshti, 2006). MIT decided to purchase a ERP system due to the complications that may arise from developing the system which may revolve around the financial cost of the development. This purchased system simply was based on the practices carried out within the corporate industry.

Sought profit seems to come through as one of the major and key findings in this study that allows enhancement of the choice making process. It was found that the organizations that are considered to maintain top performance have utilized their data & examination forcefully so as to enhance their choice making. Such discoveries are discussed by Gartner which is considered one of the best business examiner firms; they conducted an overall review of over 1500 chief information officers and stated that business intelligence (BI) has become possibly one of the most obvious and essential need for business organizations when followed by ERP frameworks (Gartner, 2008). A report by Cutter Consortium in 2003, approximately 70% of the respondents were discovered to use activities involving Business Intelligence and warehousing of information, when reviewing over 142 organizations. The importance of BI is reflected by the income of $7.7 billion by the BI merchant in 2012.

Process of ERP Implementation in the University

The implementation of an ERP system, namely SAP was initiated by MIT in the initial period of 1995. The initial aim was to release the changing system of estate management at MIT with regard to SAP central finances (Ranyer and Woods, 2011). The second implementation aim was on increasing the DLCS across the university and then apply the ERP system related steps over there. A team dwelling on important and skilled professionals from the staff of index consultation and organizations from department of IT and administration within MIT institute was established by MIT for measuring the ERP systems from the perspective of several product sellers for selecting the most appropriate one for the company.

Finally it was decided by MIT that SAP and Oracle were two such vendors which appropriately suited the requirements of ERP systems providers especially for the current problems that the company faced (Sarkis et al, 2003). A large share in the market is grabbed by MIT and this company had more awareness in the business community with best suitability which implied that the company had complete knowledge of highly technological SAP and was able to utilize newer facilities of contemporary nature. SAP R/3 was selected by MIT after considering all the reviews available for all the selected vendors with regard to selecting appropriate implementation of ERP.

Several challenges are faced by companies operating in the corporate sector that commonly provides operations in bigger competitive environments related to financing in comparison to several of other non-profit sectors which have managed to gain advantage from the ERP systems throughout the past decade. High education institutes are motivated by such success stories and they have developed an urge to implement systems of ERP appropriately with same goals that can help in increasing corporate sector adoption, for example, increase the operational efficiency while lowering the prices. Hence, MIT decided to implement and adopt ERP. According to Bingi & Godla, 2009, MIT has appropriately invested in implementing ERP so as to increase their institutional business processes; research suggests that over $5 billion is invested yb Massachusetts Institute of Technology in the implementation of ERP in the past few years. Currently, the vendors of ERP continue to increase their product’s scope by increasing the number of products in the market as a response of the increased and modern need of the market. Some examples of these products include SAP & ORACLE softwares; these are management softwares developed for the student lifecycle. However, it is important to note that the implementation of ERP in MIT has been regarded and noticed to be challenging (Stewart et al, 2000). In a study conducted, implementation of ERP had turned out to be unsuccessful in approximately 60-80% of contexts education; ERP failed to meet the needs of MIT and the results had not turned out to be satisfactory; thus, further emphasizing the fact that ERP was initially only made for corporate business organizations’. Even though ERP has the capability of providing several customization options, these options are responsible to increase the failing risk through work scope increment and cost of implementation enhancement which in turn delays the implementation scheduling. Additionally, some other authors also further stated that ERP implementation lead to several other tensions and affected the universities in many other ways; these new issues are simply dependent upon what the university perceives them as.

Conclusion

To conclude, we know institutes providing higher education have adopted ERP so as to gain integration within their management system so as to manage complex operations easily (Chaudhuri & Ganti, 2001). We know that several universities are currently experiencing pressure to deliver high quality service of education to their students at lower or minimum cost; be it due to the declined investment from the government or reducing stakeholder increments. Due to these reasons, ERP has become more and more appealing to such institutes since it allows them to satisfactorily gain their expected standards. The benefits of implementation of ERP are being investigated by both, corporate organizations and universities across the globe. For institutes, the main reasons include enhancing their educational system while reengineering their business processes (Dillard & Tuthas, 2006). Though, in the corporate sector, reengineering of business processes is much easier than in universities. This can be explained by comparing the corporate sector, institutes of higher education have a tendency to obtain very short limitation provided the capital equivalent to time spent. Additionally, the revenues of these universities also is in turn directly connecting to the position of the university academically in comparison to an administration with efficiency (Well, 1999). This would help the universities itself to gain a rare option that can alter the operational models increasing operation related risks and also adopting several thoughts than the corporate sector.

