CONNECTIVITY OF ERP SYSTEM

Vatchraporn Esichaikul, Piyanan Nuankhieo

School of Advanced Technologies, Asian Institute of Technology, Pathumthani 12120, Thailand

Keyword: Enterprise resource planning

, connectivity, integration

Abstract: The study is an attempt to propose the criteria for determining the appropriate connectivity of ERP systems.

The result of

this study provides a framework assisting ERP adopters in selecting integration approach

which are appropriate to their needs. A survey was conducted to obtain information from ERP users to learn

about their opinions on factors and criteria affecting connectivity of ERP systems. Findings from the study

revealed that data oriented approach and application integration oriented approach are the most preferred

integration methodologies. Opinions on criteria for evaluating ERP connectivity are nature of business

process of organization, availability of technologies and service supports, nature of information system of

organization, system flexibility, degree of integration, transaction volume, implementation cost, ease of

maintenance, implementation time, security, and budget. Finally, the study proposes a framework to

determine appropriate connectivity of ERP systems.

1 INTRODUCTION

In a highly competitive world, accurate and reliable

information is crucial for an organization to stay

competitive. An organization must be able to capture

the whole picture of its own business operations.

Therefore, an uninterrupted flow of information

within the organization is required. With this in

mind, companies invest millions of dollars in

developing or acquiring computing systems.

However, these systems never talk to each other,

each business unit in an organization has its own

computing system. What companies really need is

integrated, enterprise-wide system which automates

core cooperate activities such as manufacturing,

human resources, finance and supply chain

management. The Enterprise Resource Planning

(ERP) system can fulfil this business requirement.

An ERP system helps to streamline the flow of

nformation among the business units that are unable

to perform in traditional computing systems. It ties

up all business functional units together. What one

unit does also has an impact on the others because

different departments share the same system and

operate on the same data. Therefore, an ERP system

allows business decisions to be made quickly and

confidently in the knowledge that data is accurate

and up-to-the-minute.

Currently, a lot of companies turn to the ERP

syste

m to increase efficiency and productivity which

allows companies to respond to customers’ demands

more accurately and efficiently than before. Major

improvement results from adopting an integrated

information system. Though the benefits of

implementing ERP systems are many, these cannot

be realized easily. The implementation of an ERP

system consumes millions of dollars and many years

before the system can be bedded down. Success or

failure depends on many factors including technical

and managerial matters.

Ideally, most organizations hope ERP systems

will replace legacy syste

ms. However complete

systems replacement is not practical, economical, or

even feasible. An organization has to bear in mind

that each organization is unique and no ERP

application is suitable for every organization.

Moreover, no ERP application offers every function

that is required by every organization. Implementing

ERP systems requires the customization of software

to suit each organization. Degree of connectivity and

integration determine how easy the ERP system will

be integrated to other systems. The desired degree of

connectivity and integration with other systems has

to be decided before customizing an ERP

application. This involves tradeoffs: a higher level of

connectivity is expensive and hard to create and

maintain while a lower level of integration does not

support a smooth flow of data. Though the highest

level of connectivity is preferable, it does not mean

it guarantees success. Each organization needs to

consider which level is worthwhile and suitable. To

Esichaikul V. and Nuankhieo P. (2004).

CONNECTIVITY OF ERP SYSTEM.

In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 37-44

DOI: 10.5220/0002593900370044

 SciTePress

assist a potential organization in investigating an

ERP system and the preparation of an organization

for ERP implementation, the appropriate criteria and

a framework covering connectivity issues need to be

developed.

2 SURVEY

In this study, a survey was conducted to determine

ERP driving forces, and current problems associated

with connectivity and to identify the critical factors

of connectivity that an organization should consider

when implementing ERP. The survey is based on in-

depth interview with selected organizations, which

are all current ERP users in the government and

business sectors. Interviews were designed to cover

several sectors of businesses such as banking and

finance, telecommunications, entertainment,

automotive manufacturing, high technology and

electronics, and power and energy. Interviews were

focused on personnel who were responsible for or

involved in ERP implementation projects in

organizations or personnel who are currently

responsible for ERP systems such as an ERP project

manager and IT manager or IS manager.

