A Guide to ERP

One of the most influential IT developments of the past forty years has been Enterprise Resource Planning, or ERP. Thousands of organisations have used ERP to change their business models. Millions of employees in these organisations use ERP in their daily work. Tens of thousands of software developers earn their living with writing ERP software. Suppliers of ERP systems, such as SAP and Oracle, as well as ERP implementation partners, such as Accenture, realise multi-billion annual revenues in the ERP market.

This Guide to ERP is meant to be read at various levels in organisations. Board members and managers can use this book to gain an overview of the concepts of ERP, the benefits that can be obtained from it, and the link between ERP and other managerial trends and issues. At program or project management level, the book supports the development of ERP business cases, describes parties involved in a typical ERP implementation, and explains a number of ERP risks and pitfalls. For ERP users, who often only see a limited part of the ERP system in their daily work, the book offers the bigger picture.

The theoretical basis of the book is clarified by a large number of examples of ERP, from the public as well as from the private sector. The examples, and an extended case study, make the book relevant for higher education, especially for students in management science, financial management and information management courses.

This book consists of three parts. The first part is a general introduction. The aim of this part is to make the reader aware of the most important characteristics of ERP. An overview is presented of the reasons why companies and other organisations apply ERP, and what they expect from their ERP systems. The extent to which these expectations are realised are discussed, as well as the impact of ERP in practice. The most important ERP suppliers are listed, and the technical foundation of ERP systems is explained for a non-technical audience.

The two themes of the second part of the book are evaluation and implementation of ERP systems. The objective of this part of the book is to introduce the phases that can be distinguished in the ERP life cycle in an organisation, the most important decisions that have to be taken in these phases, and methods that can be used for evaluation and implementation of ERP systems. The first phase of ERP, the ex ante evaluation, is discussed in detail. This part of the books concludes with an extensive case study in which an ERP business case is developed for an example organisation.

In the third part of the book, ERP is viewed from the organisational and managerial perspective. The aim of this part of the book is to give the reader an overview of recent managerial trends, and how they relate to ERP. Trends that will be discussed are open source software, corporate governance and shared service centres.

Undoubtedly, ERP is one of the most important and influential trends in information technology. This, however, does not imply that everyone automatically subscribes to the advantages of ERP. The main characteristics of ERP, and their impact on organisations have been criticised. In a guide to ERP this criticism should not be ignored. The last chapter of this book is therefore dedicated to this criticism.

With this book I want to offer the reader a solid foundation for the use or study of ERP. In the book I combine theoretical aspects of ERP with a large number of practical examples and illustrations. I have only been able to do this because of the support and inspiration of a large number of people, some of whom I want to mention by name. I could never have created the theoretical basis of the book without the support of two of my Nyenrode colleagues, Prof. Dr. Ir. Jan Bots and Prof. Dr. Fred de Koning RA RE. I have acquired most of the practical experience with my ERP core team, and I want to compliment Vicky Aked, Jany Blaise, René Brouwers, Richard Cale, Henk van Deelen, Carlos Dias, Henk Haandrikman, Bianca Hendriksen, Julia Leladze, Vicky Rodgers, Pietro Trevisanato, Jan Vos, Johan Wempe and Wilmar Zwanenburg upon their perseverance and sense of humour. This English edition of the book has been peer reviewed by Klaas Brongers, president of the Dutch Computer Society Ngi-NGN; I thank him a lot for carrying out a very thorough review. Finally, I want to thank Fred Burgmans; without him I might have started writing this book, but I would never have finished it.

Spring 2014

Lineke Sneller

1. Part 1: What is ERP?
2. Why ERP?
   1. The main characteristics of ERP
   2. Impact of ERP
   3. Summary
3. The functioning of ERP systems
   1. The value chain and the supply chain
   2. The predecessors of ERP
   3. The first ERP systems – data integration for manufacturing companies
   4. ERP extensions – Data integration for other value chains
   5. ERP extensions – Sophisticated best practices
   6. ERP extensions – Data integration in the supply chain
   7. Summary
4. Parties in the ERP market place
   1. ERP software suppliers
   2. Implementation partners
   3. Application service providers
   4. Summary
5. ERP and IT architecture
   1. The logical architecture of an ERP system
   2. The elements of a physical IT architecture
   3. ERP on a mainframe architecture
   4. ERP on a client-server architecture
   5. ERP on a browser architecture
   6. Summary
6. Part 2: ERP evaluation and implementation
7. Principles of an ERP implementation
   1. Phases in the ERP life cycle
   2. The preselection of suppliers, implementation partners and application
8. service providers
   1. The sourcing basis: turn-key or do-it-yourself
   2. Model-building strategy
   3. Go live strategy
   4. Summary
9. Functional fit analysis
   1. Significance of the functional fit analysis
   2. A method for functional fit analysis
   3. Approach
   4. Summary
10. Risk analysis
    1. Significance of the risk analysis
    2. A method for risk analysis
    3. Approach
    4. Summary
11. Cost benefit analysis
    1. Significance of the cost benefit analysis
    2. A method for cost benefit analysis
    3. Approach
    4. Summary
12. ERP ex ante evaluation – an example
    1. Introduction of the example company
    2. The principles of the ERP implementation at P&V Europe
    3. Functional fit analysis
    4. Risk analysis
    5. Cost benefit analysis
    6. Go-no go presented to the European board
13. Part 3: Managerial trends and ERP
14. ERP and open source software
    1. Open source software: a brief introduction
    2. ERP and open source software
    3. Implementation strategy
    4. Summary
15. ERP and corporate governance
    1. Corporate governance legislation: a brief introduction
    2. ERP and internal control
    3. Summary
16. ERP and shared services
    1. Shared service centres: a brief introduction
    2. ERP and shared service centres
    3. Implementation strategy
    4. Summary
17. Criticism of ERP
    1. ERP data integration and organisational culture
    2. ERP best practice processes and competitive advantage
    3. Summary
18. References
19. Endnotes