Enterprise systems
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A short introduction to the concept of Enterprise Systems.
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Enterprise systems
- 1. www.handels.gu.se Johan Magnusson Centre for Business Solutions School of Business, Economics and Law University of Gothenburg Enterprise Systems 2013-08-29Centre for Business Solutions
- 2. www.handels.gu.se2013-08-29Centrum för Affärssystem Education PhD Business Administration "Unpackaging IT Governance", University of Gothenburg (2011) PhL Informatics "Interorganizational Collaboration among SMEs" University of Gothenburg (2005) BSc Psychology: Lund University (2001) BSc Business Administration, Lund University (2001) MSc Systems Engineering, Mid Sweden University (2000) International Faculty Development Program, IESE Business School, University of Navarra (2008) Institutions and Organizations, Stanford University (2005) Current areas of research IT Governance, Management Accounting, Enterprise Systems Current areas of teaching Enterprise Systems IT Governance Keynotes Management Events, IT Executive Forum, Effektiva Affärssystem, Forum Affärssystem, CIO Executive Club, IDG CIO Conference, SANTE Consulting Product evaluation, Product development, Investment evaluation, project management, Coaching Management Director (Centre for Business Solutions), Director (SANTE Academy), Project Manager (Stanford University Exchange), Coordinator (ECIS), Member of Microsoft Academic Alliance Advisory Board EMEA, Member of CIO Awards jury
- 3. www.handels.gu.se2013-08-29Centre for Business Solutions
- 4. www.handels.gu.se Agenda After the lecture, you will be able to: 1. Describe what ESs are and how they have developed over the years 2. Articulate the technological pre-requisites and pressing issues that impact the future development of ESs 2013-08-29Centre for Business Solutions
- 5. www.handels.gu.se Definition and background • Standardized, enterprise-wide information systems • Purpose: Increased Efficiency and Decision quality • MIS; AIS; MRP, MRPII, SCM, SRM, SEM, PLM, KMS, BI, CPM, LIS, EIS, ES, DSS, BPMS, CRM, ERP… • Forever bloating, forever changing • Walking hand in hand with advances in technology and the perception of the firm 2013-08-29Centre for Business Solutions
- 6. www.handels.gu.se 0 50000 100000 150000 200000 250000 300000 1960 1970 1980 1990 2000 2010 Exxon Mobil Ford Motor General Motor General Electric IBM What is the Big Deal? • We live in a state of constant transition and change • New markets, new regulation, new opportunities, new disturbances, increased fluctuations in demand, increased demand for personlization, increased demand for collaboration… • How do we match the need for flexibility with efficiency? 2013-08-29Centre for Business Solutions Turnover MUSD of the five largest companies 1960-2010. Source Forbes.com
- 7. www.handels.gu.se Control • How do we manage the organization? • The dream of rationality… • Fetischism of numbers • Rational decision making requires total information • Control tower metaphor • ”The fog of war” Läs mer: Dearden, J. 1965. MIS is a mirage. Harvard Business Review.
- 8. www.handels.gu.se “When we understand that slide, we’ll have won the war,” General McChrystal “It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster
- 9. www.handels.gu.se Infrastructure becomes infostructure Marginal Infrastruktur Personalhantering Teknikutveckling Inköp Ingående logistik Produktion Utgående logistik Marknad och Sälj Service Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database Database
- 10. www.handels.gu.se The reason for buying off-the-shelf… Källa: Magnusson, J. & Olsson, B. 2005. Affärssystem. Studentlitteratur, Lund.
- 11. www.handels.gu.se Historical development • From MRP to CC • Bloating and Control • Trying to find the correct composition • MRP, MRPII, ERP, EAI, SOA, Sa aS/CC 2013-08-29Centre for Business Solutions
- 12. www.handels.gu.se A stilized Alfa Laval • sa | Organisationskarta
- 13. www.handels.gu.se 1960: Centralization | Fiktiv beskrivning 1960
- 14. www.handels.gu.se 1980: Decentralization • safsd | Fiktiv beskrivning 1980
- 15. www.handels.gu.se 1998: Centralization á là Enterprise Resource Planning | Fiktiv beskrivning 1998
- 16. www.handels.gu.se 2002: Decentralization with a centralized integration Enterprise Application Integration / Enterprise Service Bus | Fiktiv beskrivning 2002
- 17. www.handels.gu.se 2010: Decentralization Service Oriented Architecture | Fiktiv beskrivning 2010
- 19. www.handels.gu.se Food for thought: Cloud Service Brokerage Service/Process Broker Service/Process Supplier Service/Process Supplier Service/Process Supplier Service/Process Supplier Client COBITITIL SCOR Process standards WSDLXBRL XML Technology standards
- 20. www.handels.gu.se Research perspective: ERP App Stores • “Apps Market” introduced by ERP vendor 2012 • Inspired from Salesforce.com and Apple • Empower the end-user to buy apps • Empower the consultant to package functionality/customizations as apps • Moving towards a Platform strategy (Gawer, 2009) 2013-08-29Centre for Business Solutions Read more: Magnusson and Nilsson. 2013. “Introducing App Stores into a Packaged Software Ecosystem: A negotiated order perspective” International Journal of Business Information Systems.
