Alain Nkoyock, Laura Caldwell, Jefferson Davis, David Weston, Tracy Whitfield
University of Phoenix, School of Advanced Studies
According to Sumner (2005), enterprise resource planning (ERP) uses software tools to support organizations in managing data. Using ERP organizations could organize daily business functions for internal departments managing data and integrate business practices. ERP identifies organizational needs, shares resources, and provides information in real-time. ERP is available in software packages, which address SAP, Oracle, and PeopleSoft. These software packages include supply chain, inventory, customer support, accounts receivable, and additional business functions of an organization.
Using ERP could enable organizational management to make decisions efficiently based upon current and relevant organizational information. Implementing ERP may allow organizations to replace old systems, which previously led to organizational inefficiencies. Using ERP may increase customer response time, reduce customer delivery time, and minimize operational costs (Sumner, 2005).
ERP is a suitable solution for organizations that are looking for a means of improving the daily functions of the business applications through an integrated system. ERP began as a way in integrating point of sale systems, material requirement planning systems, manufacturing resource planning, and manufacturing execution systems. The benefits that ERP solutions provide are data integration supporting various business functions, minimize customer response time, maximize organizational efficiency, and reduce organizational redundancy (Sumner, 2005).
Organizations perform assessments in determining an ERP provider is best suited for the daily functions of the organization. The purpose of this paper is to compare and contrast three ERP service providers (Apache, Oracle, and SAP). Each service provider offers benefits to the organization and identifies aspects the organization may need to address prior to implementation. The evaluation will identify best practices, implementation, customization, complexity, international issues, software modules, advantages and disadvantages of each ERP service provider.
Enterprise Resource Planning
According to Holland and Light (2009), “companies are radically changing their information technology (IT) strategies by moving away from developing IT systems in-house and purchasing standard package software” (p. 1). Enterprise resource planning (ERP) software is an example of standard package software (commercial of the shelf (COTS) product) that companies are implementing instead of building in-house. Enterprise resource planning is a set of software modules that enables organizations to share data from various organizational departments. The purpose of ERP systems is to support decision-making, reduce costs, and increase management control. ERP software integrates and automates many corporate functions like supply chain management, finance, manufacturing, and human resources (Holland & Light, 2009).
The integration of these various parts of the organization requires a disciplined approach from the users in the organization because of the constraints of the processes needed to make them work well (Harley, Wright, Hall, & Dery, 2006). Several factors are important to the success of an ERP implementation from a strategic and tactical perspective. The first strategic factor includes reviewing and considering the legacy systems that include the business processes, organizational culture, and any tools. The second strategic factor is the ERP strategy itself. The ERP strategy’s primary concern is about the implementation of the software package: whether the organization should use a big bang or incremental approach (Holland & Light, 2009).
From a tactical perspective the success factors focus on the changes in the business processes and configuration of the software. It is important to examine the current business processes of the organization and compare them to the processes housed in the purchased ERP software packages. Tools exist that can help with modeling the business processes and support configuration of the software (Holland & Light, 2009). Considerations of the strategic and tactical critical success factors are imperative when evaluating an ERP solution for an enterprise.
In the world of open source, Apache OFBiz provides best practices for contributors in bug reports and plain contributors. Debuggers find errors and in doing so, improve existing features from previous developers. With the flexibility of Apache open source, Newsweek (2008) provided information where Apache is able to bring together a wide-range of expertise into one forum to focus on real world needs. From contributors working toward a common goal creates a pool in-depth knowledge transfer, such sharing of knowledge provides greater enhancement of applications. Software modified under such a forum brings about tools that can benefit an organization’s need. Pulling together large communities of contributors and honing their skills by teaching them to become more effective and following a set of best practices, allows a contributor to stay in tune with emerging trends. It also provides contributors with the knowledge to make correct modifications and replacing components without affecting the stability or other systems. Following set guidelines, provides organizations a solid, reliable code that is beneficial to organization stability.
