Software as a Service and ERP Systems

Software as a Service

SaaS means Software as a Service has started picking up in last decade as Internet presence and usage continue to increase. Software as a Service is based on pay as you go concept. It allows enterprises to get software as a service and pay for their usage only and thus making it affordable to smaller and medium enterprises.

More and more SaaS is offered using Cloud services means the application is hosted in an internet enabled data center and can be easily scaled based on enterprise demand. The costing model for SaaS normally is usage based comprising of number of users, resources they would use like number of days, number of transactions etc. SaaS based systems can be accessed using web browser (thin client) and not PC installed fat client software hence saving any maintenance, update and client software costs for enterprises.

As per Gartner Group report of 2011, SaaS services revenue has reached $10 billion by 2010 and it’s forecasted to increase to $21 billion+ by 2015. TOP 3 ERP vendors SAP, Oracle and Microsoft have also invested and offering SaaS based ERP solutions.

SAP’s SaaS Offering – SAP Business ByDesign

SAP is one the Key ERP vendors with high market share. In second half of 2007 SAP announced launch of SaaS based offering addressing small and medium enterprises. It is called SAP Business ByDesign. In August 2010 SAP Business ByDesign 2.5 was released to the market which offered further improved scalability and flexibility of choices.

Key offerings

1. The solution is hosted by SAP partner and managed by SAP.
2. For use by small and medium size enterprises having less than 500 users.
3. Even companies requiring a low as 10 SAP Business ByDesign users can subscribe and monthly subscription ranges from $89 to $149 based on type of offering selected.
4. The Solution has built in business analytics as well as application support and services.
5. The offerings cover wide range of business areas. The areas covered are, Marketing, Sales, Service, Sourcing, Purchasing, Product Development, Supply Chain Planning and Control, Manufacturing, Warehousing, Logistics, Project Management, Cash Flow Management, Financials, Management Accounting, Human Resources and Employee Self Service.

Modules

• Customer Relationship Management: Includes supports processes that cover marketing, sales and service activities.
• Financial Management:  Provides single, up-to-date view of financial condition by integrating core business processes and financials that cover Financials, Management Accounting and Cash Flow Management.
• Project Management:  Contains an integrated project management solution.
• Supply Chain Management: Includes Supply Chain Setup Management, Supply Chain Planning and Control, and Manufacturing Warehousing and Logistics.
• Supplier Relationship Management:  Focuses on relationships with suppliers, procurement processes to perform self-service procurement.
• Human Resources Management: Covers Organizational Management, Human resources, and Employee self-service.
• Executive Management Support: Helps management with better decision making. Its customized real time data analytics allow managers to accurately track the most important aspects of business.
• Compliance Management: Focuses on helping enterprises maintain compliance with changing laws and regulations and to meet regulatory standards.

Flavors

CRM Starter Package: Consists of tools that help sales people in the enterprise and covers market to order business processes. Covers marketing and sales business processes areas.

Financial Starter Package: Focuses on core financials functionality that includes cash flow management, financials and account management, Human Resources and Project Management.

Professional Services Starter Package: Focuses on offering most of Market to Order and Order to Cash business processes. It does not cover Idea to Market processes and modules. Areas covered are Marketing, Sales, Sourcing, Purchasing, Project Management, Cash Flow Management, Financials, Management Accounting, Human Resources and Employee Self Service.

Configured for your business: This option makes all modules and functionalities available and is configured by SAP based on business demand and needs.

All in all SAP Business ByDesign offers complete business process integration and automation solution to small and medium enterprises at lower costs of ownership and faster implementation, expansion and use.

Small and Medium Enterprises and ERP Systems

Introduction

Enterprise Resource Planning (ERP) Systems have been around for more than four decades now, during each decade the ERP system needs and feature continued to evolve and become more user friendly and widely used by majority of enterprises.

On one side ERP systems continue to evolve and on other side the business needs continued to change we moved from industrialization economy to information economy and from information economy to entrepreneurs’ economy.

Entrepreneurs’ economy means it’s an era where generation x and generation y; who  want to work more independently and have their own businesses are taking entrepreneurial path of becoming entrepreneurs’ coming up with their own businesses.

