Enterprise resource planning

Introduction

Enterprise Resource Planning (ERP) is a generic term for the broad set of activities facilitated by multi-module application software that helps businesses manage their important facets. ERP also includes application modules for the finance and human resources aspects of a business. A typical ERP system will use multiple components of computer software and hardware to achieve the integration .One of the key ingredient of most ERP systems is the use of a unified database to store data for the various system modules. An ERP system’s success rests on the integration of data across the institution. An ERP eliminates the need for individual data stores, duplicate records, and coordination of disparate data systems with unique record formats.

The Business Drivers behind ERP

No solution would be embraced by the industry unless it is economically promising. Businesses accept ERP because it carries in its wake the promise to alleviate hitherto unsolved chronic problems. The following points are the key business drivers

1. Integrate financial information:

ERP creates a single version of internal information that cannot be questioned or doubted because everyone uses the same system.

2. Integrate customer order information:

ERP facilitates a single point of view of customer information in the enterprise.

3. Standardize and speed up manufacturing processes:

Often multiple business units across a company make the same widget using different processes and methodologies. Standardizing these processes and using a single, integrated computer system can save time, increase productivity, and reduce payroll expenditure.

4. Reduce inventory:

ERP helps the manufacturing process flow more smoothly, and it improves the visibility of the order fulfillment process inside the company.

5. Standardize HR information:

Especially in companies with multiple business units, HR maynot have a unified, simple,1

and all pervasive method for tracking employee information, benefits, and services. ERPcan fix that. This results in improved employee satisfaction and helps clear communication lines.

ERP Implementation Methodology

Traditionally ERP is implemented as a product based solution. The businesses assess their requirements, come up with the product they want to employ to address the requirements and then go about customizing it.

There are three commonly used ways of installing ERP

•The Big Bang: This is the most ambitious and difficult of approaches to ERP implementation. In this methodology, companies cast off all their legacy systems at once and install a single ERP system across the organization.

•Franchising: This approach suits large or diverse companies that do not share many common processes across business units. Independent ERP systems are installed in each unit, while linking common processes, such as finance management, across the enterprise.

•Try and Buy: ERP dictates the process design in this method, where the focus is on just a few key processes, such as those contained in an ERP system's financial module. The try and buy approach is generally for smaller companies expecting to grow into ERP. The goal here is to get ERP up and running quickly and to avoid the reengineering and tailoring issues in favor of the ERP system's out-of-the-box processes.

Why ERP and Web Services?

In the context of ERP, Web Services offer a two-fold advantage: ease of integration and reduction in costs through the hosted application model.

1. Ease of Integration

Integration is a major source of expenditure across enterprises. According to figures from the Meta Group, Global 2000 companies rely on an average of 49 enterprise applications, and they spend up to 33% of the IT budget just to get them to talk to one another.

ERP is complex and not intended for public consumption.

Now, however, clients and outsourcing vendors are demanding access to the same information employees get through the ERP system - things like order status, inventory levels, and invoice reconciliation - except they want to get all this information simply, without all the ERP software. This is where Web Services come to the rescue, wherein seamless URL calls make it possible to expose just the appropriate amount of material to the authenticated users at the right time.

2. Reduction in Costs through the Hosted Application Model

The deployment of a traditional ERP system can involve considerable business process analysis, employee retraining, and new work procedures. A franchising strategy to adopt Web Services for ERP implementation or enhancement takes advantage of the investment made in the legacy ERP applications and provides them a new lease of life. ERP provides for integrated, multicomponent application software performing multiple business functions. It involves the use of packaged software instead of client-written custom software.

How does Web Services Make ERP Easier?

The enterprise may still require an ERP application for its internal systems to function efficiently together. Web Services allow the enterprise to acquire the information needed to respond effectively, even in situations where tightly coupled application design isn't necessary.

By developing an integrated Internet information solution, ERP systems companies make public information that was never before accessible from the enterprise. Markets created in this way are by definition more efficient, because they permit companies to concentrate their efforts on customer service and profits. As this new technology gains business-wide support, more vendors will venture into product support for these Web Services. Traditional ERP vendors had a hard time building the links between the Web and their software. Most of them are now presenting solutions helpful for bridging the gaps.

The number and functionality of available Web Services is starting to increase and ERP and accounting systems vendors are beginning to tackle the integration problem by introducing what are called Web Service broker hubs. A broker hub offers a portal to provide a user interface for consumers so that they can find, evaluate, subscribe to, cancel, manage, or monitor Web Services.

Current Scenario

Major enterprise application software vendors have already embraced the Web Services architecture. Oracle, SAP, and PeopleSoft are on the forefront on this aspect, with many of them already having graduated to the Web Services way of life. SAP and PeopleSoft are pursuing Web Services to help facilitate application integration.

Where Oracle, SAP, and PeopleSoft see Web Services as a foundation for better integrating applications within their own suites, others see Web Services as an industry-standard infrastructure that will facilitate business-logic integration across diverse best-of-breed applications on a global scale.

SAP and Oracle offer web-service hubs for users of mySAP and Oracle E-Business Suite. Intuit and Peachtree offer them for use with QuickBooks and Peachtree Complete Accounting. And Navision is one of the few ERP vendors that will offer a Web Service broker hub to users of mid-tier accounting software.

The following table summarizes the Service Oriented Architecture offerings that some of the major vendors have, with which all of them aspire to capture a piece of the pie:

SAP

Oracle

Peoplesoft

Microsoft

Siebel

Economics of ERP Web Services

The TCO for a Web Services solution would be substantially lower than the staggering $53,320 reported by the Meta Group for a "heads-down" user over the first two years after installation of a similar ERP solution. This is due to the fact that the following costs normally incurred in a traditional ERP solution are alleviated or reduced in this approach:

· Deployment costs.

· Consultancy costs.

· Future expenses due to migration and scalability issues.

· Training costs.

· Integration and testing costs. We benefit from the "component ware" paradigm Web Services offer.

· Data Conversion costs.

· Data Analysis costs.

Summary

ERP is a great concept, but like so many of these great ideas, conditions apply. It seems very likely that future ERP applications will not be either products or services, but rather combinations of products, services, and "loosely coupled" applications. These applications are another form of hybrid because they combine locally installed product functions with distributed service functions delivered electronically over the Internet.

Hybrid models offer a best-of-both-worlds solution. They provide fast, locally installed product functions combined with on-demand remote services that take advantage of the Internet. They help maintain private data ownership, while making select data public in a controlled manner. They deliver simple customization of applications through the addition of Web Services channeled via service broker hubs, which focus on the needs of a specific ERP suite.

Reference:

1. http://connect.educause.edu/library/abstract/AnERPPostImplementation

2. http://www.webservicesarchitect.com

3. http://campus.hesge.ch/dugerdilp/_private/ICEIS2006.pdf.

4. http://dev2dev.bea.com/pub/a/2004/01/Sinton.html

5. http://www.informationweek.com/story/showArticle.jhtml?articleID=188100623

6.  http://en.wikipedia.org/wiki/Enterprise_resource_planning

7. http://www.msc-inc.net

8. http://campus.hesge.ch/dugerdilp/_private/ICEIS2006.pdf