Extending and Enhancing ERP Implementations with EAI

by Steve Taraszewski, and Chien-Hua (Mike) Lin, Cleveland State University

Date Submitted: June 2007
Date Presented: March 28, 2007
Location: Seventh Annual Hawaii International on Business
Program

ABSTRACT

Global market forces place demands on an enterprise information system such that the need for flexibility and adaptability become paramount. However, companies are finding that the rigidity imposed upon the information system by ERPs is problematic at best. With the ever-increasing scenario of autonomous legacy systems and disparate ERPs being accumulated by organizations through mergers and acquisitions, there is a further need to develop an information infrastructure that can remain fluid as strategic opportunities and threats are assessed. In addition, customer demand for more and better services necessitate the ability for firms to remain agile and satisfy the needs of their clients. With the ability to integrate essentially all enterprise-type applications and simultaneously provide a dynamic information infrastructure, EAI is positioned as a viable solution for post-implementation ERP-based enterprise integration. Further, the extensibility and enhancement capabilities of EAI for post-implementation ERP solutions can enhance the value of an enterprise information system.

INTRODUCTION

Enterprise Systems have been described as a “technological tour de force” (Davenport, 1998). Furthermore, enterprise systems were a logical progression or extension of information systems for organizations as the business environment became increasingly complex and demanding. From an historic perspective, today's enterprise systems have as their roots the traditional legacy systems of the 1960's. However, the need for organizations to integrate their data then drove the development of corporate information system into the manufacturing resource planning (MRP) systems of the 1970's and subsequently, into the MRPII systems of the 1980's, which extended MRP onto the shop floors and distribution management activities. Toward the end of the 1980's and early 1990's, Enterprise Resource Planning (ERP) began to come into focus. These ERP systems brought to power enterprise-wide inter-functional coordination and integration (Koh and Saad, 2005; Pairat and Jungthirapanich 2005).  

At the heart of today's enterprise system is a centralized database system that supports virtually all business activities of a company; across functional, business unit, and geographical boundaries (Davenport, 1998). Moreover, present-day enterprise systems permeate and transcend nearly all activities encountered in the business of doing business and generally fall into four generic typologies: corporate data warehouses, a hodgepodge of point-to-point integrated systems, integrated ERP systems, and Enterprise Application Integration (EAI) (Evgeniou, 2002; Lee et al, 2003).

Enterprise system integration is essential for the modern organization and can be described as the capability of an organization to integrate its processes and functionalities across a variety of different systems with the purpose of achieving agility and flexibility. It is integration not only at the technological level but also at the behavioral level, which involves the redistribution of responsibilities and roles (Lee et al, 2003).   

Perhaps no single technological advancement in enterprise computing in the past twenty years has made a more profound impact on business and its way of doing business as the emergence of ERP systems, as evidenced by the fact that 85% of the Fortune 1000 companies either have implemented an ERP or plan on doing so within the next year (Barnhart, 2004; Beard and Sumner, 2004). ERP systems describe an integrated suite that automates the core business activities such as finance, logistics, human resources, sales and distribution, and manufacturing in a real-time environment (Alshawi et al., 2004; Corbitt el al., 2005; Scott, 2002). However, although ERP solutions promise to support and improve business process, they are by no means a panacea. For example, most large companies still struggle with a plethora of diverse non-integrated applications and, in fact, the average Fortune 1000 company has around 48 applications and 14 databases for a total of 62 potential systems that need to be integrated (Apte, 2003).  Moreover, due to the restrictive nature inherent in ERP systems, a new set of problems have emerged post ERP implementation.  

EAI

EAI first emerged in the mid-1990s as an alternative to ERP for enterprise integration solutions, but with lower costs, less programming, and use of existing applications, and when applied correctly, permitted the sharing of processes, data, and functionality of diverse and disparate systems across an organization (Themistocleous and Irani, 2006). Furthermore, EAI can provide an organization with a new enterprise view of their legacy applications that they may wish to continue to use while integrating new functionality offered by new technologies such as web-services or RFID-based applications (Lee et al., 2003).  

