Assessment 3

Enterprise Resource Planning Systems

(BCO6603 Semester 2, 2012)
A research report on integration issues
In
ERP project implementation

Submitted by:
Ikramuddin SYED
(4274743)
Submitted To:
Mr. Paul Hawing
Due Date:
24 February 2013
Victoria University, Sydney

Ikramuddin SYED

Research Report

Student ID: 4274743

Executive Summary
This research report presents an overview of management information systems. The first part
of the report discusses in detail what an information system is, how information systems
evolved overtime and how organisations realised the need for enterprise systems, which are
called enterprise resource planning (ERP) systems. This section also discusses what ERP
systems are and why organisations are opting to invest in ERP systems.
In the next section the case study of ERP system implementation at Rolls-Royce is discussed.
Author of the case study has declared the ERP implementation a success, which helped RollsRoyce to keep it abreast of its competitors in the industry. Although there were many issues
faced during the implementation phase, but the management of Rolls-Royce was determined
and enough planning was done to ensure the successful implementation along with the change
management. At Rolls-Royce it was not just an IT system implementation, the project was
considered to be a big change program across the organization. The successful
implementation helped Rolls-Royce to maintain its position and helped maintain its market
share in air and defence industry.
Next section discusses the ERP implementation success story at ChemCo, which is an SME
and deals in different types of chemicals and cleaning products. The company had tough
phases during the implementation that included resistance from the managers and users. The
case study describes that enough time was allocated to complete the project and a cross
functional team was formed, which had weekly meetings on the project implementation. After
implementation of the ERP system ChemCo was able to better serve their customers and
reduce the time required for different tasks.
The last section of the report concludes the discussion stating that organisations invest in ERP
systems to achieve parity and then use of further analytical tools helps them gain the
competitive advantage. Thus suggesting that ERP system is the minimum requirement of
todays organisations to come in parity. ERP helps organisations in quick decision making,
being proactive in the market place, staying competitive, which might seem less cash
beneficial but suggests more about the intangible benefits offered by these systems.

Ikramuddin SYED

Research Report

Student ID: 4274743

Table of Contents
Introduction.............................................................................. 1
Information Systems.................................................................2
Need for Information Systems................................................................................2
Legacy Systems vs. Integrated Systems................................................................2
Why Invest in ERP System...................................................................................... 2
Business Processes Dilemma................................................................................. 3
ERP Good or Bad.................................................................................................... 3
Major ERP Vendors................................................................................................. 4
ERP Implementation Benefits:................................................................................4

Rolls-Royce Implementation of ERP (Case Study).........................5

Learning from Case Study...................................................................................... 5

ERP Implementation at ChemCo (Case Study)..............................6

Learning from Case Study...................................................................................... 6

Conclusion................................................................................6
References................................................................................ 8

Ikramuddin SYED

Research Report

Student ID: 4274743

Introduction
This report presents detailed research on legacy systems and integrated systems. The sources
used for this report include journals, case studies and online white papers. A detailed literature
review was carried out to present views, form opinions and conclude the discussion.
The report presents the overview of information systems, its need and evolution along with
the growing needs of the enterprises. Two case studies were chosen from diverse industries to
understand the ERP implementation process and conclusions from the case study is presented
along with other researched journals to support the conclusions.
This report provides the literature review and conclusion is drawn based upon the discussion
in the report using other online journal articles. It is suggested that more research should be
undertaken to reap the benefits of the research especially the link between integrated systems
and competitive advantage.

Ikramuddin SYED

Research Report

Student ID: 4274743

Information Systems
Need for Information Systems
According to Yusuf, Gunasekaran, & Abthorpe (2004, p. 252), organisations must compete on
all competitive advantages instead of just price and quality, compared to the traditional
competitive advantages. This poses a big challenge on the organizations to develop the
flexibility and responsiveness, and not only work around the price and quality. For this
purpose, organizations invest heavily on information systems, which help organizations to
develop the capability of being more flexible and responsive to cope with the changing
market dynamics. This approach initially was the main reason to invest in information
systems and legacy systems were developed to support each business function separately.
With the passage of time the need for data sharing among the business functions was realised
and enterprise resource planning (ERP) systems were developed to support multiple business
functions, where data sharing among business functions is used to complete the work flows
and support decision making.

