According to computer analysts ERP will cross 50 billion dollars by the end 2002 which signifies its impact on the world market and necessity to know about it. ERP is the abbreviation for "Enterprise Resource planning". Take any large firm, eventually it consists of many departments like shipping, distribution, manufacturing, planning, and accounting. Each department should share information and business flow. Consider a situation where customer orders for a product which is still in manufacturing stage and the distribution department had send him a bill for the goods which is not yet manufactured. Problem arises because distribution department don't have enough resourced or information systems to check the data in manufacturing department. All the above departments are interleaved. They should work in unified environment following the respective business process or work flow of a company. ERP is the solution. It is system that integrates all the functions in to a single system, which is designed to serve the needs of each department within the organization. It can be a piece of software, or various software applications integrated where all the business functions are performed in a single interface. ERP can be extended to other organizations and even includes suppliers and gives us the additional functions like "Supply chain management", "Vendor management". It depends on the each organization as each organization has a specific work flow. In the later sections we will give brief introduction about ERP, some of ERP vendors.
1.1 Background:-
ERP integrates business management practices, business objectives, and IT systems. Moreover it gives the overview of the business flow execution to the management executives which help them to take the best decisions. It is similar to data warehouse which gathers information and sends information to the other applications working on a single unified platform.
Most of the organizations have data in several servers often distributed across geographical areas. Actually the term ERP means how the organizations use it resources to perform the day to day business activities. Earlier it was referred by large organizations but it has changed from past years, Irrespective of the business and size, ERP became a part in the business.
Integration is the primary objective of ERP which integrates different business process which increases the speed and all time performance. ERP system provides a unified environment for following business activities [1].
Manufacturing
Financial
HR ( Human Resource)
Supply chain management
Projects
Customer relation management
Data Warehouse
Basically ERP term is derived from MRP II (Manufacturing resource planning) and MRP (Material Requirements planning [2].ERP system takes care of the all the business activities from sales to HR management. It became popular in the mid 1990's. Sample model of ERP is shown below. The ERP in any business will handle these core business processes as shown below.
Figure-1
ERP Model [1]
The basic components of ERP are a single unified database, information systems, different applications for business activities with unified interface and business management practices as shown below. Our paper structure consists of literature survey, methodology, results and conclusion.
Figure-2
ERP components [2]
ERP vendors:
In the current competitive business scenario every company wants to expand their business in the short time frame and they want less risk factor when implementing ERP solutions to the system. To meet the above requirements most of the companies prefer to buy the tested solution from the popular vendors rather than developing a solution on their own. Open source ERP software packages are but it is not often preferred by the companies when implementing the ERP solution. The cost incurred in implementing an open source ERP system is very less when compared with proprietary ERP software but companies prefer to buy from popular vendors because its tested ,reliable and companies provides updates and support till the end of their agreement. The most common software vendors who rule the ERP world are SAP and Oracle.
SAP:
SAP is the world largest business software company which was started in Germany. The company has more than 50000 employees working around world in many countries in their technology and research and development division. SAP has many products to cater the needs of large companies, small and medium sized companies. The main modules of SAP software are customer relationship management (CRM), Enterprise resource planning (ERP), supply chain management (SCM), Supplier relationship management (SRM) and Product life-cycle management (PLM) [8].
According to Garnet Dataquest, a research wing of an information technology company SAP has the market share of about 31% and they have the revenue of 1949 million United States dollars [9]. The market share of SAP falls from 47% percent to 31% by the year 2009 according to the study done by this company. 70% percent of the companies who have implemented SAP products are satisfied by the way it helps in streamlining their business process.
Oracle:
Oracle Corporation is an American company which main focus on relational database management system has focused its attention to the field of ERP market. Oracle employs more than 107,000 employees all over the world. Oracle is the third largest software company by it revenue. Oracle E-business suite is an ERP software package which caters the need for variety of companies depending upon their operational strength. The major modules in oracle e business suite are SCM, CRM, financial management, advanced procurement [6].
Oracle shares a major market share in the ERP market. It accounts for around 22% of the total ERP software implementation. The revenue which is earned by oracle because of ERP implementation is 1374 million United States dollars [5].These are the following advantages of ERP
Advantages of ERP [10]:-
Increases efficiency and performance of the company.
Increases the productivity
Gives overview of the business flow, reduces time delay
Helps to make decisions efficiently
No data redundancy, as it uses a single database which interacts with all the software modules across an organization.
Provides more security
It removes the necessity of running multiple complex computer applications for individual process.
"With the implementation of ERP in IBM Company, time taken to change prices of all products of IBM decreased to 5 min from 5 Days" [7]. With all the above advantages most of the companies will look forward to implement ERP system. Not always ERP systems lead to profits. Hershey is the leading manufacture of beverages and chocolates in USA they end up in huge loss in profits and sales when they implemented SAP ERP. Instead of the best practices Hershey Company faced a huge loss. Many companies have lost millions of dollars while trying to implement an ERP system. Implementation of ERP is a costly affair for a company. It takes around 6-12 month for successful implementation of ERP in a company. Implementation of an ERP system does not guarantee the improvement in the business; there are many things which need to be taken care of during the implementation to get better return of investment from the ERP software which we strive to find in this paper by using quantitative methodology.
Most of the companies have led to the bankruptcy situations. Irrespective of ERP vendors (SAP, Oracle, and other) failures of ERP system are increased since past years .Number of studies indicates that "6% out of 500 companies believed that ERP systems are useful and effective" [7]. ERP systems are huge applications which take much longer time to implement. Primary advantage of any ERP is the level of integration it provides with different information systems which operates according to the business flow. But why the failure rate is increasing. In our paper we strive to find out what are the primary factors which results in ERP implementation to success. What is the impact of ERP on the firms, and main reasons for the failures of ERP?
Research Area
Research questions:-
Our primary research questions are:
What are the factors which are involved for successful implementation of ERP?
What the factors which influence for the failure of ERP in an organization?
Impact of ERP on organization?
Research Methodology
We use qualitative research methodology. For the literature review we started of using the existing findings and case studies, and from the primary findings we have analyzed that cost of the ERP system, time it takes to implement in an organization, impact of ERP on the business logic, managing the organizational changes are the primary reasons for the failures of an ERP. We use these findings to proceed further and finding more factors from the existing literature and try to summarize our findings
