IT SOFTWARE COMPONENTS IN AN ORGANIZATION1

Introduction

Information Technology, while it is the lifeline of all organizations, is a vast and intricate subject. With the ever-growing size, sophistication and intricacy of organizations, there is relentless pressure on IT to keep evolving and devising more versatile tools to help organizations function and keep improving. This paper focuses on the particular group of technologies described generically as ‘S/W Enterprise Management Systems.’

In particular, the following five major integrated software packages are discussed:

Enterprise Resource Planning (ERP) Supply Chain Management (SCM) Customer Relations Management (CRM) Employee Relations Management (ERM) Product Lifecycle Management (PLM)

This is followed by a brief look at some of the current trends especially web-enabled technologies and the evolutionary concept of Real Time Enterprise.

Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) is perhaps the most significant software system covering all the operations of a business organization.

ERP comprises a broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. It also includes application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system.

ERP software integrates the information used by an organization's many different functions and departments into a unified computing system. That means that instead of using isolated departmental databases to manage information, such as employee records, customer data, purchase orders, and inventory, everyone in the enterprise relies on the same database. This allows employees in different departments to look at the same information.

1 Professor Behnam Tabrizi and Research Assistant Vidya Reddy compiled this report in 2003 as the basis for class discussion.

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ERP systems originated to serve the information needs of manufacturing companies. Over time, though, they have grown to serve many other industries, including health care, financial services, the aerospace industry, and the consumer goods sector. With this growth, ERP systems, which first ran on mainframes before migrating to client/server systems, are now migrating to the Web and include numerous applications.

A typical ERP system in operation can be represented as illustrated in the figure below:

[Source: Strictly On-Line: Linux in an ERP World - Uche Ogbuji, Co-founder of FourThought LLC, Linux Journal June 1999]

An ERP system is made up of several "core" ERP applications or "modules," which originally referred to the back-office capabilities to manage human resources, accounting and finance, manufacturing, and project-management functions. However, the leading ERP suites of today provide much more--including modules for sales force automation, business intelligence, customer relationship management, and supply chain management.

The following figure illustrates the modules of a typical ERP system:

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In practice, ERP systems can be difficult to deploy and maintain. ERP packages are complex by nature and IT departments must invariably tailor the software to fit the company's specific requirements and business processes. Installing an ERP system is usually a massive undertaking measured not in months, but in years. Even after the initial deployment, an ERP system must be continually adapted to reflect changes in the business and software upgrades and extensions.

The three major factors that can lead to the success or failure of ERP are illustrated below:

[Source: Points of the Triangle by Mirghani Mohamed, Intelligent Enterprise magazine September 3, 2002]

Major providersSAP AG (SAP R/3), Oracle Corp., PeopleSoft Inc, Baan Co. NV, J.D. Edwards & Co.

Supply Chain Management (SCM)

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.

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A simplistic block diagram of SCM:

With the ever-increasing trend towards integration, Supply Chain Management has now come to stand for the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It has a broad scope that includes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users. It covers the management of material, information, and funds flows.

SCM is applicable for both manufacturing and service organizations.

There are six key elements to a supply chain:

ProductionStrategic decisions regarding production focus on what customers want and the market demands. This first stage in developing supply chain agility takes into consideration what and how many products to produce, and what, if any, parts or components should be produced at which plants or outsourced to capable suppliers.

SupplyAn organization must determine what their facility or facilities are able to produce, both economically and efficiently, while keeping the quality high. But most companies cannot provide excellent performance with the manufacture of all components. Outsourcing is an excellent alternative to be considered for those products and components that cannot be produced effectively by an organization’s facilities. Companies must carefully select suppliers for raw materials.

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InventoryFurther strategic decisions focus on inventory and how much product should be in-house. Operational inventory decisions revolved around optimal levels of stock at each location to ensure customer satisfaction as the market demands fluctuate. These levels are critical to the day-to-day operation of organizations and to keep customer satisfaction levels high.

LocationLocation decisions depend on market demands and determination of customer satisfaction. Strategic decisions must focus on the placement of production plants, distribution and stocking facilities, and placing them in prime locations to the market served.

TransportationStrategic transportation decisions are closely related to inventory decisions as well as meeting customer demands. customer service levels must be met, and this often times determines the mode of transport used. Often times this may be an operational decision, but strategically, an organization must have transport modes in place to ensure a smooth distribution of goods.

