To maintain a competitive advantage in today’s technological era, it is more and more imperative for organizations to integrate their different management applications. “The characteristics of today's competitive environment put a great deal of pressure upon organizations for greater levels of organizational integration” (Barki & Pinsonneault, 2002, p. 7).
In both Enterprise Resoure Planning (ERP) and Customer Relations Management (CRM) systems, integration of business processes is the main focus. ERP seeks to integrate mostly internal business processes and units, while CRM focuses on integrating business processes in relation to the customer. “ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems” (Koch, 2007, p. 1).
Defining ERP & CRM
Enterprise Resource Planning (ERP)
Enterprise Resource Planning, commonly known as ERP is a software application using technology to organise organisations data. The rapid advancement in technology changed the face of ERP solutions over the past years. SAP, one of the major role players in ERP solutions, has recently released the successor of SAP R/3, SAP NetWeaver or SAP ERP 6.0, which utilises the latest in technology. Oracle, another major role player, recently released their version which is built on Web 2.0 technologies. But, ERP is not about software, as Wallace & Kremzar (Wallace & Kremzar, 2001, p. 3) so eloquently stated. What is ERP then?
ERP is in many instances the successor of Manufacturing Resource Planning (MRP). MRP originated from the 1960’s and evolved to MRP II before it was replaced by ERP. MRP was implemented to manage the ordering and manufacturing processes more efficiently, using bill of material processing. MRP II was a major advancement over MRP and closed loop MRP by adding other business process and a simulation element (what-if scenarios). MRP II can be defined as a “method for the effective planning of all resources of a manufacturing company” (Wallace & Kremzar, 2001, p. 10).
ERP continued on this path of resource planning by looking at manufacturing from a wider enterprise view. ERP is an application that aims to integrate different business process. As Steyn (Steyn, 2004, p. 9) stated, the “manner in which these systems integrate is the most important aspect”, and is probably the differentiating characteristic between different software applications.
According to Wailgum (2008) an ERP “attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments’ particular needs” (Wailgum, 2008).
Stratman & Roth (Stratman & Roth, 2002, p. 602) gives a very generic definition to an ERP by defining it as software that has 3 distinct elements:
- A single central database forming the foundation of the system
- Transactional application modules to collect and maintain the data in the database and
- Information generating application modules allowing the user to extract multiple views of the enterprise data.
Wallace & Kremzar (2001) “describes ERP as:
An enterprise-wide set of management tools that balances demand and supply,
containing the ability to link customers and suppliers into a complete supply chain,
employing proven business processes for decision-making, and
providing high degrees of cross-functional integration among sales,
marketing, manufacturing, operations, logistics, purchasing, finance,
new product development, and human resources, thereby
enabling people to run their business with high levels of customer service
and productivity, and simultaneously lower costs and inventories;
and providing the foundation for effective e-commerce” (2001, p. 5).
Peslak (2006, p. 1288) also points to this integration function of an ERP system. “Generally, they consist of a series of functional modules that are integrated through standard business processes and include all the data and information about vendors, customers, employees, and products.”
Steyn (2004, p. 10) concluded that the “common characteristics of all these definition summarizes the ERP system as a central database with all business processes that can be viewed, updated, and monitored through this single system in order for information to be shared across all functional departments.”
From all these definitions, it is clear that an ERP is a software application that aims to integrate different business process data in a single centralized database to simplify the availability of business process data of an organization. It also integrates different legacy applications or methods of data keeping, used by different departments (for example, finance, HR etc.) into one centralised database and makes the search and using of data across the organisations available for users. “Integrated systems thus link together systems that traditionally have been kept separate and, by their very nature, cut across the conventional departmental boundaries that normally exist in a business.” (Musaji, 2002, p. 10). This integration eventually causes an organisation to make more accurate decisions from up-to-date relevant data in a timely manner, improving its operational and competitive efficiency.
Customer Resource Management (CRM)
Like ERP, CRM is also an integrative approach to focus on the customer of an organization. Herbert defines CRM as “tracking and understanding all of the contacts and access points that a customer has with the company and trying to customize specific responses to customers based on set criteria” (Herbert, 2004, p. 3).
Although Kamakura et al. (2005) differentiates between analytical (using the firms data in relation to customers) and behavioural (studying psychological matters in relation to customers) CRM, they defines CRM (analytical) as “the process of collecting and analyzing a firm’s information regarding customer interactions in order to enhance the customers’ values to the firm” (2005, p. 1).
Gleeson (2004) calls CRM a “strategy used to learn more about customers' needs and behaviours in order to develop stronger relationships with them” (2004, p. 10).
