Understanding The Basic Concepts Of Erp System

Published Date: 02 Nov 2017

Enterprise resource planning (ERP) also known as Enterprise System is an integrated software system, which integrates most of the fundamental business processes functions and systems from different functional areas (such as Human Resources Management, Sales and Distribution, Manufacturing and logistics, Financials, Materials Management etc) and business units into a single software system, database, unified interface and channel of communication.

Unlike traditional in-house software, ERP software system is unique in several ways. ERP Maintenance can be divided into vendor-side maintenance and client-side maintenance. For example, it is purchased from a vendor versus built in-house; with helpdesk and maintenance support available from the vendor versus completely maintained by internal maintenance; and replacement of an installed version is done by choosing from readily available versions from the vendor versus re-engineering or rewriting the whole system internally, to name a few. These differences suggest that the organization, management, control and execution of ERP maintenance and upgrade are not purely an internal issue driven by internal users and IT-staff only, as with the traditional in-house software. However, neither is ERP maintenance and upgrade activities completely controlled by the vendor and outsourced to a third-party. In contrast, both the ERP software vendor and client-organization have significant influence on the maintenance and upgrade activities. The vendor plays an important role in maintenance support, such that client-organizations’ maintenance management and upgrade decisions and processes have become more complex than before. A survey suggests that total annual client-side ERP maintenance costs, inclusive of annual vendor maintenance charges of approximately 17% of original software cost, total approximately 25% of original implementation costs. ERP Maintenance is a critical IT service provided by IT organizations in the ERP Post-implementation phase. This maintenance covers the various activities to support and extend existing system; it includes the handling of user request and user training, the implementation of changes to the existing functionality of the system.

Now a day’s all the organizations have started to implement ERP system. The large and growing installed base of ERP means market expenditure on ERP maintenance related services is escalating. As with software generally, maintenance activity is the longest and most costly phase in the lifecycle for ERP Software system (Glass, 2003). Inappropriate management of ERP maintenance can be costly and may lead to –failure in meeting used and customer experience, failure to realize business benefits, failure in daily business transactions, and even failure in ERP implementation as a whole. However, very little is known about the processes and data involved in ERP maintenance. So, now the organizations emphasized the value of centrally devised and directive standards as an effective means of controlling the software process, which can ensure better level of performance from the maintenance team (in-house or vendor support team). Achieving such control required predefined, standardized and well-informed ERP maintenance and upgradation model (which includes all the processes of the related to the ERP Maintenance and Upgradation). A survey of ERP used found that almost 92% would consider to adopting a standardized model if one existed for ERP maintenance and upgradation management.

The main advantages of a maintenance model are that it helps to define, plan and manage maintenance activities; thus it improves maintenance processes, and facilitates modification of the software. It provides clarity to foster understanding and communication among all parties involved, facilitates effective maintenance support to the system users or stakeholder in general, and therefore helps in reducing the effort and cost of maintenance.

A generalize maintenance & upgradation model for large commercial off-the-shelf software is lacking. Neither is there any such model for ERP in particular, which is maintained by both the client-organization and software vendor in ‘partnership’. Are the published standard models for (in- house) software maintenance appropriate for the ERP environment? Or, are activities involved in ERP maintenance and upgrade somehow unique such that a new maintenance model is warranted? The study reported herein entailed a comprehensive case study of a large Government agencies and Public-Private organizations aimed at understanding current practices in ERP maintenance and upgrade activities, and investigating whether existing maintenance models are sufficient in the context of ERP.

Discussion herein on the maintenance & Upgradation model is focused on details of the activities involved in managing and executing maintenance preparation, maintenance procedures, and upgrades; and the order in which these activities are performed.

1.2 Problem Statement

The life-cycle of an ERP system can be partitioned into two major phases: the implementation phase include the selection and implementation of an ERP system, ending with the go-live of the system. The second phase, also called ERP post-implementation phase, covers all activities after go-live, including the maintenance, operation and upgradation of the ERP system.

Usually, ERP vendors show off their successful implementation stories. However, there are also so many activities remain after their implementation like maintenance or upgradation. The Maintenance or Upgradation is the post implementation activities. The Maintenance or Upgradation phase of any ERP system unlike the implementation faces specific issues to its recurring costs. Maintenance & Upgradation expenses are usually underestimated, an often end up costing far more than the initial purchase. Cost escalation really hit home when and after implementing ERP. According to a research, licensing represents only seventeen percent of Cost.

In essence ERP Maintenance & Upgradation is an idea whose time has come with offshore posing a new model for outsourcing. Organization need to evaluate this seriously to benefit fully from it.

"ERP maintenance is defined as post implementation activities undertaken from the time the system goes live until it is retired from production".

1.3 Research Objective

The main objective of the completed research is to present guidelines for ensuring from maintenance and Upgradation cost, providing a generalize model for Maintenance and Upgradation of ERP software system. To do so, the research identifies activities / factors associated with the Maintenance and Upgradation of ERP software system. To achieve the goal of the study, the following research questions are addressed as primary research objectives:

List and briefly describe the different maintenance and upgradation tasks and activities that have taken place after ERP went live.

