Disadvantages of Implementing IT Projects (ERP, CRM and KM)

In recent years, there has been an increase in the use of technology in conducting corporate functions such as human resources, knowledge management and customer management. Identify any 3 of such systems (KM, CRM e.t.c) and critically analyze the DISADVANTAGES of each of these systems against traditional archaic methods.

Abstract

The use of IT to perform corporate functions such asEnterpriseresource planning (ERP) systems has emerged as a dominant corporate strategic initiative. Typical benefits include gains in coordination, communication, and organizational efficiency (Rao, 2000; Stevens, 2003). Despite this promise, significant problems are associated with the use of IT for these functions. In this paper, key problems of using technology to conduct corporate functions are analyzed and contrasted with the more traditional ways.

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Introduction

Corporations spend a significant amount of their budgets on IT. Indicatively, over the past decade, IT investments have grown to be the largest category of capital expenditures in United States–based businesses (Trimi,S. et al, 2005). A high percentage of the capital spent on IT is used to conduct corporate functions such as resource planning, customer relationship and management as well as the planning of business processes. However, there are important disadvantages associated with using IT to perform such functions when compared to more traditional methods (Bingi, P. et al, 2001; Kellen, V., 2003).

Disadvantages of using IT for key corporate functions

• a. Disadvantages of using IT for Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) is not a new concept to organizations. The

functions performed by ERP systems are essentially the same basic business functions that organizations have performed for decades.

The greatest disadvantage of an ERP system, even if installed to vendor preferences, is the staggering cost of implementation (Slater,D., 1998). Implementation costs include software, hardware, installation consultant fees, and in-house staff for installation. However, these are not the only costs. There are also costs for staff to operate the system (to include help assistance to users) and the very large cost component of user training. Even when ERP systems are developed to functioning status, there are risks of vendors pulling support on old versions of their software in favour on their latest (and more expensive) versions. Many companies are then forced to upgrade to the newer versions as maintaining the older versions is often too costly (Trimi,S. et al, 2005).

Another significant problem which ERP systems have is their lack of flexibility. In particular the inability to easily modify their ERP systems is disrupting businesses by delaying product launches, slowing decision making and delaying acquisitions and other activities. These problems ultimately cost them between $10 million and $500 million in lost opportunities (All,A., 2009). When humans are involved instead of code such problems do not exist.

• b. Disadvantages of using IT for Customer Relationship Management (CRM)

CRM is used to manage a company’s interactions with clients. CRM software is used by enterprises that aim to reduce their operational expenditures. Like ERP systems, CRM software is also expensive. A key problem of CRM software based systems is that they are impersonal and do not account for human psychology (Schultz,R., 2002). This has led to customers being more frustrated and less understood by the company. Such problems would have completely been avoided with traditional/archaic CRM systems where a conscious decision was made by a human for each different customer circumstance. Therefore, CRM systems dehumanize a process that should be personal. A system that can be configured to a sales person’s requirements is necessary. This is something that cannot always be achieved with software.

• c. Disadvantages of using IT to automate business processes

As with CRM and ERP systems there are a number of disadvantages associated with using IT to automate business processes. However, it is difficult to find the right software tool to automate them. This is because it can be almost impossible for software to capture the business process correctly (Trimi,S. et al, 2005). The business process is rather complex especially in a big and old organisation (Trimi,S. et al, 2005). This suggests that only a certain proportion of the cases can be automated. Also, the automation process may fail especially when a maintenance issue is involved. Unlike software, humans are able to adapt well to fluctuations in the process flow.

Despite these significant disadvantages, corporations are not willing to return to traditional methods. At the moment, a lot of businesses feel constrained in that they have to adapt their business to the software rather than vice versa. In the future, different kinds of platform that are going to be a combination of buying a package and building onto it are expected (Goulart,K, 2012) . Thus, it is believed that attempts to solve current problems will happen via technical means.

Conclusion

The use of IT in business processes is becoming more common. However, there are a number of key disadvantages associated with using IT for key corporate functions. This is because the human factor is eliminated which makes things less flexible and more frustrating. Unfortunately, it is expected that these problems will be addressed in a technical way.

References

1. Ranganathan,J., & Brown,P. (2001) ‘ERP Investments and the Market Value of Firms’, Information Systems Research, vol.17, no.2, pp. 145–161.
2. 2.Trimi,S., Lee,S. &Olson, D. (2005) ‘Alternative means to implement ERP Internal and ASP’,Industrial Management & Data Systems, vol. 105, no.2, pp.184 – 192.
3. 3.Bingi, P. et al (2001). Critical issues affecting an ERP implementation. In: Myerson, J.M. (ed.) Enterprise Systems Integration, 2nd ed. Boca Raton, Florida: Auerbach, pp. 425-438.
4. 4.Slater, D. (1998). ERP projects cost more than their measurable payback, study says. CIO Enterprise, pp. 26-28.
5. 5.All,A. (2009). ERP systems’ lack of flexibility a costly problem [WWW] IT Business Edge Available from: http://www.itbusinessedge.com/cm/community/features/interviews/blog/idc-erp-systems-lack-of-flexibility-a-costly-problem/?cs=38464# [Accessed 18/03/12).
6. 6.Schulz,R.(2002). CRM Revisited. [WWW] Direct Marketing Available from: http://chiefmarketer.com/direct-marketing/crm-revisited [Accessed 18/03/12).[/level-freee-rstricted]
7. 7 Goulart,K. (2012). ERP’s future value depends on flexibility in the face of tech trends [WWW] Techtarget Available from:http://searchcio.techtarget.com/news/2240118705/ERPs-future-value-depends-on-flexibility-in-the-face-of-tech-trends [Accessed 19/03/12).

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