The most integrative definition of CRM comes from Rogers & Howlett (2000) who defines CRM as effective customer management that pivots around “three data management issues: collecting information about individual customers from multiple sources; cleaning and collating it centrally; providing access and transmitting data to relevant personnel, both within and outside of the organisation” (2000, p. 8). They also point out the importance of departments to look at customers from an enterprise-wide perspective.
Applicability of ERP & CRM
One of the major advantageous of ERP is the automation of business processes and an opportunity to re-engineer business processes. With any implementation of an ERP system, the process flow forms a pivotal basis of such an implementation because the processes need to be integrated in the ERP system. This is why most implementations use this opportunity to re-engineer these processes to be more efficient. Often, the processes get aligned to already built-in best practice process flows (Alwabel, Zairi, & Gunasekaran, 2006, p. 66; Bradford & Florin, 2003, p. 208; Wallace & Kremzar, 2001, p.13). This is on its own already an application of an ERP system – business process re-engineering (Bradford & Florin, 2003, p. 207). “Several researchers point to the linkages between ERP and BPR, where the former is considered a driving technology of BPR” (Al-Mashari, 2003, p. 23). Gibson states that an ERP implementation should not be to “automate old, ineffective processes” (Gibson, Holland, & Light, 1999, p. 3) and therefore, BPR is often part and parcel of an ERP implementation. We have seen this often in implementations.
Because an ERP system is all about integration, it also serves to make day-to-day operations more efficient. In differentiated legacy systems, these systems often do not collaborate with each other, making the data spread across the different systems not available to other systems. This means that data is often re-created among different organisational departments, leaving more than one working copy of documents all across the organization. An ERP implementation solves exactly this problem as it integrates all legacy systems into one centrally managed database. This cause organisations to operate more efficiently in their day-to-day tasks and activities as all relevant information is available to all. “The information and speed made possible by an ERP system can significantly improve their productivity and operational control” (Abdinnour-Helm, Lengnick-Hall, & Lengnick-Hall, 2003, p. 263).
The integration of data and business processes further increases productivity, efficiency and responsiveness to changes in the manufacturing environment.
The same applies to CRM. The integration of relevant business processes and an enterprise-wide (Rogers & Howlett, 2000) look at customers, assist organizations to offer a quicker and more integrated service as all customer related data is integrated in one centralized database and can be viewed by all departments. Often CRM is also used to implement a helpdesk solution efficiently. Because all customer data is integrated in one database, it is possible for departments to “cross sell products more effectively” (Gleeson, 2004, p. 10).
These benefits are not only limited to an organization’s relationship management towards customers. Rygielski et al. (2002) pointed out that CRM holds benefits also in the management of Business-to-Business relationships. “CRM helps smooth the process when various representatives of seller and buyer companies communicate and collaborate” (2002, p. 484).
Mithas et al. (2005) makes an important conclusion that to merely have more data of customers (or business partners) available does not automatically causes a successful CRM implementation, or as they refer to it, customer satisfaction. Organizations still need to interpret the information and acts upon it. “Only when firms act on this knowledge by modifying service delivery or by introducing new services will they truly benefit from their CRM applications” (2005, p. 207).
The buzz word in many public sector organizations is an ERP/CRM system. Organizations without an ERP system, conducting a Master Systems Plan (MSP) or IT strategy ends up with a recommendation to obtain an ERP1. But research has shown that many of these implementations have gone horribly wrong. Magnusson et al. (undated) refers to Par & Shanks (2000) who researched why there was such a high failure rate for ERP implementations. Despite this, it is still seen as a needed tool for gaining a competitive advantage.
Using Information Systems (IS) is becoming more and more essential in sustaining a competitive advantage amongst competitors. “Gaining competitive advantage requires that a corporation’s value chain be administered as a system and not as a collection of independent and separate parts. Therefore coordination is increasingly essential in order to gain competitive advantage. Sustainable competitive advantage can flow from the effective use of information and an effective information system provides this information” (Gleeson, 2004, p. 10). Wallace & Kremzar presents a simplified “ABC of implementation” (2001, p. 16) explaining that, in order of importance, A stands for people, B for data and C for Computers. This proves the importance of involving not only technology (C), but more importantly the people and data involved.
But it is also important for organizations to realise that the mere implementation of an ERP system, does not guarantee success and gaining a competitive advantage. Technology “is merely the tool which allows your organisation to achieve its strategic goals” (Rogers & Howlett, 2000, p. 21).
Like ERP, CRM is also not only a software application. Wallace & Kremzar (2001) even suggested renaming ERP to ES, thereby differentiating between the vendor-specific software application (ERP) and the integrated “enterprise-wide transaction processing software systems” (2001, p. 3). Many organizations have implemented CRM applications without understanding that it is more than just an application. It’s a strategy for managing a business using technology to assist, “it is a business concept that aims to develop and foster customer relationships as a more productive, long-term strategy for business success” (Herbert, 2004, p. 3). It is therefore imperative to implement an ERP/CRM holistically in an organisation, including technology, business processes, employees, users, consultants and vendors.
