The Development of Enterprise Resource Planning Systems

The Evolution of Information Systems ERP system was not feasible until the 1990’s Evolved as a result of Development of hardware and software technology needed to support the system Computers have gotten smaller and faster Moore’s Law Performance doubled with each new generation of computers Every 18-24 months the # of transistors on a computer chip doubled Proliferation of personal productivity software

The Evolution of Information Systems Development of a vision of integrated information systems As PC’s gained popularity, managers became aware that important business information was being stored on individual PC/s, but there was no easy way to share the information electronically. Servers became more powerful and less expensive and provided scalability Possible to view ERP systems as an extension of MRP II (Manufacturing Resource Planning)

ERP Software Emerges SAP R/3 Formed in 1972 by five former IBM systems analysts Systemanalyse und Programmentwicklung Systems Analysis and Program Development R/3 Released in 1992 Designed using an open-architecture Allows all business areas to access the same database, eliminating redundant data and communication s lags

The Significance and Benefits of ERP Software and Systems Allows easier global integration Barriers of currency exchange rates, language and culture can be bridged automatically Eliminates updating and repairing many separate computer systems Allows management to manage operations, not just monitor them Makes the organization more responsive when change is required

Questions About ERP How Much Does an ERP Package Cost? Large company might spend from $50 million to $500 million Midsize company might spend $10 million to $20 million Cost includes several factors ERP software New Hardware Consultants’ and analysts’ fees Time for implementaiton Training

What return can be expected from an ERP investment? Savings in operations expense One study indicated that 33% of companies say costs savings in sales order management, and 34% of companies said their ERP systems significantly reduced their personnel needs More sales can be generated every month Competitive advantage Save personnel, suppliers, distributors, and customers much frustration

Why do some companies have more success with ERP than do other? Some executives hope that new software will cure fundamental business problems that aren’t curable by any software Some executives and IT managers don’t take enough time for a proper analysis during the planning and implementation phase Some executives and IT managers skimp on employee education and training

The Continuing Evolution of ERP The Internet has forced ERP companies to rethink how users get and use their ERP software