ERP solutions are wide and varied according to an organization’s business needs. The Technology Evaluation Centers’ ERP comparison tool currently identifies nine categories of business involving engineering, manufacturing, and non-manufacturing industries (Technology Evaluation Centers [TEC], 2009). This section focuses on non-manufacturing ERP. Summer (2005) referenced Anderson when defining best practices as the optimal method chosen to execute a given process. Oracle’s E-Business suite integrates accounting, customer relations, manufacturing, and supply chain management across the enterprise to provide a single focus toward managing the corporate enterprise. Current Oracle efforts include the introduction of business intelligence with manufacturing known as enterprise manufacturing intelligence (Smith, 2008). Oracle continually focuses on product development and refinement.
Experiences from best practice organizations showed that successful deployments of SAP depend on the successful management of multiple factors (Al-Mashari & Zairi, 2000b). Al-Mashari and Zairi suggested an integrative model for SAP R/3 deployment adaptable to other SAP components including mySAP ERP and SAP CRM. The key elements of this framework are: (a) business case, (b) benchmarking, (c) deployment strategy, (d) change management, project management infrastructure, business process reengineering, and the software installation. This framework included a set of best practices identified by Welch and Kordysh (2007) (a) securing management approval for the ERP implementation plan, (b) establishing the right governance model, (c) emphasizing business process transformation, (d) ensuring the project support, (e) addressing organizational needs, (f) keeping in mind the business mission, and (g) managing IT infrastructure.
Implementation of Apache OFBiz coincides with the enterprise resource plan (ERP). Jones (2009) pointed out that apache is the best technology for a suite for business applications that has a no cost enterprise-ready suite for all to use. The technology is applied through a simple object access protocol (SOAP) engine within the code to allow improvements or enhancements to what already exists for the implementation of web applications but also used at the application layer as a transport protocol. The way OFBiz works is it wraps up web service and makes a connection for transferring of data. With such flexibility, apache open source technology allows for easy implementation and adaptability to provide an organization the capability of constructing a sound business on an ERP platform (“ApacheCon, ” 2008).
The scope of the customer’s business needs and budget determines how to implement an Oracle solution. The Oracle E-Business suite executes on any server platform that supports the following operating systems: Linux, IBM, UNIX, and Windows (TEC, 2009). For evaluation purposes, the business (organization) environment chosen is 1,001 to 5,000 employees with a 12 months (or greater) delivery executing an ERP budget between five hundred thousand and one million dollars managing less than 40 distinct sites within North America. An organization may decide not to hire independent contractors to reengineer and design an organization’s ERP system. Most research does not support this decision but one reason to contract out for implementation services is the scope and complexity of the effort. Mahato, Jain, and Balasurbramanian (2006) posited that management’s focus is toward the identification and development of improvement. The customer’s function during implementation comes from examining user acceptance testing and evaluation criteria. Oracle assists customers with all stages of ERP implementation including standardization efforts, rollout planning, analysis, design, system engineering, installation, and maintenance. Oracle is unique as the organization sells all components of the ERP system such as hardware, services, and software.
Various factors affect the successful implementation of SAP software packages. Gargeya and Brady (2005) pointed out two different perspectives of critical success factors in the implementation process of SAP: (a) technical factors; (b) financial factors; and (c) organizational factors. From a technical perspective, Al-Mashari (2003) described the critical common factors to consider for SAP implementation success. These factors are: (a) infrastructure resources planning, (b) local area network, (c) workstations, (d) training facilities, (e) human resources planning, (f) education about SAP, (g) recruiting the right people, (h) top management’s support, (i) commitment to implement, (j) good manual systems, (k) strategic decision on centralized versus decentralized implementation.