- 21. www.handels.gu.se Research Perspective: Public Procurement • To reduce the switching cost of public IT procurement by 10% • Background – High switching costs are detrimental for competition – Technological developments have reduced the theoretical switching costs – There is a fundamental potential in reduced public spending on IT – Building on work by Von Weizäcker (1984) and Klemperer (1987) • Joint program GU/Stockholms Universitet 2012-2014 2013-08-29Centre for Business Solutions Read more: Magnusson and Nilsson. 2011. “Studying the Implications of Cloud-based delivery models on public IT procurement: A switching cost perspective”. eChallenges, Firenze, Italy.
- 22. www.handels.gu.se Technological pre-requisites • Architecture – From technology to service • Costs – From significant to pervasive • Business Needs – From scale to scope 2013-08-29Centre for Business Solutions
- 23. www.handels.gu.se TP: Architecture • From centralization to decentralization… • Incorporation of new concepts – Business Architecture – Information Architecture – Enterprise Architecture • The fundamental question of alignment and fit • How should we design the organization? • What happens when services become the atom of the architecture? 2013-08-29Centre for Business Solutions Read more: Magnusson. (forthcoming). “When Centralization and Decentralization clash: A revelatory case study of the ideographic organization of IT at a large Swedish University“. Information Resource Management Journal.
- 24. www.handels.gu.se TP: Cost • Moore’s and Metcalfe’s Laws • Integration cost • Switching cost • Maintenance cost • Upgrade cost • Transition cost • People cost • From CAPEX to OPEX… 2013-08-29Centre for Business Solutions
- 25. www.handels.gu.se TP: Business Needs • What solution best suits anything? • Ability to reorganize during operations • Ability to set up new branches et cetera • Ability to reformulate business model • Ability to free working capital • So, what do we want? – Control – Efficiency – Effectiveness 2013-08-29Centre for Business Solutions
- 26. www.handels.gu.se Agility • .”..the ability to change the body’s position efficiently…” • Common term for ability to stay in tune with changing demands and the ability to satisfy these • Flexibility and scalability • Returning Question: How do we avoid the trade-off with efficiency? 2013-08-29Centre for Business Solutions
- 27. www.handels.gu.se Pressing issues • Standardization • The competence of the buyer • The scope and function of ES • The interplay with other products and solutions • The shift to services 2013-08-29Centre for Business Solutions
- 28. www.handels.gu.se Recapitulation 1. Describe what ESs are and how they have developed over the years 2. Articulate the technological pre-requisites and pressing issues that impact the future development of ES 2013-08-29Centre for Business Solutions
Editor's Notes
- Centrum förAffärssystem, introducera ERPsim
- Common Care Documentation (GVD)Project time: 2 years; Project cost €20MTwoyears over time, ”moth-bagged”Estimated final cost +800%, scope 50%, time +150%Development project concerning the implementation of SAPYearly costs 2008: €58M, €42M over budgetNew ideas about the final costs: €6-80M/year, time 4 yearsTotal budget: 250M€ (Project, not total costs), estimated to 400M€ROI: 27M€/year starting from 2017Currently in phase 3 of 6, 130M€ spentNew report states that the project should be terminatedFinal estimation of cost is 200M€ (1-3)Enligt Gartner:Fortsätt: 2.8-4.5 MDR KR drift ochutveckling till 2020, Avvecklaochbygganytt: 7.9-10.9 MDR KR, Behållochkomplettera med nytt: 3.2-4.5 MDR KR12% anseratt PRIO underlättararbetet, 25% ärpositivtinställdaFM sparar 1MDR per åreftersom man intekanagera I förbanden
- Enterprise systems have been defined by numerous reserachers and practitioners since the mid 1950’s. We choose to use the definition given by Magnusson & Olsson (2005;2008) as standardized, enterprise wide information systems. This is discussed along the following lines:Standardized: One-size-fits-all. The idea behind going for a standardized solution is that there are economic and process-related benefits in introducing a system that is not customized to the particular needs of the organization. Instead, we choose to see the ES as the process support through which we can change our processes to compete better. Instead of cementing the current procedures and processes of our organization, we choose to cling to an idea of importing best-practice, or new, more efficient ways of organizing and conducting our business. This also brings with it benefits on the cost-side, since the promise of the standardized systems are that you can acquire them directly (they currently exist, not like the customized system that has a considerable time-to-market) to a lesser price than it would cost to build the organization necessary for such a task and then spend time developing the system. The increased