450 Part III • Acquiring Information Systems
(^3) Ibid., pp. 122–3.
orders from 18 days to a day and a half and cut the
time required to close its financial books from 8 days
to 4 days.
Along with the successes, however, there have been
a number of resounding failures in attempts to utilize ERP
systems. Davenport^3 reports on problems with enterprise
systems:
The growing number of horror stories about failed or
out-of-control projects should certainly give managers
pause. FoxMeyer Drug argues that its system helped
drive it into bankruptcy. Mobile Europe spent hundreds
of millions of dollars on its system only to abandon it
when its merger partner objected. Dell Computer
found that its system would not fit its new, decentral-
ized management model. Applied Materials gave up
on its system when it found itself overwhelmed by the
organizational changes involved. Dow Chemical spent
7 years and close to half a billion dollars implementing
a mainframe-based enterprise system; now it has
decided to start over again on a client/server version.
Some of the blame for such debacles lies with
the enormous technical challenges of rolling out enter-
prise systems–these systems are profoundly complex
pieces of software, and installing them requires large
investments of money, time, and expertise. But the
technical challenges, however great, are not the main
reason enterprise systems fail. The biggest problems
are business problems. Companies fail to reconcile the
technological imperatives of the enterprise system
with the business needs of the enterprise itself.
An enterprise system, by its very nature, imposes
its own logic on a company’s strategy, organization,
and culture. It pushes a company toward full integration
even when a certain degree of business-unit segregation
may be in its best interests. And it pushes a company
toward generic processes even when customized
processes may be a source of competitive advantage. If
a company rushes to install an enterprise system with-
out first having a clear understanding of the business
implications, the dream of integration can quickly turn
into a nightmare.
The ERP Study
Aware of the growing use of ERP systems and concerned
that Benton might be missing an important development,
Benton President and CEO Walter S. McHenry has
formed a two-person team, composed of Adam T. Meyer
and Jerry L. Cook, to investigate whether or not Benton
should purchase such a system. Meyer is a senior systems
analyst who has been a star with the Benton IS department
for 15 years and has led many successful projects. Starting
in engineering 12 years ago, Cook has worked in several
areas throughout the company, including production,
finance, and market research. Although not an IT profes-
sional, Cook is quite comfortable with computer techno-
logy and has led the introduction of CAD and LANs into
engineering. McHenry told Cook and Meyer:
ERP seems to be the direction that our industry is
going, and we probably need one too. However, I
don’t know the specifics of what an ERP system
involves or what it might bring to the company, so I
want you to do a quick study and determine whether
ERP is for us, and if so how we should approach it.
The study team found that there are four major ERP
software vendors they might consider: SAP, J.D. Edwards,
Oracle, and PeopleSoft. Each of these vendors is financially
stable, supports global companies, has a full line of highly
integrated modules, and is a leader in R & D. There are a
number of “Tier 2” vendors, but Cook and Meyer believe
that none of them is suitable for a long-term partnership.
After a great deal of study, attending a number of
conferences, and talking with several people from compa-
nies that are using ERP systems, the study team is con-
vinced that Benton should replace its legacy “back office”
systems with an ERP system. Meyer explains:
We believe that information technology is crucial to
survival in today’s competitive environment. Our
present systems are growing old and hard to maintain,
and will have to be replaced in the next few years.
ERP systems have much more functionality and much
better integration than our internal IT staff can possi-
bly provide, so we have to use them just to keep up
with our competitors who are starting to install them.
Furthermore, Benton management has estab-
lished strategic business plans that cannot be realized
without an ERP system. These plans include the fol-
lowing emphases that cannot be fully supported by
our present information systems:
- International expansion
- Mergers and acquisitions
- Use of IT as a strategic weapon
- Integration with suppliers and customers
- Reduction of operational costs
- Product line expansion
- Process standardization across different units
of the company