What is the approximate amount of total resources, breakdown by time, effort, and frequency, spent on each of the tasks?

This research attempts to provide answers to the three major questions above to achieve the following research objectives:

1) Propose an activity of ERP Maintenance and Upgradation Model

Identify activities involved in ERP Maintenance Preparation phase.

Identify activities involved in ERP Maintenance procedure phase.

Identify activities involved in ERP Upgradation phase.

Description of maintenance and upgradation activities.

2) Validate the model using extensive data analysis

Conduct a survey based on the proposed model

Analyze the relationships between maintenance task and software component

Analyze the relationships between upgradation task and software component

3) Present a generalize model to reducing cost of maintenance

Provide research findings based on empirical analysis of ERP success.

Suggest a model to achieve.

1.4 Importance of Research

The ERP system needs regular maintenance in order to function properly. The ERP plan needs revision and updating as per the changing situation in the organization. We have already seen that the ERP system should be reviewed regularly. That’s why the Maintenance and Upgrade activities are attracting increasing attention in ERP-using organizations. Annual maintenance costs approximate 25% of initial ERP implementation costs, and an upgrade costs as much as 25-33% of the initial ERP implementation. Many organizations still lack of experience and expertise in this area. There are no proper guidelines or standards for ERP maintenance and upgrade preparation - no step-by-step procedure for conducting these activities and no upgrade processes to assist practitioners in this area (as yet).

With in-house software, in order to capture and reflect an organization’s software maintenance procedures and management issues, a maintenance model is usually defined and used. The main advantages of a maintenance model are that it helps to define, plan and manage maintenance activities; improving maintenance processes, and facilitating modification of the software. It provides the clarity to foster understanding and communication among all parties involved, facilitates effective and high quality maintenance support to the system users or stakeholder in general, and therefore helps in reducing the effort and cost of maintenance. Although there are several standard software maintenance models, they are designed for internally maintained software. There is a lack of standards for maintenance model for large commercial off-the-shelf software, particularly ERP, which is "co-maintained" by both the employing-organization and the software vendor. In order to bridge this gap in literature and practice, this study proposes a generalize ERP maintenance model, clearly relating benefits that can flow from adoption of this model.

The Maintenance and Upgradation model here is focused on the details of the activities involved in managing and executing software maintenance preparation, maintenance procedure, and software upgrade; the order in which these activities are performed; and the participants in these activities.

The vast literature related to ERP systems in Information System research has focused on the maintenance or Upgradation activities. Follow-on- research aimed at building and validating a generalize ERP maintenance and upgradation model, through multiple case studies, surveys involving practitioners from different sectors, industries and research institutions. This work should identify the commonalities and major difference in maintenance and upgradation model employed across different ERP-employing organizations based in different sectors and industries.

The results of this research will benefit the ERP-using organizations as appropriate attention is given to ensure that before and after the software modification, the software would remain eligible for maintenance support from the vendor. This is one of the key issues related to ERP Systems in the business domain, and can increase tremendous ERP lifecycle cost. Furthermore, the research provides holistic understanding about the concept of maintenance procedure, including upgradation activities. This approach should allow ERP software system to adopt generalize model for maintenance and Upgradation.

1.5 Organization of the Research

This research consists of six chapters. Chapter 1 introduces background information and motivation for the research in the area of ERP systems. Chapter 2 reviews the literature on ERP information systems and develops the theory and related propositions on the performance relevance of ERP maintenance and upgradation. Chapter 3 has two main sections. In the first section, identifies the deficiencies in the ERP maintenance model of the case firm and improvements are suggested. The second section provides the research model, describing factors and components along with their definitions and causal relationships. Chapter 4 presents the research design, showing survey instruments and their descriptions. The results of the survey items examine whether or not the survey instrument is developed properly. Chapters 5 & 6 contain the analysis of the survey results and main research findings. Chapter 7 summarizes the study and concludes by examining the contributions of the completed research and presents recommendations for future continuation of this work. Figure 1.1 shows the organization of this research.

Figure 1.1 Organization of the Research

Background

Problem Statement

Research Objectives

Importance of Research

Research Organization

Chapter 1

Identifying the problems and defining the objectives of the Research

Understanding the Basic Concepts of ERP System

Overview of ERP System in General

Theories from the ERP Based Firms

Chapter 2

ERP Maintenance and Upgradation Activities

Chapter 3.1

Developing ERP Maintenance & Upgradation model and Research Design

Structure

Descriptions of Maintenance and Upgradation Activities

Chapter 3.2

Survey Items

Chapter 4

Examining the Model and Showing the main Research Findings based on the Analysis of the Results

Data Collection

Final ERP MU Model

Comparisons of Samples

Chapter 5

Relationship of factors

Implications

Discussions

Chapter 6

Summary of the Research and Recommendation for the Future Research

Research Summary

Contributions and Limitations

Recommendations

Future Research

Chapter 7

Phase I Introduction

Phase II Overview of ERP Background Theories

& Firms Theories

Phase III ERP Maintenance & Research Design

Upgradation Model

Phase IV Analysis of ERP MU Model Research Findings

Phase V Conclusions