The capability of Apache OFBiz touches on extensive applications approaches, which all are customizable. Being able to build instead of buying is a strong customization feature, allowing organizations the ability to make changes in many areas from segregated groups into individual groups. Customizing capabilities, based on Cappallato (2009), point out items such as software development, business analysis and design, web design, and eCommerce hosting. Customization provides the ability to produce specific reports, analyze data from different angles, and track automated organizations of many variety and types of interconnected systems. The ability to customize systems expands on the ability to open up communication ties between system that were once, locked in their own data world. OFBiz allows for the customization of code, where one system is able to communication with many other systems. Such customization allows an organization the ability to link other organizations or older systems together without having to rebuild a whole new infrastructure.
Customization of an ERP system allows for flexible installation options for the customer. Oracle E-Business suite has a modular design to provide customers flexibility in scale, scope, and function. The Oracle E-Business suite has the following customizable modules: (a) portfolio and project management; (b) resource planning and scheduling; (c) opportunity, contact, and contract management; (d) time and expense management; (e) financial management, budgeting, costing, and billing; (f) knowledge management, collaboration, and analysis; (g) third party integration; (h) back-office functionality; (i) and product technology (Exforsys, 2009; Oracle, 2009; TEC, 2009). The modules automate and connect business processes throughout the enterprise, allowing the required flexibility.
The ERP business area contains 29 software product lines that fall into three main categories: financial management, human capital management, and project management (Lombardi, 2008). Purchasing all 29 software lines for the ERP business area to function correctly is not required. The financial management section, for example, contains asset lifecycle management, financial analytics, and procure-to-pay. If and organization did not desire procure-to-pay because this business function does not exist, then the organization would not purchase this module.
According to Alshawi, Themistocleous, and Almadani (2004), each ERP system standardizes a range of business processes and systems. A SAP installation consequently requires a level of customization to fit a firm’s unique business requirements. Wenrich & Ahmad (2009) warned about the extreme derivations from the generic offerings of SAP because it increases the risk of failure. They argued that restructuring a SAP software package to fit business practices and processes decreases the chance of realizing the business value of the software. To exploit the capabilities of SAP software packages, the major impact on organizational processes is through their reengineering (Mendonca, 2004). Kohli and Hoadley (2006) noted that companies embraced business process reengineering to eliminate inefficient activities and to improve organizational performance and effectiveness.
OFBiz itself is a complex piece of open source software that allows organizations the capability of customizing software to operate within their environment and provide communication customization between new and existing systems. According to US Newswire (2009), OFBiz is a part of enterprise resource planning (ERP) and customer relationship management (CRM) where both frameworks are complex guidelines. Together they support special purpose applications that allow organizations the ability to interlink complex environments using standards of Java, J2EE, XML, and SOAP. Based on Shankland (2000), who described where Apache provides the most used Web server software and discovered where Apache is used 63% of the time compared to Microsoft’s 20%; opening the door to Apache becoming a complex expansion of collaborative technology.
Oracle products have a history of complexity, often requiring experienced installers during installation and initial setup. Complexity is a known limitation for most ERP systems due to potential reengineering efforts during standardization efforts in the requirements and design phases of development (Galliers & Leidner, 2006). Figure 1 compares two products developed by Oracle and SAP. The chart category is product technology. Two noteworthy categories are technical fit and implementation (and training). Oracle solutions may be complex, but the company does provide extensive implementation and training compared to other companies such as SAP (TEC, 2009). Technical fit involves an in-depth analysis of an organization’s baseline technology to determine hardware, software, or network improvements for ERP optimal performance.
Figure 1: Comparison of product technology developed by Oracle and SAP1.
1. Adapted from Technology Evaluation Centers. (2009). Free custom software comparison (Auto-generated by TEC). Retrieved October 19, 2009, from http://free-report.technologyevaluation.com/select-vs.asp?