This is leading to flourishing of small and medium business enterprises. These enterprises open a big window opportunity for simple and effective enterprise resource planning systems.

SME Defined

SME stands for Small and Medium Enterprise. The definition varies country by country based on every countries economic status. For Singapore SME’s before April 2011 were termed as companies that have net fixed assets of more than SGD 15 million in manufacturing area and for non-manufacturing companies with employee base of less 200 staff.

From April 2011 the definition is changed and updated to be companies that have annual sales turnover of not more than SGD 100 million or have employee base of less than 200 staff.

If we look at SME’s definition for other countries then it varies based on what suites as SME for the respective country. Although the deciding criteria remains number of staff, annual sales, net asset investment in most cases the absolute numbers differ per country. For some countries SMEs are further broken up in definition as small enterprise and medium enterprise.

Why ERP systems for SME’s

Enterprise resource planning systems have been around for more than 4 decades. In past four decades ERP systems have evolved a lot and so does the vendors offering ERP solutions evolved. From several vendors the market share came down to handful which acquired several other smaller vendors to be the vendor of choice. The big 3 names are SAP, Oracle and Microsoft.

Most of the MNCs and Big size companies have already implemented ERP solution from one of the top 3 vendors. This is leading to saturation of further implementation of ERP systems and it turns to more upgrades and managing the customer accounts.

A study of market share shows that SAP, Oracle and Microsoft are leading in market share of up to 53% in year 2010 while the remaining 47% is shared by other smaller ERP vendors. This leads to the need of firstly evolving ERP systems that fit small and medium enterprises by efficiency (simpler and faster to use) and effectiveness (low cost and scalable).

The other solid reason for ERP vendors to move in the direction of SMEs is due to the fact of growing number of SMEs. Millennium decade is the decade when Generation X are reaching their late 30’s and early 40’s leading towards becoming entrepreneurs while Generation Y phasing in and having the need to work independently leading to initiate their own businesses.

The Enterprise profile statistics report of Singapore (published on 10^th July 2009 by Singapore Department of Statistics) based on data of year 2003 to 2007 shows that Singapore has 160000 enterprises and 99% of these enterprises are small & medium enterprises (SMEs). Only 1% of enterprises are non-SMEs (large size businesses). These SMEs value added to Singapore economy between year 2003 to 2007 have increased up to 49% and theses SMEs are employing 60% of workers in the country. This shows that at least up to 49% of Singapore businesses have potential for ERP vendors to deliver meaningful solutions to.

Above statistics is just for Singapore and if this is checked worldwide then in opens up a huge market space which ERP vendors can target to deliver meaningful solutions. Given that number of SMEs will continue to grow ERP vendors are targeting to capture the market share of SMEs.

For ERP vendors there is also another plus point of entering this market and that is related to mergers, acquisitions and disentanglements. The fast changing pace of business changes lead to faster and faster acquiring, merging and disentangling of business divisions by various enterprises. In doing so if ERP vendors have suitable solutions they would be able to help transform these businesses much more smoothly and hence keep the market share growing and their customers satisfied.

ERP Systems Implementation Barriers for SME’s

ERP systems are by their nature wide ranged covering various business processes in an enterprise. As ERP systems integrate various business processes and automate them, they are seen as complex in nature. For ERP systems to be implemented and used by SMEs the biggest barriers are following.

Costs

Cost of ERP Systems from initiation to whole life cycle management is number one barrier for implementing ERP systems in SME’s

1. Small and Medium enterprises are generally cash poor with low information technology budget and spending power.
2. Generally an ERP project implementation has lot of one time implementation costs in the area of Consultants, Project Mgmt, Software Licenses, Hardware – Hosting and PCs, and User Trainings.
3. Additionally the ongoing maintenance and support costs of good ERP systems are very high for small and medium enterprises.

Time

ERP systems require a long time for implementation and changes. Time is number 2 barrier in ERP Systems implementations. Generally full implementation of ERP systems could take from 6 month to 1.5 years depending on size and complexity of enterprise and customization and integrations requested. Small and Medium Enterprises does not have so much of time to get the ERP systems implemented. Also more the time and complexity it leads to more costs which is already number one barrier for ERP systems implementation.

