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technology hardware and software was simply
was not up to the task. Furthermore, even small applications showed
the necessity for increased analytical capability beyond simply
connecting systems. Finally, only 2% to 5% of corporate data existed
in machine sensible form.
THE MANAGEMENT INFORMATION SYSTEM
As the problems with the data base approach were recognized
(mid-1970s) the idea of a comprehensive MIS came to the fore based
on relational technology and designed from the top down to assure that
all company needs were met.
Once again the technology was not completely up to the task, but
it was getting so close that the importance of other issues became
- Senior management support
- User support and acceptance
- The need to revise business processes to use the
inertia and politics
- Human resistance to change.
MANY OTHER SMALLER EFFORTS,
TOO NUMEROUS TO DESCRIBE HERE, INCLUDING:
The first major attempt to provide this capability
was made in the mid-1960s by the hardware manufacturers,
most notably IBM, when they created the third generation
computer systems. These systems, very powerful for
their day, supported multi-tasking and later multi-programming.
Their power was so great that even a large company could realistically
think about all of its applications on a single machine.
ENTERPRISE RESOURCE PLANNING
ERP is our current attempt. It was originally promoted as the
long awaited integrated system to meet all of an organization¹s
information needs. The concept is incredibly seductive, but it
is essentially the same as the promise of MIS two decades before.
Here is a scenario.
A United States based company sells a widget in France. As soon
as the transaction is entered into the sales system, these things
- Inventory is decremented, the warehouse in notified, a shipping
ticket is created, the shipper is notified, the item is picked,
packed, and shipped.
- Factories in Malaysia and Taiwan are notified
of the sale and parts ordered for assembly and restocking.
customer is billed, currencies are translated into home country
currency, and the financial system is updated to reflect the
sale, costs are captured, and the P&L Statement is updated
is an executive¹s dream come true having timely,
accurate and consistent understanding all of the corporate consequences
of each transaction.
WHAT WE HAVE LEARNED FROM ERP
The users have learned:
- No single vendor can provide best-of-breed solutions for all
functional areas of a business. It is imperative that any system
allow graceful interfaces with other systems.
- Implementation of an
ERP system requires re-engineering business processes at the
same time that the new system is being installed. This causes major
corporate disruption. We have known since the early days of information
systems that any new application affects the business process
it supports. ERP systems, with their goal of supporting larger
and larger segments of an enterprise, cause greater and greater
- ERP is very expensive, and requires large commitments of money
and user organization manpower.
The vendors have learned:
- They cannot supply best-of-breed in all areas of business. Hence
they promote "bolt-ons" and "strategic partners" to
fill out their product offerings.
- Specialized expertise beyond software expertise is
needed to implement large systems.
ENTERPRISE-WIDE SYSTEMS (SUCH AS ERP) ARE A GENUINELY BAD IDEA
Suppose a company could acquire a complete
- Suppose it could afford the cost in dollars.
- Suppose it could reengineer
all of its business processes to reflect the requirements of
the ERP software.
- Suppose it could afford the cost in business disruption.
it could convert all its data to the new system without problems.
it could train all of its people to use the new system.
all of its people accepted the new system.
Every company in today¹s'world must be able to cope with radical
and rapid change.
- Changes in business needs engendered by competition, regulation,
and the business environment.
- Changes in customer demands.
- Changes in its own business strategies.
- Changes in the business environment.
- Changes in technology.
The larger the system, the more difficult it is to make changes.
Tracking the cascading effects of changes in an enterprise-wide system
is a mind-boggling task.
- Can it be done? Of course!
- Would it be a big job? Very!
(Remember that 80% of all systems development budgets are already
spent on maintenance.)
- Are there better ways to spend resources?
Could a company with the necessary resources implement
and operate a complete ERP system?
- Perhaps, but considering all of the costs and all of the problems,
this is a bad idea.
None the less, the ERP vendors have sold billions of dollars worth
of systems, and are continuing to sell at a substantial rate. What
is going on?
HOW TO MEET ENTERPRISE-WIDE NEEDS WITHOUT AN ENTERPRISE-WIDE SYSTEM
The user community has developed
a very pragmatic approach to the enterprise-wide
system issue. The approach of choice
- Build a general purpose infrastructure, most often based on
- Buy individual modules from the ERP vendors and others,
and implement them one at a time. Typically these modules support
common business functions such as finance, human resources,
etc. Users often buy several modules from the same vendor because
it minimizes learning time and interface problems.
- Buy specialized modules
from solution set providers such as Ariba and CommerceOne,
and interface them to the ERP and other modules.
- Develop custom modules
for functions that provide competitive advantage for
example, a manufacturing system that radically reduces cycle time.
This approach allows the company
- To install individual modules when and if needed, rather than
commit up front to a company-wide multi-year program.
- To control the
organizational disruption and spread it over a long period
of time if appropriate.
- Most important of all, to respond to changing business
needs by making incremental changes in individual modules without
endangering the entire organization.