Legacy Systems vs. Integrated Systems

Initially organisations developed legacy systems, which were supposed to support one
business function. It could be finance, logistics, sales, manufacturing etc. Each system used to
have its own database, thus keeping more than one copy of the same data at more than one
places. This was a source of delays and management used to run around to find the accurate
data for decision-making. This resulted in realising the need for an integrated system that
could address this business need and data can be accessed from one single source. As the
business grows, data volume increases, dependency on information systems keeps on
increasing for quick decision-making. Along with the increasing complexity of businesses, the
need for integrated systems increases, where cross-functional data sharing becomes the key
factor for strategic decision making. According to Yusuf, Gunasekaran, & Abthorpe (2004, p.
251), organizations are decentralising their operations by global outsourcing to meet the
performance objectives. This also poses a huge challenge for coordinated operations and
achieving efficiency. ERP systems promise to provide this functionality.
Contrary to this, research is also being done on the link between integrated systems (ERP) and
competitive advantage. According to Fosser, et. al. (n.d.), if all the companies start using the
same vanilla (SAP) implementation, what happens with the competitive advantage gained by
the organizations after years of work on legacy systems. The paper also contradicts authors
own point of view that ERP implementation is a minimum requirement to come to parity and
than develop a competitive advantage based on an organisations strengths. There is a need for
more research to find the link between ERP and competitive advantage to reap the real
benefits of integrated system.

Why Invest in ERP System

An Enterprise Resource Planning (ERP) system is a multi-module transaction-based
application software that helps organizations to manage the vital parts of the business (Fosser,
et. al., n.d.). The above statement means that ERP provides a set of tools and methodologies
that may enable an organisation to plan and utilise its resources more effectively It is also a
source of providing agility to the businesses, helping in accessing the information in a timely
manner and reacting to a market situation more quickly than otherwise. This is the one of the
basic needs of todays dynamic business environment. Highly competitive business
organisations keep themselves one step ahead and instead of reacting to the changing

Ikramuddin SYED

Research Report

Student ID: 4274743

environment, these organisations proactively want to predict the future business trends, which
are aligned with the changing market trends. ERP systems, with the help of advanced
analytical tools, provide this functionality and help organisations to predict the future trends
and changing market trends. ERP improves the decision making process and the management
has the flexibility of concentrating on core business development activities rather than
wasting time on searching for accurate data from different legacy systems. This drives most of
the organizations to invest in ERP systems instead of forcing them to live with the legacy
systems.

Business Processes Dilemma

Most of the ERP solutions come with standards business processes and are considered to be
the best practices as most successful organisations have followed these processes. Research
has shown that not all standard business processes are good for all organisations. Care should
be taken while implementing the standard business processes. More research is needed in
reaching the conclusion to whether to follow the best practices and change the existing
business processes to match the standard processes offered by the ERP solution, or customise
the ERP solution to match with the existing business processes. Both approaches have their
own pros and cons and extreme care should be taken to make a call on this issue. Although
most of the ERP vendors recommend, not to customise ERP systems and suggest to change
the business processes to match the offered standard business processes, but research has
shown that even this approach can not guarantee a successful implementation. On the contrary
research has also shown that organisation have opted for customization in the existing ERP
solutions to maintain their competitive advantage, which they have gained over the years of
hard work on legacy systems, and have successfully implemented ERP solutions. Although
this approach does not address the cost and upgrade issues, still it has certain advantages
(Sharma, Patil & Tandon, 2012).

ERP Good or Bad

ERP systems sound good especially when they promise to provide cross functional data
sharing, quick decision making, analysing and predicting future trends developing
competitive advantage and above all claiming the required information with a click of mouse.
No one talks about what does it take to successfully implement an ERP system and what are
the major issues faced by organisations when they start implementing an ERP solution. Or on
the other hand once implemented how agile ERP system is and does it grow with the growing
needs of the business? The list of questions keeps on increasing even in the implementation
phases. Research has shown that more than 70% ERP implementations end as failure.
Frimpon (2012, p. 121). It get worse when research shows that cost is one of the major pain
points in an ERP implementation as stated by Marry (2012, p. 23-25). Marry (2012) has
provided the detailed research figures published by YouGov that state that 58% users
responded that ERP systems do not match their business processes. Situation gets even worse
when 79% users report that the information they extract from the system is inaccurate.
Although Marry (2012, p. 25-26) has suggested some guidelines to overcome the
shortcomings, still the complexity of an ERP system and the implementation process itself are
major roadblocks and lot of effort and research is required to reap the true benefits of an ERP
solution.

Major ERP Vendors

ERP vendors can be categorised with respect to the functionality, industry, cost etc. There are
many companies providing ERP solution based upon the specific customer needs. However a
brief comparison is being provided keeping in view the functionality expertise of the ERP

Ikramuddin SYED

Research Report

Student ID: 4274743

system (Fig. 1). However care should be taken while selecting an ERP solution to ensure that
ERP solution meets the customer needs. According to an article published by Unit4 (n.d, p. 2),
The selection and implementation of a new Enterprise Resource Planning (ERP) system is
probably the most critical IT decision you and your organization will ever make its not an
easy task identifying which of the available solutions will meet your organizations evolving
requirements. An ERP system will have a huge impact on the success and growth of your
organization, so it is important to follow a selection process when choosing your system.