People (Resources)

ERP systems implementation requires various skilled resources to correctly and smoothly implement the solution. From SMEs it requires skilled business resources that know the business process very well and able to spend time with the project time during entire project life cycle. SMEs are generally small in size and its resources are multi hated (play multiple roles) leading to no or very little time to spend on ERP systems projects. This is one of the key barriers which can lead unsuccessful ERP systems implementation.

User Trainings and System Friendliness

ERP systems are wide and complex in nature and generally have too many screens, options and features. This means users need to be well trained and continued to be trained for effective use of ERP systems. SMEs being small in size have less number of users to be trained but the same users could have multiple hats leading them learn and remember several options, steps, features to successfully use ERP system. This leads to information overload and user resistance. Additionally SMEs being small in size also have faster staff change rate as very often staff joined in will learn and leave for working in bigger size organisation. This leads to continuous need for trainings of new staff.

Business Process Management

For effective configuration and installation of ERP systems, business processes of the enterprise must be well documented, maintained and owned. For SMEs the business process management is most of the time not formally documented and maintained. This leads to ERP systems configuration and implementation barrier. It also leads to higher costs of firstly documenting business processes for the enterprise and then applying the same for ERP systems implementation.

IT Department and IT Infrastructure

ERP systems require robust infrastructure and IT supporting department to be able to implement ERP solution. In SMEs IT department is generally very very lean or nonexistent. Also the IT Infrastructure for hosting and support of applications is nonexistent leading to hiring of outside service provider resources which leads to higher IT costs and as vendor resource may not have all SME IT systems knowledge could lead to unsuccessful ERP systems implementation. The barrier even continues post implementation during ERP systems upgrades and maintenance.

Strategies to Overcome Implementation Barriers

ERP Systems Implementation barriers for SMEs are Costs, Time, People, User Trainings, System Friendliness, Business Process Management, IT Department and IT Infrastructure. For overcoming these barriers ERP vendors have to come up with ERP systems that are optimized for following areas,

1. User Friendly System with e-learning training options for self-learning
2. Optimized system features, options and steps to meet the core business needs only. So only must have features enabled, rest disabled/removed to reduce usage complexity. This would lead to lesser time for training and system knowledge acquisition by enterprise staff.
3. Well documented business process management overview specific to industry segment with link to system functions/configurations which will help enterprise to see the end to end business process overview and how changes would impact configurations. This would help in reducing amount of time to be spent by enterprise staff on business process management. Also in many case SMEs could easily see the end to end process and choose to go with out of the box setup.
4. Pre-defined and success proof ERP Systems project implementation methodology that would reduce the time required at each step of the project and hence increasing the speed of implementation and reducing the costs of implementation.
5. Software offering where IT hosting, system maintenance and support is take care by ERP vendor itself. This would lead to internet based ERP solutions that would be readily available and can be easily accessed using standard web browser (thin client). This would address SME’s need as they generally don’t have IT department or have very very lean IT department and infrastructure. This would save huge IT investment costs of ERP Systems implementation. By managing the ERP Systems IT Infrastructure and Support, ERP vendors can offer ERP systems with lower costs of ownership to SMEs.

ERP Vendors have to come up with product offerings for SMEs that help address the implementation barriers. The products offered must be,

Internet hosted

• Save Client Implementation and Maintenance Costs
• Can be accessed using standard web browser (thin client)
• Use standard internet protocols and messages for communication and data exchange

Out of the box

• Standard Industry best practice business processes used in the tool
• Pre-configured for businesses to allow them to start using within days
• Configurable flexibility for businesses that want some parts to be configured

Low Cost

• Installation is ERP vendor hosted and managed means no IT Infrastructure costs to SMEs
• Pay for Use based on number of users subscribed in every month and functionality/modules they use

Above can be achieved using Software as a Service (SaaS) technology concept and ERP vendors are starting to offer products and services using SaaS technology.

Conclusion

ERP vendors are well aware of the growing number of entrepreneurs and SMEs. They also know the opportunity and growth potential in this area. ERP vendors like SAP, Oracle and Microsoft have come up with solutions that could fit SMEs. As the opportunity is seen by all IT vendors there is a lot of competition and new entrants in ERP Systems for SMEs.

