Enterprise Systems

First, what do we mean by an enterprise system? This term refers to

systems that integrate data across an enterprise (organization) to support

the business processes related to a variety of business functions—from

basic functions like human and financial resource management to

managing the supply chain and customer relationships. The same system

is used by employees performing a specific function from anywhere in the

organization. Some business functions for which enterprise‐wide

solutions are often used include the following:

• Enterprise Resource Planning (ERP)

• Supply Chain Management (SCM)

• Customer Relationship Management (CRM)

• Enterprise Messaging Systems (to include email)

• Human Resources Management

• Financial Management

• Billing and Payment Processing

• Call Center and Customer Support

• Enterprise Content/Document Management

These functions can be done by one large‐scale, enterprise‐wide system

that integrates several major functions, or through linking (or integrating)

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individual systems through a type of middleware—usually referred to as

enterprise application integration (EAI). Generally, it is much more

effective to use a single integrated platform rather than multiple

applications that were not designed to work together.

Enterprise systems can be developed in‐house or acquired as a

commercial off‐the‐shelf (COTS) product. COTS products can be

purchased and implemented on internal servers or acquired as a

Software‐as‐a‐Service (SaaS) from a cloud service provider. To attract

more customers, the COTS/SaaS vendors implement features that all

their customers can benefit from, such as heightened security

protections, support for new industry standards and legislation, and

increased ability to separate system access and update by job function.

The focus in this section will be on COTS systems developed to manage

one or more business functions across the organization. The three most

common types of enterprise systems will be covered: Enterprise Resource

Planning (ERP), Supply Chain Management (SCM) and Customer

Relationship Management (CRM).

Enterprise Resource Planning (ERP) Systems

An ERP system is built to support an integrated approach to managing

some or all of the core processes involved in running a company: human

resources management, financial management, procurement, etc. ERP

systems were originally developed to handle these "back office"

functions. ERP is actually the business process of integrating the core

functions across an organization; the term by itself is not defined as a

"system," although many people refer to an ERP systems as an "ERP."

ERP software was developed to implement the ERP process; such

software integrates, standardizes and streamlines (or optimizes) the

business processes across departments. Users of the various functions of

ERP system are presented with common screens and system functions to

allow them to move easily between functional components, and to reduce

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training costs. Generally, the ERP system operates as a single system with

a common database employing common data definitions. Using one

database saves organizations from updating several systems with the

same data, and provides greater accuracy and collaboration between

departments. Transactions are processed against the database

immediately, and the updated information is available across the

organization immediately. This is in contrast to an organization using

multiple “stovepipe” systems with redundant (and often not synchronized)

data. For example, employee data (name, address, SSN, etc.) is stored

once and can be accessed for payroll, timekeeping, travel expense

reimbursement, facilities access, etc., and if the employee makes a

change, it is changed in one place for all to access.

In summary, the characteristics of an ERP include:

• enterprise‐wide integration,

• a common database,

• real‐time operation and processing of data and transactions, and

• consistent look and feel.

Business Benefits of ERPs

ERPs improve the efficiency and effectiveness of business operations by


• Integrated information that is consistent across the enterprise and

provides a "single truth" in areas such as

◦ Financial information—There is one set of financial figures that

everyone can use.

◦ HR information—Employees can enter updates directly into the

system, and their skills and experience can be viewed by

managers across the organization.

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◦ Order information—Orders affect inventory, accounting,

distribution, and manufacturing, all of which can be updated in

the single system when an order is placed.

◦ Customer information—The same customer information is

available to all departments.

• Best practices—The systems are designed to implement best

business practices for each of the functional areas and streamline the

steps in the process, reducing the time required to complete each


• Standardized business processes—All users of the system perform

the function in the same way, and every process is supported by the

system with a similar look and feel for all users, regardless of their


• Lower IT costs—The use of a single system for multiple functions

reduces total costs associated with acquiring, operating, and

maintaining multiple systems; however, if the ERP is significantly

modified to fit the organization, the cost advantage may disappear.

• Reduced training costs—Employees use a similar interface for all

major business functions.

• Consolidated procurements—The use of a single system for

purchasing products provides opportunities to consolidate similar

orders from various departments to receive volume discounts.

• Improved compliance—Time and effort are reduced in responding to

the wide variety of government reporting requirements, including

financial reporting, human resources and wage reporting,

environmental reporting, etc. Compliance is also enforced through

the standardized business processes implemented in the ERP.

