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Spring 2010 Fundamentals of Business Information Systems

INTRODUCTION TO ENTERPRISE RESOURCE PLANNING SYSTEMS AND SAP

Rationale for ERP System Introduction

Historically, functional areas maintained independent information systems.

Systems not designed to interface with one another.

Information exchange often paper based.

Unified system for data handling should provide efficiencies and permit more effective management.

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SAP History

"I think the most profound effect R/3 has had is the general availability of real-time information. Within a company, somebody is fulfilling a task. The task ends. And all information that was affected by this task is available immediately in the new form.

That means you can improve workflow significantly. In conventional organizations, it's a sequential process. You have to pass the work forward. Something changed, and somebody else has to react to that. From the beginning, it was our idea that everyone could do everything at once. You would have access to current information wherever you were and could get everything that you wanted to know. We had to struggle for years on end. People debated this and said that is not the right way of looking at things.

Now that has changed because of the Internet."

Hasso Plattner, CEO, co-chairman, and co-founder of SAP AG Anticipating Change: Secrets Behind the SAP Empire

Reasons for Implementing ERP System—2000 study

Replace legacy systems 4.06

Simplify and standardize systems 3.85

Improve interactions with suppliers and customers 3.55

Gain strategic advantage 3.46

Link to global activities 3.17

Solve the Y2K problem 3.08

Pressure to keep up with competitors 2.99

Ease of upgrading systems 2.91

Restructure organizations 2.58

1 = Not Important 5 = Very Important

"Enterprise Resource Planning Survey of U.S. Manufacturing Firms," Production and Inventory Management Journal 41 no 20 (2000) by V.M. Mabert et al

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Discussion

Premise:

ERP software allows a company to unite its information handling.

United information handling mechanisms improve operating efficiency and decision making.

Why aren't all companies using ERP systems?

Work with neighbor(s) and come up with a list of 5 reasons. Make your list as specific as you can.

Why aren't all companies using ERP systems?

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Key Risk Areas in ERP Implementation

Organizational fit

Skill mix

Management structure and strategy

Software systems and design

User involvement and training

Project management

Critical success factors

Top management support

Implementation team competence

Interdepartmental cooperation and communication

Clear goals and objectives

Effective project management

Reasonable, clear expectations

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Critical success factors

Project champion

Vendor support

Careful data handling focus (specification, conversion, etc.)

Adequate resources

User training

Business process reengineering

Customization minimization (Configuration, not customization)

ERP System Return on Investment (ROI)

Cost of ERP implementation highly dependent on company size, number of users, modules selected, and other factors.

Almost always more spent on system installation, implementation, data migration, and training than on software acquisition/licensing.

Meta Group 2002 study: average cost of ERP ownership $15 million.

Wide distribution from $500,000 to $300 million.

Will ROI justify investment?

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How can an investment in ERP software pay for itself?

Improved decision making yielding competitive advantage in market.

Improved production efficiency--greater yield with fewer resources.

Improved management of labor cost--dominant manageable business cost.

Reduced inventory risk (obsolescence, spoilage, etc.)

Improved reporting and compliance (reduction of manpower required, improved accuracy and currency)

To understand why we are where we are, it is helpful to study the recent past.

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Pre-history of business computing

Early history of business computing

1960s Focus on inventory management and control in production environments

LEO I (Lyons Electronic Office) debuted in 1951. First computer specifically focused on business computing.

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Early history of business computing

1970s MRP software debuts to assist in production scheduling and inventory mgmt.

(More) contemporary history of business computing

1980s MRPII expands focus of previous systems into management of entire production process

1990s ERP systems apply same data collection and handling mechanisms organization-wide

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Evolution of Business Computing

MRP--Materials Requirement Planning (1970s)

Focuses on resources needed to accomplish scheduled production and when they are needed.

MRPII--Manufacturing Requirements Planning (1980s)

Expanded approach to production planning, incorporating non-production data such as from marketing and finance. (What should be made?)

ERP--Enterprise Resource Planning (1990s)

Expansion of MRPII concepts to all business functions, not just production related. Integrated planning focus. (How can we best operate?)

Functional model of business

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Process model of business

How do they differ?

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Enter SAP

SAP pioneered the ERP software market.

Five former IBM employees in Manhheim, Germany founded SAP in 1972.

Systemanalyse und Programmentwicklung

Systems Applications and Products (now), System Analysis Program Development (then)

Goals: Create software that would integrate business

processes.

Make data available interactively and in real time.

Users work with computer screen, not printed output.

SAP Software Timeline

1973 "System R" (real-time data processing) released to market. (Later came to be called "R/1")

1978 "R/2"

http://www.sapdesignguild.org/resources/r3_history.asp

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SAP Software Timeline

1992/93 SAP R/3--3 tiered architecture

Database, application, user interface (client)

Open architecture

Improved user interface

1994 and beyond

Enhancements and additional modules to R/3

Various "marketing names": SAP ECC, SAP Business Suite, mySAP, mySAP Business Suite, mySAP.com. SAP ERP, SAP Business Suite (preferred current names)

SAP ERP 3-tiered Client-server architecture

USER PCs USER PCs

Application Server

Application Server

Application Server

Application Server

Database Server

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Client-server system

Database and Application

Server

Nothing important is saved on your PC. Only things saved on the server are saved, and they are saved for good.

http://sap.uwm.edu/UWMDefault.htm

Who is SAP today?