The interviewees were limited to organizations

in which ERP systems went live and are currently

implementing ERP systems, not including planned

users. With information available from ERP vendors

and ERP consulting firms, some current ERP users

could be identified. The interview was conducted

through twenty two organizations. Organizations

were selected by judgment sampling to make sure

that the organizations contacted were the real users

and the right population.

3 ERP DRIVING AND FORCES

IMPLEMENTAION

The survey results revealed ERP driving forces and

ERP implementation as followed:

3.1 ERP Driving Forces

There is a variety of reasons or driving forces to use

ERP systems, but the most important one is the need

for integration of process and information. The

appeal of an integrated information system resulting

from implementation of an ERP system is clear. For

example, the sales force enters an order on a

computer, the transaction processes through out the

entire company. Inventory lists and parts’ supplies

are updated automatically. Production schedules and

balance sheet reflects changes. By making

organization’s information more readily available

and shortening the business cycle, organization can

get many benefits resulting from increased

competitiveness, reduced inventory, cost reduction

and increased customer services.

For international companies, driving force of

using ERP mostly comes from their headquarters

that pushing ERP system to their branch offices.

This is because of success and benefits of ERP

implementation they have realized from the practice

of headquarters and of other countries’ branch

offices. Besides the standardization of business

practices of all branches is developed, so it is easier

and faster to retrieve information and analyze data

globally.

Other driving forces include:

• Following the trend

• Media influence

• Inefficiency of legacy system

• Pressure from clients and/or suppliers

• Need a software that can fulfill business

functions

3.2 ERP Implementation

Although ERP is evolved from and developed for

manufacturing, it is feasible for service sector to use

ERP, but not all modules that come with ERP

package can be used. Currently, ERP vendors also

provide solution for different industries such as

healthcare, banking, education, and public sector.

It was shown that the basic or fundamental

functional modules that most organizations in

manufacturing industries have implemented are

financial accounting, material management,

production planning, sales and distribution, and

controlling. These modules associate with the core

activities of organization, which are the processes

from manufacturing to distribution and preparing

financial information. Although the nature of service

industry is different from manufacturing some

functional modules still can be used. In any types of

organization the financial module is the first module

to be implemented because it provides the basic

pulse of an organization. It also impacts on all other

modules.

In order to implement an ERP system, business

requirements must be identified and then the

requirements are mapped with ERP package. The

decision about customizing an ERP application to fit

with business’s needs or changing business practice

to suite ERP software must be made. Based on the

study, there were very few cases that organizations

chose these two end approaches. Most organizations

chose the middle way by adapting business process

ICEIS 2004 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

that they viewed it would be better to follow the

standard of ERP applications and customizing the

some functional modules that were not practical for

organizations to change the business practices.

Successful implementation requires the knowledge

of the existing system from in-house team and

experience and expertise of ERP from the external

consultant. Because ERP is still a new concept to

some organizations and it takes a lot of effort for the

organization to have an expertise in ERP, ERP

consultants play a major role in implementation of

ERP systems.

Although there are many choices, such as big-

bang approach and accelerated method, to

implement ERP, many companies choose phrased-

roll out as an implementation strategy by

implementing the modules that are the most critical,

and have the most links with other modules first.

Then the modules that are involved with the

modules of previous implementation phrase are

implemented accordingly.

4 ERP CONNECTIVITY

Although the full benefit of an ERP system will

accrue if all the ERP modules are implemented

together, many organizations implement ERP

modules only in those functions that are considered

to be of strategic importance. Implementation only

of functional modules of ERP application will

benefits to organizations in the term of integration

and connectivity, but it is not practical to do so

because sometimes the functions that are needed by

organization do not provide in ERP application.

Although the functions are provided in ERP

applications, they tend to be too general and the

functions are not deep or specific enough to meet the

requirement of business process. In addition, some

organizations need to interface ERP systems with

legacy systems because they contain the critical

business data that sometimes cannot be extracted

from legacy systems and converted into new

systems.

Other driving forces towards interfacing ERP

systems with legacy systems/third party applications

include:

• Lack of analytical capability of ERP systems

• Follow the application using by headquarter

• To increase efficiency in term of operation

• No budget to buy more ERP application user

license

• The existing application is good enough

Based on the study, it was found that many

organizations threw away legacy systems after ERP

systems went live. It was perceived that legacy

systems were inadequate information systems.

