Integrating key business functions so that information can flow freely between them has become the job of a type of software application known as an enterprise resource planning (ERP) system or an enterprise system. Since the mid- to late-1990s, many organizations have been replacing their disparate legacy systems with these organizationwide ERP systems. Although originally focused on the internal functions of an organization, ERP systems are typically considered the most feasible solution for integrating business information systems within the organization. Therefore, a basic understanding of ERP systems is helpful in understanding the similar integration issues that organizations face nowadays in their pursuit of external business relationships.
An ERP is a packaged software application which includes a collection of software modules that are designed using best-practice business processes [2]. Each module may replace one, or even many, legacy systems in the company. The module meets the same demands met by the legacy systems that they replace, but they are also designed to integrate with the other modules with the ERP. An ERP is primarily responsible for managing the transactional processing operations of the business in its various areas (e.g., accounting, finance, human resources, marketing, manufacturing, logistics, sales, procurements, etc.). Each of these functional areas is usually supported by a software module (or modules) that is designed to integrate with the other modules; these packaged modules then need to be configured, and sometimes customized to meet the specific demands of the company implementing the ERP. ERP systems are available from vendors such as SAP, Oracle, and Microsoft.
Organizations have different drivers for implementing an ERP [3]. These drivers mostly fall into two main categories. The first is concerned with solving those existing business problems caused by inadequate IT infrastructure and disparate information systems (i.e., integrating existing operations). However, the second driver is related to improving future business operations. This could include support for future business flexibility and growth, reducing operational costs, supporting customer responsiveness, improving data visibility, and making better business decisions.
When implemented, an ERP often replaces the many existing legacy systems within the organization. Due to the integrated nature of ERP, its modules overcome many of the drawbacks of legacy systems and enable online integration not only within the same function but within and across the other functions of the business. As a result, ERP systems are considered good candidates for forming a technology platform to support the integration of other intra- and inter-organizational applications such as supply chain management (SCM), customer relationship management (CRM), and e-commerce (refer to Figure 11.1).
In the early-2000s, the high-end of the ERP market became saturated because most large organizations had already implemented an ERP. In response to the increased competition in the ERP applications market, ERP application vendors started including other applications as part of their ERP offerings. In order to achieve this, ES vendors built the new functionalities in-house, and/or acquired, or made partnerships with, specialized enterprise application vendors. ERP systems are gradually evolving to become inter-organizational and Internet-enabled. New modules are added to the product portfolio, such as supply chain management (SCM), customer relationship management (CRM), data warehousing, and business intelligence.
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