Week 5: Enterprise Systems

Patrick opens the lecture with the assertion that “this week is the start of a new set of topics with more internal aspects that form the basis of the second assignment”. There’s a buzz of excitement and fear.

(Picture: United States Navy, via Wikipedia)

Today we meet the information system that your organisation uses to go about its day-to-day business. This, my friends, is the enterprise system, and Patrick has three big ideas for you this week:

  1. Process Management. The organisation has traditionally been seen as a set of individual departments that go about their own business. A great management hierarchy points up to the CEO. But, as we saw with the Value Chain model of business, the organisation is really more like a set of business processes. That’s the perspective that the modern enterprise system, or Enterprise Resource Planning (ERP) system, takes. We are here to get the job done.
  2. Create value by integration. Because the organisation is traditionally a set of departments, each department had their own ‘legacy’ stand-alone system. Accounting used X, Marketing used Y, Human Resources used Z, and the guys taking care of the warehouses and Supply Chain Management might have still been using MS-DOS (that picture up there is meant to be ironic). One business process would go back and forth between all these groups! The modern ERP system unites everyone and their system so that they use a common database. We connect everyone – most importantly, we connect high-level strategic planners with low-level operations staff.
  3. ‘Scripting’ through ERP. At this point, we’ve established that the modern ERP system is a huge information system that everyone under your roof uses. The ERP software will change the way you do things. Your old ways will be re-written based on the ‘best practices’ coded into the ERP. But what if your old way of doing things was special? So special, in fact, that it gave you a competitive advantage? Well, you could customise your software, but that’s expensive.

There are two other points which Patrick doesn’t elevate to the lofty title of Big Idea but are nonetheless quite large and idea-ish. Firstly, there’s the idea that all this exciting change from legacy systems to ERP systems happened during the Y2K panic era, so people were going to change their software anyway. Secondly, there’s the idea that your ERP isn’t just an internal matter. Patrick has anecdotes about large companies (I think he named Walmart) forcing their suppliers to switch to the same ERP system as them. It makes sense that your internal ERP system also has some B2B functionality.

I’m starting to get used to the textbook’s idiosyncrasies. As usual, it has more information that you need, including in-depth discussion of every “core business process” (order-to-cash, procure-to-pay, make-to-stock, make-to-order). Thankfully, it also has the occasional gem. The discussion of the ‘value system’ (formed by linking each firm’s value chain along the supply chain) is a quite helpful. The contrast between vanilla/packed software and customised software is important. And terms like Business Process Management (BPM) and Business Process Reengineering (BPR), however contrived, are probably examinable.

(I was a bit amused when they started talking about internally vs. externally focused systems because the name IOS came up – referring not to iOS but to “interorganisational system”. The term is attributed in-line to “Kumar & Crook, 1999”. Yep, 1999. You know, before Phillip J. Fry was frozen.)

The case study for this week is about Border State Industries (BSE), an American firm that switched from a legacy system to SAP’s ERP around 1999 – Patrick was right! The tutorial was held on a UNSW-hosted discussion board forum allocated to INFS1602. Under Tony’s watchful eye we bagged out BSE for any issues it encountered during implementation. Most of it was related to project management, but the point about customisations raising TCO unreasonably high is, I suppose, more relevant to this week.

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