ERP Introduction Lesson 1 (1) PDF

CHAPTER 1 Introduction to Enterprise Systems for Management 1  Learning Objectives Understand the information systems evolution and its historical role in the organization leading to systems integration and Enterprise Resource Planning (ERP). Learn...

CHAPTER 1 Introduction to Enterprise Systems for Management 1  Learning Objectives Understand the information systems evolution and its historical role in the organization leading to systems integration and Enterprise Resource Planning (ERP). Learn about ERP systems and evolution, components, and architecture; understand the benefits and drawbacks of implementing ERP systems and how they can help an organization improve its efficiency and worker productivity. Gain an overview of the implementation process (e.g., the ERP life cycle, business process reengineering project management, and change management). Understand the role of people, vendors, consultants, and the organization in making the ERP implementation process successful. Comprehend the ethical, global, and security challenges while implementing an ERP system, and look at the ERP vendors and industry trends. 2  Preview In the early days of ERP implementation most management did not understand the magnitude of issues an organization has to consider before, during, and after implementation. ERP systems are very different from conventional packaged software, such as Microsoft Office and others. There are no shortcuts when it comes to implementing an enterprise system. 3  Enterprise Systems in Organizations Business organizations have become very complex and their business needs can no longer be supported by one single information system. Information Systems are a critical component of a successful organization today. Management is generally categorized into three levels: Strategic, Mid-Management and Operational. Information Systems provide a high level of computer automation to support business functions such as: Accounting Finance Human Resource Management Customer Service Marketing Operations 4 Figure 1-1 Management Pyramid with Information Requirements 5  Information Silos and Systems Integration Over time, Information Systems create a hodgepodge of independent nonintegrated systems ultimately creating bottlenecks and interfering with productivity. Organizations need to be agile and flexible and will require their information systems to have integrated data, applications, and resources from across the organization. To compete effectively, organizations have to be customer focused. – This requires cross-functional integration among the accounting, marketing and other departments of the organization. 6  Enterprise Resource Planning (ERP) Systems WHAT IS AN ERP SYSTEM? Enterprise Resource Planning Systems are the first generation of enterprise systems meant to integrate data and support all the major functions of organizations. ERP systems integrate various functional aspects of the organization as well as systems within the organization of its partners and suppliers. The goal of an ERP system is to make the information flow dynamic and immediate, therefore, increasing its usefulness and value. 7 Figure 1-2 Integrated Systems - ERP 8 Enterprise Resource Planning (ERP) Systems (Cont’d) Another goal of ERP is to integrate departments and functions across an organization into a single infrastructure that serves the needs of each department. ERP systems replace an assortment of systems that typically existed in organizations. (Accounting, HR, Materials Planning, Transaction Processing, etc.). ERP solves the critical problem of integrating information from different sources and makes it available in real- time. 9  Evolution of ERP Timeline System Platform 1960s Inventory Management Mainframe legacy systems using third & Control generation software-(Cobol, Fortran) 1970s Materials Requirements Mainframe legacy systems using third Planning (MRP) generation software-(Cobol, Fortran) 1980s Materials Requirements Mainframe legacy systems using fourth Planning (MRP-II) generation database software and manufacturing applications. 1990s Enterprise Resource Mainframe client-server systems using fourth Planning generation database software and package software. 2000s Extended ERP or ERP- Client-server systems using Web platform, II open source with integration to fifth generation applications like SCM, CRM, SFA. 10  Business Processes and ERP A crucial role of ERP in business is to better position the organization to change its business processes. ERP software have hundreds of business processes built into the logic of the system which may or may not agree with current processes of an organization. When implementing an ERP system, organizations have two choices: – Change business processes to match the software functionality. – Modify the ERP software to match the business processes. 11  ERP Systems Components An ERP system consists of: Hardware Servers and peripherals Software Process Operating systems and database Information Organizational data from internal and external sources Process Business processes, procedures, and policies People End users and IT staff 12 Figure 1-3 ERP Components 13 Figure 1-4 ERP Components Integration 14  ERP Architecture The architecture of an ERP system influences the cost, maintenance, and the use of the system. A flexible architecture is best – it allows for scalability as needs change and grow. A system’s architecture is a blueprint of the actual ERP system and helps the implementation team build the ERP system. If purchased, ERP architecture is often driven by the vendor but other IT architectures are driven by organizational strategy and business processes. 