The enterprise resource planning projects during the past two decades have increased the volatility of the enterprise software market. The implementation of the projects in companies is considered a complex undertaking. Organizations that have experienced success in the implementation of the ERP projects have transformed the process of providing information system within the organizations. They are able to integrate the local information systems into one package with a common database. This helps in effective management of the wide process of business. Despite the benefits that come with the ERP projects, there are a number of challenges that affect its proper implementation and thus leading to a low success rate of ERPs. According to Martins (2008) the success rate of ERP projects implemented was around 33 percent.
Wong and Tien (2007) indicate a number of factors that challenge successful implementation of the ERP systems. They note the expensiveness of implementing the systems as one of the leading challenges that organizations have to overcome. In order to purchase the ERP systems, organization has to go through an extraordinarily complex process of making decisions. Wong and Tien (2007) also note the nature of the systems as requiring technical expertise, which a lot of organization would find themselves not ready. The ERP projects integrate every functional aspect of an organization and thus affect the entire organization. Human and technical expertise is therefore required for its development and full implementation. Basically, everyone within the organization will be expected to familiarize with the utilization of the ERP systems. Because of these challenges, many ERP projects have failed to be implemented. Ranganathan and Samarah (2008) provide examples of companies that have had no success with the ERP system.
Based on the low success rate of ERP projects, questions are raised as to whether the projects are actually viable. The main concern for the successful implementation of ERP systems comes from risk assessment that tries to weigh the potential pay offs and the massive investment that will cost a company to implement the system. A survey conducted by Robins Gioia in 2001, in Virginia, showed that most companies that had implemented the ERP packages were unsuccessful. Out of all the companies within the setting of the survey, only 51 percent asserted that the EPR system was a fail. At the same time, some of the participant interviewed in the survey indicated that their organization implemented the system too before understanding how it could be used to improve business operations. Even though a good number of the respondents indicated that their organizations had a program management officer to assist in implementation of the project, some respondents felt that the system was still unsuccessfully implemented.
According to the findings of this survey, it is clear that success or failure of the project is not defined by the objective criteria. The success and failure of the project is clearly defined by the perception of the people who utilize the program on a daily basis. The approach however may not be accurate. Relying on the perception of the respondents can be considered subjective. On the positive side, a lot of concerns may be raised. As a result several ways of integrating them can be used. However, on the negative note, the approach may be partial. For instance, if one respondent was exceedingly familiar with the project and actively uses it, the true nature of the project may not be revealed. Also at the same, if the ERP project is forced on a person, then most likely they would develop a negative perception about the project.
Basically the failure of ERP projects in many organizations today is largely blamed on the organizations and not the system itself. The right software package has to be chosen so that it fits into the needs of the organizations. Also, the implementation budget has to be a factor to consider especially during the selection of an appropriate software package to be installed. The employees and everyone who will be required to utilize the software package will have to be trained properly because training and education is vital for the implementation of the ERP system.
How ERP application can contribute to business intelligence and competency intelligence
ERP system can be used as a business intelligence application. It does not matter the size of organization using the system; any organization can implements the system and use to integrate all its business function into a unified database system. ERP systems used today are able to cover more than two functions of business and cause them to be integral. For instance, finance, manufacture functions, supply chain management, customer relation management, and human resource management can easily be integrated and be covered with the ERP system. The aspect about ERP systems that make them meet their objectives is integration. All data are unified and put into one database so that access to information can be made easy. Through the ease of access, the workflow can be made efficient and as a result businesses begin to experience the payoffs of the ERP system.
With regards to business intelligence, the ERP system therefore integrates all functions of business into one. So there will one database where all information from all the various units, departments and business functions are kept. With regards to manufacturing and business production, the system will integrate information about the work flow management, engineering, process of manufacture, bills of materials and quality control among others. With regards to finance management, system will integrate accounts payable, accounts receivable, information about fixed assets, cash management and general ledger.
In the human resource management some pertinent information that the system integrates include benefit and compensation, training, time and attendance, and payroll. In the supply chain management, system will integrate information about inventory, supply chain planning, order entry, claim processing, supply scheduling, and purchasing. In the customer relation management, system will integrate the sales and marketing, customer contact, commissions, services, and call center support.
All this information is kept in a single database to aid in ease of access. Management is actually made easier when information can be easily accessed. The nature of the data is also crucial for effective management of businesses. The enterprise resource system serves the purpose of yielding accurate and reliable information. With this integration, it is hard for individuals to temper with information from one business functional unit. For instance, before companies could actually adopt the enterprise resource planning system, every department and business unit had their own database and software programs. However, with the ERP systems, there is one central area where all the business unit functions can be monitored and effectively managed. This is by far the best way in which the ERP system has been used for business intelligence and competency intelligence.
Since each business functional unit is related to the other in one way or another, there, integrating data from all these business function creates the ease of communication between the various business functions. If the human resource management and finance have their own database then important processes that connect the two functions will be complicated. The ERP ensures that there is harmonious co existence between all the important general aspects of organization.
Instead of using several software programs to run business operations, the ERP system eliminates the need for other software programs. In addition, companies can begin to realize increased productivity when the system is effectively implemented. This can be a perfect ground in which organizations can use to remain competitive within its industry market and edge out rival companies. Implementation of the system is therefore the main area where organizations need to focus on once they have selected an appropriate package that suits their business need. This is the hard task and in some cases it will require special consultancy for effective implementation. Because of this, it might cost an organization a lot of money just to implement it while hoping that its potential payoffs would be realized.
The ERP application can therefore contribute to business intelligence and competency intelligence in several ways. The first one is through total integration. Once every aspect of business is integrated with others to work harmoniously, managing and controlling all the business functions is simplified. The other way is through streamlining all the business processes and functions. This facilitates the work flow and makes it easy for businesses to be effective. The other way is through sharing of data across every department and units of business. Since all the business departments are related in one way or another, some interdepartmental functions can be easily facilitated through the sharing of data.
Important business decisions can be made since the ERP system provides for tracking and forecasting. It could be used to forecast productivity, and profitability levels while tracking every operation of business. In the long run, an organization will find out that the system translates to lower operational cost. In order for a business to remain competitive, it has to take into account customer relations, increase productivity and reduce cost of production. When the business operations are effective, customers would be satisfied. This is important for competitive advantage as customers are the main determinant for the success or failure of businesses.
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