Fig. 1
(Source: Panorama Consulting: online viewed on 20-February 2013)
http://panorama-consulting.com/erp-vendors/lists-erp-vendors/erp-software-vendor-list-byfunctional-expertise/

ERP Implementation Benefits:

According to Elragal and Al-Serafi (2011, p. 5),
ERP was found to save costs (Huang et al.,2009; Kang et al., 2008; Loh et al.,
2006; Wieder et al., 2006), facilitate business processes (Gattiker & Goodhue,
2005), and provide better information management (Federici, 2009). Operational
aspects like lead time can also be shortened by utilizing ERP systems (Cotteleer &
Bendoly, 2006; Gupta et al., 2004; Kang et al., 2008). According to Velcu (2007),
faster fulfillment of customer orders can be achieved using ERP systems. Gupta et
al. (2004) and Matolcsy et al. (2005) also agree that ERP systems provide more
customer satisfaction by reducing time of delivery of products.
Gartner (2010) cited in Marry (2012) states that proactive pattern analysis will be a key trend
in the ERP sector, and will see agile businesses using ERP data to predict events that are
likely to have a major impact. This ERP data will enable businesses to plan and pre-empt or
profit from these events. This, after all, is what enterprise resource planning was designed to
do. Marry (2012) also concluded that companies should analyse the key benefits and make
them count when budgeting the business change plan. These key benefits include but are not
limited to accelerated sales, increased profits, cost savings, time savings, reach more
customers and serve them better, improve cash flows, flexibility, value for money and peace
of mind. This proves that investment in ERP systems in not only for cash benefits, but the
ERP system promises to provide other intangible benefits, which can help organizations to

Ikramuddin SYED

Research Report

Student ID: 4274743

develop long term competitive advantage, provided that the ERP system has the flexibility
and responsiveness, as stated by Yusuf, Gunasekaran, & Abthorpe (2004, p. 252).

Rolls-Royce Implementation of ERP (Case Study)

Yusuf, Gunasekaran, & Abthorpe (2004) researched the ERP implementation at Rolls Royce.
The aim was to study the implementation strategy of ERP implementation and the challenges
faced by the organization, during the implementation phase.
Rolls-Royce is one of the leading UK company that deals in turbo engines. Due to the nature
of its high tech clients, company decentralized its operations by global outsourcing. This
posed a huge challenge to coordinate global suppliers and customers in terms of meeting
deadlines and having complete control on the value chain. The company was operating on
legacy systems, which did not meet the changing business dynamics and organization realized
the need for an integrated system, which can help the management to overcome the issues.
SAP/R3 ERP solution was selected as it was considered to be standard for big organizations.
EDS (Electronic Data Services) was selected as their consultants to assist them in
implementing the ERP system. King (2005, p. 83) verifies that consultants help in
customizing and implementing the ERP systems. Researcher agrees that this a good move by
Rolls-Royce. Generally project teams are comprised of consultants and client representatives
and this helps in resolving the issues more effectively. These issues may involve conversion
of data from legacy systems, user acceptance testing and user training, organizational
maturity, readiness for ERP system and management of conflicting goals compared to the
organizational strategy. Although author criticized on the composition of project teams as the
configuration of team may vary based upon the task given to them. As an example the ERP
selection team might be different from the one providing user trainings or getting the
acceptance testing etc. Objectivity was missed and this lead to many problems during the
implementation stage. Rolls-Royce management ensured that ERP system implementation
was not just an IT software implementation, rather it was a change program and re-arranged
the teams to successfully implement the system. The commitment of the top management
towards ERP implementation was very high and users buy-in was ensured through rigorous
trainings.

Learning from Case Study

Although author has declared the project as successful and lessons learned from the project
might be useful for other organizations in helping them develop a more effective
implementation strategy. According to the article,
An immediate benefit that will be achieved by the system will be the ability to
promise and then deliver to the customer on time. This was something that the
older systems could never achieve, as they often used due dates that were in the
past.
Author has suggested more research on sustainable benefits that could result in the
development of the executive information system, as there is a lack of research on sustained
benefits after about an year of stable implementation.

ERP Implementation at ChemCo (Case Study)

The case study The effect of ERP system implementation on business performance: an
exploratory case study by Elragal and Al-Serafi (2011) presents a detailed research on the
benefits of successful ERP implementation. According to the author of the paper, ChemCo,

