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SME ERP system sourcing
strategies: a case study
Submitted To: Prof. Gunmaa Suri
Submitted !y: "es#a$ "umar
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!A %&'erations ( Mar)eting* Setion+
SME ERP system sourcingSME ERP
system sourcing
strategies: a case study
strategies
Deb Sledgianowski and Mohammed H.A. Tati
De!artment o "normation Technology and #uantitati$e Methods%
&'(
)rank *. +arb School o ,usiness% Hostra -ni$ersity%
Hem!stead% ew /ork% -SA% andRecei$ed ' Se!tember '001
2im 3ierstead
Re$ised '& o$ember '001
Acce!ted 4 December '001
3anebridge 5or!oration% 6akland% ew 2ersey% -SA
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ose o this !a!er is to identiy ERP system sourcing strategies a$ailable to SMEs and to !ro$ide insights rom a case study o the!ractices a!!lied and decisions made by an SME in using a hybrid o sourcing resources to im!lement the successul con$ersiono their legacy ERP system to a new inormation technology 8"T9 en$ironment.
Designmethodologya!!roach 7 This research is a case study utili;ing $arious data sources including ace
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ms has brought about
(0B%&se$eral o!tions or SMEs in sourcing inormation technology 8"T9 solutions such as ERP
that until recently% ha$e only been within the reach o large organi;ations. 6n the other
hand% se$eral new !ro$iders o ERP solutions ha$e Foined SAP and other !ro$iders to
oer $arious o!tions or SMEs in im!lementing their ERP systems 8DePom!a% '00C9.
&''These recent de$elo!ments ha$e o!ened new windows o o!!ortunities or SMEs in ERP
sourcing strategies including the use o outsourced sotware 8,ryson and Sulli$an% '00C9.
This !a!er discusses case study research conducted at 3anebridge 5or!oration 8www.kanebridge.com9. 3anebridge% amedium
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client
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integrate enter!rise
The sourcing o!tions o !urchasing a !ackaged system or leasing the system rom an ASP assumethat a decision to buy has been made or the acJuisition o the sotware. 5hen and Soliman 8'00'9de$elo!ed a make
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ani;ationnerallyct to
ce theirall "Ts% ocusheir core!etencies
d gain
su!erior technical resources when outsourcing !art or all o their "T unctions. Among allreasons to outsource% the one that has emerged as the !rime reason in recent years is to gaincom!etiti$e ad$antage through !artnershi! by sharing inormation and knowledge 8)ish andSeydel% '009. Howe$er% without a careul consideration o the $arious risks associated withoutsourcing% any gain in the abo$e areas can be oset by signiicant risks in$ol$ed. Some othe risks associated with outsourcing include loss o "T e=!ertise% hidden costs% ina!!ro!riatecontract% limitation o control and loss o !ri$acy and security. "n the 3anebridge case% therisk actor has been addressed and mitigated by management in $arious ways including
!ro$isions to retain intellectual !ro!erty right to source code% choosing a $endor o similarsi;e as well as establishing close !roessional relationshi!s% and making sure
as a clear and accurate understanding o their ERP !roFect obFecti$es. These areas areamong the eight characteristics 8)igure (9 discussed in this !a!er.
5ase study: background5om!any background
3anebridge 5or!oration is a leading wholesale distributor o industrial asteners 8nuts%bolts% screws% etc.9. They are a !ri$ately held cor!oration with 10 em!loyeesheadJuartered in 6akland% 2 with branches in 5aliornia and "llinois. Their currentannual sales e=ceed (C.4 million 8the com!any reJuested to withhold s!eciicinancial data9.
The com!any was incor!orated in (L14 by owners 2oe Mc*rath and ,obby Iilliamswho saw a demand or ins business
!rocesses.
SME ERPsystem sourcingstrategies
&'4
ti$itydecisionri!tion
(L1"nce!tionAutomated in$entory andsales tracking(LB(ogistics system5ollaborated with Dyma=
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ms to de$elo!
logistics system% a !recursor o ERP
nction establishedbridge decides to maintain and enhance
ics system in PowerHouse &* tool to
o! and im!lement custom ERP on HP
aSer$er
ors announce sun setting o !roductsannouncement o !hasing out the
For im!etus or change leading to theaSer$er% and the resulting 5ongnos>
urcing decision9ion to mature their PowerHouse &*
uct on 6!enMS leads 3anebridge to
consider $arious "Tsourcing o!tions'00CMake or buyN *oingoshore
Decided to Gmakesotware using new
de$elo!ment en$ironmentwith ins sales grew and their business transactions increased% they needed to makesome decisions about their "T resources. 3anebridge knew that any com!etiti$e ad$antagethey were reali;ing rom the Dyma= turnkey logistics system would Juickly diminish as thesystem became !ublicly a$ailable to any other com!any in the astener distribution industrythat wanted to buy it. Additionally% like other SMEs% they reali;ed the growing im!ortance omanaging their su!!ly chain and su!!lier !erormance 8okurka and +ank% '009.3anebridge had to decide whether to continue using the Dyma= logistics system as
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nessesses% ortheirulls "Thistory included C0years o in
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build. ERP $endors% ha$ing saturated the market or large
DS%&
The decision to outsource de$elo!ment
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ebridge>sident 2oe
*rath irst
theident orce5odeat ating olnessers.rce5odeis a
wareulting!any
dJuartere
ytown%not ar
mebridge>sdJuarters.two!anyidents
meaintance
drmallyed aboutebridge>scy ERPem$ersionect.ce5ode>
esidentestedhis!anyd !ro$ideebridgecontractram
de$elo!ers to hel! them Juickly com!lete the !roFect% at a third o the cost to de$elo! itonshore.