Oracle’s E-Business Suite manages the following business areas: asset lifecycle management, customer relationship management, enterprise resource planning, procurement, product lifecycle management, supply chain management (SCM), and manufacturing (Lombardi, 2008; Oracle 2009). The suite contains 60 software product lines among all business areas. Enterprise software of this magnitude is inherently complex, but manageable provided a scalable solution includes personnel training at all levels (LaRue, Childs, & Larson, 2004).
SAP’s software has a reputation for complexity and the application takes a long time to implement (Al-Mashari & Zairi, 2000a). SAP proposes extensive analytics intuitive accessible portals (analytics, financials, and human capital management) and a set of value-added services to improve management of resources and assets (SAP, 2009). The company supports full procure-to-pay and order-to-cash processes. Starting from the 70‘s, SAP proposed various innovations including mainframe computing, client server architectures, and service oriented architectures (SOAs). According to Arif, SAP embraced SOAs through NetWeaver (Arif, 2005). Like all web services, NetWeaver enables customers to leverage existing investments in applications and technology. SAP NetWeaver interconnects different IT systems by taking advantage of the existing infrastructures and by linking users, information, and business processes across technology boundaries and the organization.
The international issues, which come into the picture for Apache OFBiz open source, are proprietary laws of ownership of the code. Based on MacCormak (2008), used of open source code or proprietary models, have specific signatures and the only way to keep from other organizations from making a claim to it, is being able to differentiate between open source and commercial software. This is done by developing features which have dependencies between one part of the design and another. Creating specific differences in the design of the architectural structure, such a difference creates a product that is specific to the organization function compared to another organization. This method provides organizations the ability to have code written from international or local subcontracted organizations. Knowing the design or pseudo-code produced, meets the needs of the organization that is having the code written for them. There are also further differences between open source and commercial software describe in following table (Costa, 2006, p. 404).
Figure 2: Comparison between open source and commercial software2.
2. Adapted from Costa, C., (2006). Organizational tools in the web: ERP open source. IADIS International Conference, 6(2), 43-56 . Retrieved October 15, 2009, from http://www.iadis.net/dl/final_uploads/200606L051.pdf.
Oracle takes a multi-national approach to product development. Oracle software (in general) supports from 13 to 22 languages depending on the specific software and interrelated modules (Oracle, 2009). The finance and services modules manage currency at the local, national, and international level. Oracle develops software worldwide and offers multiple support options including local (onsite), online, and telephonic. User interfaces are language-specific and are configurable.
Globalization issues prompted Oracle to leverage international expertise during the development of a new transportation management system (TMS). International finance concerns may be critical for some business and recent studies have shown up to a 10% savings in logistics cost when implementing an integrated TMS (Hoffman, 2008). The TMS software line integrates into the SCM business area of the Oracle E-Business Suite.
Huang and Palvia (2001) pointed to two broad categories of factors that affect the implementation of ERP at the international level: environmental and organizational factors. Government regulations, and forms of the firm are some of the variables these categories. According to Huang and Palvia, government regulations can encourage or eliminate barriers to the introduction of ERP software. The interrelationships between SAP implementation and the strategy of a multinational corporation can also influence international issues. Madapusi and D’Sousa (2005) showed that these interrelationships depend on the type of multinational corporations. Drawing upon Bartlett and Ghoshal’s (1989) organizational topology, recent conceptualizations proposed four categories of firms operating in a global environment: (a) multidomestic corporations, (b) international corporations, (c) global corporations, and (d) transnational corporations.
To understanding software modules and the way modules are referred to, the need to define the term modules seems fitting. The definition of modules or modularity for software developers and those who maintain the product is that “Modularity refers to the manner in which a design is decomposed into different modules” (MacCormak, 2008, p. 6). The definition goes on to describe where modularity is where “The degree of modularity is an important property of a product’s architecture (and indeed, any complex system) that is often used to characterize how designs differ” (MacCormak, 2008, p. 6). Apache OFBiz, is build modularly which gives the open source software its ability to be reconstructed and provides cost benefits to an organization, allowing a better relationship between product architecture and organizational structure.
