Since the 1980s, Information and Communication Technology (ICT) has been a facilitator of change in the business world. This has been driven by the advancement in processing speeds and the capacity to store information and share it with each other through seamless integration of organisation‘s processes and systems (Davenport, 1998) irrespective of time and distance (Stephenson & Sage, 2007b). In 1990, Gartner Group first employed the
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acronym ERP system as an extension of material requirements planning (MRP), later manufacturing resource planning, and computer-integrated manufacturing. By the mid–
1990s, ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and non–profit organisations also began to employ ERP systems. Thus, ERP systems are relatively new phenomena within the software industry (Samira et al., 2013);
thus their implementation methodologies are still developing (Robertson, 2013).
Nevertheless, a number of authors and practitioners introduced several approaches and methodologies, according to Holland and Light (1999). ERP systems give organisations competitive advantage (Al-Mudimigh et al., 2001) by exploiting business opportunities or creating new organisational competencies (Peppard et al., 2007). However, many organisations still view ICT investments as costs (Levy et al., 1998).
The above-mentioned scenario of integration facilitates smooth sharing of resources and information within the entire organisation (Simpande & Javokljevic, 2003). This initiated a number of new ways in which organisations deploy ICTs. Amongst these technological advancements, ERP systems became one of the more significant ones. Zachman (1987) posits that the cost involved and the success of any business organisation depends on a disciplined approach to the management of the increasingly complex and distributed systems. The tight integration of all departmental information systems into a single Enterprise Architecture1 (EA) is a requirement for ERP system success (Murphy & Simon 2002). This is made possible through provision of the following capabilities:
2.3.1 Flow of Information
Many ERP systems can now facilitate the flow of information across all business processes internally and externally (Robertson, 2013). This enables reusability of services across the organisation. Consequently, it is cheaper for the organisation to run its day-to-day tasks using shared and coordinated resources. Typical examples are sharing the same human resources systems and management, databases, etc. Ordering and purchasing using principles such as just-in-time (JIT) inventory replenishment, transferring funds, and electronic authorisations become some of the benefits2. This enables efficiency and greater control over inventory and its distribution (Nah & Lau, 2001).
1 Enterprise Architecture (EA) can be described not only as a management program but also as a documentation method that provide a useful and planned view of an enterprise‘s strategic direction in terms of business process integration and standardisation (Chandiwana et al., 2010).
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15 2.3.2 Interoperability
Liimatainen (2008) emphasises that interoperability in organisations enables some centralised governance structures which are helpful in evaluating the benefits of enterprise- wide systems. Interoperability is the ability of information systems and the business processes they support to exchange data and enable sharing of information, especially through customer data integration (Themistocleous & Irani, 2001). Customer Relationship Management (CRM3) applications will not automatically work successfully within the organisation. The old adage "garbage in, garbage out," definitely applies to the realm of CRM. If organisations do not have clean, reliable, centralised data, their customer view will not be complete or accurate, and their business goals will not be achieved. Any change of processes must be aligned to corporate strategy (Remenyi et al., 2000).
2.3.3 Unification
Nafeeseh and Al-Mudimigh (2011) write that an ERP system enables unification of fragmented business units and operations. Where Service Level Agreements (SLA) are used enterprise-wide and/or extended to external partners (e.g. suppliers) to improve collaboration within the enterprise and with external partners, an ERP system smoothens monitoring and evaluation of these crucial SLAs. Shin and Lee (2013) note that the ERP system implementation provides the basis for a continuous auditing system that eventually assists both internal and external auditors. This means that the ERP system is capable of auditing the auditors. Murphy and Simon (2002) further explain that Enterprise Architecture Integration (EAI4) enables some linking, leasing, customer care, improved customer access, customer service, and/or satisfaction on a single integrated IT system. EAI is an integration of IT architecture with Business architecture, according to De Vries and van Rensburg (2008).
2.3.4 Compatibility
Compatibility is becoming a requirement by business partners where any organisation has to process financial transactions. For electronic funds transfer between different banks, for example, compatible systems are required. Daneva and Wieringa, (2006) aver that ERP
3 CRM is a widely implemented strategy for managing a company‘s interactions with customers, clients and sales prospects. It involves using technology to organise, automate, and synchronise business processes—principally sales activities, but also those for marketing, customer service, and technical support.
4 The literature review indicates that ERP, EAI and enterprise-wide system are terms used interchangeably by different authors to refer to the same technologies. In this research the term ERP system will be consitently used. Also the term ICT will be used for ICT, IT and IS in accordance with the literature available.
