LEARNING OBJECTIVES

Appreciating the importance of a well defined process for the purchase of ERP systems Analyzing the different steps involved in the selection of ERP vendors and ERP package Identifying the steps involved in preparing RFP ( Request for proposal) Understanding the process of vendor analysis Evaluating the pros and cons of system acquisition alternatives

INTRODUCTION
Once the decision or the case has been made to go for ERP system, the organization needs to purchase an ERP system and hence there is a requirement of selecting the software vendor and the software package.

Importance of Vendor Selection of a vendor is a critical step, The selection

because:
There are a large number of ERP products (ERP systems) available in the market with different functionalities and features. To decide which product and from which company is the most suitable may be a confusing situation for the organization. ERP systems, along with being the most complex, are a heavy investment decision, and thus need careful assessment of the various vendors and their packages so as to make the final decision about the ERP package.

Selection Process
Various steps involved in selecting a vendor and the ERP software package are:

Identification of requirements Preparation of database of ERP vendors ERP packages Matching User requirements to ERP product features Request for bids/proposal Vendor Analysis and Selection Negotiation and Contract Agreement Delivery and Implementation Post Implementation Review

Major ERP providing Companies

SAP AG Oracle Corporation J.D. Edwards World Solution Company Infor Global Solutions SSA Global Technologies Epicor Microsoft

Alternatives for ERP Acquisition

For the implementation of ERP systems, besides purchasing a ready made ERP system from a vendor, organizations may have other alternatives/options as well. These options include: Building In-house ERP Software Software as a Service (SaaS)

Building an In-house ERP Software

Sometimes, an organization might have unique business processes which provide them with a competitive advantage. In that case, an organization would like to develop ERP system in-house. Inhouse development approach may also suit to small or medium organizations. When the system is built in-house, the developers of the system need to follow the SDLC approach and the development model as per the nature of the ERP project.

Software as a Service (SaaS)

An organization that offers the use of software through communication lines is called an Application Service Provider (ASP). The concept is called Software As A Service (SaaS) or software by subscription. Many companies including IBM Global Services, US internetworking (USi), and Oracle Corporation offer such services.

Software as a Service (SaaS) Contd...

In the SaaS approach, an ASP does not install any software on a clients computers; rather, the application is installed at the ASPs location, along with the databases and other files that the application processes for the client.

Software as a Service (SaaS) Contd...

An organization, which opts for this alternative, gets the following benefits:

An organization is not required to commit large sums of money upfront. The application is immediately available. There is no need to hire experts for installation and maintenance. No need to acquire hardware for the installation. There is no need to learn how to maintain the application since it is the responsibility of the ASP. No storage hardware is required for the application and the associated data since the vendor uses its own hardware.

Software as a Service (SaaS) Contd...

However, SaaS has the following risks as well:

There may be long transaction response time on the Internet. There is a high security risk, as the application is controlled by the vendor.

Basic Concepts
Business process (What/why actions to produce outputs from inputs) Value added (Add value to organizational customers via values added to products/services) Business Process Reengineering (BPR)

Fundamental changes to people and culture, organizational

structure, policies/procedures, and technology

Demand chain
Pressures to produce products or provide services

Supply chain
Flow of materials, information, and services from raw

material suppliers through factories & warehouses to the end customers (also includes organizations and processes that create and delivery those products, information, and services to the end customers)

Basic Concepts

Supply chain management

Planning, organizing, coordinating all supply chain

activities to reduce uncertainty and risks and positively affect inventory levels, cycle time, business processes, and customer service

Extended supply chain

Combination of the push of the supply chain and

the pull of the demand chain

Networked organization
Linking functional components of the organization

via Intranets, Internet, LAN, and WAN

What is a Business Process?

A collection of activities that take one or more inputs and turn that into a product that adds value to a customer

Characteristics of Business Process Reengineering Several jobs are combined into one
Employees are empowered to make decisions Steps in business process: natural order Process may have multiple versions Work is performed where it makes the most sense

Common Benefits of BPR

Enterprise integration
Departments are consolidated Several jobs are combined into one job

Worker empowerment
There is both horizontal and vertical

reorganization Handoffs are eliminated There are fewer rules and less coordination is required

Common Benefits of BPR, Contd

Number of steps in a process are reduced

This is simplification Inspections, checks and controls are

reduced or eliminated

The steps are performed in a more natural order

When to Use BPR?

Failure rate as high as 75-85% Improperly aligned BPR and IT Expensive Organizational resistance

4-20

INTRODUCTION

BPR becomes a prerequisite for the successful implementation of an ERP system in an organization.

The stage of BPR is analogous to systems analysis and design in a typical system development life cycle.

What is Business Process Reengineering?

Business process reengineering refers to a systematic methodology to identify the best way of doing the business; and to re-engineer or redesign the business processes so as to get the maximum benefits.

Business Process Reengineering (Contd..)

There may be the following reasons for conducting a BPR study in an organization:

To implement the current purchased ERP system To automate the existing manual processes To improve the customer services To streamline the current business processes to increase efficiency and reduce cost

BPR Life Cycle

The BPR life cycle, which is also known as a BPR process, consists of the following steps:

Preparation and planning for undertaking BPR Current or existing business processes of the organization are understood Business Process Mapping and Gap Analysis is done Business processes are redesigned so as to match the best practices Redesigned processes are tested and evaluated for further improvements.

BPR Life Cycle

Preparation and Planning for BPR

In this phase, the goals and scope of BPR is defined. The goals must be measureable and simple to understand by an organization.

Understanding of the Current Business Processes AS IS

In this phase the existing business processes are understood.
This activity is considered as the most difficult and also the most error-prone activity because of the communication gap between the user and the technical people.

Process Mapping and Gap Analysis

Process mapping refers to modeling the business processes using some graphical tools and techniques so as to understand the business processes. As the technical person may not be well versed in business processes, there may be certain gaps in their understanding when these processes are described by the users.

Process Mapping and Gap Analysis (Contd...)

The process mapping is done by using various tools and techniques like Data Flow Diagram (DFD), Data Dictionary, Decision Tree, Decision Table, ER Diagram and object oriented tools & techniques like rational unified language and use cases.

DFD for Payroll Processing

Redesigning the Business Processes TO BE

This phase dismantles the existing processes and puts them back with a new sense of purpose. Some of the processes are eliminated and some may be grouped or combined to get efficient and better results.

Evaluation and Continuous Improvement

After the business processes are redesigned, the new processes must be tested for the validity and reliability of the results.
Processes are evaluated on continuous basis and improvements made as per the changed requirements of an organization.

BPR Tools And Technologies

There are various approaches, which an organization can use to re-engineer its business processes. Broadly speaking, there are two categories of tools and technologies used in reengineering the business processes of an organization:

Technology enabled reengineering Clean slate ( line up) reengineering

Success and Failure Factors in Implementing BPR

Generally the following factors are considered critical success and failure factors while implementing BPR:
Top management commitment BPR planning User participation Collaborative environment IT application Training & education Resistance to change

Business Process Mapping Tools

Some of the BPR mapping tools are given below:

Data Flow Diagram (DFD) Data Dictionary Structured English Decision Trees Decision Tables