The culture and structure of the organization such as that in the case study, also mostly affected under the implementation of ERP. A formal and hierarchical process in the sector of corporate with regard to making decisions effectively, helped in making the ENGCO operate in alignment with the standardized process and eventually becoming more successfully in reengineering process at a larger scale than that of MIT that posses an autonomic and collegial environment (Birnbaum & Edelson, 2009). In regards to this, the change and relationship management plays an essential and significant role in the implementation of ERP in institutes providing higher education (Wilderman, 1999).

The above study simply further confirms that ERP implementation results in various challenges in both, universities and corporate businesses. Mainly, this study chose the universities- MIT (the main case study); San Francisco and any other universities are classified as universities of research conducting very big activities of research in the classification of higher education institution.

References

Al-Mashari, M. (2003). Enterprise resource planning: A taxonomy of critical factors. European Journal of Operational Research, 146(2), pp. 352-364.

Al-Sehali, S. H. (2010). “The factors that affect the implementation of enterprise resource planning (ERP) in the international arab gulf states and united states companies with special emphasis on SAP software (saudi arabia),” University of Northern Iowa.

Ash, C., & Burn, J. (2003). A strategic framework for the management of ERP enabled e-business change. European Journal of Operational Research, 146(2), pp. 374-387.

Bajwa, D. S., (2004). An integrative framework for the assimilation of enterprise resource planning systems: Phases, antecedents, and outcomes. Journal of Computer Information Systems, 44(3), pp. 81-90.

Balderston, F. E. (2008). “Managing today's university: Strategies for viability, change, and excellence,” jossey-bass higher and adult education series. ERIC.

Beheshti, H. M. (2006). What managers should know about ERP/ERP II. Management Research News, 29(4), pp. 184-193.

Bingi, P., & Godla, J. K. (2009). Critical issues affecting an ERP implementation. Information Systems Management, 16(3), pp. 7-14.

Birnbaum, R., & Edelson, P. J. (2009). How colleges work: The cybernetics of academic organization and leadership. The Journal of Continuing Higher Education, 37(3), pp. 27-29.

Bruce, D., (2008). “MIT selects sap’s r/3 to support reengineering efforts. Unpublished manuscript.

Chaudhuri, S., & Ganti, V. (2001). Database technology for decision support systems. Computer, 34(12), pp. 48-55.

Dillard, J. F., & Yuthas, K. (2006). Enterprise resource planning systems and communicative action. Critical Perspectives on Accounting, 17(2), pp. 202-223.

 

 

AMR Research. (2002). AMR Research predicts enterprise applications market will reach $70 billion in 2006.

Brynjolfsson, E. (1993). The productivity paradox of information technology. Communications of the ACM, 36(12), 67-77.

Carlino et al, (2000). AMR Research predicts enterprise applications market will reach $78 billion by 2004.

Davenport, T.H. (1998). Putting the enterprise into the enterprise system. Harvard Business Review, (July/August), 121-131.

Davenport , T.H. (2000) . Mi s s i o n critical Realizing the promise of enterprise systems. Boston: Harvard Business School.

Deloitte Consulting. (1998). ERP’s second waveMaximizing the value of ERP-enabled processes. New York.

Gartner , (1998). 1998 ERP and FMIS study Executive summary. Stamford, CT.

Gefen, D., & Ridings, C. (2002). Implementation team responsiveness and user evaluation of CRM: A quasi-experimental design study of social exchange theory. Journal of Management Information Systems, 19(1), 47-63.

Kalling, T. (2003). ERP systems and the strategic management processes that lead to competitive advantage. Information Resources Management Journal, 16(4), 46-67.

O’Leary, D.E. (2000). Enterprise resource planning systems: Systems, life cycle, electronic commerce, and risk. Cambridge: Cambridge University Press.

Olson, D.L. (2004). Managerial issues of enterprise resource planning systems. McGraw-Hill International.

Rayner & Woods, (2011), ERP Strategy: Why do you need one, and key considerations in defining one. Gartner RAS core Research.

Sarkis, J., & Sundarraj, R.P. (2003). Managing large scale global enterprise resource planning systems: A case study at Texas Instruments. International Journal of Information Management, 23(5), 431-442.

Stewart et al, (2000). Organizational readiness for ERP implementation. In Proceedings of the Americas Conference on Information Systems (pp. 966-971).

Weil, M. (1999). Managing to win. Manufacturing Systems, 17(November), 14.

Wilderman, B. (1999). Enterprise resource management solutions and their value. Stanford, CT: MetaGroup.

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