InformationEffective supply chain management requires obtaining information from the point of end-use, and linking information resources throughout the chain for speed of exchange. Overwhelming paper flow and disparate computer systems are unacceptable in today's competitive world. Fostering innovation requires good organization of information. Linking computers through networks and the internet, and streamlining the information flow, consolidates knowledge and facilitates velocity of products. Account management software, product “configurators”, enterprise resource planning systems, and global communications are key components of effective supply chain management strategy.

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Implementation

There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties.

Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies.

Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers can trade and even make auction bids with suppliers.

Leading providersI2 (Supply Chain Management), Manuquistics (NetWorks 1), Oracle, SAP, International Business Systems (IBS), Manugistics, EXE.

OthersJD Edwards, Baan (as part of ERP suites)

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Customer relationship management (CRM)

Customer relationship management (CRM) is a business strategy that aims to understand, anticipate and manage the needs of an organization's current and potential customers. It entails acquiring and deploying knowledge about one's customers and using this information across the various touch points to balance revenue and profits with maximum customer satisfaction.

CRM’s objective is to provide to the company and its employees a 360 degree view of the customer.

[Source: What Is Integrated Customer Relationship Management? - CMO Consulting International – White paper]

CRM is a business approach that integrates People, Processes and Technology to maximize the relations of an organization with all types of customers. The true value of CRM is to transform strategy, operational processes and business functions in order to retain customers and increase customer loyalty2.

Now more than ever, customer satisfaction is critical for the survival and success of a business enterprise. The speed and effectiveness with which a company responds to customers is crucial. Customer Relation Management or CRM helps meet this very important and crucial requirement.

CRM delivers optimal solutions to support customer-intimacy strategies by recognizing that: multiple roles and relationships exist throughout the enterprise roles interact with the extended enterprise through multiple devices and channels

2 Customer Relationship Management: A Strategic Imperative in the World of E-Business Ed. by Stanley A. Brown (John Wiley & Sons)

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the individual view of the enterprise is a function of specific wants, needs and preferences of different customers

roles, devices and channels connect with business processes and corresponding touch-points characterizing the optimal value chain

this combination of defining fundamentals enables true cross-enterprise analytics, management and optimization

The Elements of CRM

Sales forceautomation

Customer service/callcenter management

Marketingautomation

Call center telephone sales Call centersmanaging aspects

of customer contact 

 Campaign

management 

E-commerce

Field sales  Web-basedself service

 

 Content

management 

Retail

Third-party brokers,distributors, agents

 

 Field servicesand dispatch

 

Data analysisand business

intelligence tools 

Data warehouse and data cleansing tools

[Source: Picture from Customer Relationship Management – Robin A. Robinson Computerworld, FEBRUARY 28, 2000]

CRM can help enterprises: excel in anticipating and meeting unique customer requirements to increase customer

intimacy maximize sales efficiency, order accuracy and standardization; minimize service costs to

optimize operational performance accelerate commercialization of ideas and utilize customer feedback to develop leading-

edge products

Figure depicting important factors for successful CRM implementation

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[Source: Customer Relationship Management - Beyond Technology, USi services]

Leading providersSiebel Systems (Siebel 7), Oracle (Global CRM / CRM 11i part of Oracle Business suite), SAP (mySAP CRM 3.0), PeopleSoft (People Soft 8.4 CRM), J.D. Edwards (J.D. Edwards CRM v 1.1)

OthersOnyx, Pivotal and Interact, Kana (iCARE Suite), Applix (iCRM), E.piphany (E.piphany E.6), Onyx (Onyx Enterprise), Salesforce.com, SalesLogix, FrontRange, Epicor, Goldmine, Upshot, Salesnet,

Employee relationship management (ERM)

Employee relationship management (ERM) is a bundling of human resource management solution (HRMS) applications. It encompasses performance and incentive management; e-learning; knowledge and information management; workforce analytics; and a host of operational issues like recruitment, time and expense reporting, indirect procurement and employee self service.

ERM is a business strategy that stretches across the entire organization, whose technologies help businesses streamline the processes of hiring, training, managing, and retaining workers. The solutions reduce the time and costs associated with those processes and improve worker relationships, making employees more productive and companies more profitable. ERM applications usually work in conjunction with ERP systems.3

From a technology perspective, ERM is essentially a portal aimed at employees. Using a browser, employees can access corporate information, services, and applications such as their performance objective.

