Enterprise Resource Planning (ERP) is the method of trying to unify all processes within an organization into one software system or database. Enterprise Resource Planning Projects should not be entered into lightly. Not only are ERP projects a new software program to learn, but they are a new way of thinking. This chapter provides a brief history of ERP; follows by the advantages and disadvantages of ERP for organizations considering the adoption of ERP. The next section introduces various strategies of ERP implementation with a list of ERP software vendors. ERP is a long-term IT investment. The total cost of ownership is analyzed and discussed with several cases of ERP implementation.
History Of Erp
ERPs came about as a way to reduce costs within organizations in the early 1990s. Called organization “re-engineering” or “business process redesign”, ERPs helped to streamline processes (Davenport, 1993; Davenport, 1998; Hammer and Champy, 1993; Hammer, 1997). The IT staff would no longer need several application specialists on staff to support the multiple software programs running. Organizations would no longer need as many administrative personnel in each department since there would be one common database shared by multiple departments.
When ERP Systems were first developed, IT professionals were anticipating a “one-size fits all” software development that could capture the functions of all departments across the board (White, 2002). The first versions of ERP in the early 1990s tied together logistics and production. By 1995, software vendors were hearing requests from organizations to have a marketing and sales solution added to the ERP platform. For those customers that already owned ERPs, vendors offered add-on application solutions. For new customers, vendors created total solutions that tied Logistics, Production, Marketing and Sales all into one program. Vendors focused their newer versions on the recommendations of their users. Once organizations implemented ERP software, the vendors were able to take advantage of the “relationship” by imposing mandatory upgrades every twelve to eighteen months. Organizations had no other choice but to comply since it is not economically viable to discontinue use of an existing ERP or switch to a new vendor.
By the time 1999-2000 rolled around, ERP vendors saw a slow down in sales of ERP solutions. This was due, in a large part, to the Y2K scare. Those organizations that were interested in ERP solutions either hurried up to implement prior to 2000 or waited to ensure that the ERP vendors had successfully solved the Y2K problem within their programs. Several organizations also took the money that would have been used for ERP implementation and used it to ensure that their existing systems would survive the stroke of midnight January 1, 2000 and thus their respective ERP projects were delayed a year.
In the early to mid 2000s there has been a decline in sales of ERP solutions as a result of a “saturation” of the market. Due to the cost and complexity of ERP systems, historically only large organizations have been able to afford a total ERP package. The larger organizations also have the personnel resources to devote to the ERP project. In order to combat the declining sales, vendors are now designing ERP solutions catered to small to medium sized organizations with scaled down versions of the total ERP package that is designed for the large organizations. These scaled down versions of the ERP solutions would require less IT support and thus fewer personnel (Koh and Simpson, 2007).