15 Figure 1-5 Example of Architecture of ERP at Large University 16 Figure 1-6 Logical Architecture of an ERP System 17 Figure 1-7 Tiered Architecture Example of ERP System 18  E-Business and ERP E-Business ERP Focuses on linking a business with its Focuses on integrating the internal external partners and stakeholders functional silos of the organization into an enterprise application Disruptive technology—Totally Adaptive technology—Merged the transformed the way a business early data processing and integration operates in terms of buying and efforts within an organization selling, customer service, and relationships with suppliers Early focus of e-Business was on Focus of ERP systems was mainly on communication (e-mail), collaboration data sharing, systems integration, (calendaring, scheduling, group business process change, and support), marketing and promotion improving decision making (Web sites), and E-commerce (Front through the access of data from a office functions) single source (Back office functions) 19 Figure 1-8 e-Business and ERP 20  System Benefits of an ERP System Integration of data and applications across functional areas (i.e., data can be entered once and used by all applications; thus improving accuracy and quality of the data). Improvements in maintenance and support as IT staff is centralized. Consistency of the user interface across various applications means less employee training, better productivity, and cross-functional job movements. Security of data and applications is enhanced due to better controls and centralization of hardware. 21  System Limitations of an ERP System Complexity of installing, configuring, and maintaining the system increases, thus requiring specialized IT staff, hardware, and network facilities. Consolidation of IT hardware, software, and people resources can be cumbersome and difficult to attain. Data conversion and transformation from an old system to a new one can be a tedious and complex process. Retraining of IT staff and end users of the new system can produce resistance and reduce productivity. 22  Business Benefits of an ERP System Increasing agility of the organization in terms of responding to changes in environment for growth and maintaining market share. Information sharing helps collaboration between units. Linking and exchanging information in real-time with supply-chain partners improves efficiency. Better customer service due to quicker information flow across departments. Efficiency of business processes are enhanced due to the re-engineering of business processes. 23  Business Limitations of an ERP System Retraining of all employees with the new system can be costly and time consuming. Change of business roles and department boundaries can create upheaval and resistance to the new system. 24 ERP Implementation (Business Process Management) Business process management is the understanding, visibility, and control of business processes. BPM has a prescribed methodology that should be followed to help document business processes and understand their use throughout the business. Improved business processes may result in: – Improved customer satisfaction. – Reductions in cost. – Increased productivity by allocating resources to more value- added activities. 25  ERP Implementation (ERP Life Cycle) The key to a successful implementation is to use a proven methodology, take it one step at a time, and begin with the planning and understanding the ERP life cycle. ERP system implementations are very risky, and using a well-defined project plan with a proven methodology will assist in managing those risks. There must be a strong well-communicated need to make the change from the existing information systems/applications to an ERP system. 26 Figure 1-9 ERP Life Cycle 27 Figure 1-10 ERP Implementation Methodology 28 Figure 1-11 Product Life Cycle 29  Software and Vendor Selection It is best for an organization that does not have the experience in developing ERP systems to purchase one on the market. Before selecting a vendor, the organization must carefully evaluate its current and future needs in enterprise management systems. Review the organization’s existing hardware, network, and software infrastructure, and the resources available for the implementation. 30  Vendor Evaluation Business functions or modules supported by their software. Features and integration capabilities of the software. Financial viability of the vendor as well as length of time they have been in business. Licensing and upgrade policies. Customer service and help desk support. 31  Vendor Evaluation (Cont’d) Total cost of ownership. IT infrastructure requirements. Third-party software integration. Legacy systems support and integration. Consulting and training services. Future goals and plans for the short and long term. 32  Operations and Post-Implementation Going live (“Go-live”) is one of the most critical points in a project’s success. It is vital to focus the efforts of all project teams to ensure that task and activities are completed before going live. – This allows project management to address any outstanding issues that may jeopardize the Go-live date. – This involves a readiness process that needs to include as many team members and appropriate users and managers as possible. 33  Five Areas of Stabilization are Important: Training for end-users. Reactive support (i.e., help desk for troubleshooting). Auditing support to make sure data quality is not compromised by new system. Data fix to resolve data migration and errors revealed by audits. New features and functionalities to support the evolving needs of the organization. 