Introduction – ERP and Information Systems

Introduction

The evolution of enterprise resource planning (ERP) packages and the principal types or degrees of information systems (ISs) integration is to be discussed in this introduction. The factors affecting the relationships between the evolution of ERP packages and the integration or the disintegration of the ISs are also discussed.

After the first expansion, between 1980 and 2000, from “material requirements planning (MRP)” and “manufacturing resource planning (MRP II)” toward “enterprise resource planning (ERP)” considering the modules like production planning, purchasing, manufacturing, sales, distribution, accounting and human resources [ESC 99], a second evolution seems to be in progress. In order to meet the new requirements of users, it is important to take into account the framework of the ERP, new modules like “customer relationship management (CRM)”, e-business, “supply chain management (SCM)”, “product lifecycle management (PLM)”, “business intelligence (BI)”, etc. For the purpose of our research, the package which is the result of the first expansion is termed “ERP 1st Generation (1st G)” and the package that is the result of the second evolution is called “ERP 2nd Generation (2nd G).”

Various authors have written about the degree and the maturity of “information system (IS)” integration. Depending on the architecture’s composition, many degrees or rates of IS integration are present today. Our study draws attention to two principal types or degrees of IS integration: a “total integration of IS (TIIS)” and a “hybrid integration of IS (HIIS)”. Many studies have been conducted on the evolution of IS. This kind of research often analyzes paths of integration from a “disintegrated information system (DIS)” to an “integrated information system (IIS)”. These paths could be not only from a DIS to a HIIS or to a TIIS, but also from a HIIS to a TIIS. However, according to our study, a possible way back or a regression from integration toward disintegration (from a TIIS to a HIIS or to a DIS) has never been highlighted. Our study will discuss whether this type of regression is possible due to the evolution of ERP systems.

Figure I.1. Evolution of ERP system

As an ERP system is an indicator privileging IS integration, its selection and then its implementation by a company (which could be a success or a failure) could also be taken into account as factors that improve (or not) this integration. This study of factors as “critical success factors (CSFs)” and “critical failure factors (CFFs)” permits us to determine the evolution’s trajectory of IS (toward integration or not) and also to analyze the contribution of ERPs in the IS integration. Reasonably, CSF could promote integration while CFF could prevent this integration and could even observe the IS in a state of disintegration.

This book analyzes some of the factors affecting the relationships between the evolution of ERP systems and the integration or the disintegration of the IS. More briefly, this analysis aims to study whether assigned values given to these factors could guide the evolution of ERP systems in a way that promotes IS integration; and if the assigned values opposite to the same factors could guide the evolution of ERP systems in a way that provokes IS disintegration instead.

In spite of the fact that the evolution of ERP systems is developed by vendors, this crucial mission should not be delegated solely to these vendors any more. In the future, all stakeholders (vendors, integrators, consultancy firms, clients, etc.) should be involved in the evolution of ERP systems. The experiences and the useful suggestions of integrators and of consultancy firms, as well as important feedback from clients, should also be considered. Accordingly, this research does not limit the analysis of the evolution of ERP systems to factors that are related only to vendors. The studied factors are:

  • “Economic crisis and competitiveness (ECCO)”;
  • “Total dependency on the ERP vendor (TDEV)”;
  • “Project management ERP (PMER)”;
  • “Interoperability of the ERP (INTE)”;
  • “Evolution strategy of existing systems (ESES)”;
  • “Complexity of ERP (COER)”;
  • “Evolution strategy of ERP vendors (ESEV)”.

The principle behind the selection of the seven research factors is as follows:

  • “Economic crisis and competitiveness (ECCO)” should be taken into account because of the knowledge that, during a period of economic crisis, firms hesitate to make important and expensive investments. This hesitation could impact the IS integration. “Implementation of ERP systems in many organizations is characterized by troubled multimillion dollar software deals that produce spectacular failures and large spending nightmares” [WAI 09]. Many times in ERP projects, costs exceed budgets [FIS 11, PAN 11, NAU 07]. However, companies can be motivated if a “return on investment (ROI)” calculation shows that buying an ERP system can improve their competitiveness [SHA 00, BAR 02, KAM 08, FED 09]. Therefore, the economic crisis and competitors should be studied together, as this combined factor could be involved in the determination of the IS integration rate. Moreover, competitiveness requires that companies complete the perimeter of their ISs by adding new subsystems: CRM, e-business, SCM, PLM, etc. The successful expansion of the IS’s perimeter depends on the firm’s evolution strategy of its existing systems;
  • “Total dependency on the ERP vendor (TDEV)” could impact the IS integration. Firms should make an arbitrage to decide whether they prefer a dependency on an ERP vendor or not [LAM 01, NAU 07]. The IS integration rate could be different depending on this arbitrage. Total dependency means that ERP vendors should be able, within the framework of an evolution strategy, to develop and to commercialize a complete ERP (including old and new modules);
  • “Project management ERP (PMER)” occupies an important role in the IS integration. Its success or failure leads to different rates of IS integration. “Three quarters of ERP projects are considered failures and many ERP projects end catastrophically” [RAS 05]. The success or failure of a project management is generally related to the complexity of ERP;
  • “Interoperability of the ERP (INTE)”, which is a measure of how the ERP is interfaced or integrated with other subsystemswithin the framework of the IS, also plays a crucial role [MAR 01, BID 04b]. Interoperability could help to determine the integration rate in IS;
  • “Evolution strategy of existing systems (ESES)” chosen by the firms is an important factor. When a company implements an ERP system within the framework of its IS evolution, there are mainly two strategies: urbanization or total overhaul. The choice of a given strategy, which depends beforehand on the state of the existing systems [RET 07, MAR 00a, LON 01], could also affect the integration rate in IS;
  • “Complexity of ERP (COER)” could likewise be involved in the determination of the IS integration rate. ERP systems are extremely complex and difficult to implement, and many implementing companies have encountered unexpected failures [YAJ 05];
  • “Evolution strategy of ERP vendors (ESEV)”, which defines the enlargement of the perimeter (scope) of the ERP, is also to be taken into account as an indicator of the IS integration rate. The larger the expansion of ERP perimeter, the higher the IS integration rate.

After this introduction, we will define the research terms in the first chapter. We will present the ERP: contribution and trends in the second chapter. The research question and methodology will be explained in the third chapter. The literature review (research factors affecting the relationships between the evolution of ERP systems and IS integration or disintegration) will be discussed in the fourth chapter, followed by the fifth chapter that analyzes the relationships between these research factors. The validity of the research questions is then verified in the sixth chapter by three case studies. Chapters seven and eight are devoted, respectively, to a discussion (relationships between research factors and the evolution of ERP systems and IS), research interests and limitations. Finally, a conclusion is given.