Enterprise Resource Planning - Case Study Example

Table of Contents Introduction 1 ERP integration at Small business issues 3 Impact of ERP on Small Business 4 ERP Implementation Problems at Small Business 5 Resolving ERP problems at 9 Conclusion 12 Introduction At the present, the information technology is the main driver for economic growth of organizations, since the innovation produced by the information technologies has revolutionized and improved the ways of conducting business. Additionally, the development of information systems such as enterprise resource planning (ERP) systems has revolutionized not only the ways in which products, goods, and services are traded, however how they are distributed to customers, stores, and dealers. Enterprise resource planning (ERP) is the technology that unites the corporation’s activities or operations by integrating the core processes. In addition, an enterprise resource planning (ERP) system is information system that unites processes in a corporation using shared reporting tools and a common database. Moreover, an ERP system allows the different departments of the corporation to distribute and receive data and information, enhance management of business processes, and diminish expenditures. In other words, an ERP system is an integrated, tailorable, and configurable information system which plans and organizes the entire resources and their utilization in the corporation as well as rationalizes and integrates the corporation’s activities inside and across the technical or functional boundaries in the corporation. Additionally, an ERP system automates corporation’s basic business processes, minimizes the cost of the collaboration and complication, allows the corporation itself to apply the business process reengineering (BPR) to optimize its processes, and at last result in a business success. However, the basic motives behind the implementation of the ERP technology are to offer qualities of standardization and integration to business operations plus offer better business support (Dredden & Bergdolt, 2007; She & Thuraisingham, 2007; Al-Mashari, 2002; Malhotra & Temponi, 2010). Though, the implementation of an ERP is considered as the biggest investment which an organization can ever make, thus it is not suitable for small businesses or corporations. And they face a lot of challenges throughout implementation (Hitt et al., 2002). This paper presents a critique of the paper “critical decisions for ERP integration: small business issues” which is written by Rajiv Malhotra and Cecilia Temponi. This paper outlines some of the main aspects and scenarios of implementing ERP technology at small businesses and their critical decisions and issues. ERP integration at Small business issues According to Malhotra & Temponi (2010), the small corporations are facing a number of challenges to become large organizations. Thus, these small corporations are adopting some advanced technologies to attain a better competitive edge in the overall business market. However ERP technology is big deal for the small businesses. ERP technology is not so popular in small business due to its excessive costs associated with accessing a vast marketplace of potential customers. Thus, the implementation of the ERP technology at the entire corporation is taken as more expensive and risky; however it is a great deal more challenging for small businesses. Thus, small corporations need to take some serious decisions regarding the implementation of the ERP technology at the business. The research of the Malhotra & Temponi (2010) has offered six best practices for the critical decisions of ERP implementation at a small corporation (Malhotra & Temponi, 2010): Project team structure Implementation strategy Database conversion strategy Transition technique Risk management strategy Change management strategy The successful implementation of above mentioned practices will help the small businesses implement ERP successfully. Impact of ERP on Small Business According to Elbertsen, Benders, & Nijssen (2006) ERP systmes offer the faclity to add customer relationship management (CRM) components that are more supportive in increasing the number of business customers and business market value. Additionally, the ERP technology as well offers much better customer and business support functionalities to improve small business credibility (Elbertsen et al., 2006). Effy Oz (2008) outlined that the ERP technology implementation at small business offers effective business information that supports corporate planning, managing resources, handling funds, personnel, vehicles and raw materials. In this way small business needs to put less effort in managing the business processes that leads toward higher business revenue (Oz, 2008). According to David C., Hima, & Amy, (2005) the implementation of ERP technology especially at small businesses supports the entire operational and functional areas of the business. Additionally, the ERP technology presents a backbone structures to the small businesses that help them organize back-office business information system applications such as purchasing, finance, inventory management, HR etc. without deploying lots of human resources and efforts. In addition, the ERP systems are capable to put together the entire corporation’s transactional data into their main and master business databases system for business/organizational planning (David C. et al., 2005). ERP Implementation Problems at Small Business There are a number of important issues in implementing ERP such as ‘probability of fold in the selection of technology’, ‘requirements intended for innovating latest software applications’, ‘the diverse method and