34 Figure 1-12 Project Management 35 Figure 1-13 Project Life Cycle 36  People and Organization Project Management For an ERP system to be implemented successfully, project management must provide strong leadership, a clear and understood implementation plan, and close monitoring of the budget. Consultants It is often the case for organizations without much ERP implementation experience to use implementation partners such as consultants. 37  People and Organization (Cont’d) Change Management This helps prepare for changes to how business is done. In implementing new systems, communicating, preparing, and setting expectations is as important as providing training and support. Business Process Re-engineering Business processes will need to be changed, adjusted, or adapted to the new system to use the functionality of an ERP system fully. Global, Ethical and Security Management Outsourcing overseas, ethical issues, and problems with system security have also attracted a lot of attention in ERP implementation. 38 ERP Market Tiers 39  ERP Vendors SAP SAP is the recognized global leader among ERP vendors with over 12 million users. Its solutions are for all types of industries and for every major market. www.sap.com Oracle/Peoplesoft As the second largest ERP vendor, Oracle provides solutions divided by industry category and promises long- term support for customers of PeopleSoft- (acquired in 2004). www.oracle.com Infor The world’s third largest provider of enterprise software. It delivers integrated enterprise solutions in supply chain, customer relationship and suppliers management. 40  ERP Vendors (Cont’d) Microsoft Dynamics Formerly Microsoft Business Solutions or Great Plains, Microsoft Dynamics is a comprehensive business- management solution built on the Microsoft platform. Microsoft Dynamics integrates finances, e-commerce, supply chain, manufacturing, project accounting, field service, customer relationships, and human resources. Lawson Industry-tailored software solutions that include enterprise performance management, distribution, financials, human resources, procurement, and retail operations. www.Lawson.com 41  ERP Vendors (Cont’d) SSA Global Acquired Baan in 2004.They claim to offer solutions that accomplish specific goals in shorter time frames and are more efficient with time. Epicor This company provides enterprise software solutions for midmarket companies around the world. Claims to have solutions to a variety of needs, whether a customer is looking for a complete end-to-end enterprise software solution or a specific application. 42  Software Extensions and Trends As e-Business firms started growing bigger with advanced needs in HR, accounting, and warehousing, non-ERP vendors were unable to support their requirements. ERP vendors were starting to expand their functionality to the Internet and e-Business. Intense competition and fluctuating sales have forced the ERP vendors to expand functionality to add value. The saturation of the demand in big business and the lucrative nature of the small and midsized business markets have led vendors like SAP and Oracle to enter the small business market. 43  Software Extensions and Trends SOA implementation will continue to grow as a factor in ERP purchase decisions because vendors are using creative marketing around product strategies versus buying what is currently available. Another shift is toward recurring and variable revenue models - Maintenance charges driving industry growth. The other major revenue shift is toward software as a service or hosted subscription-based applications. Social networking and open-source software solutions are also poised for significant growth. 44  Implications for Management ERP systems implementation is a complex organizational activity. – Important to evaluate and learn from the successes and failures. – Managing risk is all about keeping project focus and clear communications throughout the organization. ERP systems implementation requires strong project management oversight. ERP systems provide improved and added functionality for an organization. ERP systems are set to proliferate globally. 45  Summary Whereas the risks for implementing an ERP are greater, the payoff is very high for organizations. The integration of data helps an organization to better meet the demands of a fast and dynamic business world. The use of ERP systems provides for integrated data and business processes, thereby creating opportunities for organizations to expand and change as their business changes. 46  Summary (Cont’d) ERP components consist of hardware, software, information, process, and people to perform the fundamental phases of an information system: input, process, and output. ERP system architecture is a blueprint of the actual ERP system. There are two types of architecture: physical and logical. The selection of a system must be based on the needs of the organization and how well a vendor meets those needs now or in the future. 47  Summary (Cont’d) To be successful in implementing an ERP system, an organization and its management must clearly understand the implementation process. – The key to this is the application of an ERP life cycle and methodology throughout an implementation. People and organizations are an important part of the implementation process. Without in-house experts, either the software vendor or a third party should be hired and used to assist or lead the project. Whereas ERP implementations are costly in time and resources, the greater costs are in process change, system maintenance, and remaining current. 