ERPs lead to better decision‐making.

• Common data that is shared across the organization is used for

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analysis and decision‐making.

• Better data improves planning and reporting.

• ERPs promote collaboration across departments and levels of the

organization since all involved have the same version of the facts.

• ERPs support distributed decision‐making, as participants can act

locally in accordance with the guidance provided and the results of

their actions are available throughout the organization.

ERPs lead to increased organizational agility.

• The standardization and simplification of the business processes and

the use of a common system allows the organization to adapt quickly

when necessary.

ERPs provide enhanced security for corporate data.

• Data that is stored in one location can be better secured than data

that is stored in multiple locations, especially since corporate data

may be stored on hundreds of servers and personal computers

anywhere and its existence may even be unknown to the security


• Vendors serving multiple customers can provide better and more

extensive security for systems and data than individual organizations

are able to provide.

Industry‐specific ERPs are designed to support the unique business

processes of the industry, such as those required by financial institutions,

service industries, government, health care, higher education, and

hospitality. The way that processes are carried out in each of those can

be quite different. ERPs are also designed specifically for small, small‐to‐

medium size, large, and very large international organizations. The size

and type of organization are taken into account when selecting an ERP.

Major Disadvantages of Implementing ERPs

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• The time it takes to implement them: Since ERPs are used

throughout the organization, many departments are affected and

much coordination is required. Further, since the ERP may be

replacing a myriad of systems implemented throughout the

organization (including on individual desktop PCs), it takes a

considerable amount of time to discover all those legacy systems and

determine if and how to incorporate the data into the new system.

• The cost of the system: There are initial purchase costs, which can be

quite high, and significant implementation costs to coordinate the

implementation across the enterprise. Depending on the amount of

customization needed, the ongoing maintenance costs can be very

high, since each new release from the vendor needs to be thoroughly

tested, and any modifications already made need to be applied to the

upgraded system.

• Change management is required before, during and after

implementation to align business practices with the way the system


There have been some very well publicized ERP implementation failures,

and you may have witnessed one where you work(ed). Among the causes

of failure are:

• Selecting the wrong ERP. As mentioned above, ERPs are designed

for various sizes of organizations. Choosing an ERP with too many

features may overwhelm a small organization; conversely, not having

enough features to support a very large and diverse organization can

lead to failure. Although ERP systems were originally designed for

large organizations, there are now many products available for small

to mid‐sized businesses.

• Customizing the ERP. When organizations implement an ERP, their

business processes must be adapted to the way the system is

designed. If an enterprise determines that they will modify the

software to match their process, many issues are introduced. The

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time to implement and the costs go up significantly, as does the risk.

Future upgrades from the vendor may not function without

significant code changes due to the customization.

• Employee resistance. People resist change, but employee resistance

seems much more common with ERPs, where the changes are more

pervasive and obvious. The process changes that an ERP requires

may remove flexibility formerly enjoyed by the staff, who might

perceive a loss of autonomy and control.

• Lack of common data definitions. When an ERP is implemented,

data from multiple stovepipe systems must be migrated to the single

database. Most often those legacy systems each have their own

definitions and formats for the data – and the same data item stored

in different systems may be called by a different name and/or may be

formatted differently. Before the data can be loaded into the ERP, a

common set of definitions and formats is needed. For some

organizations, this is an insurmountable problem, and they end up

abandoning their ERP implementation.

ERP Summary

ERP systems have been extended in many organizations to include

seamless integration of supply chain management (SCM) and customer

relationship management (CRM) processes and data across the

organization. Linked with ERPs, SCM and CRM systems provide the end‐

to‐end visibility of a company's information; the ERP provides the "glue"

to allow all the systems of an enterprise to work together to get the right

information to the right people at the right time.

By now two things should be clear:

1. Effective ERPs can provide great strategic advantage to an

organization and help break down the stovepipes of information

aligned to specific functions (like human resources, finance, etc.).

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2. ERPs require significant investment of time and money and can be

very expensive to effectively select and implement.

Supply Chain Management (SCM) Systems

If you think of the basic model of a business, it is: input/process/output.

