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Enterprise technologies comes in many forms, but there are two broad choices; go with
individual software to handle different tasks (e.g. one each for human resources,
manufacturing, supply chain management, finance etc.,) or go for an Enterprise Resource
Planning solution that combines multiple functions in a flexible package. Again in ERP
there is different kind’s available viz., SAP, Oracle, Baan, PeopleSoft, JD Edwards etc.
Organizations’ today use ERPs to bring various departments (e.g administration, payroll,
inventory, finance etc.,) onto the same platform. This is because any ERP has a number
of embedded business functions that can be simultaneously run throughout the enterprise.
“Organizations’ which have several products, complex schedules and spread operations
can tremendously benefit by the implementation of ERP,”
An ERP can also be customized to handle different tasks and different industries. This
can be done right from generating Purchase Requisition to processing of the invoice and
final payment.
The greater the care taken during evaluation and selection of the ERP product, lesser the
time for implementation, and greater the chances of success.
2. SELECTION OF AN ERP:
Business Process Reengineering is a pre-requisite for going ahead with a powerful
planning tool, ERP. An in- depth BPR study has to be done before taking up ERP.
Business Process Reengineering brings out deficiencies of the existing system and
attempts to maximize productivity through restructuring and re-organizing the human
resources as well as divisions and departments in the organisation
Business Process Reengineering evolves the following steps:
Once the BPR is completed the next task is to evaluate and select a suitable package for
implementation. Evaluation of the right ERP package is considered as more crucial step.
Evaluation and selection involves:
ü checking whether all functional aspects of the Business are duly covered ;
ü checking whether all the business functions and processes are fully integrated ;
ü checking whether all the latest Information Technology (IT) trends are covered ;
ü checking whether the vendor has customizing and implementing capabilities ;
ü checking whether the business can absorb BOTH THE CAPITAL INVESTMENT
IN HARDWARE AND SOFTWARE MAINTENANCE (the) costS ;
ü checking whether the RETURN ON INVESTMENT (OI) is optimum ;
Investment required in ERP is very high and an inappropriate selection of ERP could
prove to be a nightmare for the company. Meticulous planning is therefore required in the
selection process.
The following costs are associated with ERP implementation:
HARDWARE COSTS:
a) Data center space capable of housing, powering, backup power ;
b) Special power requirements for uninterrupted power supply, power distribution
units) ;
c) Server hardware (viz., database server, application servers, other internet servers,
management appliances, infrastructure servers such domain controllers etc) ;
d) Disk subsystem hardware (each system in the landscape requires a database server
and thus a disk subsystem, database, license and so on) ;
e) Network infrastructure (switches, hubs, routers and all cabling) ;
f) Disaster Recovery infrastructure ;
LICENSING COSTS:
a) License fee and ongoing annual maintenance fee for operating system for each
server ;
b) License fee and ongoing annual maintenance fee for the Database Management
System for each database server in every system of ERP system landscape ;
c) ERP vendor license fees and ongoing annual maintenance fees ;
d) License fee of tools and other service applications involved in supporting ERP ;
PERSONNEL COSTS:
a) Costs associated with hiring project manager (s), project coordinator(s), project
librarian / documentation specialist and so on ;
b) Costs related to technology-focuSsed members like the Solution Architect, database
administrators, application and other technical specialists’ ;
c) Costs related to functional specialists, developers, and business process experts,
technical and functional consultants ;
d) Opportunity costs scarifiedby temporarily assigning people to the ERP project.
Backfilling their previous line-of-business, technology support or other roles within the
organization ;
e) Travel and other infrastructure costs ;
OTHER COSTS:
a) Management system costs (typically ERP aware application capable of monitoring
the systems historically) ;
b) Incremental Computer Operations costs, depreciation etc ;
c) Incremental Help Desk costs ;
d) Break / fix hardware maintenance contracts ;
e) System installation (server, disk subsystem, Os, database, and each specific ERP
component or product) ;
f) Costs of middleware applications which integrates the legacy systems and ERP ;
Further, no IT initiative can be effective if it is not aligned with the company’s business
objectives. It is, therefore, necessary to formulate a business strategy to achieve business
objectives and then align IT initiatives to achieve them. ERP implementation may be one
among such initiatives.