48  CHAPTER 2 SYSTEMS INTEGRATION 49  Learning Objectives Understand the impact of organizational structure on information systems. Find out about the types of functional silos in organizations. Learn about the evolution of information systems technology generations and architectures and its influence on silo environment. Know what systems integration is and why it is important for organizations. Understand the role of Enterprise Resource Planning (ERP) systems in systems integration. 50  Preview Systems integration means that you allow a heterogeneous (hodgepodge) IS to communicate or integrate and share information (or data) seamlessly with one another. Systems integration is a key issue for an organization for its growth - Management needs to pay close attention to this issue. ERP systems are a major kind of enterprise information system allowing organizations to integrate different systems into one organization-wide application with an integrated database management system. 51  Functional Silos Silos are basically compartmentalized operating units isolated from their environment. Horizontal Silos The POSDCORB (Planning, Organizing, Staffing, Directing, Coordinating, Reporting and Budgeting) categorization by Luther Gulick led to a set of formal organization functions such as control, management, supervision, and administration starting in late 1930s. Classification of organizations into departments like Accounting and Human Resources, reflects the breaking of complex tasks into smaller manageable tasks that could be assigned to a group of people who could then be held responsible. 52 Figure 2-1 Functional Model of Organization (POSDCORB) 53  Functional Silos (Cont’d) Vertical Silos Organizations also divided roles in hierarchical layers from strategic planning to management control and operation control. CEOs and Presidents plan long-term strategy, midlevel management focuses on tactical issues and on the execution of organizational policy whereas the lower-level management task is to focus on the day-to-day operations of the company. As organizations get big and complex they tend to break functions into smaller units and assign staff the responsibility for these activities allowing them to manage complexity as well as specialize in activities that enhance productivity and efficiency. 54 Figure 2-2 Hierarchical Model of Organization 55  Business Process and Silos The problem of functional silos gave birth to business process re-engineering (BPR). The cross-functional business process can involve people and resources from various functional departments working together, sharing information at any level of the organization. The cross-functional organizational structure breaks the functional silos by opening up the informational flows from one department to another. 56 Figure 2-3 Matrix Structure of Organization 57  Evolution of Information Systems in Organizations The functions of an organization (e.g., sales, manufacturing, and HR) are important as they provide a structure by which an organization functions smoothly. A silo information system is inefficient, inaccurate, and expensive. – The system creates bottlenecks for everyone and information is not available in real-time. The evolution of IS suggests that its role has generally been to support evolving information needs of the organization. 58 Figure 2-4 Functional Silos in Organization 59  IS Architectures Rapid advances in computer and networking technologies and changing organizational dynamics, drive the emergence of new information system models. Web-based systems today use a distributed architecture which allows the sharing of applications and data resources between the client and the server computers. In this configuration, personal computers are connected via a network to a Web server that provides a window to an application and database server, which could be a mainframe or another type of computer. 60  IS Functionalization In addition to serving the different management levels, IS also supports major business functions, such as manufacturing, marketing, accounting, finance, and HR. Each functional area has different information needs and report requirements. Each functional area in an organization also has multiple levels of management, each requiring different levels of analysis and details of information. 61 Figure 2-5 Information Systems Architectures 62 Figure 2-6 IS as Categorized by Functional and Hierarchical Models 63  Systems Integration Logical Develop information systems that allow organizations to share data with all of its stakeholders based on need and authorization. Management needs to change organizational structures, processes, and employee roles and responsibilities. Physical Provide seamless connectivity between heterogeneous systems. Business process reengineering involves changing the mindset of the employees in the organization, encouraging and enabling them to do their tasks in a new way. 64  Steps in Integrating Systems Step 1 Resource Instituting IT support for an integrated systems categorization environment is necessary to avoid support and maintenance problems with the integrated system. Step 2 Compliance and Develop a single sign-on policy because all standards employees and external partners will need access to an integrated system from anywhere, anytime. Step 3 Legacy systems Develop a policy in support of older legacy support applications. Step 4 Middleware tools Middleware tools are essential for integration in the short term if existing applications must be used by the organization. 