EAI is often a misinterpreted term and one that causes confusion even among knowledgeable information technology personnel. To resolve this misunderstanding Themistocleous and Irani (2006) propose a definition of EAI as the “structured application of technologies, tools, methods, approaches, and plans to deliver end to end integrated business processes running on IT infrastructures.” Similarly, Lee et al. (2003) describe EAI as “plans, methods, and tools aimed at modernizing, consolidating, and coordinating the overall computer functionality of an enterprise.” These definitions imply that EAI is not only a technological term for the requisite technologies used in integration (e.g. message brokers or web-services) but also encompasses the approaches, methods, and tools that are applied in a structured method to integrate business processes and information technology infrastructures (Miles and Huberman, 1994; Puschmann and Alt, 2001; Ring and Ward-Dutton, 1999).  

Linthicum (1999) posits that EAI systems not only encompass the technologies but also the process definitions required to enable custom-built and packaged business applications to exchange semantic level information in mutually compatible formats and contexts that are understood by each system. This implies that EAI products not only perform integration at a technical level, but also provide a communication framework that forms a foundation for integration of information systems - both semantically and pragmatically (Puschmann and Alt, 2004). Moreover, this information infrastructure can extend beyond traditional organization boundaries to provide a foundation for integrating disparate systems of vendors, clients, and other business partners (Gleghorn, 2005). 

RESEARCH MOTIVATION

The literature is rife with research concerning ERP post-implementation concerns. There also exists a large body of research that examines the capabilities promised by EAI. However, there is little in the literature that actually forms a linkage between these two areas.  The purpose of this research is to offer a practical solution, using EAI, to address ERP post-implementation concerns in the face of continually changing market forces. Specifically, this paper posits that there are several business, technological, and financial motivations for companies positioned at the post-implementation phase of ERP solutions to extend and enhance their ERP-based enterprise systems with an appropriate EAI infrastructure.  

THE LITERATURE

Davenport (1998) and Singletary (2004) examine the motivations for organizations to engage in enterprise system integration and suggest that ERPs may not be a correct fit for all firms. They both caution that the negative effects on the organization must be considered prior to moving forward with enterprise system integration. For example, the rigidity, or lack of flexibility, is oft cited as a primary concern of many organizations, post ERP implementation (Hagel and Brown, 2001; Evgeniou, 2002; Gleghorn, 2005). This lack of flexibility tends to lock organizations into rigid business processes (Hagel and Brown, 2001). In addition, today's global business environment requires an information infrastructure that can be fluid and responsive to quickly changing opportunities and threats. However, the rigidity imposed by an ERP constrains an organization from this needed capability and further, impedes providing of timely and relevant information to decision makers (Evgeniou, 2002; Shafiei and Sundaram, 2004; Themistocleous and Irani, 2006). Moreover, Linthicum (1999) suggest that EAI adds value to an organization by creating a more dynamic information technology infrastructure that can evolve.  

Another area of concern in ERP implementations is the inability for a single vendor to provide 100% coverage of an organization's informational needs (Connelly, 1999; Themistocleous and Irani, 2006). Conventional wisdom from the Boston Consulting Group and many ERP specialists is to generally not mix ERP modules from different vendors. However, much supplemental advantage is lost when using single vendor solutions (Alshawi et al., 2004). Furthermore, Alshawi et al. (2004) comment that one of the many problems inherent in ERP solutions is that ERPs barely represent back office processes, let alone the enterprise as a whole. 

The literature cites the misfit of an ERP solution to the organization's informational needs as problematic. Exacerbating this situation is the fact that 66% of companies implementing ERP chose a complete vanilla approach to their implementation; foregoing ERP customization or additional integration (Holland et al., 1999). Lee et al. (2003) also found the only 5% of the Fortune 1000 firms chose to modify their ERP package to match their business processes. This gap between the functionality offered by a particular ERP package and the needs of an adopting organization often precludes the realization of expected benefits of adopting and ERP solution (Soh et al., 2000). For example, a 1998 study by Deloitte Consulting and Partners, Inc. revealed that only 16% of its study's respondents achieved improvements in quality and visibility of their information (Baldwin, 1998; Shafiei and Sundaram, 2004). Similarly, several other studies reveal that ERPs have failed to generally satisfy the information system requirements of organizations (Irvin, 2001; Steadman, 2000; Themistocleous et al., 2001a,b). Scott (2002) recommends a gap analysis as a tool for discovering ERP misfits and to identify where an EAI solution can be used to bridge this gap.  Additionally, a post-implementation study by Rao (2000) found that 94.6% of ERP implementations fail to meet their expected objectives. Likewise, Al-Mashari (2000) reports that ERP implementations do not achieve expected benefits in 70% of the examined cases. In the same vein, Themistocleous et al. (2001b) found that 72% of ERP specialists believe that the adopted ERP solution fails to meet business needs over 50% of the time. Seeley (1999) reports more optimistic results, with 70% to 80% of the organizations achieving favorable results, whereas Holland et al. (1999) report only 30% of an organization's information system needs are satisfied by ERP solutions. 

