Critical Thinking-Budgeting Challenge in ERP Management - Example

Critical Thinking-Budgeting Challenge in ERP Management Name: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Causes of the Issue 4 2.1 Increasing Product Prices 4 2.2 Disruptive Technology 4 2.3 Under Budgeting 5 3.0 Drawbacks and Implications 5 4.0 Recommendations 6 4.1 Project Management Application 6 4.2 Strategic Planning 8 5.0 Conclusion 8 References 10 1.0 Introduction The process of the development and application of ERP programs has had its share of success and as such revolutionized business operations globally. In this regard, an enterprise resource planning system involves coordinating and joining the various organizational functions into one as illustrated in the chart below: Nevertheless, it has a share of challenges. In this regard, the application process has been characterized by the development and emergence of efficient and profitable organizations, but also the challenge of its budgeting and sustainability funding. In this case a study of ERP systems by Bingi, Sharma and Godla (1999) stated that one of the fundamental issues and challenges facing ERP systems application is the issue of funding and balancing the budgetary allocations not only in the system development stages, but also in its sustenance in the long term application stages. As such, this evaluation essay analysis, the key causes if such financial and budgeting challenges, as well as negative implications of the failure in ERP systems development. Finally, the analysis offers recommendations through which to overcome the financial and budgeting challenge for increased ERP system efficiency. 2.0 Causes of the Issue In order to establish and offer a critical analysis of the budgeting and financial allocation challenges it is imperative to evaluate the key causes of the issue in ERP management. In this case, the section discusses the key causes as increasing product prices, under budgeting and technology changes as among the root causes. 2.1 Increasing Product Prices The global market as Epstein and Yeldan (2010) argued is facing inflation on a daily basis. In this regard, all that differs globally is the rate of inflation where low inflation rates are financially favorable for economic development and growth during high inflation rates cause economic stagnation and backward development. In this regard, one of the fundamental implications of inflation in any industry is the rise of product prices, where increased money supply, with constant production rates, causes a demand surplus, and thus increased prices in the market as a means to establish and develop new market equilibrium. In this regard, in the case of ERP systems development, the system requires a wide range of tools and products that are budgeted for and scheduled for purchase both in the short and long run periods. However, unexpected inflation rates in the market lead to high market costs for the budgeted for products than the prices financed for. Consequently, this leads to a financial and budgetary challenge for such ERP programs in the long run period. 2.2 Disruptive Technology In addition, the ERP budgeting challenges are based on changing technology systems on a regular basis. In this regard, as Lucas (2012) noted, the technology industry is continuously developing as such, leading to the development of disruptive technology. In this regard, one of the fundamental traits of disruptive technology is the virtue of operational models change, where such technology developments require the installation of new IT infrastructures to operationalize them. Therefore, in the long term ERP systems development, if the disruptive technology changes occur, it means a change of the applied systems and IT infrastructure to the new required systems. Thus, this change process has a direct implication on the allocated project budget satisfaction in that it increases the overall budgetary requirements. One of the main challenges of handling this cause is the radical nature of technology changes. As such, one cannot anticipate technology changes and as such forecast accurately on the ideal and relevant remedies worth undertaking to counter it. Hence, it remains a major deterrent to long-term ERP systems, budgeting and financing based on the regular changes. 2.3 Under Budgeting Finally, the ERP budgeting challenge is caused by an under budgeting challenge. In this regard, failure of the project managers to factor in product market changes and the actual ERP systems usage lead to situations where some of the required infrastructure is supplied in minimal quantities that are insufficient to function as required. In this context, the budgeting process often leads to financial shortages as the missing IT infrastructure must be incorporated. Moreover, the challenge of under-budgeting is caused by failure to consider market trends (Dugdale & Lyne, 2010). As such, project managers lack competency and skills in the evaluation of expected future product prices through the evaluation and the use of the present and future value evaluation tools. 3.0 Drawbacks and Implications As already evidenced, the financial and budgeting challenge has numerous effects on the ERP systems ad program. In this regard, this section evaluates the tactical implications that the strategic budgeting challenge has on the ERP systems. In this context, the system failure, and stalling effects. On one hand, like Kumar, Maheshwari and Kumar (2003) noted, the under budgeting challenge has a direct implication of system failure and collapse. In this regard, in the case of under budgeting and the failure to acquire the desired IT infrastructure, would lead to a direct project failure. On the other hand, in the event that the system faced the cause of changing technology, this has a direct probable impact of slowing the adoption and execution process. In this regard, this regular technology change and the need to adapt and acquire new IT infrastructure lead to in increased production costs that derail such ERP application and adoption systems. Therefore, this analysis establishes that the causative factors of the financial challenge in ERP systems management have their individual implications that could affect the systems either independently or in collaborations. 