65  Steps in Integrating Systems (Cont’d) Step 5 Authentication Single sign-on policy for application and data and authorization access because all employees and external policies partners will need access to an integrated system from anywhere, anytime. Step 6 Centralized IT The IT staff needs to be able to support all services and applications and platforms with a centralized IT support help desk support. Step 7 Back-up, A good back-up and recovery system is recovery, and essential if there is a system failure or a major security disaster. Step 8 Hardware and Develop organization standards and policy on software acquisition of new hardware and software which standardization is aligned with organization IT strategy. 66  Benefits and Limitations of Systems Integration Benefits Limitations Increased Revenue and Growth High Initial Set-up Costs Leveling the Competitive Environment Power and Interdepartmental Conflicts (due to the sharing of information) Enhanced Information Visibility Long-term and Intangible ROI (Usually several years) Increased Standardization Creativity Limitations (Restricts Creativity and Independence) 67  ERP and Systems Integration Enterprise Resource Planning (ERP) systems are integrated, multi-module application software packages designed to serve and support several business functions across an organization. ERP systems are typically commercial software packages that facilitate collection and integration of information related to various areas of an organization. ERP systems enable the organization to standardize and improve its business processes to implement best practices for its industry. 68  ERP’s Role in Logical Integration ERP systems require organizations to focus on business process rather than on functions. ERP systems come with built-in processes for a wide variety of common business functions. An ERP system implements best practices via specific built-in steps for processing a customer order in terms of: – order entry. – routing through departments. – communication of output to various parties. 69  ERP’s Role in Physical Integration Before installing the ERP system, an organization may have to upgrade or install middleware or get rid of their legacy system’s hardware and software. Integration is also required at the Data level, Client level, and at the Application level. A good ERP implementation improves operational efficiency with better business processes that focuses on organizational goals rather than on individual departmental goals. Improved efficiency with a paperless flow and electronic data interchange (EDI) or business-to-business (B2B) commerce environment with partners. 70  Implications for Management Silos do not work. – Most organizations lose out in the long-term when information is not shared in real time across the functional boundaries within the company. System integration has many hidden benefits. – Allows decision making to be cascaded to all departments – Allows employees at lower-levels to make better decisions while interacting with clients or partners. System integration has many challenges. – Replacing old hardware and software – Working with IT consultants – Human challenges, such as impact on IT staff, department heads losing control of data, and rumors of layoffs 71  Implications for Management (Cont’d) Systems integration raises many new ethical issues. – Possibility of some employees exploiting information for personal advantage and illegal access of information. Remedies can consist of: – Develop policies on ethical usage of information. – Install proper security software and hardware (like firewalls). – Allocate resources for training and education on accessing information. 72  Summary Functional silos categorize an organization’s tasks and activities into groups to improve efficiency and responsibility of work in the organization. Silos can improve productivity, but they often lead employees to achieve departmental goals rather than overall organizational goals. IS over the years have been divided horizontally by functions and vertically by hierarchical levels. IS architecture has evolved from centralized mainframe architecture to personal computers with distributed or client–server architecture. 73  Summary (Cont’d) In order for systems integration to be successful, organizations have to focus both on the human or logical level and on the physical or systems level. ERP systems thus make the process of systems integration easier, but they are expensive and often require organizations to start from scratch. System integration involves the whole organization, requiring top-management support and resources for a long-term period. Management must be ready to face the human and ethical challenges in a systems integration project. 74  CHAPTER 3 ENTERPRISE SYSTEMS ARCHITECTURE 75  Learning Objectives Examine in detail the enterprise systems modules and architecture. Understand the effects of a well-designed architecture on ERP implementation. Know the various types of ERP architectures and the related benefits and drawbacks of each architecture. Learn about the Service Oriented Architecture and its impact on ERP systems. Learn about cloud architecture and its impact on ERP systems. 76  Preview Once ERP systems are integrated and implemented successfully in a company, they become the cornerstone of the organization because every single transaction will be processed through this system. In addition to the Systems Integration, it is also necessary to focus on: – Business process architecture. – Business requirements. – Budget. – Project management. – Commitments from top management. – Continuous communication with employees informing them about future changes. 