What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies?

Many firms have implemented enterprise systems and systems for supply chain and customer relationship management because they are such powerful instruments for achieving operational excellence and enhancing decision making. But precisely because they are so powerful in changing the way the or­ganization works, they are challenging to implement. Let’s briefly examine some of these challenges as well as new ways of obtaining value from these systems.

1. Enterprise Application Challenges

Promises of dramatic reductions in inventory costs, order-to-delivery time, more efficient customer response, and higher product and customer profitabil­ity make enterprise systems and systems for SCM and CRM very alluring. But to obtain this value, you must clearly understand how your business has to change to use these systems effectively.

Enterprise applications involve complex pieces of software that are very ex­pensive to purchase and implement. It might take a large Fortune 500 company several years to complete a large-scale implementation of an enterprise system or a system for SCM or CRM. According to a 2018 survey of 237 ERP users con­ducted by Panorama Consulting Solutions, ERP projects took an average of 17.4 months to complete, and 44 percent of the projects delivered 50 percent or less of the expected benefits. Approximately 64 percent of these projects experi­enced cost overruns, and 79 percent exceeded their initial timelines (Panorama Consulting Solutions, 2018). Changes in project scope and additional customiza­tion work add to implementation delays and costs.

Enterprise applications require not only deep-seated technological changes but also fundamental changes in the way the business operates. Companies must make sweeping changes to their business processes to work with the software. Employees must accept new job functions and responsibilities. They must learn how to perform a new set of work activities and understand how the information they enter into the system can affect other parts of the company. This requires new organizational learning and should also be factored into ERP implementation costs.

SCM systems require multiple organizations to share information and busi­ness processes. Each participant in the system may have to change some of its processes and the way it uses information to create a system that best serves the supply chain as a whole.

Some firms experienced enormous operating problems and losses when they first implemented enterprise applications because they didn’t understand how much organizational change was required. For example, Kmart had trouble

getting products to store shelves when it first implemented i2 Technologies (now JDA Software) SCM software. The i2 software did not work well with Kmart’s promotion-driven business model, which created sharp spikes in demand for prod­ucts. Supermarket giant Woolworth’s Australia encountered data-related problems when it transitioned from an antiquated home-grown ERP system to SAP. Weekly profit-and-loss reports tailored for individual stores couldn’t be generated for nearly 18 months. The company had to change its data collection procedures, but failed to understand its own processes or properly document these business processes.

Enterprise applications also introduce switching costs. When you adopt an enterprise application from a single vendor, such as SAP, Oracle, or others, it is very costly to switch vendors, and your firm becomes dependent on the vendor to upgrade its product and maintain your installation.

Enterprise applications are based on organization-wide definitions of data. You’ll need to understand exactly how your business uses its data and how the data would be organized in a CRM, SCM, or ERP system. CRM systems typically require some data cleansing work.

Enterprise software vendors are addressing these problems by offering pared- down versions of their software and fast-start programs for small and medium­sized businesses and best-practice guidelines for larger companies. Companies are also achieving more flexibility by using cloud applications for functions not addressed by the basic enterprise software so that they are not constrained by a single do-it-all type of system.

Companies adopting enterprise applications can also save time and money by keeping customizations to a minimum. For example, Kennametal, a $2 billion metal-cutting tools company in Pennsylvania, had spent $10 million over 13 years maintaining an ERP system with more than 6,400 customiza- tions. The company replaced it with a plain-vanilla, uncustomized version of SAP enterprise software and changed its business processes to conform to the software. Office Depot avoided customization when it moved from in-house systems to the Oracle ERP Cloud. The retailer is using best practices embedded in Oracle’s Supply Chain Management Cloud and in its cloud-based Human Capital Management (HCM) and Enterprise Performance Management (EPM) systems. By not customizing its Oracle ERP applications, Office Depot simpli­fied its information systems and reduced the cost of maintaining and managing them (Thibodeau, 2018).