3 E-Business Ecosystems - Is ERM a Contender? by Jim Ericson, Line56, June 20, 2002

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ERM’s goal is to:

• Manage and mobilize a unified, global workforce. • Connect people directly to business processes anywhere in the world, anytime. • Align the workforce with strategic business goals.

ERM aims to provide a 360 degree view to every employee.

The obvious benefits of ERM are automating tasks--such as answering benefits questions; filing expense reports; handling payroll; purchasing office supplies and other indirect goods; recruiting; and training. This contributes to efficiencies by saving employee time, streamlining processes, and reducing errors. The benefits are particularly significant in the case of managers as it frees them up to spend more time with customers and other strategic concerns by reducing the amount of time they spend on performance appraisals, compensation plans, and other "administrivia."

The idea is not only to drive workforce efficiency and productivity, but also bring solutions together like planning, recruiting, developing, compensating, and training people, all in an integrated way so there is more value. At the foundation you have applications, employee and manager self service, financial applications like travel and expense (T&E). The end result is optimizing all the interactions between employee and corporation, including communication, training, collaboration and financial processes.

While higher productivity is the obvious gain, ERM's chief benefit is improved communications with employees. At the most basic level, a well-designed portal can improve morale and employee retention. Employees are using the technology and find that it helps them in many ways: getting their jobs done, get their investments, filling out benefit forms. Companies can bring together analytics, development, incentives and performance management to increase revenue.Leading providers:Siebel (ERM7, a suite of 25 modules), PeopleSoft (HCM for Human Capital Management, about to introduce HR HelpDesk, forms part of People Soft 8.8), SAP (my SAP)

OthersExtensity, WorkBrain, Apptricity

Product Lifecycle Management (PLM)

In today's fast-changing markets, businesses are striving to respond to customer demands and to build customer loyalty. At the same time, they must optimize product design and production cycles to reduce time to market and minimize product costs. To do this, manufacturers are seeking input on product concepts and designs from strategic customers and suppliers, earlier in the design cycle.

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Product development teams4 include not only remotely located engineers, but also customers, partners, suppliers, and many departments throughout the enterprise. These disparate players already collaborate today using face-to-face meetings, faxes, phone calls, and email. Why the need for a change? As global enterprises have become more dependent on geographically dispersed teams, and competitive pressures force cost cutting, regularly scheduled face-to-face meetings have become less frequent. The low-powered collaboration tools typically used today, such as email and sharing of design files, provide only a basic exchange of information. Without a broader context for the information, remote users are hindered from full understanding of the impact of the design. They are therefore limited in their ideas for design improvements.

Product Lifecycle Management (PLM) technologies increase the variety and frequency of information exchanged throughout the design team to enable creative decision making.Global growth strategies present a whole new spectrum of management challenges to senior executives. Companies must meet or beat tougher standards for new product or service introduction. New automobile platforms that used to take five to seven years in development are now developed in 36 months. Software, which nominally went through major releases on a 12-month cycle a few years ago, is now released every six months.

To compete in this environment, companies must be able to manage larger portfolios of products more efficiently. This means shorter product life cycles and more efficient product development. To accomplish this task, companies must adopt best-in-class business processes and generally become much better organized to manage resources and information. The complexity of the task is further increased by the multiple regulations and standards that must be satisfied in different countries and product variety to meet local customer requirements (i.e., mass customization). In e-businesses, customization is carried out to the extreme to satisfy individual customer requirements and buying patterns.

4 ‘What is PLM?’ – IBM Product Lifecycle Management, www.ibm.com

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The figure above illustrates how in discrete manufacturing, industrial design and CAD/CAM/CAE, applications are used to create the information and product data management systems used to manage it.

Reduction in cycle times has been aided by applications software in the past, but further substantial improvements will require automation and integration of the entire product life cycle.

Collaboration breeds innovation. Product Lifecycle Management breaks down the technology silos that have limited interaction between the people who design products, and the people who build, sell and use them. Using the collaborative power of the Internet, PLM lets an organization make a quantum leap in innovative product design while reducing cycle times, streamlining manufacturing and cutting production costs.