77  Why Study Enterprise Systems Architecture? Help management and the implementation teams understand in detail the features and components of the enterprise system. Provide a visual representation of the complex system interfaces among the ERP application and databases, operating systems, legacy applications, and networking. Management can develop a better IT plan if the requirements for system infrastructure, training, change management, and business process reengineering are clarified. 78  Components of the Enterprise Systems Architecture Functional – Defines the ERP modules that support the various business functions of the organization. Examples include: Accounting Human Resources Procurement Fulfillment Etc. System – Defines the ERP architecture through the physical components of hardware, software, and networking angle. 79 Figure 3-1 Enterprise Systems Architecture (ESA) Model 80  ERP Modules The key role of an ERP system is to provide support for such business functions as accounting, sales, inventory control, and production. ERP vendors, including SAP, Oracle, and Microsoft, etc. provide modules that support the major functional areas of a business. The ERP software embeds best business practices that implement the organization’s policy and procedure via business rules. 81 Figure 3-2 Typical ERP Modules 82  ERP Modules From Three Vendors Function SAP Oracle/ Microsoft PeopleSoft Dynamics Sales Sales and Marketing and Retail POS, Distribution, Sales Sales, Supply Chain Field Service Opportunity Management Management Procurement Purchasing, Supplier Procurement and Supply Chain Relationship Supplier Management Management Relationship Management Production MRP, Product Life Manufacturing Manufacturing Cycle Management Accounting Financial Accounting Financial Financial Management Management 83  ERP Modules From Three Vendors (Cont’d) Function SAP Oracle/ Microsoft PeopleSoft Dynamics Distribution Warehouse Supply Chain Distribution Management Management Management Customer Service CRM CRM CRM Corporate Governance, Risk, Corporate Analytics Performance & and Compliance Performance Governance Management Management Human Human Capital Human Capital HR Resources Management Management Management Miscellaneous Banking Campus Solutions E-commerce, Portals 84  Overview of Modules Production – Helps in the planning and optimizing of the manufacturing capacity, parts, components, and material resources using historical production data and sales forecasting. Purchasing – Streamlines the procurement process of required raw materials and other supplies. Inventory Management – Facilitates the processes of maintaining the appropriate level of stock in a warehouse. 85  Overview of Modules (Cont’d) Sales and Marketing – Implements functions of order placement, order scheduling, shipping, and invoicing. Finance – Can gather financial data from various functional departments and generate valuable financial reports. Human Resource – Streamlines the management of human resources and human capitals. Miscellaneous Modules – Nontraditional modules such as business intelligence, self- service, project management, and e-commerce. 86  Benefits of Key ERP Modules Self Services – Flexible support for employees’ business functions. – Simplified access to relevant information. Performance Management – Delivery of real-time, personalized measurements and metrics. – Provides executives with access to such information as business statistics and key performance measurements. Financials – Ensure compliance and predictability of business performance. – Gain deeper financial insight and control across the enterprise. – Automate accounting and financial SCM. – Rigorous support for financial reporting—SOX Act. 87  Benefits of Key ERP Modules (Cont’d) HR Management – Attract the right people, develop and leverage talents, align efforts with corporate objectives, and retain top performers. – Increase efficiency and help ensure compliance with changing global and local regulations by using standardized and automated workforce processes. – Enable creation of project teams based on skills and availability, monitor progress on projects, track time, and analyze results. – Manage human capital investments by analyzing business outcomes, workforce trends and demographics, and workforce planning. 88  Benefits of Key ERP Modules (Cont’d) Procurement and Logistics Execution – Sustain cost savings for all spending categories by automating such routine tasks as converting requisitions into purchase orders and by allowing employees to use electronic catalogs to order products and services. – Reduce costs through process automation, integration of suppliers, and better collaboration. – Improve resource utilization with support for cross-docking processes and data collection technologies. (RFID and bar codes). – Enhance productivity of incoming and outgoing physical goods movements. – Reduce transportation costs through better consolidation and collaboration. 89  Benefits of Key ERP Modules (Cont’d) Product Development and Production – Shorten time to market. – Deliver higher quality products and ensure timely delivery. – Real time visibility and transparency (availability check). Sales and Service – Higher number of sales orders processed and reduction in administrative costs. – Easy access to accurate, timely customer information. – Cost-effective mobile access for field employees. – Reduce travel costs by using online functions. – Adhere to environmental, health, and safety reporting requirements. – Improve the management of incentives and commissions. – Realize more effective real estate management. 