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system implementation enables adoption of cross-organisational ERP systems that are crucial for Electronic Data Interchange (EDI5), especially in inter-organisational integration.
Cane and McCarthy (2007) support the same argument by postulating that EDI with business partners results in good relationships with trading partners through operational efficiency and accurate, quality and timely information interchange. ERP systems facilitate the collection and dissemination of information to managers timeously, thus improving their ability to process and analyse accounting information (Davenport 1998). Updates and new software components will always be standardised and thus compatible if an ERP system is in use.
Different independent, or nearly independent, businesses can be integrated by an ERP system, according to Daneva and Wieringa (2005).
When organisations automate basic processes, it results in cost saving through fast and accurate transactions (Teltumbde, 2000). It enables reduction in headcount by eliminating duplication of tasks, reduction in inventory carrying, counting and re-fulfilment costs. An ERP system eliminates redundancies by providing some solid back-office systems that are up-to- date, functionally adequate, and properly integrated. ERP systems enable the ability of corporate accounting to consolidate the books more efficiently because all inventory and order status information is on one database, rather than on numerous independent systems (Gattiker & Goodhue, 2005).
2.3.5 Centralised monitoring
Incorporation of Geographical Information Systems (GIS) enables a wide range of users to access valuable data, for example, town planners, traffic controllers, property tax assessors, etc. (Goldstein, 1997). It provides a platform for a merger or acquisition through centralised monitoring, configuration management, service lifecycle and deployment management. In addition, an ERP system supports continuous improvements in addressing operational inefficiencies (Stephenson & Sage, 2007a).
2.3.6 Auto-error handling
An ERP system provides the technical ability to track and monitor business events and processes in real time to enable auto-error handling and publishing. This is possible through standardisation, reuse, analysis, and risk monitoring, according to Dameri (2009).
This also includes efficient automated audits (Shin & Lee, 2013).
5 EDI is the structured transmission of data between organisations by electronic means. It is used to transfer electronic documents or business data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention.
17 2.3.7 Accurate data
ERP systems adoption enables the creation of some social value where systems facilitate the formulation and enable the implementation of socially responsible policies and tariff structures. Equipped with adequate and accurate data, the authorities can make informed decisions, especially in differentiating between those residents who cannot pay and those who just do not want to pay (Diga et al., 2013). Saloojee and Groenewald (2007) found that efficient information management results in improved service delivery.
2.3.8 Common user interface
Finally, as a single, common user interface that can hook to other systems outside its design (Klaus et al., 2000). Web-enabled ERP systems can facilitate self-service usage and link organisations in the supply chain management and thus obtain increased performance benefits (Chen, 2001). Data and information sources used in managerial decision making are also integrated (Ward & Daniel, 2006). This argument is supported by the notion put forward by Lee et al. (2003) and Themistocleous (2004), both sources avering that that ERP system implementation introduced an alternative approach to EAI. EAI as a technology emerged to integrate ERP systems, according to Themistocleous et al. (2001). This confirms that an ERP system is a complete application package that can be used to achieve enterprise-wide coherence.
From the literature summarised above, it is clear that ERP systems have a list of salient characteristics. Firstly, it has a complete set of integrated software modules (e.g. production, logistics, finance, human resources, and output design). Secondly, it has cross-functional and integration software (intra-organisation). Thirdly, it has configurable software that suits different needs. In addition, as a single and common, enterprise-wide database, it spans across enterprise business processes (inter-organisation). Finally, the focus of an ERP system is on the integration of organisational systems for corporate computing to accomplish everyday tasks.
Based on the above, this research notes that an ERP system offers organisations a comprehensive and integrated solution for managing services such as financial, revenue, human resources, maintenance, procurement through a common repository and with various data entry points. ERP systems make it easier to track the work-flow across various departments and reduce the operational costs involved in manually tracking, and perhaps duplicating, data using individual and disparate systems. They actually equip organisations with the tools they need to cut costs, improve operational efficiency and make smarter decisions faster and more competitively. Some researchers argue that it is not as much
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about the technology as it is about the integration of business processes contained within the system.
From the documented literature, this research also gathered that an ERP system provides a complete visibility into all-important processes. It also automates workflow and enables a unified reporting system, e-commerce integration, business intelligence functionalities on a secure centralised repository. This makes it easier for order tracking, revenue tracking and other related essential business activities, even in a globally dispersed organisation.
Generally, ERP systems positively influence businesses‘ financial performance (HassabElnaby et al., 2012). In spite of the above-analysed advantages, ERP systems implementations seem to be challenging. This is evidenced by the high failure rate that is well documented. The section that follows analysed some issues that organisations have to take into consideration to implement their ERP systems successfully.