means necessary to implement a business applications similar to ERP’, ‘the ability of the marketplace players to cope up with ERP’, ‘the services as well as usage’ have to be addressed by the corporations and ‘exploit the ERP to gain benefits and competitive edge (Hitt, Wu, & Zhou, 2002). These issues are significant as well as help in deciding the business model of the corporation. The organization should think the above facts as well as cover the matters previous to making a choice on including ERP (Hitt, Wu, & Zhou, 2002). The ERP accomplishment involves definite aspects that are vital for the ERP implementation. For this reason understanding the ERP implementation issues is significant for the whole implementation of the ERP project (Elbertsen, Benders, & Nijssen, 2006). ERP implementation issues are mechanism of ERP solution that transforms or updates the corporation products as well as services. There should be flat flow of data and information among the diverse parts of the project's major concern. The domain of the project is broad as well as it includes a number of complex ideas, that necessitate planning as well as execution (Al-Mashari, 2002). Additional factors that manipulate the method of ERP implementations are usually controlled by the professionals. The achievement of the ERP implementation is reliant to a large extent on the obligation from top management. Consequently the ERP project needs transparent communication with the top-level executives (erpwire, 2010). One more significant ERP implementation matter is the reengineering idea that is changing the actual business into something that would give a great deal more returns and benefits to the corporation or business owner. In addition, the ERP systems are foundational on the tasks that are best and most important for the business. Thus, before an organization starts the process of ERP implementation that has to make sure that some other procedures that are employed must be adapted to the new ERP implementation concept. Here we can have following types of difficulties (Dredden & Bergdolt, 2007): Numerous complexities are hidden leading do “doubling the time as well as tripling the cost” approximations for the project Complexities increases organizational confrontation to change Strategic profits are hard to measure Targets are hardly ever attained Plans are too determined Prospect are impractical Lack of accepting of strategic reimbursement of ERP accomplishment External implementation by means of a lack of essential infrastructure support Malhotra & Temponi (2010) outlined that small businesses more and more are adopting information technologies (e-commerce) to be capable to struggle across a variety of industries as well as to become suppliers of other businesses. Additionally, the researches show that the ERP technology implementation offers a number of business advantages. However one of the main experiences normally found among businesses implementing ERP systems is high expenditures that normally raise their initial budgets. It is outlined that total cost of implementing the ERP technology is approximately 32% on hardware, 16% on software, 38% on systems integration, and 14% on personnel. In this scenario ERP technology implementation is risky investments, as well as a number of costs and benefits are hard to quantify. Sometime the implementation of ERP technology at SMEs has presented various cost related problems. Moreover, at SME’s the ERP implementation is always going beyond the boundaries of the initial budgetary and resources assumptions (Malhotra & Temponi, 2010; Buonanno et al., 2005). According to Telden (2009), the ERP facilitates SMEs to take pleasure of unimaginable benefits. Nevertheless the difficulty of ERP in S.M.E.’s remains unsettled. Additionally, there are yet some ups and downs in it. And there are a number of problems intended for S.M.E.'s in the ERP marketplace. However, they are not simply addressed from the company's viewpoint however as well from the vendor's perspective (Telden, 2010). Additionally, the basic problem is the high cost of ERP. In this way, the small size of the corporations proves to be one more challenge to the vendor. As there are a lot of SMEs in the marketplace they demand an extremely low price from the vendor. Moreover, the small businesses cannot afford the high costs of the ERP technology that leads toward higher danger of ERP technology failure (Nazor, 2009). Another problem is the choice of ERP technology. In this scenario, the businesses have to work out adequately in selecting their ERP vendor as well as ERP Software for small business. However, the main problem is regarding the selection of appropriate technology for the business. In this scenario a lot of corporations are going towards the branded player that can satisfy the requirements of small business. While the other SMEs are arguing that simply small vendors are flexible when it approaches to customizations. However there are risks in all types of technology structures implementation (Venkatesh, 2003; Buonanno et al., 2005). There is another problem that is customization of the ERP package. In implementing the ERP technology at SMEs the main trouble comes while the customization acquired solutions for SME'S. Additionally, the level of customization and the work demanded by the SMEs are tightly linked with each other. In this scenario there is need for better match among the offered services and business needs. Thus, failure of the fulfillment of the business needs by the intended application leads to overall failure of the project of ERP technology implementation (Telden, 2010; Buonanno et al., 2005; Lee et al., 2008). A lot of small businesses either