For more SMEs to adopt ERP Systems its essential that ERP Systems are internet hosted, out of the box and low cost. The need and use of ERP Systems will continue to increase for SMEs till the time the systems are low cost and faster to implement and easy to use meeting SMEs’ needs. The challenge for ERP Systems effective implementation and use in SMEs still remains in below areas.

Lift and Shift

ERP Vendors have to continue to think and come up with plug and play ERP Systems. By plug and play its meant lift and shift of ERP Systems. SMEs are often acquired by other larger SMEs or larger enterprises and for such cases ERP systems and data used by SMEs should be easy to lift and shift or easily portable to other enterprise’ ERP System.

Mobility

ERP vendors also have think about SME solution to be compatible and light enough to access from mobile devices and tablets. Given the growing power of mobile devices and growing use of tablets for business this is an essential must to be brought in place.

Success and Failure of ERP Implementations In Brief

Success and Failure of ERP Implementations

ERP Implementation projects success and failure depends on several factors. The top five factors are as described below.

Clear understanding of Scope and Ownership :

Its essential that the project scope is clearly understood and the project is owned and driven by business than by IT. All members of the project team must know the scope clearly and plan execution based on must have scope items. Business Management normally the CEO or COO or CFO of the organization should own the business requirement and help define clear scope and business priorities with in the specified scope.

Clear Benefits identification and management:

All projects are done for a business reason with benefits clearly defined and agreed. Business case must detail out the benefits with clear ownership for each factor and who will be driving it to realize the benefits. Some benefits can be reported during the project execution phase itself while others would be realized post implementation. So its important that benefits are owned by the business and reported to management on timely and standardize manner.

Right Resources:

For ERP implementation success its essential to have best people in the organization with through knowledge in respective areas are chosen to be represent the business requirements and to drive the project from business side. The project should have the best and experience ERP consultants to be able to drive the technical execution correctly. Resources allocation to the project should be normally 50% or more as anything lower could lead to priority conflicts and affect the implementation

Managing Change Management:

Change management is highly important and requires high attention and management. The change management for the project scope changes needs to be managed in a structured manner using project boards as improper change management would lead to implementation delay and can affect the business objectives very highly. The other side of the change management is related to people in the Organization as moving to a new system requires buy in and involvement of various people of the organization. The people related change management in the organization should be managed through HR and company’s top management to ensure all businesses and their people support the change and be part of it to make it a success.

Integration needs:

Normally IT systems and specially ERP systems implementations lead to organizational structure and roles change. On one side along with the system automation certain roles in the organization get redundant while on the other side some people’s role increases while some other new roles have to be created to manage the new system related functions/activities. Its essential that the integration needs owned by business with well-defined planning and clear ownership for execution.

Post Implementation needs:

The real work for ERP Implementation is to ensure there is clearly defined ownership of post implementation support (e.g. change, incidents, issue handling, access request etc.) is establish during the project itself and required teams are involved in the ERP implementation at various stages of the project. It’s also essential to define how user trainings and ongoing organizational changes would be handled with respect to ERP system.

Sarbanes-Oxley Act Basics and ERP Systems

Sarbanes-Oxley Act Basics

From year 2000 to 2002 several large corporate companies are caught in series of frauds in area of financial practices and reporting. Examples of Enron and WorldCom lead to creation of Sarbanes Oxley Law, also called as SOx and known as  ’Public Company Accounting Reform and Investor Protection Act’ (in the Senate) and ‘Corporate and Auditing Accountability and Responsibility Act’.

The SOx Act was activated in year 2002. The Act was named after Paul Sarbanes and Michael G Oxley who sponsored and helped in creating this law to implement stricter controls for companies financial reporting, auditing and corporate responsibility.

Explain the reason for the Act and briefly implications

The SOx (Sarbanes Oxley Act) act was created in response to the financials frauds of Enron and WorldCom companies. The Act applies and puts in place stricter controls for all publicly listed companies in US as well as it applies to all companies the audit US based publicly listed companies. The Act does not apply to private companies.

