Reference no: EM131816699

ERP and the Standard, Standard Blueprint

Designing business processes is difficult, time consuming, and very expensive. Highly trained experts conduct seemingly countless interviews with users and domain experts to determine business requirements. Then, even more experts join those people, and together this team invests thousands of labor hours to design, develop, and implement effective business processes that meet those requirements. All of this is a very high-risk activity, prone to failure.

And it all must be done before IS development can even begin. ERP vendors such as SAP have invested millions of labor hours into the business blueprints that underlie their ERP solutions. Those blueprints consist of hundreds or thousands of different business processes. Examples are processes for hiring employees, processes for acquiring fixed assets, processes for acquiring consumable goods, and processes for custom "one-off" (a unique product with a unique design) manufacturing, to name just a few.

Additionally, ERP vendors have implemented their business processes in hundreds of organizations. In so doing, they have been forced to customize their standard blueprint for use in particular industries. For example, SAP has a distribution-business blueprint that is customized for the auto parts industry, for the electronics industry, and for the aircraft industry. Hundreds of other customized solutions exist as well.

Even better, the ERP vendors have developed software solutions that fit their business-process blueprints. In theory, no software development is required at all if the organization can adapt to the standard blueprint of the ERP vendor. As described in this chapter, when an organization implements an ERP solution, it first identifies any differences that exist between its business processes and the standard blueprint. Then, the organization must remove that difference, which can be done in one of two ways: It changes business processes to fit the standard blueprint.

Or, the ERP vendor or a consultant modifies the standard blueprint (and software solution that matches that blueprint) to fit the unique requirements. In practice, such variations from the standard blueprint are rare. They are difficult and expensive to implement, and they require the using organization to maintain the variations from the standard as new versions of the ERP software are developed. Consequently, most organizations choose to modify their processes to meet the blueprint, rather than the other way around. Although such process changes are also difficult to implement, once the organization has converted to the standard blueprint, they need no longer support a "variation."

So, from a standpoint of cost, effort, risk, and avoidance of future problems, there is a huge incentive for organizations to adapt to the standard ERP blueprint. Initially, SAP was the only true ERP vendor, but other companies have developed and acquired ERP solutions as well. Because of competitive pressure across the software industry, all of these products are beginning to have the same sets of features and functions. ERP solutions are becoming a commodity. All of this is fine, as far as it goes, but it introduces a nagging question: If, over time, every organization tends to implement the standard ERP blueprint, and if, over time, every software company develops essentially the same ERP features and functions, then won't every business, worldwide, come to look just like every other business, worldwide?

How will organizations gain a competitive advantage if they all use the same business processes? If every auto parts distributor uses the same business processes, based on the same software, are they not all clones of one another? How will one distinguish itself? How will innovation occur?

Even if one parts distributor does successfully innovate a business process that gives it a competitive advantage, will the ERP vendors be conduits to transfer that innovation to competitors? Does the use of "commoditized" standard blueprints mean that no company can sustain a competitive advantage?

Discussion Questions

1. Explain in your own words why an organization might choose to change its processes to fit the standard blueprint. What advantages accrue by doing so?

2. Explain how competitive pressure among software vendors will cause the ERP solutions to become commodities. What does this mean to the ERP software industry?

3. If two businesses use exactly the same processes and exactly the same software, can they be different in any way at all? Explain why or why not.

4. Explain the following statement: An ERP software vendor can be a conduit to transfer innovation. What are the consequences to the innovating company? To the software company? To the industry? To the economy?

5. In theory, such standardization might be possible, but worldwide, there are so many different business models, cultures, people, values, and competitive pressures, can any two businesses ever be exactly alike?