SAP Implementation Cost Benefit Analysis

Topics: SAP AG, Enterprise resource planning, SAP Pages: 41 (10638 words) Published: October 3, 2013

In the modern age of competition, Businesses and Organizations need to undergo transformation in order to compete with the best and create Value for its Stake holders. Numerous methods have been tried over several years for mapping the functions of business on software, however most of them have been limited to conversion of data from legacy Systems to new systems till the advent of ERP System. Many projects have failed, new systems were not up to the task and this meant additional cost and loss of business. With the arrival of ERP, all this has changed.

Advent of ERP’s has led to introduction of new tools, custom methodology databases and applications leading to effective and efficient utilization of resources & increase in overall productivity. Motivation level of employees has improved, focus on budget has made executive level contribute with more enthusiasm.

In order to prepare for the arrival of the year 2000 (Y2K), Many companies were engaged in implementations of standard business software applications, the enterprise systems particularly such as ERP, and supply chain management systems. While these software systems solved the immediate problem of Y2K compliance, they were typically implemented with an emphasis on speed and the need to fix the Y2K problems. The scope of data conversion from the legacy to the new systems was not sufficient. Focus on business processes was required in order to leverage the capabilities of the Software to a maximum. Need arized to re-engineer the business processes completely for technology-driven business dynamics such as the implementation of e-business applications, ERP, B2B, SCM or Data Warehousing applications.

1.1 ERA OF ERP’s

Major motivation for an ERP was data visibility. Because ERPs are highly integrated, they have the potential to make much better decision-making information available to managers. This visibility, which gives an end-to-end view of supply chain processes, was expected to improve operating decisions. In addition, data visibility helped to present a single face to distributed customers and to recognize global customers as a single entity. The impact of data visibility was expected to extend to strategic decision making. The online, real-time transaction processing characteristic of ERPs can provide current rather than historical information on a firm's performance thereby facilitating increased responsiveness to market conditions and new internal capabilities.

Advantages and Disadvantages

ERP systems can support a company’s work in many ways. Since ERP systems integrate all parts of a company seamlessly, more proper control is possible. ERP systems are able to minimize redundant data registration, control data produced by different departments, and reduce registration errors. The interconnectivity among all the modules of ERP systems reduces the time to perform the different operational tasks, so the company’s efficiency can be increased. ERP systems enable users to access timely information and accurate reports can be produced at any time. The main reasons that companies undertake ERP systems are summarized as follows 1

1.1.1 Integrate financial information

Finance has its own set of revenues, sales, costs, and other information. Different business units may have their own versions of how much they contribute to revenues. ERP systems create a single version of the information that cannot be questioned because all members of a company are using the same system.

1.1.2 Integrate customer order information

ERP systems can become the platform for where the customer order stays from the time a customer service representative receives it until the merchandise is shipped and an invoice sent. By having this information in one integrated system rather than scattered among many different systems that cannot communicate with one another, companies are able to keep track of orders more easily and coordinate other...
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