Usually PLM solutions put the product – the source of profits – at the center of everything. It pulls relevant information from your ERP, SCM and CRM systems, associates it with product knowledge, and makes it available to your extended enterprise – empowering everyone from manufacturing to marketing and from purchasing to field support to work more efficiently. This allows the entire network of companies, working together to conceptualize, design, build and support products, to operate as a single entity. PLM allows companies to share common business processes and a common knowledge of the product throughout all stages of its lifecycle, from concept to retirement.

Why PLM?

According to Dave Burdick of Visionary Designs, the world's most innovative companies generate twice as many ideas, develop three times as many into products and enjoy twice the success rate for new products as their average competitors. What's different about these companies is how they use what they already know. Innovative companies break out of their business process silos, unleashing the power of their information. Working within existing systems and processes, they make better product decisions, earlier in the development process – allowing them to develop three times as many products as their competitors in the same amount of time and with the same budget.

It is a powerful competitive edge, and it is what Product Lifecycle Management (PLM) is all about.

Additional benefits of PLM5 include: Increased revenues as a result of better product acceptance in the marketplace

5 mySAP Product Lifecycle Management, http://www.sap.com/solutions/plm/

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Faster time-to-market Fewer design flaws resulting in lower customer care costs and improved customer

satisfaction Greater flexibility for mass customization and design-to-order products

An Essential Technology Strategy for the Future

Forward-looking manufacturers planning to better manage product development processes tend to:

Employ Internet-based, Web-native technologies for sharing information broadly among stakeholders in the collaborative product life cycle modelEngage the entire enterprise in product knowledge sharing

Web-based PLM applications offer a way to improve communication across the product development process. They allow manufacturers to create a central product data repository and to manage the entire product life cycle through a corporate intranet or an extranet network, or via the Internet. Determining what data should be put in the repository and how to manage that data is critical.

Major ProvidersIBM (IBM PLM), SAP (mySAP PLM), IDe

OthersEDS, Oracle, Sun Microsystems, Agile Software, Matrix One, PTC, Realm

IT and Enterprise Management Software – The Future

The future will see the importance of Web and Internet-enabled concepts and technologies, and systems that operate in real-time. Figure indicating the spending on IT from 1990 and 2010 is shown below:

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The real time enterprise

Real-time enterprise is the forward-thinking business strategy of continuously having up-to-the-minute and accurate information for use by internal management and employees as well as partners and external customers. This model allows companies to utilize "always available" information in real-time when working with customers, partners, suppliers and even employees.

A real-time enterprise allows organizations to immediately address customer needs, continuously update corporate information, communicate corporate messages to your employees and stakeholders for greater customer satisfaction, improve customer loyalty and retention and ultimately and most importantly, develop long-term profitability and greater ROI.

Real-Time Enterprises will lead their respective markets: The Real-Time Enterprise is data transparent, provides always on-the-time data access, has actionable operations data, and is highly collaborative. The Real-Time Enterprise is about reducing information latency and ultimately shortening business cycles by making information immediately available to the corporation and ensuring that any piece of information is always current.6

Convergence

The current trend is to breakdown the walls between customer-facing, enterprise-facing and supplier-facing technologies – the drive towards convergence.First, ERP vendors SAP, Oracle, and PeopleSoft began enlarging their suites into CRM. Siebel turned its sell-side microscope inward, addressing employee management, online order management and configuration management concerns and came up with its Universal Application Network (UAN). SCM vendors like i2 Technologies are coming up with customer-facing offerings, called "demand-chain management software." Other signs of convergence come from enterprise software vendors like Baan and Oracle. Baan now labels PLM (Product

6 “Creating the Real-Time Enterprise”, www.dci.com

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Life Cycle Management as "the glue that binds everything together," and makes it the umbrella over its CRM and SCM suites as well7.

Integration

As the concept of ERP is based on the premise of integrating various modules, at the enterprise level it is very important to integrate individual packages of ERP, CRM, SCM etc. While this was largely left to customers and consultants, more recently the ERP vendors have started offering “connectors” to integrate packages supplied by them and sometimes with packages of other vendors. A typical case is Siebel providing a prebuilt connector that integrates with PeopleSoft implementations.