Other reasons were information required by

management was not available immediately; data of

various systems was inconsistent; application could

not be integrated; frequent lack of documentation;

and costs of running both ERP systems and legacy

systems are high.

4.1 Obstacles to Interface ERP with

Legacy Systems/Third Party

Applications

The major obstacles are as followed:

• Data structure of ERP is very complex

ERP application is a proprietary system and each

ERP vendor has its own data structure standard.

Schema of ERP contains hundreds of tables inside

which users do not know when one transaction

occurs and which tables are updated. In addition,

customizing a certain table would affect many other

tables which may not know to user.

• Third party application cannot directly

interface with an ERP system

The nature of ERP is proprietary. The degree of

proprietary differs from application to application.

Therefore, the available options for interfacing other

applications to ERP applications depend on ERP

application. However, ERP venders provide

opportunity for integration through published

integration framework, application program

interface, or middleware.

Although integration framework is available,

organizations require understanding of ERP native

and enabling technologies, which is time consuming.

Another easier way of interfacing third party

applications is using the applications that are the

partners or certified to ERP application. However,

this limits the choices of third party applications

because some organizations have to use applications

that being implemented before the implementation

of ERP systems.

• Lack of knowledge about ERP

From the study, it shows that organizations rarely

have knowledge about ERP systems. They also lack

of computing personnel who experience on ERP.

Besides, the training fee of ERP is quite expensive

and after training personnel only knows about ERP

in term of usage not the technical aspect about ERP

application. Therefore they need helps from

consultants. Consultants are not always the solution.

In some cases, organization wants to interface

certain third party application which ERP

consultants do not have knowledge about that

CONNECTIVITY OF ERP SYSTEM

application. So far some consultants are still lack of

knowledge about application integration technology.

4.2 Integration Technologies

Currently many ERP vendors and third party

application vendors start adopting interface standard

like CORBA, Microsoft’s Component Object Model

(COM), Object Linking and Embedding (OLE),

Enterprise JavaBeans, and the XML. However,

methodologies those employ for interfacing ERP

systems with legacy systems/third party applications

can be grouped into data oriented and application

integration oriented.

In data oriented approach, information move in

and out of ERP’s relational databases to external

applications or systems which can be accomplished

with database-oriented middleware products,

message brokers, data migration software packages,

or even with the replication and data link features in

most popular relational databases.

It found from the study that most organizations

that employ data orientation approach wrote code to

move data from ERP to external application.

Employing this approach, programmers need to

understand the details of database schema of both

systems. The databases provide the best point of

integration as long as there is no need to access the

business processes encapsulated within the

application.

In application integration oriented approach, the

ERP application integrates with other applications

by using well-defined application interfaces. Based

on the study, organizations employed this approach

enjoyed the benefit of middleware products rather

than developing themselves.

Many ERP and EAI vendors have released tools

that can move data between ERP packages, on the

basis of an understanding of the APIs and data

mappings that are implemented by the ERP

packages being linked together. This eliminates the

need for customized coding to integrate the

packages. However, not all packages are supported,

and it is unclear who will be the eventual winners in

this emerging product category.

5 CRITICAL FACTORS OF

CONNECTIVITY THAT

COMPANY SHOULD CONSIDER

5.1 Critical Factors

Based on the survey, the following are the critical

factors of connectivity that company should consider

when implementing ERP.

• Open/Closed System

The nature of system being connected and

existing system is important. If one the systems is

closed, it is very difficult to interface or connect

with other systems. Therefore, organization should

select an ERP application that is quite open and has

various means of integration with other applications.

This also applies to the selection of third party

applications.

• Degree of Customization

Whenever the processes represented in an ERP

application differ significantly from the processes

used by the organization, the following options can

be performed by an organization. The options are to

build the organizational process into the ERP

software by customizing ERP application or

changing the organizational practice to suit the

process native to the ERP application. Traditional

common sense would force people to customize

application to meet the demand of organization.

However, too much customization will raise the

problems. This first problem arises out of the fact

that any customization done locally is outside the

core ERP application. Then the next release of ERP

application would not support local customization.

