Jul 26, 2017
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ERP Systems

ERP Solution Evolution
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Much attention has been paid to optimizing business transactions and the associated processing of data. However, top-level management is disappointed in the role information technology plays in supporting decision making in organizations. Being able to use information systems to support decision making has been a goal since the introduction of computer technology to business.

One type of information system with this specific goal was termed a decision support system (DSS)

DSSs promised to provide managers with timely and relevant information, in addition to analytical capabilities to enhance decision making.

Three major characteristics of DSSs:

  • Designed specifically to facilitate decision processes
  • Support rather than automate decision making
  • Respond quickly to the changing needs of decision makers

As the demand for information systems to support effective decision making has increased, so have the terms used to describe them: data warehousing, knowledge management, data mining, collaborative systems, online analytical processing-with business intelligence tending to encompass all.

ERP Systems

ERP systems are information systems that are integrated and modular, have broad business functional scope, and are responsible for transaction processing in a real-time environment. The potential benefits of ERP systems make them essential for companies to be competitive and provide a foundation for future growth.

Researchers believe the growth in the uptake of ERP systems is due to several business needs:

  • Streamline and improve business processes
  • Better manage information systems expenditure
  • Meet competitive pressures to reduce costs
  • Increase responsiveness to customers and their needs
  • Integrate business processes
  • Provide a common platform and better data visibility
  • Use a strategic tool in moving toward electronic business

Evolution of ERP Systems

The maturity model of ERP usage, the cost, entropy (level of disorder), complexity, flexibility, and competitiveness is impacted at different stages

  • In stage one, companies commence their ERP implementation while simultaneously managing their existing legacy systems.
  • In stage two, the implementation is complete across the organization and the functionality is adopted.
  • In the third stage, the ERP system has been accepted and companies investigate avenues for achieving strategic value from the additional functionality available in the ERP system.

The evolution of ERP systems toward BI through three value drivers they identified for ERP usage

  • Integrate: where a company is able to integrate its data and processes internally and externally with customers and suppliers
  • Optimize: where a company standardizes strategic processes based on best business practices offered by the ERP system
  • Inform: where a company can provide context-rich information to support effective decision making

ERP and Business Intelligence

Although an ERP system's strength is in the integration of data across functional areas to support particular business processes, the reporting capability has been limited. This was the case for SAP's ERP system (R/3) which primarily focused on transaction processing and the associated reports.

The evolution of ERP has resulted in the development of a broad range of "bolt-on" solutions. These solutions built upon the underlying data contained within the ERP system and provided extended functionality to assist with more strategic decision making.

In addition to BW, the other solutions included: Customer Relationship Management (CRM), Strategic Enterprise Management (SEM), Advanced Planner Optimizer (APO), and Workplace (later to become Enterprise Portal). Maturing companies are placing similar importance on their data warehouse solution. In accordance with this characteristic, SAP introduced "Business Content" to enable companies to fully exploit their BW solution. This was comprised of pre-defined reports including the underlying infrastructure to support specific business situations.

Similarly, CRM supports the decisions associated with customers in terms of marketing, sales, service, and interactions. CRM requires information to be captured and applied to a pre-stored scenario, and much of the required information is supplied via the BW solution.

The analytical solutions of SAP rely increasingly on a data warehouse to supply the necessary information. The SAP "bolt-on" solutions satisfy many of the characteristics of DSS. The BW solution collects and transforms the data from a variety of systems and then provides it to the other solutions for analytics in specific business domains. An important component of BI solutions is the presentation of knowledge to assist with decision making. The BW solution has several interfaces that allow end users to create ad hoc queries and drill down as far as the individual transaction documents.

Enterprise Portal (EP) recognizes that users often require more than one solution to perform their daily tasks. The portal provides single sign-on whereby a user logs on to the portal, which in turn automatically logs the user on to all other specified systems. Similarly, all the required reports, queries, and transactions from the different systems are accessed through a standardized portal interface. This means that information required for decision making is quickly accessible on a single screen rather than forcing a user to move between systems with different interfaces.

The implementation of BW is relatively simple compared to other BI solutions. It does not require major process change or job redesign, and the benefits are easily realized. More important, companies that implement an ERP system to replace legacy systems never replace all previous systems-because of cost and/or because the ERP system lacks the appropriate functionality. Therefore, by inference, these remaining systems are necessary for processing data and decision making. Often, information is required from both the ERP system and the legacy systems.

The data warehouse extracts data from all systems; the data is then transformed, integrated, and consolidated in preparation for querying and reporting. Therefore, a data warehouse provides access to information which may not have been readily available. The data warehouse is the tool that collects and consolidates this data. The data consolidation provides the foundation for SAP's other BI solutions. There is a very strong interdependent relationship between ERP systems and BI solutions. The reliance of business intelligence on data generated by transaction-processing systems and the long-term dominance of ERP vendors in transaction processing gives these vendors a chance to dominate this market as well.

ERP systems are no longer solely responsible for transaction processing; they have evolved a range of value-adding applications of which business intelligence is the latest iteration. There will be an increasing focus on business intelligence in specific business domains and business solutions.

All these solutions are underpinned by integration solutions branded as NetWeaver. Many of SAP's industry presentations to customers have focused on the role of integration and the importance of business intelligence analytics.

Companies face a similar dilemma when choosing their BI infrastructure as they faced with their transaction processing systems: whether to implement "best of breed" solutions or an integrated solution with less functionality. Experience indicated that, with transaction-processing systems, integration was more important than the extended functionality that "best of breed" offered.

The notion of "best of breed" implies that companies have an understanding of their future BI journey. As companies increase in BI maturity, new solutions will be implemented and integrated with other solutions. The adoption of ERP vendor BI solutions overcomes many of the integration issues. It would also be reasonable to expect ERP vendors to provide a holistic approach to BI reflecting the broad reach of their transaction processing functionality.

When considering a BI solution, companies should consider how the solution would support the more mature BI activities in addition to satisfying immediate BI requirements.

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