90  ERP Architecture ERP system architecture is organized in layers or tiers to manage system complexity in order to provide scalability and flexibility. Three-layer architecture (the most reliable, flexible, and scalable architecture) is the most prevalent today and includes: – Web Servers. – Application Servers. – Database Servers. 91  Layered Architecture Example (Info.Net) The Layered ERP architecture generalizes the functional layers to allow it to change with newer technologies. A Web-based user interface is provided. – Users can access the application via the Internet. – The PC needs to be capable of running a Java-enabled Web browser. – The PC is connected to both Intranet and Internet to be able to use one of Info.Net’s servers. – The user interacts with the Java Virtual Machine™ Interface layer to establish a secure connection via a secure socket layer (SSL) connection. – The user is then communicating with the server through the applications software layer (ASL). 92 Figure 3-3 Example of Info.Net Architecture 93  Infrastructure Requirements Traditional networks require upgrading prior to the deployment of ERP systems and must be a component of the overall budget. A high-availability network is a requirement for a fully functioning ERP system, one that grows with the user population and supports continued expansion and integration of a supply chain. Integration with partner and customer systems allows “a company to manage important parts of the business such as order tracking, inventory management etc.” Online analytical processing (OLAP) provides the ability to access, present, and analyze data across dimensions. 94  Three-Tier Architecture Most of the current ERP implementations follow a three- tiered architecture, which consists of a Web tier, an application tier, and a data tier. Benefits – Scalability - Easier to add, change, and remove applications. – Reliability - Implementing multiple levels of redundancy. – Flexibility - Flexibility in partitioning is very simple. – Maintainability - Support and maintenance costs are less on one server. – Reusability - Easier to implement reusable components. – Security - IT staff has more control system to provide higher security. Limitations – Can be very expensive and complex. 95  Tiers The Web Tier – Web-based portal allows users the ability to access and analyze information through their Web browser. The Application Tier – Consists of a Web browser and reporting tool where business processes and end-users interact with the system. – It shields the business users from the inner workings of an ERP system, but still provides the information relevant to their job and business process. The Data Tier – Focus is on structure of all organizational data and its relationships with both internal and external systems. 96 Figure 3-4 A Three-Tier ERP Architecture 97  Web Services Architectures Web-based architecture often described as a fourth tier where the Web tier is split into Web Services tier and Web Browser tier. The ERP systems focus on the Internet to provide a powerful new functionality for Internet-based access and integration. This functionality is primarily supported through the following Internet access technologies: – Web Server. – ERP Portal. – Back-end Server Integration. – Browse Plug-ins or Applets. 98 Figure 3-5 Example of PeopleSoft’s Server-Centric Internet Architecture 99  Benefits and Drawbacks Benefits – Large numbers of end-users have access to ERP applications over the Web. – Easily integrate ERP applications with existing systems. – Server-centric—No complex, expensive client software installation. – The server-centric architecture enables secure end-user access to ERP application. – Client-centric—Architecture has better response time because user requests are mostly processed on the client’s computer. – Web-based architectures also allow better system-to-system integration. Drawbacks – Client-centric architectures lack security. – Server centric is slower. 100  Service-Oriented Architectures Also known as object-oriented architectures for Web platforms. Breaks the business tier into smaller, distinct units of services, collectively supporting an ERP functional module. Allows message interaction between any service consumer and service provider. A consumer from a device using any operating system in any language can use this service. 101  Service-Oriented Architectures SOA is a software development model based on a contract between a consumer (client) and a provider (server) that specifies the following: – Functional description of the service. – Input requirements and output specifications. – Precondition environment state before service can be invoked. – Post condition environment state after service has been executed. – Error handling when there is a breakdown. 102 Figure 3-6 A SOA Architecture 103  Benefits of Service-Oriented Architectures Business-level software services across heterogeneous platforms. Complete location independence of business logic. Services can exist anywhere (any system, any network). Loose coupling across application services. Granular authentication and authorization support. Dynamic search and connectivity to other services. Enhances reliability of the architecture. Reduces hardware acquisition costs. 