They have to be redone by the end user for the new

release. Secondly, by over customizing, the

implementers would deprive the benefit of best

practice in industry that embedded with ERP

applications.

According to the survey, organizations try to

minimize customization by adjusting the business

practice that is able to change. If organization wants

to replace any manual work with computerized

system, the functional modules that provide with the

ERP application is taken into consideration first

since the functional modules that come from the

same application vendor posses the high degree of

connectivity and integration.

ICEIS 2004 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

• Existing Infrastructure

If a legacy system is interfaced with an ERP

system, existing infrastructure (such as databases)

play a significant role, especially if data oriented

approach is the choice of integration. If a legacy

system is abandoned after ERP system comes,

attribute of existing system (such as databases)

determines the degree of difficulty of data extraction

and conversion. This is true if the database of

existing system is different from of ERP system.

Problems resulting from not having the right

infrastructure can result in poor system performance

or unacceptable downtime at a time when users and

management tend to have the highest expectations

that will affect effectiveness of the flow of data.

• Similarity of both system infrastructures

This would result from the existing infrastructure

of legacy systems and of ERP systems. From the

study, it was shown that infrastructure of ERP

system is always different from legacy system.

Many databases of legacy system are in-house

developed and database structure was not up to

standard.

• Standard of software employed

The key to enabling different vendors' software

packages to interoperate is industry wide standards,

both business and technical. If ERP vendors employ

the same standard, it is possible and easy for one

vendor's software component to replace another

vendor's without forcing a new round of

reengineering. Besides, there are more choices for

third party applications selection if all ERP vendors

employ the standard.

Technical standards are necessary because there

has to be a way for different vendors' packages to

communicate with one another. By employing

standard, it lessens and eases customization

requirement, and implementation time of connecting

third party applications with ERP system, and

improves connectivity.

• Security

Security must be present as a service across all

tiers of the ERP core infrastructure to obtain the

necessary granularity expected of enterprise

applications. It is critical that data be exposed only

to applications and users that have the proper

credentials.

• Third party support

Since organizations are lacked of expertise about

ERP systems, support from the vendors then is the

major consideration. The level of support from third

party vendors depends on whether they are partners

of the ERP applications or not. If they are, it reduces

the problem of integration, update and maintenance

the software. Troubleshooting service is another

issue that should be considered when selecting third

party applications. Users require that consultant can

help them solving problems when they arise in

timely manner with minimal interruption of their

businesses. Besides user training and documentation

should be provided from third party support.

• Installation

As mention earlier, the success of ERP

implementation is not just like integrating it to other

systems in organization but it has to mirror the

business of organization. Installing ERP system is

not an easy task like installing Microsoft word. It

has to map the current state of organization and its

business processes to the ERP system. Data is

extracted and transferred to new system. Although it

sounds simple but it is not that easy. Implementation

time is about one year as a minimum and for some

organization it takes about two or three years. The

way you configure the ERP systems will affect the

way and choices you can interface ERP systems

with other systems, and how effective the flow of

data between interconnected systems.

5.2 Criteria to Determine

Appropriate Connectivity

The survey showed the interviewees’ opinion

towards the criteria that should be used to determine

the appropriate level of connection as follows:

• Nature of business process of organization

The most important criterion is the nature of

business process. The success of implementing ERP

system depends on how much business process of

organization can be mirrored by an ERP system. To

smooth the flow of information, the selected

integration methodology should facilitate business

process of organization.

• Availability of technologies and service

supports

Before selecting the integration approach,

organization should study what technologies and

supports are available in local market and

understand what is needed for the organization.

Advantages and disadvantages should be weighted

thoroughly. Organizations should choose the

technology that service supports are locally present

and ensure that the technology is not outdated from

the support since technology changes rapidly.

Selecting knowledgeable consultant can help

organization solve this issue.

CONNECTIVITY OF ERP SYSTEM

• Nature of information system of organization

Information system of ERP includes hardware,

operating system, database, and ERP application.

The most important component when talking about

integration issue is database if organization choose

database as a point of integration. The database of

system being integrated with ERP like legacy system

can come from the same vendor, different vendors or

even the databases that employ different data

models. The solution after weighting cost and

benefit can be database replication and data

federation.