do not have enough resources or are not interested to consign a huge amount of their resources because of the long implementation times and high expenditures associated with ERP implementation. In addition, there are many aspects that strongly influence, either positively or negatively, the ERP implementation by small businesses. These aspects can be, the insufficient strategic planning of information systems (IS), resource shortage, the inadequate expertise in IT, and also the choice to implement a process-oriented view of the business. Therefore, small businesses discover alternative solutions offering the ERP capabilities at a reasonable cost also implementation costs (Buonanno et al., 2005; Nazor, 2009). Resolving ERP problems at Malhotra & Temponi (2010) present a six step strategy to overcome above mentioned challenges. This six step strategy is (Malhotra & Temponi, 2010): Project team structure Implementation strategy Database conversion strategy Transition technique Risk management strategy Change management strategy Project team structure: In case of ERP implementation at SME there is need for the effective team structure that refers to the organization of the project team as well as organizational specificity (Malhotra & Temponi, 2010). Implementation strategy: In this scenario given ERP implementation strategy needs to rely upon on a set of consistent objectives. Additionally, these objectives can have values rated from a scale of low to high. In addition, a modification in the value of one objective can influence the values of further objectives for the reason that of objectives’ interdependencies (Malhotra & Temponi, 2010). Transition technique: In case of a new ERP system implementation at SMEs there is need to replace an existing system that is acknowledged as the legacy system. In this scenario there is need for the transition technique that runs the process of change from the current system to the new ERP implementation (Malhotra & Temponi, 2010). Database conversion strategy: Need for data residing in the legacy system that has to be moved to the new ERP system (Malhotra & Temponi, 2010). Risk management strategy: To implement the ERP at SMEs there is need to build some risk management strategy that has the capability to resolve issues in ERP implementation (Malhotra & Temponi, 2010). Change management strategy: In implementing new ERP technology there is need to deploy effective change management strategy that can effectively manage and handle any potential change in the ERP technology establishment (Malhotra & Temponi, 2010). On the other hand it is stated that we can resolve the problems regarding the ERP technology implementation at the small enterprise. Since, the cost and implementation problems can be resolved by reducing the customization. This will decrease the ongoing support demands that are required by the staff. In addition, there is another way that is to make sure that the business procedures are openly supported by the software package that are mainly associated with the company’s own practices or that the business is agreeable to vary its present procedures to align the ERP software package’s requirements (Iskanius, 2009). Another way is about acquiring an ERP package through an intuitive as well as easy-to-use interface to reduce the overall training as well as user support costs. However, there is need to establish some performance-measuring principles offered by the system and they should be similar to the performance indicators that business employs to evaluate itself (Lee et al., 2008). Conclusion The fame of ERP as a business application does justify a particular state. However, the most vital factor in the entire ERP system is the implementation aspects. The establishment stage has the capability to cast the spell on ERP'S fortune. As I have stated earlier the implementation of an ERP Implementation depends on quick procedures as well as therefore training plus the speed at that the quintessence of training is received makes a decision about its worth and value. This paper has presented a critique of the paper “ERP technology implementation at small businesses” by the Malhotra & Temponi (2010). This paper has summarized the main idea of the paper. The researches have shown that the implementation of the ERP brings a lot of benefits and opportunities to an organization but it takes lots of resources (time, cost etc). And small businesses face a lot of problems throughout the ERP implementation. In this scenario (Malhotra & Temponi, 2010) presented a six step strategy to resolve these problems and possible suggestions to improve the process of ERP implementation. Presently corporations are seeking ERP that should essentially understand the overall business procedures. In this scenario for the effective implementation of the ERP technology there is vital need for the ERP planning, however it is not enough to make sure the benefit of ERP. It is very important to apply ERP as planned after conceiving the idea of enterprise resource planning. Bibliography Al-Mashari, M., 2002. Enterprise resource planning (ERP) systems: a research agenda. Industrial Management and Data Systems, 102(3), pp.165-70. Buonanno, G. et al., 2005. Factors affecting ERP system adoption. Journal of Enterprise Information Management, 18(4), pp.384-426. David C., C., Hima, B. & Amy Y., C., 2005. BI and ERP integration. Information Management & Computer Security, 13(5), pp.340-49. Dredden, G. & Bergdolt, J.C., 2007. Enterprise Resource Planning. Air Force Journal of Logistics, 31(2), pp.48-52. Elbertsen, L., Benders, J. & Nijssen, E., 2006. ERP use: exclusive or complemented? 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