2. Next-Generation Enterprise Applications

Today, enterprise application vendors are delivering more value by becoming more flexible, user-friendly, web-enabled, mobile, and capable of integration with other systems. Stand-alone enterprise systems, customer relationship manage­ment systems, and SCM systems are becoming a thing of the past. The major enterprise software vendors have created what they call enterprise solutions, enter­prise suites, or e-business suites to make their CRM, SCM, and ERP systems work closely with each other and link to systems of customers and suppliers.

Next-generation enterprise applications also include cloud solutions as well as more functionality available on mobile platforms. Large enterprise software vendors such as SAP, Oracle, Microsoft, and Epicor now feature cloud ver­sions of their flagship ERP systems and also cloud-based products for small and medium-sized businesses (as described earlier in the Interactive Session on Management). SAP, for example, offers SAP S/4HANA Cloud for large compa­nies, and SAP Business ByDesign and SAP Business One enterprise software for medium-sized and small businesses. Microsoft offers the Dynamics 365 cloud version of its ERP and CRM software. Cloud-based enterprise systems are also offered by smaller vendors such as NetSuite.

The undisputed global market leader in cloud-based CRM systems is Salesforce.com, which we described in Chapter 5. Salesforce.com delivers its ser­vice through Internet-connected computers or mobile devices, and it is widely used by small, medium-sized, and large enterprises. As cloud-based products mature, more companies, including very large Fortune 500 firms, are choosing to run all or part of their enterprise applications in the cloud.

2.1. Social CRM

CRM software vendors are enhancing their products to take advantage of social networking technologies. These social enhancements help firms identify new ideas more rapidly, improve team productivity, and deepen interactions with customers (see Chapter 10). Using social CRM tools, businesses can better en­gage with their customers by, for example, analyzing their sentiments about their products and services.

Social CRM tools enable a business to connect customer conversations and re­lationships from social networking sites to CRM processes. The leading CRM ven­dors now offer such tools to link data from social networks to their CRM software. SAP, Salesforce.com, and Oracle CRM products now feature technology to monitor, track, and analyze social media activity on Facebook, LinkedIn, Twitter, YouTube, and other sites. Business intelligence and analytics software vendors such as SAS also have capabilities for social media analytics (with several measures of customer engagement across a variety of social networks) along with campaign management tools for testing and optimizing both social and traditional web-based campaigns.

Salesforce.com connected its system for tracking leads in the sales process with social-listening and social-media marketing tools, enabling users to tailor their social-marketing dollars to core customers and observe the resulting com­ments. If an ad agency wants to run a targeted Facebook or Twitter ad, these capabilities make it possible to aim the ad specifically at people in the client’s lead pipeline who are already being tracked in the CRM system. Users will be able to view tweets as they take place in real time and perhaps uncover new leads. They can also manage multiple campaigns and compare them all to fig­ure out which ones generate the highest click-through rates and cost per click.

2.2. Business Intelligence in Enterprise Applications

Enterprise application vendors have added business intelligence features to help managers obtain more meaningful information from the massive amounts of data these systems generate, including data from the Internet of Things (IoT). SAP now makes it possible for its enterprise applications to use HANA in-memory computing technology so that they are capable of much more rapid and complex data analysis. Included are tools for flexible reporting; ad hoc analysis; interactive dashboards; what-if scenario analysis; data visualization; and machine learning to analyze very large bodies of data, make connections, make predictions, and provide recommendations for operations optimization. For example, SAP created a machine learning and neural network application (see Chapter 11) that recognizes patterns associated with machine performance in the oil and gas industry. The software automatically generates notifications of potential machine failures and sends them to SAP Plant Maintenance, which planners use to schedule machine repair and replacement (Franken, 2018).

The major enterprise application vendors offer portions of their prod­ucts that work on mobile handhelds. You can find out more about this topic in our Learning Track on Wireless Applications for Customer Relationship Management, Supply Chain Management, and Healthcare.

Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16th edition.

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