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28 Chapter 1 • Introduction to Enterprise Systems for Management

stay current with the rush toward SOA, you need to be on our platform.” Another shift is toward
recurring and variable revenue models—with maintenance charges driving industry growth—
companies like Oracle earn about 50 percent of their revenue from maintenance. Finally, the other
major revenue shift is toward software as a service or hosted subscription-based applications.
Although this strategy is causing difficult adjustments for the big vendors, they are adjusting their
pricing models so that they can get incremental license revenue through higher levels of usage.
Looking ahead, social networking and open-source software solutions are poised for
significant growth. For example, Facebook has become the number one social network software
worldwide in 2010, with 500+ million users and growing. Soon, we may see an integration of social-
networking system with ERP systems. Similarly, open-source software vendors, like Compiere
(www.compiere.com) and OpenBravo (www.openbravo.com), have emerged by focusing on
reducing the total cost of operations (TCO) of ERP implementation and by enabling high-level
customization due to access to source code, which is not possible with traditional ERP software.

IMPLICATIONS FOR MANAGEMENT
Managers implementing ERP systems in their company should remember the following:
ERP systems implementation is a complex organizational activity. Mistakes will be made in
any ERP system implementation, and these will usually not be on technology. It is important to
evaluate and learn from the successes and failures. As described in the examples in this chapter,
the difference between success and failure is sometimes very small. Managing risk is all about
keeping project focus and clear communications throughout the organization. For example,
ComAir had major problems with their merger with Delta Airlines because they had not upgraded
their legacy customer and financial systems. Replacing legacy systems with a new ERP system is
a very high risk, but, as Comair found out later, the cost of not replacing an aging system can be
greater. The lesson to learn here is that managing risky endeavors is instrumental to business
growth and success. IT systems are critical to a company’s daily business. If Comair had clearly
understood the problems they were facing, their decision to migrate to a new system would have
saved the company customer service and financial problems. In the case of UMass Amherst, not
fully testing the system under a heavy load created a great amount of confusion on campus.
ERP systems implementation requires strong project management oversight. ERP imple-
mentation projects must be continually evaluated for project status, effectiveness, and risks to the
organization. Large ERP implementations often require external assessments done on a quarterly
basis to help identify and address project risk areas and minimize failures. Older management
styles and structures are not as effective in today’s organizations. Current management styles
need to be collaborative, creative, and flexible. Managers must be skilled in developing business
models that can fully utilize the capabilities of an ERP. Successful managers will need to have
skills both in facilitation and communication and in managing organizational change.
ERP systems provide improved and added functionality for an organization. ERP systems
create an advantage by strategically cutting costs, increasing profit margins, and growing the
enterprise. Integrated business processes and data also provide for improved strategic reporting
for planning and decision making. The utilization of the Web creates access to new audiences and
customers. Management must develop and communicate a long-term strategic business vision to
determine how an ERP system will change or improve business. It will be difficult, if not impos-
sible, to bring change to an organization without looking at the organization holistically.
ERP systems are set to proliferate globally. The globalization of commerce and the Internet
bring the world closer, understanding how these systems work and the effects they will have on