Source5ode submitted a bid or the !roFect based !rimarily on lines o code and number o
screens. The two com!anies could not agree on a i=ed !rice ee structure% but theye$entually agreed on a timem im!ressed with their G5ustomer )irst attitude. "truly belie$e that ha$ing Source5ode as a long time strategic !artner is a sound and stable businessdecision 8Source5ode "nc.% '0019.
6shoring
Shortly into the !roFect 3anebridge was ready to utili;e additional outsourced 2a$ade$elo!ers. Two de$elo!ers rom Source5ode were added to the !roFect to work at
3anebridge>s 2 location% or a total o three onshore consultants. Source5ode recommendedthat 3anebridge use their oshore ser$ices or additional de$elo!ers. They decided to Gstartsmall and added de$elo!ers in !airs as needed until there was a total o si= oshorede$elo!ers working in "ndia.
The Source5ode onshore !roFect leader handled most communication with the "ndiade$elo!ers. The oshore !roFect team worked in two grou!s o three members each. Eachgrou! worked on a dierent module o the system. They were able to gain
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gy% le$eraging the L and (' hour time dierence by sending !rogrammings!eciications at the end o the onshore work day and recei$ing the code back rom"ndia the ne=t morning. Ihile 3anebridge was able to take ad$antage o the timedierence to increase !roducti$ity% oshore !roducti$ity le$els were two
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0
urces
e=!ectations romtheir outsourcing$endor included notonly !ro!er le$el otechnical skills% butalso a clearunderstanding otheir ERP !roFectobFecti$es. "t wascritical that theoutsourced "T stawere e=!erienced2a$a !rogrammers
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!roicientwiththe
sot
ware de$elo!ment !roducts being used. Ha$ing a !roFect contact !ointknowledgeable o 3anebridge>s ERP needs and the technology being used% whocould successully communicate !roFect reJuirements with the oshore !roFectteam% was a critical actor leading to a successul outsourcing $enture. "n the caseo "S outsourcing% i the !ro$ider does not ully understand what the business isall about the customer>s needs may not be !ro!erly met.
This case re!resents a successul endea$or by a medium
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Aubert% ,.A.%Ri$ard% S.and Patry% M.8'00&9% GAtransactioncost model o"Toutsourcing%"normation@Management%ol. &( o. 1%
!!. L'(
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Da$is%A.%Ren;ulli%
.andAldrich%H.E.8'009
%GMi=ingormatchingN
The inluence o $oluntary associations on the occu!ational di$ersity and density o smallbusiness owners> networks% Iork @ 6ccu!ations% ol. CC o. (% !!. &'s time to ocus on Juality and inormation security% 6ctober%
a$ailable at:www.indiaonesto!.comace'acemark.htm8accessed o$ember'&% '0019.
3oh% 5.% Ang% S. andStraub% D.I. 8'00&9%G"T outsourcingsuccess: a
!sychological contract!ers!ecti$e%"normation Systems
Research% ol. (4 o.&% !!. C4
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tegic Decisions Making or Management% Iiley% ew /ork% /.
Mears% 2. 8'009% GSM,s: outsourcing a growth tool% etwork Iorld% ol. 'C o. B% !.'L.
Mirani% R. 8'009% G5lient tryst with outsourcing% The Economic Times% 2anuary (%a$ailable at: www.oshoringtimes.comPages'001oshorenews(&4.html 8accessed
o$ember '&% '0019.
Plant% R. and Iillcocks% . 8'0019% G5ritical success actors in international ERPim!lementations: a case research a!!roach% 2ournal o 5om!uter "normation Systems% ol. &1
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o$ember'&% '0019.
okurka% R.2.and +ank%*.M. 8'009%GA systematica!!roach tosu!!lier
im!ro$ement%
"nternational2ournal oManagement @Enter!riseDe$elo!ment%ol. C os ('%!!. B4s !erce!tion o thetransactional risks o inormation technology outsourcing announcements% 2ournal oManagement "normation Systems% ol. '' o. &% !!. '1(
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