|
3.3 Commonalities
and Differences between ERP and E-Business Implementations
While many
of the benefits derived from ERP and E-Business implementations
are similar or even identical, the nature of those implementations
is quite different. To achieve the maximum level of
benefits from both, it is important to understand from
the outset what the commonalities and the differences
between them are.
3.3.1 Commonalities
between ERP and E-Business Implementations
Both E-Business and ERP implementations are undertaken
with similar strategic goals in mind. They both need
to be part of the same enterprise-wide strategy to be
successful because they have an impact on almost every
business process, spanning Financial management, Order-to-Cash,
Production Planning and Logistics and Requisition-to-Cash
process chains.
In many cases, both implementations need to interact
with the same external partners, such as suppliers and
customers since traditional communication channels such
as EDI will co-exists with E-Business communication
over the Internet.
3.3.2 Differences between ERP and E-Business Implementations
The differences
between ERP and E-Business implementations can be categorized
into:
3.3.2.1 Technology
ERP implementations
are based on complex packages of standard software,
running on company (or service-provider)-owned client/server
architectures.
E-Business
implementations are supported by components such as
webservers, commerce servers, firewalls and gateways.
They utilize the ERP system's transaction server
and database server by connecting to them through middleware.
The customization
of the ERP system takes place largely using its proprietary
development environment. whereas E-Business application
development utilizes open standards such as HTML and
Java. This leads to different skillset requirements
for the developers and configurators.
While the
ERP system is in most cases maintained in-house, E-Business
implementation more often include long-term partnerships
with external service providers who may develop, maintain
and even host the company's web-presence
3.3.2.2 Partner
orientation
The audience
(and stakeholders) of an ERP system is potentially every
employee in the company as well as key suppliers and
customers. Typically, an ERP system in its final rollout
will replace the majority of legacy systems and interface
with the remaining systems. To the outside world however,
the ERP system will be largely transparent, as it communicates
with suppliers and vendors using traditional media or
standard EDI transactions.
An E-Business
implementation is from the onset aimed at integrating
business processes with outside business partners and
is built on and supported by the ERP foundation. The
main focus of the implementation will therefore be the
integration of cross-company value chains using E-Business
tools.
3.3.2.3 Implementation
Framework
An ERP Implementation
has a defined lifecycle of typically 12-24 months depending
on the scope and other parameters. After the initial
implementation, upgrade and functional enhancement projects
follow in irregular intervals.
E-Business
implementations need to be significantly faster than
initial ERP implementations. However it can be expected
that activities will continue on an ongoing basis to
accommodate changing relationships with business partners
and enhanced functional and technical scope of existing
relationships.
3.3.3 Potential
risks of E-Business/ERP Implementations
As discussed
above, while the goals and audiences of E-Business and
ERP implementations overlap, the implementation frameworks
are quite different.
This poses
a risk if the ERP and E-Business projects are not well
coordinated.
While the nature of an ERP implementation normally will
ensure that it is firmly embedded in the enterprise-wide
strategy, this is not necessarily the case with E-Business
projects. E-Business implementations are typically a
lot smaller and of shorter duration than ERP projects.
Single departments or initiatives might event want to
undertake an E-Business project on their own. However,
uncoordinated efforts will potentially create an inconsistent
image of the company to its external partners. Furthermore,
the success of the E-Business implementation depends
on its integration in the value chains embedded in the
ERP system. If integration is postponed, significant
additional work will be created for internal staff,
eliminating many of the anticipated benefits. A lack
of integration with the ERP system is also likely to
increase rather than decrease the time it takes to process
a transaction, thus resulting in dissatisfied business
partners and poses a threat to the credibility of the
E-Business readiness of the company.The resulting damage
is not limited to the immediate problems but more importantly
the delay in establishing a credible E-Business presence.
It is the nature of the E-Business that the time it
takes to build the new value chains is one of the most
important measures of success. To recover lost ground
is very difficult in a highly competitive environment.
A company needs to strike the right balance between
taking shortcuts and risky implementation approaches
and a too traditional and slow approach.
It is important
that an E-Business project is not viewed as a technology
project. Ownership needs to be assumed by the business
leadership which requires that business strategy and
IT strategy are unified.
3.4 Aligning
business processes, people, technology and organization
between ERP and E-Business
To make an
E-Business implementation successful, it must be aligned
with the ERP foundation on which is being build. It
is more than likely that adjustments to the strategy,
processes and technology, which support the ERP system
and vice versa will be necessary so they can meet the
needs of E-Business.
3.4.1 Business
Process
E-Business
will enhance existing value chain to cross company boundaries
in many ways. For example, in the procurement area,
B2B procurement will streamline internal processes such
as requisition approval and purchase order creation
as well as external processes. Suppliers will be able
to monitor inventory levels and improve their own ability
to forecast, thus truly integrating themselves in the
value chain. It is likely that some suppliers will emerge
better equipped and willing to participate in this collaborative
environment than others. New tools using the Internet
as enabler make more efficient sourcing a reality in
the area of competitive bidding. Online intermediaries
like FreeMarkets.com and InsWeb bring buyers and sellers
together,forcing firms to share processes like how to
make a quote online.