SAP AG

World’s Largest Business Software Company

World’s Third-largest Independent Software Provider

Annual revenues exceeding $10 billion.

Company Statistics

51,400 employees in more then 50 countries

1,500 Business Partners

75,000 customers in more then 120 countries

12 million users

100,600 installations Source: SAP AG website

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SAP Software Applications

Small & Medium Size Solutions:

Business One 1-50 employees. SE (Small Enterprise) focus.

Bought (not made) by SAP. Not sold by SAP directly.

Business by Design 50-100/500 employees. SME (Small, Medium

Enterprise) focus.

Based on Service Oriented Architecture (SOA).

SAP All-in-One 100/500-1000 employees. ME (Medium Enterprise)

focus. http://www.sap-best-fit-adviser.com/adviser.aspx

SAP Business Suite

SAP NetWeaver

SAP SCM

SAP PLM

SAP SRM

SAP CRM

SAP ERP

SD

MM

PP

QM

PM

HR IS

WF

AM

CO

FI

PS

SAP R/3 Client/Server

ABAP Basis

Old Diagram New Diagram

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SAP Business Suite

SAP NetWeaver

SAP SCM

mySAP PLM

SAP SRM

SAP CRM

SAP ERP ECC 6.0

SAP NetWeaver

Set of cooperative technologies that provide internal connectivity between SAP modules and external connectivity with other systems.

NetWeaver Exchange Infrastructure (NetWeaver XI)

NetWeaver Portal

NetWeaver Web Application Server

NetWeaver Business Intelligence (NetWeaver BI)

Composite Application Framework (CAF) allows services to be abstracted and joined together into a customized process.

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SAP R/3 ERP Modules

FI Financial

Accounting

CO Controlling

Workflow PP Prod.

Planning

SD Sales &

Distrib.

MM Materials

Mgmt.

QM Quality

Mgmt.

PM Plant

Maint.

HR Human

Resources

AM Asset

Mgmt.

PS Project

System

SAP Industry Solutions—Best Practices

• Aerospace & Defense • Automotive • Banking • Chemicals • Consumer Products • Defense & Security • Engineering, Construction • Healthcare • High Tech • Higher Education • Industrial Machinery • Insurance • Life Sciences • Logistics Service

• Media • Mill Products • Mining • Oil & Gas • Pharmaceuticals • Postal Services • Professional Services • Public Sector • Railways • Retail • Telecommunications • Utilities • Wholesale Distribution

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SAP Duet

Microsoft, SAP partnership to add SAP functionality directly to Microsoft Office products

http://www.sap.com/solutions/duet/demos/index.epx

ERP System Functional Details

ERP Systems are large-scale applications that run on top of database systems for storage and data management.

SAP typically used with Oracle, DB2, or MS SQL.

Basic SAP installation--over 28,000 tables.

ERP Systems are not "install and go." Configuration required.

Configuration: making the standard software fit your business processes.

SAP: over 8,000 configuration decisions.

ERP Configuration Management--full time job

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ERP System Functional Details

Systems are large-scale distributed applications that need system level administration and control.

Performance tuning, network and equipment management, redundancy and backup, development and test systems, transport.

SAP "Basis Administration", "NetWeaver Administration" non-trivial for large company with significant infrastructure.

SAP Configuration, Development

Copyrights

Microsoft, Windows, Excel, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation.

IBM, DB2, DB2 Universal Database, System i, System i5, System p, System p5, System x, System z, System z10, System z9, z10, z9, iSeries, pSeries, xSeries, zSeries, eServer, z/VM, z/OS, i5/OS, S/390, OS/390, OS/400, AS/400, S/390 Parallel Enterprise Server, PowerVM, Power Architecture, POWER6+, POWER6, POWER5+, POWER5, POWER, OpenPower, PowerPC, BatchPipes, BladeCenter, System Storage, GPFS, HACMP, RETAIN, DB2 Connect, RACF, Redbooks, OS/2, Parallel Sysplex, MVS/ESA, AIX, Intelligent Miner, WebSphere, Netfinity, Tivoli and Informix are trademarks or registered trademarks of IBM Corporation.

Linux is the registered trademark of Linus Torvalds in the U.S. and other countries.

Oracle is a registered trademark of Oracle Corporation.

HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C®, World Wide Web Consortium, Massachusetts Institute of Technology.

Java is a registered trademark of Sun Microsystems, Inc.

JavaScript is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape.

SAP, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, SAP Business ByDesign, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and other countries.

Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius, and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects S.A. in the United States and in other countries. Business Objects is an SAP company.

Other products mentioned in this presentation are trademarks of their respective owners.

Presentation prepared by and copyright of Dr. Tony Pittarese, East Tennessee State University, Computer and Information Sciences Dept. (pittares@etsu.edu)

Podcast lecture related to this presentation available via ETSU iTunesU.