The ERP business area from the Oracle E-Business Suite contains business areas that include financial management, human capital management, and project management. Financial management modules include asset lifecycle management, cash and treasury management, credit to cash, expense management (including travel), financial control and reporting, financial analytics, governance issues, procure-to-pay, and risk management (Oracle, 2009). Human capital management includes advanced benefits, compensatory management, human resources, iRecruitment, learning management, payroll, performance management, self-service, time and labor, tutor, and workforce scheduling (Oracle). Project management includes project portfolio analysis, daily business intelligence; project costing, project management, project collaboration, project billing, and resource management (Oracle).
A software module analysis is difficult as some sources differ between what constitutes a main module. The TEC (2009) main module analysis was the most comprehensive of all sources (including Oracle). Figure 3 depicts what TEC constitutes as main modules based on the original scenario and functional selection.
Figure 3: Comparison of Oracle and SAP main modules3.
3. Adapted from Technology Evaluation Centers. (2009). Free custom software comparison (Auto-generated by TEC). Retrieved October 19, 2009, from http://free-report.technologyevaluation.com/select-vs.asp?
Delving deeper into one specific area (finance) one can observe the statistical information that comprised the financial data section (see Figure 4). The financial management section includes budgets, transactions, billing, costing, and tracking of assets. If one enables project costing, a link to project estimation may provide a value-added service as one could track the effectiveness of estimations. Additional links to the project management section may allow project managers to adjust forecasts based on prior analytics.
Figure 4: Comparison of Oracle and SAP financial modules4.
4. Adapted from Technology Evaluation Centers. (2009). Free custom software comparison (Auto-generated by TEC). Retrieved October 19, 2009, from http://free-report.technologyevaluation.com/select-vs.asp?
SAP is an integrated suite of the following modules: (a) manufacturing, (b) financial, (c) logistics, (d) distribution, (e) quality control, and (f) human resources (Al-Mashari & Zairi, 2000a). Figure 5 depicts the three layers of a SAP’s architecture: (a) the graphical user interface (GUI), (b) the application layer, and (c) the database layer.
Figure 5: SAP’s architecture5.
5. Adapted from Al-Mashari, M., & Zairi, M. (2000a). Supply-chain re-engineering using enterprise resource planning (ERP) systems: an analysis of a SAP R/3 implementation case. International Journal of Physical Distribution & Logistics Management, 30(3/4), 293-313. Retrieved September 26, 2009, from ABI/INFORM Global database.
Like the SAP R/3 release, mySAP ERP customers can extend the functionalities of the software by adding any one of the mySAP business suite solutions. Figure 2 depicts few examples of functionalities available in mySAP ERP. These functionalities include customer relationship management, supplier relationship management, product relationship management, and supply chain management.
Figure 6: Examples of functionalities of mySAP ERP6.
6. Adapted from SAP (2009). MySAP ERP: The Superior ERP Solution. Overview for Customers. Retrieved October 15, 2009, from http://www.sap.com/solutions/business-suite/erp/pdf/BWP_ERP_Q_A.pdf.
Advantages and Disadvantages
In the use of open source code, there are factors that provide positive and negative considerations when an organization is looking to for cost cutting methods. Listed from (Costa, 2006, p. 404) in the table are several items to consider.
Figure 7: Open source opportunities and threats7.
7. Adapted from Costa, C., (2006). Organizational tools in the web: ERP open source. Retrieved October 15, 2009 from http://www.iadis.net/dl/final_uploads/200606L051.pdf.
Analyzing ERP software systems may be difficult and error prone process depending on the chosen methodology. ERP approaches may require business process reengineering (BPR) efforts that may confuse long-term metrics collections (McNurlin & Sprague, Jr., 2006). A methodology for deciding how to purchase an ERP system may provide insight into determining a best-fit solution for an organization.