It is difficult
to imagine how those concepts will function if they
are not supported by an ERP system-like foundation.
Each E-Business process needs to be linked with the
ERP supporting processes and while technical integration
may not be part of the initial rollout, the design should
provide for it.
When designing
new E-Business processes, the compatibility with existing
processes should not be overlooked. Implementation time
is a limiting factor in the age of E-Business and a
process design, which would require a redesign of the
supporting ERP system would be off target. Process owners
need to be
assigned who have responsibility across supporting platforms
(ERP/E-Business). They need to work closely together
with their counterparts in the value chain forming a
team to design the integrated value chain.
3.4.2 People
The emergence
of E-Business as a new differentiating factor between
companies changes the skill requirements for the both
the people implementing E-Business solutions and those
who are using the enhanced value chain.
Exclusively
technical or business oriented staff will need to cross
train in the other discipline as the borders between
technology and business blur.
At the same time, change management skills becoming
more important because employees will have to work in
frequently changing environments and teams composed
of both internal and external resources.
The integration
of the ERP system with E-Business application will require
that staff which supports the ERP system and is responsible
for applying changes to it adjusts to the "speed of
E-Business" ERP systems are often "protected" by a set
of rules, which are strictly enforced and often add
weeks to the process of making a change. This is not
compatible with the needs of E-Business. While it is
imperativethat system integrity is enforced, established
procedures, which slow down the integration of E-Business
and ERP, need to be adjusted. Oftentimes, the adjustment
is less a change to the procedure but an education of
the staff who enforces it.
In terms
of alignment of the skillsets required for ERP and E-Business
implementation, it seems apparent that E-Business takes
the enhancement of skills, which began with ERP implementations
a step further. While in an ERP environment, the combination
of technical skills and business knowledge is a strong
advantage, it becomes a necessity in an E-Business environment.
3.4.3 Technology
Development
and deployment never stops in the transition process
to an E-Business environment. The pace of change affecting
technology, competitive landscape and business model
means that companies have to plan for more rapid life
cycles for their E-Business applications than their
ERP systems. This creates a problem for aligning the
two platforms, which from a business prospective need
to work seamlessly together.
Future scalability
and maintenance are of utmost importance when choosing
the approach to build E-Business applications.
The best
answer to this challenge is to rely as much as possible
on predefined application interfaces provided by the
ERP vendor and architect the solutions around them.
Developing custom-interfaces will often result in a
short-lived solution, which either needs to be abandoned
or requires constant re-work and maintenance.
The same
approach holds true for the development of the E-Business
solution. Few companies will want to spend their resources
on constantly updating and re-inventing their E-Business
models. By choosing a software vendor who has been certified
by the ERP vendor for a certain E-Business application,
the company can mitigate a large risk area.
Whatever
decision is taken, it effects the way the ERP system
and the E-Business application will work together. Any
unilateral approach, which does not take the other side
into consideration, is bound for failure.
From on overall
design prospective an inventory needs to be made of
all enterprise applications which eventually will be
part of the E-Business architecture. Depending of the
landscape, it may be more advisable to choose an ERP
independent platform to integrate all those systems
rather than selecting the offerings from the ERP vendor
which is exclusively geared towards the ERP package.
The rationale for this is that a web-front-end offered
by the ERP vendor does not have the capability to integrate
with other applications. While it will offer a robust
web-enabled interface from the ERP application to the
Internet, it falls short on supporting the E-Business
vision.
Security
considerations gain importance the more the E-Business
applications are integrated with the company's ERP system.
Traditionally, an ERP system has very limited and tightly
controlled interface to the outside word, such as EDI
connection via private networks.
The additional
channels, which will be established to send and receive
data from and to the ERP system, need to be clearly
defined and the need for security has to be addressed.
A trade-off between protection on the one hand and functionality,
ease of use and performance will be the result and ownership
and
accountability needs to be established.
3.4.4 Organization
3.4.4.1 Support
Organization
ERP systems
are best supported by a central IT organization. This
is due to the nature of an ERP system, which operates
with a centralized database and in a client/server environment
is accessed through application servers, which physically
may or may not be in a central location. While communicating
with outside
business partners, there is no need for the IT organization
to support their systems as those communication channels
are managed by the provider of the service, e.g. the
VAN.
E-Business
on the other side spans by definition business processes
across companies and possibly across the globe. The
applications are changing at a rapid speed and requirements
are likely to be different by location. Procurement
for example is governed by different laws in the US
and the European Union.
The right
mix to support an E-Business application will include
:
|