The all-powerful www

The Internet is the single most important force reshaping ERP. This overarching trend plays a major part in the development of the three other trends described in this article. As a platform for integration, the Internet has excellent potential because access is broadly available and Internet-based technologies are based on open standards. ERP vendors are modifying their software to use application servers, Web servers, HTTP, Java, and XML.Portals, e-markets, and other browser-based adaptations to the Internet are having a significant effect, but even more important is the underlying shift to Internet architectures and ERP packages become increasingly engineered around Web servers, applications servers, Web services, and other Internet standards. ERP vendors are adding to their traditional product suites several categories of e-business applications and modules like Sales force automation (SFA), eCRM, E-procurement, and Business intelligence.

XML: Revolutionizing data transmission

The Extensible Markup Language (XML) is a new standard for data transmission evolved by the World Wide Web Consortium (W3C). It is based on Standard Generalized Markup Language (SGML) and represents an improvement over Hypertext Markup Language (HTML). Basically, XML is a meta-language, which enables a general availability and interchange of information that is structured according to its content. XML has the potential to rewrite the e-commerce landscape by defining a standardized data format flexible enough to be utilized by corporations around the world.  With international adoption takes place, XML will dramatically change the way electronic business is done. 

The primary benefit derived from switching to XML is that it can function as a standardized language for e-commerce.  Currently e-commerce companies utilize a mix of proprietary technologies to communicate over the Web, which reduces the possibility of open competition and/or cooperation between suppliers and purchasers.  XML will permit everyone to talk the same language.  For instance, all players in specific industries will have the ability to communicate prices, product descriptions, sales agreements, and contracts without confusion. 

7 SCM, CRM Merger in the Works by Tom Kaneshige, CRMDaily.com, October 31, 2002

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Additionally, the interactivity enabled through XML will allow Web users to knit applications together and make content available universally via the Internet.8

Mobile usersThis is the other area where exciting developments are taking place. Wireless networks and handheld devices are making it possible to connect users such as field-sales reps, field-service agents, and traveling executives. Some of the big ERP vendors, including Oracle, PeopleSoft, and SAP, are starting to offer modules that let mobile users access corporate ERP systems.

References

1. Web sites and manuals of SAP AG, Baan, PeopleSoft, Siebel, Oracle, JD Edwards, i2 Technologies

1a. http://www.infochain.org/quarterly/F01/Lambert.pdf

1b.Source: Douglas M. Lambert, Larry C. Guinipero and Gary J. Ridenhower, “Supply Chain Management: A Key to Achieving Business Excellence in the 21st Century,” unpublished manuscript.

2. What Is Integrated Customer Relationship Management? CMO Consulting International – Innovations in Marketing Strategies http://www.webcmo.com/whitepaper/ICRM2.html

3. Customer Relationship Management Beyond Technologyhttp://www.usi.net/pdf/CRM_Strategy_8-26-02.pdf

4. An Executive's Guide to CRM By Patricia Seybold Group AnalystsHow to Evaluate CRM Alternatives by Functionality, Architecture, & Analytics

8 XML: The Universal Language of the Future - Internet Business Models, Professor Afeche et al, Kellogg Business School, Northwestern University

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5. Customer Relationship Management By ROBIN A. ROBINSON Computer World, FEBRUARY 28, 2000

6. Integrated Customer Relationship Management (ICRM)CMO Consulting International White Paper March 18,2002

7. CIO.comResearch Center papers on ERP http://www.cio.com/research/erp/CRM http://www.cio.com/research/crm/SCM http://www.cio.com/research/scm/

8. CIO.comResearch Reportsa) Best Practices for CRM  11/04/2002 - CIOs Move Forward with CRM Plansb) ERP Progress Reporthttp://www2.cio.com/research/surveyreport.cfm?id=31

9. Intelligent ERP: News, events, and discussion customized for managers of ERP systems - Various articles

10. Information WeekERP http://www.informationweek.com/techcenters/sw/bizapps/erpCRM http://www.informationweek.com/techcenters/sw/bizapps/crm

11. THE ERP FAN CLUB AND USER FORUM http://www.erpfans.com/ (BaanFans site, SAPFans Site, SAP Fans Site, Oracle Fans Site)

12. IT Tool Box Supply Chain Knowledge Basehttp://supplychain.ittoolbox.com/

13. Stanford Global Supply Chain Management Forum, GSB, Stanford University - various papers including “Managing Supply Chain Key Link to Growth”

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