Many researchers have studied the implementation of ERP and CRM systems and have reported and developed critical success factors (CSF) of such implementations. Al-Mashari (2003) lists comprehensive organisational preparedness as a critical success factor. This includes technological preparedness (hardware, network and systems infra-structure) as well as employee preparedness. “The adoption of ERP system in an organization requires intense efforts, focusing on both technological and business themes of implementation” (2003, p. 24).
The following list (not exhausted) from various researchers is some critical success factors for an ERP/CRM implementation to be successful:
- As with many other IT projects and initiatives, top management’s support proves to be one of the most important critical success factors (Alwabel, Zairi, & Gunasekaran, 2006; Bose, 2002; Bradford & Florin, 2003; Holland, Light, & Gibson, 1999; Hunton, Lippincott, & Reck, 2003; Loonam & McDonagh, 2005, p173).
- Another key success factor is training (Alwabel, Zairi, & Gunasekaran, 2006; Bradford & Florin, 2003; Hawking, 2007, p. 24; Abdinnour-Helm, Lengnick-Hall, & Lengnick-Hall, 2003). Often training is seen as the least important facet of an IT project like an ERP/CRM implementation, but if the users are not trained in using the system, they will revert back to the known, or simply get along without it. “Preparing the people involves gaining support from future users of the system, training them how to use the technical aspects of the system, and familiarizing them with how jobs and processes will change after implementation” (Abdinnour-Helm, Lengnick-Hall, & Lengnick-Hall, 2003, p. 260). Coupled to training is employee resistance and/or attitudes (Alwabel, Zairi, & Gunasekaran, 2006) and Change management (Esteves & Pastor, 2001). Jiang et al. (2000) did research on user resistance in transaction processing systems (TSS), under which ERP/CRM are also classified, and found that the lack of user training added to user resistance with system implementations. “Employee attitudes are a key factor in determining ERP implementation success or failure. Early attitudes about ERP systems, even before these systems are implemented, shape employee views that may be difficult to change once the systems become fully operational” (Abdinnour-Helm, Lengnick-Hall, & Lengnick-Hall, 2003, p. 271). Wallace & Kremzar (2001) says that education is all about transferring facts and behavioural change. “This (behavioural change – TP) occurs when people who have lived in the world of the informal system—missed shipments, angry customers, funny numbers, lack of accountability—become convinced of the need to do their jobs differently. It’s when they truly understand why and how they should use a formal system as a team to run the business more professionally and how it will benefit them” (2001, p. 137).
- Strategic alignment (Holland, Light, & Gibson, 1999) and BPR (Loonam & McDonagh, 2005; Bradford & Florin, 2003, p. 207). “One telling sign that strategic understanding is valuable was that successful firms had an easier time selecting their software package since they understood what they needed for the future. The unsuccessful companies tended to focus more on current tactical practices such as inventory entry, billing, purchase order entry, etc. and not at strategic alignment issues” (Muscatello, Small, & Chen, 2003, p. 857). Although BPR is a huge undertaking on its own, Gibson et al. (1999) makes a valid point of using a balanced approach. “To be successful in ERP implementation requires a balanced approach between project management, business process design and software configuration” (1999, p. 8).
- Proper planning, or more correct, the use of Project Management Principles and framework (Kashef, Izadi, & Al-Sehali, 2001) which includes the “project champion” (Loonam & McDonagh, 2005, p. 168), vendor and consultants and modular implementation or project life cycle implementation (Loonam & McDonagh, 2005; Kashef, Izadi, & Al-Sehali, 2001). “Many failed CRM initiatives were heavy on implementation and light on planning because companies jumped on the CRM bandwagon without doing any proper research or analysis of real business needs” (Herbert, 2004, p. 10). From our experience with Prince2 as a project management framework, there is ample "checks and balances" built into Prince2 to assist in ddressing risks, project issues, mis-alignments, poor business cases, customer expectations etc.
From many research literature, ERP/CRM implementations did not achieve the success that the organizations expected. “Thirty percent of CTOs in InfoWorld's recent CTO network survey said that CRM was the biggest blunder/most hyped technology of 2001” (Sodhi, 2002). Since then, major improvements has been made in both the software as the implementation of ERP/CRM systems. Many research papers emerged showing the requirements for successful ERP/CRM implementations. It is therefore imperative that any decision to implement an ERP/CRM solution should learn from past experiences. ERP/CRM is not just the newest “must-have” technology. To implement an ERP/CRM solution requires proper planning, proper IT Project Management and alignment with the strategic direction of the organisation. Technology should be an enabler, helping the organisation to achieve its objectives and ERP/CRM is a tool in achieving this.
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