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The Development of Enterprise Resource Planning Systems
Top management
25
Finance and
Accounts Accounts
Payable Accounting Receivable
Marketing and Sales

Manufacturing
Suppliers Procurement Information flow Logistics Customers

Supplies Conversion Storage and
shipping
Material and product flow

Source Line: Course Technology/Cengage Learning.

FIGURE 2-3 Information and material flows in a process business model

horizontal flow promotes flexibility and rapid decision making. Michael Hammer’s 1993
landmark book, Reengineering the Corporation: A Manifesto for Business Revolution,
stimulated managers to see the importance of managing business processes. Books like
Hammer’s, along with the difficult economic times of the late 1980s, led to a climate in
which managers began to view ERP software as a solution to business problems.
In recent years, further impetus for adopting ERP systems has come from companies’
efforts to be in compliance with the Sarbanes-Oxley Act of 2002, a federal law passed in
response to the accounting fraud discovered at large companies such as Enron and
WorldCom, among others. The law, which is covered in more detail in Chapter 5, requires
companies to substantiate internal controls on all information.
In the next section, you will learn about the development of the first ERP software.
SAP was the first company to develop software for ERP systems and is the current market
leader in ERP software sales. As of 2011, SAP has over 109,000 customers, 53,000
employees, and sales of $12.5 billion annually.

ERP SOFTWARE EMERGES: SAP AND R/3
In 1972, five former IBM systems analysts in Mannheim, Germany—Dietmar Hopp, Claus
Wellenreuther, Hasso Plattner, Klaus Tschira, and Hans-Werner Hector—formed
Systemanalyse und Programmentwicklung (Systems Analysis and Program
Development), or SAP—pronounced “S-A-P”. Later, the acronym was changed to Systeme,
Anwendungen und Produkte in der Datenverarbeitung (Systems, Applications and

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