Much of the EAI research is focused on its use as an alternative to ERP for enterprise system integration. The problem of enterprise system integration still exists in companies that implement ERP packages because ERP does not effectively address the integration problem of co-existing autonomous applications (Themistocleous et al. 2001b). Additionally, ERPs tend to shift restrictive unit-based information silos to more integrated, but nonetheless restrictive, enterprise silos (Hagel and Brown, 2001) This situation is exacerbated by the recent trend for mergers, acquisitions, divestitures, and creation of virtual organizations. However, the integration limitations of ERPs in this ever-changing environment can be mitigated by an EAI infrastructure (Gleghorn, 2005; Puschmann and Alt, 2004). Moreover, EAI can be used to extend an organization to include its clients, vendors, and partners information systems by integrating not only data but inter-organizational processes as well (Giesecke, 2006; Themistocleous and Irani, 2006). 

As previously stated, there is scant literature vis-ą-vis the application of EAI to enhance or extend ERP-based enterprise systems, and hence, is the motivation for this research. In one example Shafiei and Sundaram (2004) propose EAI as a solution for integrating DSS and ERP within a firm because of EAI's ability to integrate all combinations of enterprise applications - including ERP - and describe an EAI framework that extends to multi-national levels. Likewise, Themistocleous et al. (2002) relate the failure of ERPs in integrating supply chains and propose a framework for supply chain and ERP integration using EAI. Additionally, other research advocates the use of EAI to realize organizational flexibility and visibility; albeit without any specific suggestion to the details involved to achieve organizational adaptability (Evgeniou, 2002). Another area, Best-of-Breed (BoB) solutions, is also discussed in the literature and involves the integration of disparate ERP modules, though using point-to-point integration rather than EAI (Alshawi et al. 2004; Kubera, 2005; Puschmann and Alt, 2004).  Lee et al. (2003) posit that EAI's ability to support new areas such as eCommerce, mCommerce, ERP, and B2B position it as a viable enterprise information infrastructure. Finally, Hagel and Brown (2001) discuss the enterprise use of web services - an EAI tool - to reduce the risk of integration for companies by shifting responsibility for maintaining systems to outside providers and reducing the risk of being stuck with outdated applications. 

DISCUSSION

The success of the modern business organization depends heavily on its informational awareness and its ability to maintain its agility in response to both internal and external changes. Furthermore, research affirms that the profitability of a firm is highly dependent on its organizational IQ, which in turn is dependent on its information awareness and the internal diffusion of knowledge (Evgeniou, 2002; Mendelson and Ziegler, 1999; Mendelson, 2000) In the face of today's rapidly expanding business environment, global market forces necessitate a constant strategic realignment and reevaluation and, therefore, require accurate and timely information to quickly respond to emerging opportunities and threats. Additionally, the notion of the extended enterprise creates the situation where not only data, but interrelated processes, reside on external information systems of partners, clients, and vendors. However, in this increasingly complex and dynamic environment, homogenous information system architectures are no longer practical options - particularly in light of the increasing deployment of ERP systems alongside legacy systems - and compels an information system architecture that encourages connection of data, information, applications, and processes. Moreover, it should be understood that the integrated systems of today will be the legacy systems of tomorrow (Puschmann and Alt, 2004; Sharif et al., 2004; Themistocleous and Irani, 2006).  