104  Benefits of Service-Oriented Architectures (Cont’d) Accelerates movement to standards-based server and application consolidation. Provides a data bridge between incompatible technologies. Provides the ability to build composite applications. Creates a self-healing infrastructure that reduces management costs. Provides truly real-time decision-making applications. Enables the compilation of a unified taxonomy of information across an enterprise. 105  Business Value Benefits of SOA Increases the ability to meet customer demands more quickly. Lower costs associated with the acquisition and maintenance of technology. Empowers the management of business functionality closer to the business units. Leverages existing investments in technology. Reduces reliance on expensive custom development. 106  Drawbacks of Service-Oriented Architectures SOA implementations are costly and time-consuming. Requires complex security firewalls in place to support communication between services. Performance can be inconsistent. Requires enterprise-level focus for implementation to be successful. Security system needs to be sophisticated. Costs can be high because services needs to be junked very often. 107  SOA and Web Services Web services basically are interfaces that allow different software application and components to be operated together. According to IT industry standards, different applications can interact with without communication problems. The only method of interaction by Web services is by receiving and sending messages. Services are developed using open standards such as WSDL (Web Services Description Language), UDDI (Universal Description, Discovery, and Integration), and SOAP (Simple Object Access Protocol). The protocols used in Web services are XML-based. 108  Enterprise Content Management and SOA Enterprise content management deals with enterprise software products that usually store, preserve, manage, and deliver content connected to business processes. Enterprise content management also about supporting business goals, not just managing content. Vendors have come to an understanding that content management takes advantage of technology and information assets across the business and is no longer application specific. 109  Cloud Architecture Cloud computing is basically a software service provided over the Internet, securely, by a service provider on a monthly or yearly lease. Companies leasing CC services save money by replacing their purchased software that requires a license fee per seat. Some cloud computing providers also let you build your own applications using their engines and then they would host those applications for you as part of the service. 110  Cloud Architecture The cloud computing platform provides a great alternative for organizations that do not want to: – Purchase, install, or maintain software applications. – Worry about security, privacy and legal issues associated with data storage. The cloud computing platform is risky for organizations as it forces them to rely on external vendors for reliability, security, and continuity of enterprise applications. 111  Benefits of Cloud Computing Pay for subscription, not for licenses and upgrades. Reduced capital and operating expenditures for IT equipment and support personnel. Accessed from everywhere, as long as you have an Internet connection. No need to install anything on the user’s computer. Dynamic scalability available on demand. No maintenance fees for software or hardware. Promotes green computing environment as servers in cloud run on clean energy. Guaranteed reliability. 112  Drawbacks of Cloud Computing Data security. Vulnerability. Possible conflict of interest, if the company who stores your applications decides to create a similar application to what you created on their servers. Not suited for all highly competitive industries like biotech where intellectual property cannot be protected easily. 113  Implications for Management Enterprise architecture is an important technology for the long-term functioning of the organization. ERP architecture decisions are complex because their impact goes beyond systems and technology to people, organizational policy, and business processes. ERP architecture must be flexible to support a diverse set of hardware and software platforms. Management must learn how to filter out the hyped technologies that do not provide value to their organization. 114  Summary System architecture provides answers to questions like: – What will the system look like? – How will the system work? – How will it be developed? – Do we have the required infrastructure to support the system? – Can the system be used for any business function or just for a specific business function like human resources? System architecture includes ERP modules and ERP architecture. 115  Summary (Cont’d) Major vendors provide modules to support basic business functions as accounting, finance, marketing, and HR to such advanced business functions as self-service, compliance management, business intelligence. ERP systems have traditionally been organized in three- tiers or layers providing flexibility and scalability: data, application, and presentation. There are various types of layered architecture. Two-tier architecture is the simplest form. Three-tier architectures separate application from the presentation layer. Web-based architectures facilitate better integration with Internet technologies. 116  Summary (Cont’d) Service-oriented architecture separates the service provider from the service consumer similar to object- oriented system architecture which has a higher degree of separation. Management must be involved in the design of the architecture from the very beginning of the ERP implementation project because the system has a wide and long-lasting implication on the organization. 117