complexity of technology also brings with it an increased difficulty in actually building it yourself. Enterprise-wide: The idea behind the ES is to integrate the whole of the business so that information can flow throughout the entire organization. Information from the Market-side will be accessible to the R&D-department, and the CFO will have complete control in real time, given that the functions of the business are integrated. This is an ancient idea of Total systems, where the system covers every aspect of the organization. So, total in scope and in real-time. This will give the managers the information necessary for rational choices. Information system: IT based artifact consisting of information, people and processes. With increased technological possibilities, the manor in which we design and implement these systems has changed. From the earlier systems not being standardized, to the later systems building to a high degree on standardization. From high costs of integration to the current low costs of integration. From the previous high dependence upon the vendor of systems to the current more customer driven development of the market for ES. This also impacts the level of control that an organization can have over their operations, which in turns brings with it alternative possibilities for organizing. The rise of multi-national corporations, with high geographic distribution could be seen as directly dependant upon the development of control means for such an enterprise. With companies such as Wall-Mart (250.000 employees) in mind, this would be impossible to control without a well-functioning ES.
- Constant changePre-requisites for business have during the past decades gone through radical changes. We have seen a decrease in the “fat” allowed in organizations, where Lean and Down-sizing and BPR have swept with it a state of almost anorectic organizations. We can not afford to have manual routines, since they are cost-intensive and lead to longer lead-times. The following issues are of particular importance to the organization of today:Ability to reorganize under pressureAbility to decrease lead-timesAbility to invite new (and barr) organizations into the corporate ecosystem, managing the relationship with both suppliers and customersAbility to provide external stakeholders with relevant information of how the business is doingAbility to rationalizeAbility to have a process oriented businessThese abilities bring with them a new take on which type of information system that should support the organization. Some of the demands on IT include:Ability to decrease the gap between business and IT configurationAbility to change swiftly when new opportunities ariseAbility to stay in tune with technological changesAbility to scale the costs associated with IT depending on how the organization changesExamples of failures:A major percentage of the cases regarded by research are considered to be failures. There are but few examples of cases that are seen as total success stories, which links us back to the question of what the critera for successful projects actually are. Commercial research firms in the form of professional analysts have stated that as much as 80% of all ERP implementations fail to fulfill the hygiene criteria of scope, budget and time, yet only a smaller percentage are actually regarded as upright failures. One could argue that the traditional criteria for project success solely depicts the ability of the organization to plan projects that are possible to plan, whereas a major project such as an ERP implementation is too large to plan successfully. Hence, the projects are often considered to be successful if they are completed. On this same issue the projects are highly complex due to their integrated nature. Since an ES implementation affects several aspects of the organization as well as potentially even the business model of the corporation, they are difficult and complex. The wide array of different stakeholders involved also adds to this complexity, making the projects politically as well as technologically complex. Examples: Levis, LEGO, Försäkringskassan, Försvarsmakten, GemensamVårddokumentation, Exemples of Success:When we use IT to informate and automate, the benefits for decreased lead times can be massive. If we move from a manual process to an automated process, we can reduce the errors and lead times, at the same time as we can rationalize in terms of staff. Hence, the benefits of a successful ERP project are impressive and promising. Once the organization has access to an integrated information environment, the level of insight through accurate information is an additional bonus that will aid the decision making process, making for better decisions and smarter moves. This brings us to the two general reasons for investing in an ERP: to reduce lead times (efficiency) and to increase decision quality and execution (effectiveness). Examples. Boeing, IBM, Hestra…