Securities and Exchange Commission is accountable for checking that public companies adhere to SOx compliance, rules and regulations. Additionally the Public Company Accounting Oversight Board is helping to ensure the accounts auditing firms are doing their roles correctly and independently ensure SOx compliance of companies audited by them.

The SOx Act has eleven sections with several sub sections detailing each section. The sections are focused on Public Company Accounting Oversight Board, Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analyst Conflicts of Interest, Commission Resources and Authority, Studies and Reports, Corporate and Criminal Fraud Accountability, White Collar Crime Penalty Enhancements, Corporate Tax Returns and Corporate Fraud and Accountability.

The Key Implications of SOx Act are,

Section 302 – Corporate responsibility for financial reports: Requires the CEO and CFO to be fully accountable and responsible for financial reports accuracy. It requires both officers to be responsible for internal controls that enable full transparency, accuracy and timely reporting of changes affecting financial reports. It also requires the officers to highlight any gaps in the internal controls and required corrective action.

Section 401 – Disclosures in periodic reports: Asks for full transparency of financial reports on period basis (e.g. quarterly). It requires companies to submit financial reports with full clarity on deviations like off balance sheet transactions reporting.

Section 404 – Management Assessment of Internal Controls: Focuses on defining the internal control measures and responsibility for internal controls implementation and day to day use. It also requires an audit and information on yearly basis of the effectiveness of the internal controls being practices by the organization.

Section 409 – Real Time Disclosure: Requires companies to do real time disclosure of change in financial situation due to material and operation changes in the company.

Section 802 – Criminal Penalties for altering documents: Defines the penalties for companies for altering financial documents, document/transaction audit logs and alteration of audit results.

Section 806 – Whistleblower protection: Empowers employees in organization to be able to report back on any fraudulent activities by protecting them.

How does MySAP ERP meet these implications

MySAP ERP is created based on leading industry best practices that meet, suite and support company needs from process automation to compliance to creating transparency and control. The solution helps companies to deploy industry standard internal controls that help companies to practice and comply easily.

SOx require companies to be faster, timely, accurate and transparent in their financial reporting and accounting practices. My SAP ERP is helpful in enabling companies to achieve above with industry standard processes and automation tooling.

MySAP ERP has internal control management sub module that helps in business process modeling, internal controls documentation and identifying improvements required in any control processes. It makes available management reports and dashboard that help C-level executives to check the state of accounting and internal controls used. This helps in enabling SOx compliancy for Section 302 – Corporate responsibility for financial reports and Section 404 – Management Assessment of Internal Controls.

MySAP ERP provides fully configurable financials and accounting module that helps organisations to setup their organisation structure and reporting flexibly. The general ledger in MySAP ERP helps in full transparency and disclosure. Its available in such a way that using one information source, multiple reports can be generated which could be suitable for various needs like legal and management reporting. It helps companies to have periodic, timely, accurate and transparent reporting. This helps in enabling SOx compliancy for Section 302 – Corporate responsibility for financial reports, Section 401 – Disclosures in periodic reports and Section 409 – Real Time Disclosure.

MySAP ERP has a sub module available for capturing whistle-blower complaints. The sub module helps employees to send messages about accounting irregularities noticed, directly to the audit committee using electronic form which can also be made anonymous if required. This helps ensure whistleblower policy can be enabled with ease and with employee protection while keeping the company focus on improving the accounting practices. This helps in enabling SOx compliancy for Section 301 – Public company audit committees and partly Section 806 – Whistleblower protection.

MySAP ERP helps deploy stronger internal controls and segregation of duties by creation of authorisation profiles that restrict users to specific roles and transactions in the system. This helps in ensuring strong authorisation control and prevention of possible miss use of data due to clear visibility of segregation of duties related conflicts. All in all it helps improve audit compliance and reinforcement of controls and governance. This helps in ensuring compliance for SOx Section 802 – Criminal Penalties for altering documents.

MySAP ERP has an in built audit information system, that allows internal and external independent auditing firms to do structured audit reviews. The system has preconfigured set of reports and activities that help auditors go through to validate required compliance as well as find out gaps and improvements. This helps internal and external SOx auditors in performing relevant audit checks in a structured manner.

