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IS 425 Enterprise Information Summer I 2005-2006LECTURE 5
Agenda • Enterprise Planning • Enterprise Resource Planning (ERP) & Enterprise Systems
Enterprise Planning Stimulating the Future • Enhancing the value of information done at the level of the people doing the work —not at the executive level • A form of “gap analysis” • What information do we have? • What information would we like? • What alternative do we have for getting the information that we don’t have?
Assessing the Gap Alternatives • EASE: Is the alternative easy to realize? • POPULAR: Is it likely that the people involved will accept it? • CHEAP: Are the costs for implementing the alternative reasonable?
How do we start? • Modeling the information that is deemed most important used now • Is there additional information that would be useful? • How would it be useful? • Then ask the Ease/Popular/Cheap questions
Hospital Information Model Current important Information Assets runs has has
Focus on Patient Care (Scenario 1) Coordinating care of repeat visitors Key – finding relationships between visits
Possible Information Assets: Patient Care GOAL – Providing educational info to patients for self-managing conditions MEANS – Finding patterns in frequency of conditions/treatments ??? – ease / popular / cheap
Focus on Department & Facilities (Scenario 2) Looking at how well space is used and cost effectiveness
Possible Information Assets: Department and Facilities GOAL – Better space utilization and cost effectiveness MEANS -- Revenues fromvisits Expenses fromrunning facilities ??? – ease / popular / cheap Net revenues leases janitorial
Possible Information Assets: Grants and Research (Scenario 3) Goal – Expanding the role of research Means – Gathering information on grants, funding agencies ??? – ease / popular / cheap
University Information Model Problem: Demand not known after class closed
Possible Information Assets: Enrollment Activity (Scenario 1) Goal – Determining Demand Means – Tracking Requests ??? – ease / popular / cheap
Possible Information Assets: Larger Scope (Scenario 2) Expansion to information about Degree Programs for Course Demand
Increased Information Value Planning Prioritization Tiers
Prioritizing Potential Benefit Info easy to access? Info accurate? People trained to use? Policies encourage effective use? Positive results for users?
Measuring the Effect • Assumptions: • Goals are better than no goals • Specific goals are better than vague goals • What gets measured tends to get done • Types of measures • Quantitative – ROI – usually contrived • Qualitative – Power of info assets to add value
Measuring the Effect Lagging Indicators • what has happened • appears precise • c/be inappropriate, when? Leading Indicatorsmatch direction sought helps keep ship on course
Areas to measure for Balanced Picture • Customer – what is our relationship • Internal business processes (3 basics) • Getting and paying for the inputs • Converting inputs to salable product • Delivering product/receiving payment • Learning and growth areas (R&D) • Financial stakeholders
Exercise (next week) • You are the IT steering committee that will decide which hospital project to fund. • From last weeks readings and lecture detail the steps that you would take in determining which hospital project to do. • Based on the previous session readings and lecture (Session 6) 1. What two questions would you ask to find out which one should be implemented?2. How would you use the prioritization tiers decision tree?3. How would you use the Prioritizing Potential Benefit tree?4. What is the major problem with lagging indicators when developing new software?
Enterprise Resource Planning • A structured approach to optimizing a company’s internal value chain. • Packaged, application software (modules) designed to address common business functions (across industries) • Evolved, in part, from MRP concepts • Typically, vendors assume some customization and integration will be required • Vendors also assume system infrastructure exists (including: RDB, client, servers, browsers, network, etc.)
Common Features • On-line system with no traditional batch interfaces • One database for all data • Clear definition of every data items • Efficient support of back-office transaction processing; weak in decision support and analytical support • Templates for processes of best practices • Client/server computing, network infrastructure, RDB, GUI, Web Enablement • Proprietary and tools (e.g. ABAP/4 for SAP R/3)
Advantages • Tight integration among all modules • Single view of the business -- same db, consistent reporting and analysis • Process orientation: streamline processes • Rich functionality : templates & reference model • Flexibility: current and new environment • Scalability: small group vs. enterprise • Expandability: modular vs. total systems • Interoperability with 3rd party solutions • Rapid implementation: “vanilla” version
Business Engineering (BE) vs. Process Engineering (BPR) • BPR -- Process driven, use IT to automate existing or redesigned process. Difficult to find/build software for new process. • BE -- utilizes IT for designing/redesigning processes, or entire value chains. • Describe, simulate, or model organization. • BE / Enterprise software impose its logic on organization • Templates of best practices, e.g., SAP R/3 Reference Model
The ERP Market: Key Decisions and Drivers • Build vs. buy • Single vendor vs. best of breed • Drivers • Year 2000 & EMU (Euro) • The promise (integration, flexibility, etc.) • Control maintenance costs (infrastructure, application) • Re-engineering, shared services • Competition
Rapid ERP Deployments • Advantages • Up and running on ERP quickly • Less staff time spent on project • Less business disruption • Can be lower cost over time • Disadvantages • Difficult to customize software to match business needs • Small core group involved in implementation • Insufficient understanding of business context and process • Require more up-front preparation costs • Limited support from IT staff
Hidden Costs of ERP • Training --software, process, roles, skills, 10-15% of total project budget • Integration and Testing--process oriented • Data Conversion -- data cleansing, outsourcing? • Data Analysis--Warehousing? • Consultants -- disengagement, knowledge transfer • Total Cost of Ownership 3x-10x, cost per user?
Post-ERP Activities • First Stage (3-9 months) • Productivity decline, redefining jobs, establishing new procedures, fine-tuning ERP software • Second Stage (6-18 months) • Skills development, structural changes, process integration, and add-on apps • Third Stage (1-2 years) • transformation
ERP Business Benefits (expected) • Operational • Cost reduction, cycle time reduction, productivity improvement, quality improvement, customer services improvement • Managerial • Better resource management, improved decision making and planning, performance improvement • Strategic (?) • Support business growth, support business alliance, build cost leadership, General product differentiation, build external linkage, Worldwide expansion, enabling e-commerce • Infrastructure -- enterprise data backbone
More on Business Benefits • IT Infrastructure • Build business flexibility for current and future changes • IT cost reduction • Increased IT infrastructure capability • Organizational • Support organizational changes • Facilitate business learning • Empowerment • Build common visions • Change employee behavior • Better employee morale and satisfaction