Verville and Halingten (2002) posited the following approach for a thorough evaluation of ERP software: literature review, case study research, qualitative and quantitative data collection, validity checks through triangulation, and enforced study limitations. The acquisition process involves the following processes: planning, establishing requirements, information search, selection, evaluation, choice, and negotiation (Verville & Halingten). A distillation of the before-mentioned processes may allow one to perform a cursory examination of ERP software products.
Comparing Oracle to SAP, the Oracle product meets or exceeds the SAP product in every category. Using TEC’s weighted scale, the chart below clearly shows Oracle has a substantial advantage. Oracle’s advantage lies in product completeness based on prior infusions of technology from the J.D. Edwards and PeopleSoft acquisitions. The two ERP companies were market leaders before Oracle purchased both companies. Today, Oracle and SAP have a majority of the world ERP market share (Lombardi, 2008; TEC, 2009).
Figure 8. Overall performance rating between Oracle and SAP8.
8. Adapted from Technology Evaluation Centers. (2009). Free custom software comparison (Auto-generated by TEC). Retrieved October 19, 2009, from http://free-report.technologyevaluation.com/select-vs.asp?
Oracle is a large, complex, highly technical software system designed to encompass an entire enterprise. The ERP business area of the Oracle E-Business Suite requires extensive planning prior to implementation. The cost of the software suite may be prohibitive for smaller businesses and the timeline to implement may exceed the immediate needs of some companies. Most Oracle solutions require external training for the implementation staff, installers, end-users, and maintainers. The benefits of ERP are extensive; however, an Oracle solution may not be the correct solution for all businesses.
According to Gargeya and Brady (2005), the extensive capability of SAP’s functionality is its main advantage. In the late 80’s, SAP focused on automation with its R/2 release. In the 90’s, the two foci of R/3 were on efficiency and control. MySAP ERP is the current version of SAP that tries to create strategic business value for companies that embrace decision support.
In 2003, SAP was the first company in ERP market with 18% global market share and total revenues of € 7.02 billion (Arif, 2005). Arif added that SAP pointed to 76,100 installations in 22,600 companies with 28 industry solutions. According to Gargeya & Brad, the main disadvantage of SAP is its complexity and the resulting implementation. The implementation of SAP is difficult because it involves various areas related to strategy, technology, culture, management systems, human resources, and structure (Al-Mashari & Zairi, 2000a).
ERP is system used by organizations to integrate data and business practices. ERP increases organizational functionality, reduces organizational inefficiency, and minimizes organizational costs. Considering ERP implementation organizations could review several strategies in implementing ERP: (a) assessing the current systems and determining the requirements of the system (b) replacing old and inefficient legacy systems, and (c) implementing the correct ERP software package and tools. The evaluation review identifies three possible ERP implementations: Apache, Oracle, and SAP.
Apache offers an ERP implementation solution by focusing on information transfer and knowledge sharing. The approach allows organizational personnel to work together promoting team collaboration. Apache uses a protocol, SOAP, to encourage personnel to communicate with one another to develop innovative solutions.
Oracle provides an ERP implementation solutions which focuses on the entire organization. The Oracle solution implements accounting, customer relations, inventory, and supply chain management tools into a module customized for the organization. The Oracle ERP solution requires extensive planning prior to organizational implementation.
SAP identifies an ERP implementation solution identifying areas of improvement in management. SAP encourages organizational management to develop benchmarks, identify a strategy to implement, develop managers for projects, monitor change management, and business process reengineering. SAP encourages organizational management to evaluate the current management infrastructure to assess organizational production, inefficiencies, and reduce organizational costs.
Evaluating the ERP service providers, organizations could perform an initial assessment of the organization. The assessment could identify the areas of weakness within the organization and the ERP solution to address those weaknesses. Organizational management should select an ERP solution, which will streamline business processes, increase organizational efficiencies, minimize organizational inefficiency, improve customer response times, reduce organizational costs, and improve organizational revenue.
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