Financial Accounting Basics and ERP Systems

Introduction

Financial accounting and reporting needs at high level are still the same and basic transactions and calculations required by all companies are also similar. The growing globalization of businesses and cross country, overseas business handling has created some complexity as well as need for more standardization in reporting for international companies. Needless to say that for several countries there are still their own local legal accounting and business needs that has to be complied by the companies operating internationally.

On one hand for publicly listed and traded companies the shareholders require full transparency and standardized reporting of their financials that are audited by independent auditors and are accurate plus trust worthy. On other hand the international companies still have to deal with the complexities of import, export, taxes, and local fiscal requirements fulfillment.

This leads to need of enterprise wide resource planning system that can bring together all functions and related transactions of production, purchasing, supply, sales and internal organization operations costs. This is more and more required by all companies having international presence, by international it means operations and sales in more than 1 country.

Let’s initiate with understanding of financial accounting needs of companies and then move towards the international legal and compliance needs followed by how MySAP ERP can help in meeting the required needs as well as what needs to be taken care for implementation.

Classification of Accounting

Accounting of companies and enterprises are done using two broad categories namely Financial Accounting and Management Accounting. Financial Accounting is outward focused to meet the needs and standards of outside world (e.g. Shareholders, Legal, International Accounting practice standards etc.)

Management Accounting focuses inwards on company financial reporting needs internally. This helps give financial overview in terms of reports at various levels of the organisation. Management accounting helps companies keep track of internal spending, cost allocations and cost controls.

Why Accounting is classified

The Accounting information is classified in two broad categories to ensure that the Organisations use standard accounting practices for reporting their costs and revenues in a standard way that can be understood by shareholders, customers and society in one standard way. On the other hand, given the globalization and growing needs of the companies to expand, it’s essential to have some flexibility for companies to be able to manage their internal costs and revenue reports as per their business needs.

Classification helps companies to use one standard reporting practice for outside world while having the flexibility to arrange internal financial reporting as per their own needs in various businesses and locations.

What Activities Are Undertaken in Accounting

The accounting information is classified and required to accurate, up to date and in required standard industry format to be able to present it to outside world as well as for the company to practice it effectively for internal accounting with full transparency.

For Financial Accounting to work effectively the key activities and features required are,

• accounts receivable and payable transactions management in the general ledger
• company’s assets management and accounting to handle assets registration and depreciation
• Banking Transactions, Cash and Funds Management of the company
• Consolidated financial reporting with full drill down to details of each section of the report as per industry and government standards.

For Management Accounting to work effectively the key activities and features required are,

• Cost centre accounting and management for the ability to track internal organization’s respective department costs
• Profit centre accounting and management for the ability to track company’s profit and loss details at various levels of the organization
• Profitability Analysis and Reporting for the ability to review company’s profit at various levels of the organization.
• Product costing analyses to be able see actual product costs which can help in deciding products price.

What Feature MySAP ERP has to meet the Accounting Requirements

MySAP ERP has two modules in financials management for companies. One of them is Financial Accounting (FI) focused on company’s external sales and legal reporting needs. The second module is Controlling (CO) focused on company’s operations management and internal management reporting needs. Controlling module helps company’s management in effective planning and decision making.

The seamless and real time integration of financial management modules with other modules like sales and distribution, material management, logistics, human resource management etc. makes MySAP ERP a top leading system for enterprise resource planning.

Financial Accounting (FI) Module

The FI module is made up of several sub modules that help cover the needs of financial accounting based on industry standard – best practice processes. The FI sub modules with brief features are described below.

General Ledger - Accounting postings are recorded from various modules using General Ledger. The postings are real time and latest with full audit log details.

Special Purpose Ledger – For any financial records from external applications to be accommodated, MySAP ERP has special purpose ledger that can be used to capture data and make them available for reporting and analysis purposes.

Accounts Receivable – This sub module focuses on financial postings and records management resulted from customer sales. General Ledger is auto updated for every posting.

Accounts Payable – This sub module posting generated from supplier / vendor purchase activities. General Ledger is auto updated for every posting.

Asset Accounting – As the name suggest the sub module is used for fixed assets management. It allows comprehensive configuration and setup for assets of all types and their depreciation methods.

