Consulting information systems have been seen as a very attractive option for various administrations, this is due to the belief that their vendors can achieve more relevant economic and potential aspects since their only business is information processing; thus the change of implementing, operating and maintaining the planning of the resources of the company (ERP) together with the companies that offer this type of services have made ERP consulting a very attractive option for many organizations. But it should be clarified that this business is still very new and in our country it is hardly carried out; This article mainly shows the advantages that this system can have, especially for SMEs since they are the companies that have the least economic resources to acquire these,this in terms of the application service provider (ASP) considering aspects of costs and contract terms to guarantee an effective institutionalization of the relationship.
Introduction
Currently the globalization of business is leading companies to consider alternative solutions that are not new, but simply have not been taken into account for their own benefit, these decisions are being based on the world demand for global quality services or World class as they are called, all processes must be generated with transparency and with specific standards to fit into the business world and thus participate in a win-win market.
Also, Small and medium-sized companies are having to reconfigure the way they operate today because they have negotiations with Large companies and the investment or collaboration requirements are increasingly demanding, this is how lately the need to incorporate services that have been used in other countries for a long time, such as those of the Company's resource planning (ERP) that help the exchange of internal company information to optimize production processes and improve the profitability of the company.
There are different applications dedicated to meeting these demands, however the cost of many of them is too high for companies that would have to invest thousands of dollars in the acquisition of one of them, which is why a new consulting market for different types of companies are emerging to provide these services externally and facilitate their operations together with a low cost of interrelation.
These companies allow direct contact with the client and ensure the operation of the organization they serve since the latter can dedicate all its time to key activities that allow it to generate income. Having these services is a very good option today for saving business resources, the market is still very small, the needs are emerging and the outlook is very uncertain, but the possibilities of success of this type of business should be considered by SMEs that would benefit directly.
Methodology
The bibliographic sources reviewed to carry out this research consisted mainly of the Tec de Monterrey digital Library in its different Databases and also through the online pages visited where information was abstracted from different white papers whose addresses are specified in the bibliographic references found. at the end of this document.
Chapter I
Definition and timeliness of ERP systems
Currently the planning systems of the company's resources (ERP) according to Deepinder et al (2004), can be seen as information technology solutions that allow integrating the competency processes of companies. These products are modular in structure and easily offer capabilities for integrated logistics, financial planning, sales, order processing, production, and material resource planning; Organizations can choose to implement one or a few modules at the same time with implementation follow-ups of other modules planned in the future.
A system for the planning of the company's resources comprises all the commercial software packages that promise the complete integration of all the information that flows through the company: financial, accounting, human resources, the supply chain and information. according to TJ Davenport (1998) mentioned in Harvard Business Review (2003).
According to Shang et al (2000), the interest in using ERP systems is determined by success, having numerous benefits in its operational and strategic implementation. The evidence of studies that are currently available indicate that having an ERP system improves the information itself and the integration of business operations, as well as the organizations tend to have a high financial development with respect to the market value than those that have not invested in this type of system.
It is for all the above that according to the Harvard Business Review (2003) comments that there are certain advantages that must be considered when making the decision to acquire an ERP system, which are:
- Input of information to the system only once Use of “best practices” forces It allows customization It is based on a reliable structure It provides functionality to interact with other modules It provides tools for complex queries.
All the previous points will be sustainable if the decision is made with anticipation and determination of senior management, no implementation plan will work if the task of selecting the best ERP system that suits the needs of the company has not been carried out. (Shang et al., 2000).
ERP and SMEs
Companies, even the smallest ones, need to develop their own strategic ERP concept beyond the selection of a supplier, soon the ERP market will be divided between the leading ERP vendors with advanced support architectures for global requirements and the SME vendors. that focus on companies with single-site needs. For this reason, Information Technology planners must consider ERP as the core of their infrastructure and work with its suppliers to build an information architecture that allows interconnectivity and services that increase existing capacities.
However, this can be very expensive for large organizations, considering prices of hundreds of millions of dollars (Robey 2002) being for small companies an investment of approximately 50% of their annual profits, adding that it can result in a failed process; furthermore, implementation can take a long time to disrupt existing business operations by contracting the resources available to the company (Deepindir 2004).
According to a report from India, only 8 to 10% of the almost 3 million SMEs are using IT systems according to Rajalakshmi (2004), director of the Software technology park of India, according to the study only 35% of a sample of 4,000 SMEs (with less than 500 employees) are preparing to implement an ERP system. The results also showed that small companies in some sectors such as leather, steel and chemicals have not invested in IT, but use third party portals to buy and sell their products.
Small and medium-sized companies worldwide are a very attractive market for vendors of business software applications according to the Datamonitor company mentioned in Europemedia (2002). The SME market presents this attractiveness due to the saturation of top-end software markets, low penetration of business applications in the medium market.
Adoption of an ERP
According to Majed (2003), the adoption of an ERP system in an Organization requires great efforts focusing mostly on technology and business issues. A critical aspect for the success of this task is having adequate organizational preparation to acquire it. The following list developed by Rao (2000) describes the main factors that must be considered for a successful ERP implementation:
- Infrastructure Resource Planning Local area networkServersPC'sTraining facilitiesHuman Resource PlanningEducation of the new ERP systemCommitment to train the right peopleCommitment of senior managementAbility and proactivity to consider itself as a greenfield siteWell-elaborated systems manualsStrategic decision in centralization versus decentralized implementation.