4.0 Recommendations As established by the above analysis, the financial challenge has numerous implications for ERP systems management and execution and thus should be averted. In this regard, this evaluation section offers an analytical review based on which to counter the challenge, both proactively and reactively. 4.1 Project Management Application Nicholas and Steyn (2008) noted that the process of project management is emerging as a growing organizational approach based on which management's increase their operational efficiencies as well as enhance organizational culture development. In this regard, the use of project management teams has promoted the use of cross-functional teams in the management and execution of specific organizational endeavors. In his regard, among the registered project management approach merits is the concept of project success rates due to proactive skills integration as illustrated below through the activities value chain process. Thus, this recommendation argues that in order to reduce the financial and budgeting challenge in ERP programs is should use the project team management approach. In this regard, the teams should have staff from three key departments, namely the IT, research and the financial functions respectively. Thus, the IT function team members should be charged with the mandate of evaluating and establishing the required IT infrastructure and services required for such a program’s success, which are the basis of the entire funds costing process. In addition, the research and development function staff should be responsible for evaluating forecasted technology and market changes. Therefore, this would enable the IT and other functional members adjust the project requirements based on the foreseeable technology changes and allow for such emergency fund reserve in the vent of such changes. In this regard, although the process cannot fully evaluate the expected technology changes, it would exponentially reduce the variances in the costing process. Finally, the finance function staff members should be charged with the responsibility of developing a relevant financial evaluation base, through which the current market, as well as the expected future change, is incorporated. As such, the money value evaluation skills of present and future value determination would serve as a favorable basis for reducing the foreseeable inflation rates influence of the overall budgeting process. 4.2 Strategic Planning One of the alternative approaches to overcoming a majority of business challenges is the adoption and use of the strategic planning approach. In this case, as Matthews (2005) stated, the strategic planning approach is a segment of the strategic management concept that seeks to develop proactively rather than reactive management systems. In this regard, the proactive approach to strategic planning involves the development of not only systems for adoption, but also fall back alternatives and control measures in the event they fail. Therefore, the approach application in ERP systems planning would increase the development of a system in which ERP systems failures would be mitigated. In this approach, in the event of the unexpected inflation rates and technology changes, the systems management would have proactive measures such as emergency funds and a continuous improvement system through which such additional costs would be financed reducing the probable system failure and stalling risks. 5.0 Conclusion In summary, this article’s analysis offers an in-depth review and evaluation of the financial and budgeting failure challenge in ERP systems, operation success. In this case, the evaluation process narrows down to the key challenge causes, its operational and tactical implications of an ERP system and finally the recommendations on how to avoid the challenge in future ERP projects. On one hand, a causes evaluation establishes that among other causes, poor budgeting skills, technology changes, and unforeseen inflation rates in the market lead to the budgeting challenge development. As such, the article establishes that the causes have ripple effects on the ERP system’s success, such as through causing total system failure, increased operational costs, and the delay of the ERP systems execution and development timelines. Therefore, the article concludes with recommendations for overcoming this budgeting challenging in future ERP programs. In this case, it argues that the adoption of a project management approach, with cross functional teams representation, and the strategic planning concept adoption, this challenge would be proactively eliminated in the future. References Bingi, P., Sharma, M. K., & Godla, J. K. (1999). Critical issues affecting an ERP implementation. IS Management, 16(3), 7-14. Dugdale, D., & Lyne, S. (2010). Budgeting practice and organisational structure. Oxford: CIMA Publishers Epstein, G. A., & Yeldan, E. (2010). Beyond inflation targeting: Assessing the impacts and policy alternatives. Cheltenham: Edward Elgar. Kumar, V., Maheshwari, B., & Kumar, U. (2003). An investigation of critical management issues in ERP implementation: emperical evidence from Canadian organizations. Technovation, 23(10), 793-807 Lucas, H. C. (2012). The search for survival: Lessons from disruptive technologies. Santa Barbara, Calif: Praeger. Matthews, J. R. (2005). Strategic planning and management for library managers. Westport (Connecticut: Libraries. Nicholas, J. M., & Steyn, H. (2008). Project management for business, engineering, and technology: Principles and practice. Amsterdam: Elsevier Butterworth Heinemann. Read More