The financial accounting module also has sub modules that help in travel related transactions, banking transactions, funds management and consolidation (reporting of financial statements in required consolidated way.

Controlling (CO) Module

The CO module is made up of several sub modules that help cover the needs of internal company management reporting and operations management. The CO sub modules with brief features are described below.

Cost Center and Cost Element Accounting – This sub module helps in capturing all costs incurred by a department within a company. Cost Centers are assigned to various departments in an organization. Cost center are assigned to Cost Elements that capture the sub details of costs incurred.

Internal Orders – This sub module is used for detailed level costing and collection of costs spend on internal tasks.

Profit Center Accounting – This sub module is used to check company’s profit and loss visibility. Profit centers in a company are setup for production lines (like factories), geographic business divisions. Profit Centre enables company’s management to have internal controls and reviews. Profit centers show the cost and revenue balance.

Product Cost Controlling – This sub module helps in analyzing product cost details and helps the organization to decide on product pricing based on costs. Product Costing has two sub sections that help in product costs analysis based on costs object controlling and actual costing.

Profitability Analysis – This sub module helps in bringing full visibility on company’s or specific business division’s profit. The analysis can be done using two methods namely Cost based analysis and Account based analysis.

Activity-Based Costing – This sub module helps in identifying the costs source and the driving process. It helps in having a process oriented view for cost centers.

Enterprise Resource Planning Systems - Part II

Today’s ERP Systems

Today’s ERP Systems are vast and cover end to end business process integration and automation. Key features of them can be listed as follows,

• End two End enterprise wide business process integration and automation
• Ready to use industry based solutions that are made from industry practices
• Fully configurable system with possibility to customize specific areas for business needs
• Faster and effective decision making using self configurable and drill down reporting
• Standard interfacing based on industry standard data interchange standards making it easier to interface and integrate existing applications with ERP Systems
• Internet and Collaboration capabilities making it easier to collaborate with customers, colleagues, partners and vendors.
• Software as a service solutions for small and medium enterprises to able to afford and use industry standard based ERP systems at lower costs

Top ERP vendors in today’s market

There are many ERP vendors for different industries and business sizes. Key vendors that standout and are world known are SAP, Oracle and Microsoft.

SAP

SAP is world’s largest ERP vendor with high market share and revenues. SAP was founded in 1972 by a group of ex-IBM German employees. The product has its own evolution cycle over past three decades and its now the market leader in wide range of industries. SAP has created various solutions based on industry best practices and packaged the solutions with power of full customization (meant for multi nationals/fortune 500 companies), minor customization (medium to large size companies) and out of the box (for small and medium size companies). It further continues to develop a complete suite of ERP solutions consisting of end to end business processes.

Oracle

Next to SAP, Oracle is the second largest / known vendor in ERP market. Oracle was founded with focus on relational database management software and systems. Even for SAP the backend database many of the times would be Oracle. Oracle entered in the field of ERP systems over a period of past decade and has gained momentum with acquisition of some of the 1990s well known ERP software companies like PeopleSoft who had before acquired JD Edwards. This gave Oracle a big base of customers to expand its ERP Systems and solutions. Oracles recent acquisition of Sun Java further adds a feather in Oracle’s capability to build and deliver sound ERP Systems

Microsoft

Microsoft entered the ERP Systems with a product named Dynamics and has started emerging in last decade with focus on small and medium enterprises ERP Systems and Solutions. Microsoft Dynamics has a positive point as it combines the full end to end software needs as Microsoft makes the server and client operating systems (world known as windows), the relational database management system (known as MS SQL) and the thin browser client (known as Internet explorer). On top Microsoft is well known for its collaboration tools like Microsoft office range of products, Microsoft Sharepoint and Microsoft Duet solutions which help combine ERP systems with collaboration functionality.

ERP Systems - Further Evolution

Given the importance, dependency and need for ERP Systems, the evolution of ERP systems will continue with even more speed to bring more agility in the solution provided and adaption/implementation of ERP solutions.

