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					ERP: Custom Development for the Masses -- Utilizing
Packaged Software in Lieu of Custom Development




                     NCOAUG
                   March 3rd, 2003
                    Michael Wahl
History of ERP


  • Provided standardized functions for accounting,
    distribution, and manufacturing
  • Strength in mid-market
  • Proliferation of niche industry solutions
  • Midrange computers (IBM AS/400, HP3000, DEC
    VAX)
  • Built on proprietary systems (hardware, OS,
    programming languages)
  • One stop shopping for hardware, software,
    consulting through VAR channel with industry focus
Benefits of Early ERP

    • Low cost of ownership from initial
      purchase through ongoing maintenance
    • Whole solution including hardware,
      software, and consulting promoted
      through well defined channels
    • More than adequate functionality,
      especially for niche industry solutions
    • Standardized functions afforded some
      degree of process improvement (early
      MRP for example)
Underlying Technology Stack


                                         Hardware



                                         Operating
                                          System


                                         Software
                                        Development
                                           Tools


                                         Packaged
                                        Application
                                         Software



* Network considered a part of the operating system for the purposes of
this illustration
Disadvantages of Early ERP

  • Proprietary systems
  • Risk of technical obsolescence at all levels of
    the underlying technology stack
     – Hardware
     – Operating System
     – Development Tools (programming languages)
  • Large number of software providers each
    with niche focus and minimal market share
  • Limited breadth of functionality
  • Limited industry coverage
ERP II

   • Distinguished primarily by technology stack
      – Client/server initially
      – Web-based, three tiered architecture currently
   • Tier one providers include Oracle, PeopleSoft, SAP,
     JD Edwards
   • Broader industry support
   • Enterprise (multi-org) support for global
     businesses
   • End-to-end functionality, CRM through supply
     chain including partners in the supply chain
   • Still in early majority phase of the technology
     adoption lifecycle, despite demand surge
     associated with Y2k and Internet bubble
 Industry Coverage


       • Manufacturing                    •   Aerospace & Defense
       • Professional Services            •   Automotive
       • Engineering &                    •   Real Estate*
         Construction                     •   Travel &
                                              Transportation
       • Financial Services*
                                          •   Telecommunications*
       • Health Care
                                          •   Utilities
           – Life Sciences*
                                          •   Consumer Packaged
           – Provider                         Goods
       • Service and Repair               •   Higher Education*
       • Government*

* Oracle offers functionality specific to the industry
     Product Depth

                                  Basic Value Chain Functions




 ERP packages are
 extending the definition
 of the value chain for the
 enterprise.                           Ordering                 Production        Procurement              Shipping



Extended Value Chain Functions




                                                                                                                    Returns
 Demand                Ordering   Production          Procurement            Packaging          Shipping              and
 Creation
                                                                                                                  Allowances
E-Business Suite Breadth


 Financial Accounting        Service, Warranty & Repair
 Treasury Management         Maintenance Management
 Project Accounting          Product Development
 Procurement                 Project Accounting
 Human Resources             Sales & Marketing
 Order Management            Interaction Management
 Manufacturing (Discrete &   Contract Management
 Process)
                             Property Management
 Supply Chain Planning
                             Business Intelligence
 Warehouse Management
                             Performance Management
Complementary Products


     •   Application Management
     •   Integration
     •   Reporting
     •   Data Analytics
     •   Document Management
     •   Data Collection
     •   Payment Processing
     •   Taxation
Phasing Philosophies

   • Implement in manageable waves and avoid
     “swallowing the elephant”
   • Core functionality first before web or
     wireless enabled extensions
   • Basic value chain functions first, extended
     value chain functions later
   • Stable modules first, newer modules later
   • Basic architecture first, integrated
     technologies later (wireless, telephony)
   • Inside out approach - back office, basic value
     chain, extended value chain
Phasing Strategies

   • By business function, such as back office, order
     management, manufacturing, sales, service
   • By division or operating unit
   • By geography (U.S. vs. International)
   • By line of business
   • Keeping customers together, products and production
     together
   • Mirror overall organization structure (financial, go-to-
     market, basic responsibility and accountability model)
   • Maintain integrity of integrated accounting system
   • Minimize interfaces to minimize cost of ownership
Shared Services Center
Concept

   • Shared support functions including financial
     reporting, bill paying, collections, purchasing,
     financial reporting
   • Global, consolidating financials instance for
     multiple operating units
   • GL, AP, AR, FA, PO for non-direct materials, HR,
     Projects, iTime and iExpense, SSHR
   • Performance management and financial based
     analytics including procurement for cost
     management
   • Interfaces typically include GL Journals, Purchase
     Orders and Receipt for AP match, AR invoices
Shared Services Center
Benefits

     • Visibility into key financial
       performance metrics
     • Consolidation of support services and
       elimination of staff redundancies
     • Improved and standardized shared
       support functions for bill payment,
       collections, HR administration and
       financial reporting
     • Better purchasing cost visibility across
       the enterprise
     • Improved closing process
Supply Chain Improvement
Strategies

   •   Basic value chain functions (ordering, procurement,
       production, shipping) first
   •   Rationalize and consolidate customer facing activities
        – One invoice for all products
        – One shipment for all products on the order
   •   Rationalize distribution strategy to fulfill customer lead
       time expectations
   •   Rationalize production capabilities across multiple
       product lines or lines of business
   •   Evaluate make-to-demand capabilities
   •   Extend the solution to partners in the basic value chain
   •   Extend the value chain to the customer with customer
       service, support
   •   Extend go-to-market reach with sales and marketing,
       web-presence
Traditional SDLC Approach

  • Basis in ANSI SPARC Three Schema Architecture
    Definition (Logical, Physical and External Views)
  • Top down approach including requirements
    analysis, design, build, test, transition
  • Waterfall approach still prevalent to manage scope,
    predictability of outcome
  • Iterative design to the extent physical view (OOP)
    supports iterative development
  • Heavy emphasis on requirements analysis and
    logical modeling constructs to develop “to-be”
    system design that can be quickly and easily
    translated into a physical design
  • Primarily led by technical experts with logical and
    physical design skills
Package Implementation
Approach

  • Basis in ANSI SPARC Three Schema Architecture
    Definition
  • Physical View is configured with setups
  • Logical View is best described by process models
  • Less emphasis on requirements analysis, to-be
    modeling
  • External view or CRP is most effective method to
    validate requirements and design, identify gaps in
    solution
  • Iterative design is easily accomplished by multiple
    iterations of CRP or future implementations
  • Primarily led by business process and module setup
    experts
Key Philosophies for
Package Implementations

  • Need to align overall implementation strategy with
    long-term business improvement imperatives
  • Need to firmly state and manage competing project
    objectives (cost, time frame, fit vs. standard
    functionality)
  • Implement “vanilla” functionality in CRP to provide
    a foundation for review by user constituency (using
    CRP to validate requirements)
  • Minimize customizations to reduce cost of
    ownership
  • Use workflow to affect high degree of collaboration
  • Implement analytics to turn operational data into
    performance metrics
Conclusions

 • ERP still has a ways to go as products mature to
   provide more depth and breadth across a wide range of
   industries
 • ERP vendors that protect their customers from the risk
   of technical obsolescence and introduce business
   process enablers will dominate over the long run
 • ERP solutions offer tremendous capability in
   architecting an application strategy consistent with the
   evolution of the business
 • IT organizations will be made up of a greater
   concentration of business and process specialization
   skills and less of a concentration of technical skills
 • As IT organizations become proficient in long-term ERP
   implementation strategies, they will evolve to a greater
   role in leading improvement initiatives within the
   business

				
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