The Enterprise System Challenge: Putting the Enterprise First

1. IS605/606: Information SystemsInstructor: Dr. Boris Jukic Putting the Enterprise into the Enterprise System Reading Discussion

2. ERP Challenges • Corporate Examples • Merger Issues: Mobil Europe • Management Model Fit: Dell Computer • Architecture Switch: Dow Chemical • Organizational Change: Applied Materials • ERP paradigm may be at odds with what is good for an organization • Centralization • Generic Processes • Process ceases to be a source of competitive advantage • Potential rewards are great but so are the risks

3. ES (Enterprise Systems) Rationale • Data Fragmentation in organizations • Redundancies, multiple points of the data re-keying, storing, updating and maintenance • System Fragmentation in organizations • Losses due to the lack of the proper, real-time information flow • ES is based on single enterprise-wide database

4. ES approach success stories • IBM's Storage Systems • Product re-pricing time reduced form 5 days to 5 minutes • Autodesk • Average order delivery time reduced form two weeks to under 24 hours • Fujitsu Microelectronics • Order cycle time reduced to 36 hours from 18 days • What do all these companies have in common?

5. System vs. Strategy • Standard way: software fits the business process • ES way: business process must fit the software • ES is a generic solution. • Based on assumptions about the way companies operate in general. • ES is supposed to reflect best practices, • vendor, not the customer, is defining what "best" means. • In some cases, ES assumptions may run counter to a company's best interests.

6. ES customization • ES systems are modular • Organizations can “mix and match” to some degree • Major intra-module modifications are typically not technically or economically feasible "SAP isn't a software package; it's a way of doing business." • What if process is THE source of competitive advantage (order filling for spare parts example)

7. Commoditization of the Business Process • SAP's R/3 package is being implemented by almost every company in the personal computer, semiconductor, petrochemical industry. • How to compete? • Not a problem if a company's competitive advantage derives primarily from the distinctiveness of its products (Apple Computers) • Proprietary (in-house developed) modules for those processes that are the source of competitive advantage (Compaq) • Do not invest in ES (ERP) and use savings to compete on lower prices and not better service (Air Products and Chemicals) • Industry wide adoption of one package: compete on how well (and how inexpensively) the package is implemented and operated (SAP/Petrochemicals Industry)

8. Organizational Impact: Two Opposite forces • Corporate-wide real time data flow • Centralized system structure

9. Organizational Issues in Multinational Companies • Global process model: • Example: Owens Corning • Federalist Model • Core common information module • For other needs, roll out different versions of the same system in each regional unit, tailored to support local operating practices • Examples; HP, Monsanto(85% common standards), Nestle • Elf Atochem Case: In-class summary and discussion

10. Final Comments: Role of Management • Managerial risk in viewing the installation of an ES as primarily a technological challenge. • ES responsibility pushed down down to IT departments. • ES' has profound business implications • technology itself might undermine a company's strategy • Off-loading responsibility to technologists is particularly dangerous. • General manager should act as the mediator between the imperatives of the technology and the imperatives of the business. • If the development of an enterprise system is not carefully controlled by management, management may soon find itself under the control of the system.