Figure 1. Development trend for the implementation of an ERP system, Willis (2003).
Gupta (2000) finds that the key to a successful implementation of an ERP system is related to the administrative committee of managerial security, forming a cross-functional force linked to the administration of the project with the business units, bringing with it an evaluation of the Hardware requirements, emphasizing the introduction step by step rather than just one, starting with early planning in training and user support, optimizing decision-making to make the implementation efficient and I feel patient in the times that such implementation requires.
Outsourcing Considerations
The current situation of SMEs leads us to think of a proposal that reaches them more, Outsourcing; Although many companies implement an ERP system by outsourcing the installation and configuration of the system by expert consultants, some companies are going one step further by employing consulting firms or ASPs for continuity, maintenance and upgrades of the ERP system once installed. The ASP model consists of an ERP vendor or an experienced technology firm that will maintain the Organization's applications and provide access to those applications over the Internet or through an internal network.
The ASP company maintains the application, regularly conducts back-ups of customer data, develops software applications and updates them as quickly as new versions of their product emerge and mainly offers help desk support, all for fixed monthly payments, for many companies. This is a great way to keep your trading costs low. (Buchout et al., 1999).
Smaller companies are mostly attracted to the ASP model by ERP systems because they cannot cope with the high prices of an ERP system, however, they also do not want to install a small system that does not have the possibility of being scaled with their anticipation. growth forecast and need the installation of a new system with reconfiguration and the changes used in the data conversion. The ASP model also allows them to "pay while they grow" and manage their IT support costs with a contract that ensures their ERP expenses will not be more than a specific monthly fee. (Outsourcing Journal, 1999).
Now, the first thing to consider in any decision to choose an ERP outsourcing is the reason and purpose for making said contract as well as the opportunities and risks that it entails; The reasons for making an agreement of this type can be according to Kweku-Muata (2003):
- The search for more efficient operations Remove the aspect of recruiting and retaining expensive IT maintenance personnel who will not fully know how to manage them Manage your own cash flows effectively through a predetermined monthly cost for your IT expenses The company You want to have consulting for your IT processes so that you can dedicate your efforts to the main functions of the company.
The next issue to examine in any decision to outsource any ERP is to evaluate the motives and capabilities of the ASP, as well as its opportunities, there are several reasons why an ASP is good to provide ERP Outsourcing services for a particular company, which among others are: (Clemons, 2000)
- Opening of new lines of business The opportunity to use the "good knowledge" of the organization as a reference. The opportunity to gain a market share in a reliable Industry. The company is financially weak and has few business processes.
Considering the above aspects, according to Bryson and Ngwenyama (2000), that once the consulting decision for ERP has been made, an analysis of its fundamental aspects can be carried out, this author recommends using the following follow-up to obtain better results in terms of to the financial content of the company:
The approach proposed by Bryson and Ngwenyama (2000) has three main steps:
- Generate the expected profit values, specifying the direct benefits of the ASP that are generated automatically for various probable situations Trade-off analysis, through the use of company data the Outsourcer conducts this analysis to determine the level of development or Most advantageous competition that is sufficiently attractive to the seller. Specific incentive contract, guarantee component, penalty and contract payment rules should be automatically generated based on the customer's choice.
Paul (2000) proposes a cost model so that small companies can define their decision and know what payments they should incur if they decide to use the consultancy, the basic concepts of the transaction cost model is that the total cost of the Outsourcing can be divided as follows:
- The cost of the information processing service, which can be estimated from the market Set-up and contract costs that include the cost of finding a vendor, negotiation fees and other charges incurred in institutionalizing the relationship The cost of monitoring and you coordinate the activities of the seller that includes the work and equipment. Switching cost which is the cost of changing ASP in low development or failure situations.
When previously this has been seen in “horizontal” terms (Bryson and Ngwenyama, 2000), the situation is considered when the contract is long-term, and the attitude of the seller and the conditions of the contract vary in different periods, this may be due to many factors such as market conditions, the presence of risks and their corresponding costs. Similarly, the value of a level of development given to the outsourcer and the cost of the ASP may vary in different periods.
Figure 1. Classification of an ERP, Majed Al-Mashari, 2003.
Conclusions
The considerations specified in this research provide us with a general overview of the aspects to consider so that any company can make the consulting decision for its purposes, emphasis is placed on SMEs because they are the ones that present a more delicate financial situation, but also it is adoptable for large companies.
It is intended that a company can take these points, customize them to their needs, and evaluate them according to the goals they wish to achieve, that is, visualize them in today's world and determine the feasibility of implementing it in their business, seeing the pros and cons to those that can be faced and carrying out reasonable time and cost considerations.
It is recommended that feasibility be taken into account and that if a company decides to carry out the consultancy, first know the type of operations that it carries out, how demanding they are of the information and finally determine through an analysis the consultant to be employed. that all the information of your organization will be managed by them and the transparency and effectiveness coupled with the vanguard of Information Technology can provide you with a valid frame of reference that allows you to make the best decision.
There is no "right" or "good" ERP, there are simply ERP's to which my operations adapt and through which I optimize internal processes, however, dedicating time to their implementation will be an arduous planning and development task that the company may not be able to pay, so it would be advisable to consider the option presented in this document, not as a replacement, but as a way to optimize resources and times.
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