Ikramuddin SYED

Research Report

Student ID: 4274743

Egypt Branch was formed in 1997 as a result of merger of a chemical company and a
pharmaceutical company. Keeping in view the number of employees it can be categorised as
SME. ChemCo is operating in five countries with more than hundred branches. The
management felt a need for integrated system and selected JDEdwards as their ERP vendor.
Factors for selecting this solution included the total cost of ownership and the fact that
hardware infrastructure to support the solution was already in use. The researcher interviewed
IT manager, and also got the questionnaires filled by finance manager, logistic manager and
operations manager. Data was analysed based upon the responses. Researches selected this
company for the case study to ensure that it had a stable ERP implementation for more than
one year and company is reaping the benefits of integrated system. Before implementing the
ERP system, ChemCo was running legacy systems, but after the implementation of JDEdward
World, all legacy systems were replaced by the new system except few modules in production
department. After two years of hardwork ChemCo was able to go live with new ERP system.
As stated by the IT manager, we implemented the ERP system in phases, so that it has
minimum distraction on routine business activities.
The analysis of the data shows that overall business performance goals were met with ERP
implementation. The routine processing time was reduced and tasks were quickly performed
compared to legacy systems. Also due to the integration of systems, it was easy to access the
required information for quick decision making, which helped the management to respond to
the quickly changing market needs. According to the operational and logistics manager,
As for the operational benefits both the logistics and operations managers have
agreed that the ERP has shortened the time needed to deliver products to the
customer, has a great effect on the capability of the company to produce or
provide more products and services, has reduced the amount of inventory,
improved greatly the capability to respond to customers, has reduced the number
of errors in shipping and sales returns, and has a great effect in improving
communication with customers and integration with partners.
Keeping in view the constraints and limitations, author declares that the implementation of
ERP system in ChemCo was successful and after the implementation of ERP, the business
performance improved and customers are more satisfied.

Learning from Case Study

The paper however does not include the communication benefits with the top management
and this might be because ERP is an organisation system and the communication tool. The
author has suggested more research on the issue and how the integrated system can play more
vital role in communicating useful information across the organisation in order to make it an
executive information system.

Conclusion
The case studies discussed in this research report present a glimpse of benefits achieved by
ERP implementation. More research is needed to find out the issues in implementing an ERP
system. According to a white paper published by IBM Software (2012, p.2), IT
infrastructures must evolve to cope with the exploding volume, variety and velocity of
information available today. According to the white paper a Brazilian financial company
needed to predict the buying behaviour of its customers. The company leveraged the
advantage of multiple analytical tools, data warehouse and an existing ERP system and can

Ikramuddin SYED

Research Report

Student ID: 4274743

now predict the buying behaviours of its customers and analyse market trends in a better way.
The company has also reduced its CRM deployment cycle from eight months to few weeks
IBM Software (2012, p.2). A successful implementation of an ERP system and rightly chosen
analytical tools can help a company in quick decision making, respond quickly to the
changing market trends, reaching and serving its customers in a better way and thus
maintaining a competitive advantage over its competitors. This is what an integrated system
can do for an enterprise.

Ikramuddin SYED

Research Report

Student ID: 4274743

References

Batada, I & Rehman A 2011, Selection, implementation and post production of an

ERP system, Proceeding of the European conference on information management
and evaluation, pp. 38-44.

Elragal, AA and Al-Serafi, AM 2011, The effect of ERP system

implementation on business performance: an exploratory case
study, Communications of the IBIMA, Vol. 2011,
http://www.ibimapublishing.com/journals/CIBIMA/cibima.html

Fosser, E Leister, OH Moe, CE & Newman, M n.d., ERP systems and

competitive advantage: some initial results, University of Agder,
Kiristiansand, Norway.

Frimpon, FM 2012, A Project Approach to Enterprise Resource

Planning Implementation. International journal of business and
management, vol. 7, no. 10 pp. 116-133.

Hong, KK Kim, YG 2002, The critical success factors for ERP

implementation: an organizational fit perspective, Information &
Management, vol. 40, Iss. 1, pp. 25-40,
(http://www.sciencedirect.com/science/article/pii/S03787206010013
43).

IBM Software 2012, Integrated systems for operational analytics, A

white paper from IBM software information management,
(http://docs.media.bitpipe.com/io_10x/io_106982/item_593195/Integ
rated%20Systems%20for%20Operational%20Analytics.PDF), viwed
on 20-February-2013.

King, WR 2005, Ensuring ERP implementation success, IT strategy and innovation,

vol. Summer 2005, pp. 83-84.

Marry, P 2012, Addressing common pain points of ERP systems,

Operations management, No. 3, pp. 23-27.

Sharma, RRK, Patil, SM & Tandon, A 2012, Customization and best

practices model for adopting ERP system: an analysis, International
journal of business strategy, Volume 12, No.1, pp.1-9.

Unit4 Business Software (n.d.), The ERP Selection Process, 10 Steps

to Selecting your ERP Solution, Embracing Change, published online
viewed on 27th August 2012, http://www.unit4software.com

Ikramuddin SYED

Research Report

Student ID: 4274743

Yusuf, Y Gunasekaran, A & Abthorpe, MS 2004, Enterprise

information systems project implementation: A case study of ERP in
Rolls-Royce, Int. J. Production Economics, vol. 87, pp. 251266.