Analysis of minimum size requirements of organizations
for the implementation of enterprise resource planning systems

Nejc M. Jakopin
Henning Kassen
Philip Kirst
MGMT 581
Strategic Management & ERP/SAP Systems:
Supply Chain Management

Indiana University of Pennsylvania

April 29, 2002

Term Paper

Table of Contents

List of Figures and Tables II

Abbreviations II

Abstract 1

1 Introduction 1

2 Investment requirements and costs of ERP system implementation 2

2. 1 Structure of incurred costs 2
2. 2 Analysis of minimum requirements for successful rollout 2
2. 2. 1 Hardware & Infrastructure 2
2. 2. 2 Software 3
2. 2. 3 Consulting 5
2. 2. 4 Implementation Team 6
2. 2. 5 Training 7
2. 3 Benchmark data for minimum expenses 8
2. 4 On-going expenses from ERP systems 9

3 Generic benefits of implementation of ERP systems 10

3. 1 Cost savings 11
3. 1. 1 Productivity 11
3. 1. 2 Human Resources 12
3. 1. 3 IT maintenance 13
3. 2 Customer satisfaction 14
3. 2. 1 Service aspects 15
3. 2. 2 Quality aspects 16
3. 3 Aggregation of benefits in relation to organization size 16

4 Comparison of costs and benefits for threshold organization size 18

5 Resume 19

References 21

List of Figures and Tables

Figure 1: Structure of incurred costs 2
Table 1: List of required infrastructure 3
Figure 2: ERP system benefits versus costs 22

Abbreviations

AG = Aktiengesellschaft
ASP = Application Service Providing
CRM = Customer Relationship Management
ERP = Enterprise Resource Planning
IT = Information Technology
LAN = Local Area Network
mySAP = Web-based SAP Application
ROI = Return On Investment
SAP = Systems, Applications and Products in Data Processing
SCM = Supply Chain Management

Abstract

The research will focus on finding benchmark data on the required size of companies that is necessary for a full SAP Enterprise Resource Planning (ERP) system implementation. The analysis will look into benefits and costs of the implementation and long term prospects generated by the system. Practical examples will be used to illustrate the main findings, both from a positive as well as a negative viewpoint.

1 Introduction

Although SAP has widened its product range to accommodate different organizational sizes, including small and medium range businesses, we find that a full fledged ERP system implementation has to go along certain requirements. The central underlying assumption for this research will therefore be the implementation of an extensive ERP system that handles close to all operational tasks along the value chain. Consequently we are not talking about the minimum implementation of one module or a pre-packaged standardized software solution (e.g. an online shop or accounting software) that can easily be achieved by businesses of all sizes.

A systematic study of costs and benefits is essential for all organizations that are considering the adoption of a new system. Competitive pressures require a fast and efficient workflow along the value chain. To achieve the highest level of workflow efficiency integrated ERP solutions that cross departmental borders and organizational structures have to be in place. In the recent past many companies have adopted such systems and more will do so in the near future. ERP systems are understood as a management tool, used to coordinate and maneuver the primary activities of the firm. Large, mostly multinational companies where the first to introduce the system, while medium-sized businesses followed consecutively, increasing the cumulated adoption rate to at least 30000 businesses.

2 Investment requirements and costs of ERP system implementation

2. 1 Structure of incurred costs

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