With the deconstruction of existing value chains, traditional vertically integrated companies are giving way to a more networked coordinated framework, which requires the building of inter- and intra-organizational relationships (Puschmann and Alt, 2004). Building upon the work of Themistocleous et al. (2002), the use of EAI to integrate supply chains and ERP can be similarly extended to include other applications such as CRM, DSS, eCommerce, and other ERPs, and allows organizations to extend beyond the traditional enterprise walls and further enhance relationships with business partners. In fact, because of the ability to integrate almost all types of enterprise applications - including disparate ERP systems - an EAI architecture can serve as the foundation for an enterprise's information system infrastructure. For example, using an EAI enterprise service bus architecture, an ERP can, through use of adapters and connectors, be non-invasively “plugged” into an a common bus where the data, information, and processes are mapped between the ERP and other enterprise applications also connected to the enterprise service bus. On the other hand, alternatives such as bolt-on adapters for ERP systems do exist and can be used to add some extensibility such as SCM to an ERP. However, these can be problematic because the release of third party bolt-on applications typically lag behind ERP version revisions and therefore, upgrading to new ERP versions may be necessarily delayed while waiting on the update of a critical bolt-on. Also, an issue of responsibility for technical support can arise between the ERP vendor and the vendor of the bolt-on application. More importantly, the problem of integrating autonomous systems with ERPs still exists with bolt-on solutions, which in fact, can even exacerbate the integration problem. 

The ERP post-implementation concern that companies adopting a vanilla approach to ERP implementation can lose competitive advantage when all players within an industry use a common information infrastructure, and essentially “look” the same and lose their differentiation, can be mitigated with the use of EAI. Dell Computer and the Robert Bosch Group are just two examples of organizations that chose EAI to enhance and extend their enterprise ERPs to maintain their competitive advantage (Davenport, 1998; Puschmann and Alt, 2004). A BoB approach, which integrated ERP modules and autonomous systems was chosen by Dell Computer. This integration approach more appropriately matched their business model and allowed them to keep the competitive advantage they received from their information system (Olson, 2005). Likewise, Bosch chose a BoB approach and used EAI as the new foundation for their enterprise information system infrastructure (Puschmann and Alt, 2004). Moreover, the current state of technology makes this type of EAI-based enterprise solution even more feasible than ever before. Never before has the technological landscape been more capable of supporting EAI-based enterprise solutions. The maturity of EAI technologies such as the enterprise service bus, message queuing mechanisms, Java Connector Architecture, RFID, privacy and security mechanisms, adapters, connectors, Channel Framework Architecture, and web services facilitate the implementation of EAI as the basis of an information infrastructure framework.  

The need to realize a higher ROI of enterprise information system investments also begs the need to implement EAI. Although EAI toolkits can initially exceed $500,000 and purchased adapters can reach $100,000 or more, there is an economy-of-scale that is achieved with an EAI solution. For example, a point-to-point integration that does not utilize an EAI-based integration framework requires N x (N-1) connections to integrate the components of an information system. On the other hand, an enterprise service bus will require only N x 2 connections to integrate the same system (Puschmann and Alt, 2004). As previously mentioned, the typical Fortune 1000 company has 62 systems (Apte, 2003). A total integration of the typical Fortune 1000 company using non-EAI technologies would require 62 x 61 = 3782 integration points compared to 124 integration points required by an EAI-based enterprise service bus. The realization of economy-of-scales makes the integration of autonomous and disparate systems much more attractive in light of this potential in savings. 

Finally, EAI can be used to extend the capabilities of ERP systems that have been implemented by service-oriented organizations. Because the service industries dominate the economy of most developed countries and job growth within the service sector is expected to increase, there is much pressure for service organizations to compete with new offerings (Menor et al., 2002). However, while Botta-Genoulaz and Millet (2006) posit that the full benefit of ERP integration can only be achieved with complete functional integration, complete functional integration within the service-sector is non-existent (Cigref, 1999; Miranda, 1999; Schneider, 2000). Various reasons for this condition are given such as: (banking) the maturity of existing software used in the banking industry and the lack of comparable systems offered by ERP vendors; (public-sector) constant changes in reporting and collection process requirements placed on the public-sector service organizations; and, (hospitals) lack of flexibility in describing such things as patient units within existing ERPs (Botta-Genoulaz and Millet, 2006). This imbalance between the standardization required by an ERP package and the unique specifications of the service industries is a compelling driver for extending existing ERPs with the integration capabilities offered by EAI. 

CONCLUSION

This paper posits that ERP-based enterprise systems can be enhanced and extended through the use of the mature technologies offered by EAI. Furthermore, with the continued acquisition of disparate applications and systems caused by merger and acquisitions, there is an ever-increasing need to develop a strategic information infrastructure that can achieve adaptability, agility, and flexibility needed to cope with the pressures of today's and tomorrow's business environments. Moreover, the rigidity imposed upon enterprise systems by ERPs can be mitigated through the use of EAI to achieve information visibility and a flexible integration platform that will respond to future needs.

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