ERP Systems in coming years can focus on and evolve in the areas of,

1. Enhancing the internet based system performance and user experience. By doing so discontinuation of any client software need to use ERP systems. The need also arises from the speed with which business needs ERP systems changes done and implemented. In doing so the user experience of ERP systems usage will further help to reduce the time and effort spent on training/re-training users on ERP System functionality.

1. Cloud based offering in the area of Software as a Service could open up easy and affordable ERP solutions for small and medium enterprises. ERP vendors are already having Software as a Service solution available for businesses. These would further evolve in cloud based low costs and easy ready solutions.

1. The transformation of PCs to laptops and laptops to tablets on hand and other hand mobile devices becoming as powerful as laptop computers in processing speed and functionality. This opens the need for at least part of the ERP Systems solutions to be available on mobile devices.

After Thought

ERP systems have came long way over several decades and in doing so they improved the functionality offered, user experience, industry best practices and focusing on standardized solutions.

The evolution will continue towards cloud based offerings for possible small and medium business enterprises making process automations available on internet at a click of a button. The evolution will also continue in the areas of making ERP systems available on tablets and mobile devices.

As the speed of business change continues to grow higher, the ERP systems would be under constant need to become highly Agile in the area of change implementation, user experience and execution.

Enterprise Resource Planning Systems - Part I

Background

Enterprise Resource Planning (ERP) Systems started in 1970s the years’ when business and markets were heavily focused on mass production of materials and industrialization was on the peak. The so called enterprise, five to six decades back was in need of automation of industrial materials and their effective plus efficient management. The prime focus remained on materials and resources management.

In this fast changing business environment and heavy dependency of businesses on automated processes running using various IT Systems; the value and need for a reliable ERP System is constantly on rise.

ERP Systems have evolved over several decades and still continuing to evolve to become more fit for today’s business needs.

Legacy Systems

Legacy systems are generally any systems that are old systems built using software and hardware platform that is more than a decade old. Systems that are built using old programming languages like ‘COBOL’ and are running on mainframes, considered legacy systems. In some organisation such systems are still in use as they are complex, costly and difficult to replace. Legacy systems are difficult to interface with and make changes.

In organisations systems that are archived or not actively used and kept for audit purposes are also referred to as Legacy systems. These systems normally were built and used 7 or more years back and consist of business transactions and information that are of use for historical referencing. Older ERP systems are also termed as legacy if they are kept running and used for historical transactions referencing.

ERP System Contents

The enterprise resource planning system is software package that brings together various business processes by automating plus integrating them and maintaining a central database with all relevant master data and transaction data. One of the Key benefits of using ERP systems is they are normally having real time availability of information which is key for businesses.

Enterprise resource planning systems cover a wide range of business processes management namely Manufacturing, Supply Chain, Financials, Human Resources, Projects and Customer Relationship.

ERP Systems structure is made up of various modules ideally focused on respective functional domain like Manufacturing, Finance, Supply Chain, Human Resources. The system needs one central database which consists of Master and Transactions data for various modules.

Decades of ERP Evolution

ERP Systems have evolved over 4 decades. If we look at the evolution in each decade major steps happened.

1970s – MRP

In 1970s all systems were standalone and separate systems. Given the ear of industrialization 1970s ERPs started with MRP systems called Material Requirements Planning System. MRP offered production planning which helped businesses in inventory management. In the same decade the standalone financial and human resource systems evolved.

1980s – MRP II

In 1980s MRP systems where further enhanced as MRPII which helped bringing inventory management and production management together. In the same decade for financials management, FMIS systems arrived.

1990s – ERP

In 1990s major evolution happened and ERP Systems emerged which offered one integrated MRP, FMIS and HR system. In the same decade Supply Chain Management systems emerged to take care of planning, scheduling and distribution of products. As this was also the decade of Internet boom customer facing systems like e-commerce, sales force automation and customer relationship management emerged.

2000s – ERP End 2 End

In last decade (2000s) ERP systems have become robust and evolved as one end to end system covering the entire business portfolio needs. ERP systems took a turn to become industry based and various standard industry best practice based industry specific solutions emerged. In the same decade ERP vendors increased focus on making ERP systems web based and making it available as viable out of the box solutions for small and medium enterprises.

Continued in Part II ...