In order to survive in this competitive business world, every business must produce or offer not only a better product or service, they must also offer better customer service, reduce their production costs and overhead costs, have a more well-planned management system, a highly reliable infrastructure, and the list is endless. Many of these can be achieved through a customized enterprise resource planning system (ERP). ERPs serve as “one comprehensive database to house all of the company’s corporate information”. However if these systems are not used correctly with the necessary change in management of people and technology it can result in failure.
PowerIT Ltd. is an autonomous company of about 200 employees whose job is to produce and repair power conversion supplies. The midsize company decided to replace their existing materials resource planning (MRPII) legacy system with an enterprise resource planning (ERP) system to “modernize practices and provide an integrated software solution” to match the growth of their customer base.
Like many other companies, PowerIT chose to purchase an ERP package from a third party vendor and have it modified to fit their company. The advantage of this option over an internally developed system is that it does not require high knowledge IT team, a requirement in developing the high scale software and application domain expertise. The disadvantage, however, is that in-house developed systems are custom- built for the company by an IT team that has high company knowledge. Whereas, a cheaper and mass produced off- the- shelf solution is built to fit the industry standard and is not tailored for a particular company. As a result, it is difficult to gain a competitive advantage.
PowerIT’s acquisition strategy & areas of relative strength: Fig 2
Figure 2 contains the list of acquisition strategies and their relative strength areas. The strategy chosen by PowerIT is a 3rd party modified off-the-shelf solution. Since it is a solution created by specialized software company, thus the level of software development expertise was also high. Also, since this is an ERP system, and since all the vendors were specializing in ERP solutions; their application domain expertise was also high. However, since the companies were not closely dealing with PowerIT, their knowledge of local company and its business cycle was presumed to be low. As we can see in the example of PowerIT, “local company knowledge area” was indeed at a low level, while other two areas were relatively high.
Problems encountered during the Selection and Implementation Phase
First of all, CEO and financial director made the decision about obtaining an ERP system based on wrong background. They perceived that their competitors within the industry were moving to an ERP system and therefore, after some investigation, decided that an ERP system needed to be acquired. Thus, they did not really see the need for an ERP system, but just wanted to be better than their...