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Disadvantages of ERP, CRM and BPM Systems

| February 8, 2012 | 0 Comments

In recent years, there has been an increase in the use of technology in conducting corporate functions such as human resources, knowledge management and customer management. Identify any 3 of such systems (KM, CRM e.t.c) and critically analyze the DISADVANTAGES of each of these systems against traditional archaic methods.

Abstract

The use of Information technology  and information systems to support corporate functions have increased recently. IT/IS systems have substituted archaic methods in order to increase effectiveness and efficiency. Such systems attract substantial investment  and are associated with significant problems. Using different examples the disadvantages in the use of these systems is provided with a view to overcoming the issues encountered.

 

Introduction

During the past 40 years IT expenditure and consumption have increased significantly (Gartner, 2000). This has been accompanied by a decrease in IT prices and a dramatic increase in IT functionality. As a result IT systems conducting corporate functions such as human resources, financial planning,  knowledge management and customer management have proliferated. Today, many organisations have come to rely on such systems for effective management of their corporate functions.

Since 2001, however, the contribution by IT to growth has been declining.  Impediments to progress and the disadvantages associated with systems currently in place are increasingly raised as a concern (Zukis, B. et al.,  2008).

A  number of disadvantages associated with current systems have been identified and are evident in systems such as  Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Business Process Management (BPM). (Bingi, P. et al, 2001; Kellen, V., 2003).

 

Disadvantages of ERP, CRM and BPM Systems

ERP systems integrate management information across an entire organisation and embrace finance/accounting, manufacturing, sales and service functions. Such systems run on a variety of configurations and, typically, employ a database as a repository of information (Khosrow–Puor,M.,  2006)

Compared with traditional more archaic methods current ERP systems several disadvantages have been identified (Smaizys & Vasilecas 2009; PricewaterhouseCoopers, 2008):

–           It is difficult to incorporate changes and customizations required as business processes change. The systems encodes process definitions in proprietary source code. Changing this code is difficult, risky, expensive, and therefore rarely done. As a result most organisations forego opportunities to optimize their processes;

–          The systems focus on what organisations have in common and not on processes where real value is created for individual customers. This is due to  ERP systems being developed for horizontal operational processes in the value chain but unable to effectively support or automate the many vertical specific business processes where real value is created;

–          Inability to grow or work with other systems. Current systems do not integrate well with other feeder systems from third party suppliers. This makes the initial deployment difficult since certain aspects cannot be easily and cheaply integrated and subsequently upgraded  without soaring deployments costs.

As a result of the above, traditional approaches can stand out as more flexible for companies to adapt and re-engineer processes to achieve competitive advantage.

CRM systems are used for managing company’s interactions with customers, clients and sales prospects. They can be part of ERP systems or stand alone.

The disadvantages with these systems tend to be in the overly complex tools and workflows requiring extensive training and business contextualisation training. The systems are difficult to use which leads to low usability, attention to detail and, consequently, data quality issues (Reid & Catterall, 2005). Security concerns in CRM systems have also been raised (Turban et al., 2008).

BPM systems capture and disseminate strategic information and outcome measurement (Kellen, 2003).  A good example of BPM systems is the generation of the Balanced Scorecard (BSC) report. This is a strategic performance management tool used to present a mixture of financial and non-financial measures (Parmenter, 2010).

Similarly to ERP/CRM systems, there are also a number of disadvantages in the use of BPM systems when compared to traditional approaches. For example, BPM systems need to be easily changed and they need to be understandable and not overly complex. Often they are not. BPM systems are often seen as irrelevant to most employees throughout the organization. Decisions on the build of such systems are often left to consultant analysts and external developers. This leads to many BPM systems being inconsistent and unable to enhance the organisation’s learning and knowledge management environment. Data integration, latency and data quality is also an unacceptable issue in BPM systems. This leaves  managers having to revert to ‘intuition’ in decision making and to more traditional methods of performance measurement (Kellen, 2003).

Despite the disadvantages outlined above it is unlikely that organizations will go back to traditional and more archaic methods of corporate management. Instead these disadvantages are likely to be dealt with through technical, organisational and Individual changes.

Technologically, service oriented architecture (SOA) and engineering approaches have been proposed and may provide greater flexibility and less complexity (Bell, 2008) – particularly if delivered via Software as a service (SaaS) (Schneider 2007).

Organisational issues include the creation of a business culture based on metrics, knowledge sharing and learning;  better and more effective leadership, streamlined processes, and better strategic control and intent.

In terms of Individual roles CEOs need to understand the IT implications of their strategies. CFOs and CIOs should collaborate to explain the business case for eliminating systems and hardware that some business units may have come to depend on but which are overly complex and underused.  COOs must demand IT architecture that drives value to internal and external customers.

 

Conclusion

Despite rising IT spending most Industries are currently unable to focus their IT budgets on truly innovative value-adding systems and processes. This is creating a situation of diminishing returns from IT and an IT cost crisis increasingly difficult to justify..

Current ERP, CRM and BPM systems have a number of significant disadvantages compared to traditional archaic methods of managing corporate functions. These disadvantages are likely to continue unless significant shifts in Technical, Organisational and Individual approaches take place.

 

References

Bell, M. (2008). Service-Oriented Modeling: Service Analysis, Design, and Architecture. Hoboken, New Jersey: John Wiley & Sons, Inc., pp.  3.

Bingi,  P. et al (2001). Critical issues affecting an ERP implementation. In:  Myerson, J.M. (ed.) Enterprise Systems Integration, 2nd ed.  Boca Raton, Florida:  Auerbach, pp.  425-438.

Gartner Inc. (2000). IT Spending: Its History and Future  [WWW] Gartner Inc. Available from:http://www.gartner.com/4_decision_tools/measurement/measure_it_articles/july01/mit_spending_history1.html [Accessed 21/10/11).

Kellen, V. (2003). Business Performance Measurement  [WWW] DePaul University. Available from : http://www.kellen.net/bpm.htm  [Accessed 22/10/11).

Khosrow–Puor, Mehdi. (2006).  Emerging trends and challenges in information technology management.  Idea Group, Inc. p. 865.

Parmenter, D.  (2010). Key Performance Indicators (KPI): Developing, Implementing, and Using Winning KPIs. Hoboken, New Jersey: John Wiley & Sons, Inc., pp. 16–18.

Reid, A. and Catterall, M. (2005). Invisible data quality issues in a CRM implementation. Journal of Database Marketing & Customer Strategy Management,  12 (4), pp.  305–4314

Schneider, R.D.  (2007). SaaS, Composite Applications, and SOA: Understanding their Differences and Making Them Work Together  [WWW] The SOA Magazine Available from: http://www.soamag.com/I9/0707-2.php [Accessed 22/10/11).

Smaizys, A. and Vasilecas, O. (2009). Business Rules Based Agile ERP Systems Development. Informatica, 20 (3), pp.  439–460

Turban, E. et al. (2008). Information Technology for Management, Transforming Organizations in the Digital Economy. Massachusetts: John Wiley & Sons, Inc., pp. 300–343.

Zukis, B. et al. (2008). Why Isn’t IT Spending Creating More Value?  [WWW] PwC. Available from : http://www.pwc.com/us/en/increasing-it-effectiveness/it-spending-and-value-creation.jhtml [Accessed 21/10/11).

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Category: Essay & Dissertation Samples, Information Technology Essay Examples

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