Resources (human, financial or supply resources) come in, and then the

work of the company is to transform them some way into something that

customers want (process), and then provide it to the customers (output)—

the output could be to wholesalers, retailers, or individual customers. A

simplistic overview of the input/process/output supply business model is

provided in the table below:

Input/Process/Output Supply Business Model

Industry Input Process Output

Manufacturing Raw materials Combine raw

materials to

make a product


Consulting Information;

human capital


Analysis Report

Restaurant Fresh or frozen





SCM can be thought of as "the management of the chain of supplies." It

encompasses the range of activities needed to plan, manage, and execute

the development of the product, from the acquisition of raw materials,

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through production and distribution, all the way to the final customer.

The objective is to do so in the most cost‐effective manner possible.

In the example of a simplified manufacturing supply chain, we might start

with several suppliers of raw materials—all the things needed to make the

product. Each of these items may come from a different supplier, in

different quantities, and on different schedules. All of the necessary items

need to be assembled at the manufacturing plant and then they are put

together to make the product. The product then is shipped to a

warehouse where it is stored. At the appropriate time, product is moved

from the warehouse to a retail store, where it is put on a shelf to be sold.

The supply chain does not stop there. After the product is sold, it may

need service, or the customer may wish to return it. Every one of these

steps have costs and complexity associated with them. Through SCM,

both management and employees can view what's happening along the

supply chain to make better decisions. Each step in the supply chain

provides an opportunity to impact profitability, quality, etc.

In today's world, it is impossible to have an effective supply chain without

the use of technology, including the right technology solution to

implement the business strategy. Companies compete on the basis of

who has the right product, in the right place, at the right time. Once

again, getting the right information to the right people at the right time is

critical to successful SCM, and that is exactly what good SCM systems do.

Businesses use SCM to plan, source, make, deliver, and return their

products. SCM helps them develop a plan for managing all the resources

needed; choose reliable suppliers; manufacture their products or services;

implement their logistics processes (receive and fulfill orders and receive

payment); and provide for returns, excess product, and customer support.

This is an iterative process that goes on continuously as companies

monitor, evaluate, and modify their supply chains. SCM is a clear example

of the relationship between people, information, business processes, and

information technology.

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Customer Relationship Management (CRM)Systems

CRM, like ERP and SCM, is a business philosophy, not a technology,

although many people use the term to represent a system. CRM is based

on the idea that a strong competitive advantage can be achieved by

understanding customer needs. Companies that recognize that their

customers are not just generators of revenue but are valued assets are

moving quickly from a focus on their product to a focus on the customers.

As companies deal with customers around the world and expanding

competition, they find that adopting a CRM strategy is essential. It costs

much less to make a repeat sale to an existing customer than it costs to

make a sale to a new customer.

CRM helps organizations of all sizes, but the larger the company, the

more complex the problems become. Here's where an information system

can provide immense value—allowing the company to capture

information, make it available to all functions that need to know

something about the customers, and provide superior customer service.

In addition, the availability of this data enables companies to analyze the

information to determine patterns and trends in customer habits, analyze

demographic profiles of customers to target marketing campaigns, and

identify ways to build customer loyalty. CRM systems can link customer

information from a variety of sources, including social media. While they

are designed for use by marketing, sales, and support organizations, the

information they contain can inform a wide variety of business decisions,

such as production levels, geographic distribution of their products,

markets for new products, etc.

ERP, SCM, or CRM System?

SCM and CRM systems bring similar advantages and disadvantages to

those discussed above for an ERP. Organizations determine which type

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of enterprise system is appropriate based on analysis of the requirements

of the organization, just as for any other system. If the organization

simply wishes to automate its "back office" functions, then an ERP

(focused on accounting or finance) may suffice. If the organization can

take advantage of an industry‐specific ERP to perform those functions in

a way that is uniquely suited to the industry, then that is the category of

ERP that should be researched. If the organization needs supply chain or

customer relationship management tools, and already has an ERP in place,

it might look for additional modules from the ERP vendor to perform

those functions. Such solutions should come with built‐in integration with

the ERP, which could greatly benefit the organization. If an SCM or a

CRM is needed and there is no ERP in place, the organization should

consider the totality of its requirements and determine whether a

combined capability is needed or a point solution (just SCM or CRM) is

what is needed. Certainly an SCM or a CRM can be implemented on its

own, but as the organization looks forward, it may wish to select such a

system that has the ability to be expanded to include other modules as

may be needed in the future. The selection should, therefore, be based on

a combination of what the needs are, what systems are already in place,

and what future needs should be considered.

© 2023 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the

validity or integrity of information located at external sites.

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