IS 425Enterprise Information

Summer I 2005-2006LECTURE 5

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Agenda Enterprise Planning Enterprise Resource Planning (ERP) &

Enterprise Systems

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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?

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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?

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How do we start?

1. Modeling the information that is deemed most important used now

2. Is there additional information that would be useful?

3. How would it be useful?4. Then ask the Ease/Popular/Cheap

questions

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Hospital Information Model

Current important Information Assets

runs

hashas

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Focus on Patient Care (Scenario 1)

Coordinating care of repeat visitors

Key – finding relationships between visits

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Possible Information Assets: Patient Care

GOAL – Providing educational info to patients for self-managing conditionsMEANS – Finding patterns in frequency of conditions/treatments ??? – ease / popular / cheap

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Focus on Department & Facilities (Scenario 2)

Looking at how well space is used and cost effectiveness

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Possible Information Assets: Department and Facilities

GOAL – Better space utilization and cost effectivenessMEANS -- Revenues from

visitsExpenses from

running facilities

??? – ease / popular / cheap

leasesjanitorial

Net revenues

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Possible Information Assets: Grants and Research (Scenario 3) Goal – Expanding the role of research Means – Gathering information on grants, funding agencies ??? – ease / popular / cheap

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University Information ModelProblem: Demand not

known after class closed

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Possible Information Assets: Enrollment Activity (Scenario 1)

Goal – Determining DemandMeans – Tracking Requests??? – ease / popular / cheap

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Possible Information Assets: Larger Scope (Scenario 2)Expansion to information about Degree Programs for Course Demand

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Increased Information Value Planning

Prioritization Tiers

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Prioritizing Potential BenefitInfo easy to access?Info accurate?People trained to use?Policies encourage

effective use?Positive results for users?

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Measuring the Effect Assumptions:

1. Goals are better than no goals2. Specific goals are better than vague goals3. What gets measured tends to get done

Types of measures Quantitative – ROI – usually contrived Qualitative – Power of info assets to add value

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Measuring the EffectLagging Indicators what has happened appears precise c/be inappropriate,

when?

Leading Indicators match direction sought

helps keep ship on course

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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

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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?

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Enterprise Resource Planning (ERP) and Enterprise Systems

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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.)

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Evolution of ERP

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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)

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Components of Traditional ERP

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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

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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

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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

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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

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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?

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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

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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

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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

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ERP Value: Gap between Expected vs. Actual vs. Potential

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Traditional ERP vs. Extended Enterprise Systems