• System flexibility

The architecture and integration approach of an

ERP system should be selected carefully since it

becomes IT backbone of organization. A system

should be planned for future changes, such as more

applications will be connected to ERP system, or

users of ERP system will be increased. Then

addition of more users and applications should not

affect or have least effect to the existing system. If

many different type of applications will be

interfaced with ERP system, organization should

choose the approach that is efficient for interfacing

many different type of applications such as

application integration oriented approach.

• Degree of integration

Although tight integration is an ideal solution,

other factors like cost and budget may affect the

decision about degree of integration. For example, it

is cost effective to choose the less tight integration

approach for a system that does not require tight

integration like human resource system. However,

tight integration is appropriate for the system in

which transactions occurring have a critical effect on

other systems, such as material management and

production planning.

• Transaction volume

Transaction volume determines the necessity of

real-time processing. If the data being transfer

among ERP and other systems is less, it may not be

worth for investment. Batch processing may be the

option for this one. If the volume of information you

need to move from one application to another is low

and is moving between two databases, it is generally

easier to use some form of data-level integration

tool.

• Implementation cost

Typically, costs involved in ERP implementation

include cost of ERP application, cost of hardware

(host and workstations), training cost, consulting

cost, and maintenance cost. Actually the cost of ERP

is generally 30 percent of total cost of

implementation. A user should examine needs and

available technologies to estimate costs. User may

compare costs charged by each ERP consultant and

choose the most beneficial one.

• Ease of maintenance

Ease of maintenance should be taken into

consideration when selected certain approach of

integration since ERP system becomes IT

infrastructure for organization. Although certain

approach is easier to implement, you have to

consider whether it is worth to maintain because the

system stays with you as the age of organization.

• Implementation time

Time to implement can range from one to five

years or more. Time to implement whatever

integration approach should keep at minimum

because ERP involves the core activities of

organization.

• Access control and data security

Security must be present at all tiers of the ERP

system (presentation, application, and database

server). It is critical that data be exposed only to

applications and users that have the proper

credentials. Only authorized users can gain access to

data through identification code and password.

Authentication and encryption techniques should be

provided in ERP network. They protect transmitted

data from being disclosed and changed.

• Budget

Each integration approach has different costs and

benefits. However the selection of appropriate

integration approach should be considered on the

basis of efficiency rather than cost. Money should

not limit what is the best for your organization. So

the management should provide support in the term

of budget.

6 CONCLUSION

The study presents critical factors of connectivity

that organizations should consider and a framework

to determine appropriate connectivity of ERP

systems and legacy systems/third party applications

that will be used for making decision on ERP

implementation. To successfully interface ERP

systems with legacy systems or third party

applications, eight important factors should be taken

into consideration. These factors include

open/closed system, degree of customization,

existing infrastructure, similarity of both system

ICEIS 2004 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

infrastructures, employment of standard, security,

third party support, and installation.

Figure 1 presents the framework for organization

to determine the appropriate connectivity of ERP

systems and legacy systems/third party applications.

In the case that organizations start their computing

systems by implementing ERP systems, selecting

third party applications that are partners of ERP

vendors is the best solution for connectivity among

systems. However this may be not possible for the

organizations that have long establishment of

computing systems in their organizations. Then, the

criteria should be taken into consideration when

analyzing the appropriate connectivity approach of

ERP systems.

The results and conclusions of the study

mainly concern with intra-organizational

connectivity of ERP systems. The further study of an

ERP-to-ERP system can be focused on the selection

of integration methodology that can eliminate the

differences in ERP systems of business partners.

Consideration Criteria

Figure 1: A Framework to Determine Appropriate Connectivity of ERP Systems

ERP Syste

Legacy System /

Third Party

Application

1. Nature of Business Process

2. Availability of Technology &

Service Support

3. Nature of Information Syste

4. System Flexibility

5. Degree of Integration

6. Transaction Volume

7. Implementation Cost

8. Ease of Maintenance

9. Implementation Time

10. Access Control & Data

Security

11. Budget

Integration

Method

Select

Integration

Method

ERP Syste

Legacy System /

Third Party

Application

CONNECTIVITY OF ERP SYSTEM

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