ERP II: NEXT GENERATION ERP

Dr. Suresh Subramoniam1, Nizar Hussain M2,

Dr. Krishnankutty K.V3 and Dr. Gopalakrishnan Nair K3
1

College of Business Administration

Prince Sultan University, Saudi Arabia
3

Riyadh Community College

King Saud University, Saudi Arabia

Department of Business Administration

College of Engineering, Trivandrum

Abstract:
Globalization, world class competition, modern business environment and the availability of
the Internet are the premises which stress the need for ERP. The evolution of ERP to its
present form has taken place starting with Pay roll and Bill of Materials in the 1960s to Web
enabled ERP in the 2000s. The salient features of ERP II which makes it different from
ERP are presented here. The results of an international survey pertaining to the embedding
of intelligence and the corresponding evolutionary trends in the modern day ERP are also
presented.
Keywords: ERP, ERP II, AI, Web-enabled

1. Introduction
ERP is an Enterprise wide system that facilitates
integrated and real-time planning, production and
customer response. ERP has multilingual capability,
multi-currency handling ability, and can recognize
legal and tax reporting needs of various nations
across the world. The real need for such an
integrated system has emerged with the onset of
Supply Chain Management, e-business and global
operations which calls for exchange of information
with other companies and customers directly. The
world in which we do business is shrinking, and
virtually every enterprise is either marketing or
selling to customers in other countries, or simply
using parts or materials that are produced
elsewhere. Internet has overcome time and
distance to a great extent. It has become the need
of the hour to think globally and to include the same
in plans, processes and strategies. Globalization
and Web commerce riding on the development of
the Internet have changed traditional business
behaviors and practices. Leveraging the Internet by
the business has become a need to quickly
establish a virtual presence. They must use
collaborative technology in order to respond to
customers requirements better and faster. When
the operations are scattered through multiple
locations around the world, the need is to gain
visibility across all sites. This enhanced visibility
can lead to more negotiating power for purchasing

parts and more efficient centralized accounts

payable and receivable thereby improving overall
performance. Solutions like ERP, SCM or CRM
solutions provide tools to manage the information
that is essential to growing business value.
Enterprise wide automation alone can address
transforming
relations
among
suppliers,
purchasers, producers and customers. ERP has
fallen short in the following
areas that are
critical to todays business needs [5]. Scope of
conventional ERP is limited; conventional ERP
helps automate individual departments and did not
integrate its back-office benefits into the front-office
to help businesses manage people, workloads and
supply-chain issues; it could not establish
consistent control of all the processes of the
business. Competitive pressures and globalization
have made it clear that the business world is still in
need of more effective, total enterprise solutions.
2. ERP II
The need for e-business, Internet readiness in the
Internet era and a situation which prevailed to tide
over Y2K problems in the late 90s and early 2000s
pushed ERP into the market. Average price of
setting up a commercial website for a large or
midsize organization was kept at $ 1 million as
reported by Research agencies like Gartner
Research Group [2]. Most of the websites
developed during this period were not having

backend support and could only accept shopping

cart details from customers, print them out and do
the rest of the processing manually. This means
that only front-end website existed which made it
appear as if everything was integrated
electronically. Modules in the suite supplied by
Oracle and SAP had sufficient functionality to
attract a good majority of any business wanting to
implement the e-way. Companies had to spent lots
of money on maintaining the interfaces among the
components after implementing the system during
this early stage of e-business proliferation. With the
development of the middleware called Enterprise
Application integration (EAI), most of the integration
issues remained within limits. The differences
between
ERP,
new-generation
application
packages and e-business started vanishing beyond
recognition at the boundaries. ERP of the past can
be thought of as fully integrated modules which
provided automated support for various functions.
In 1999, ERP by major vendors started
incorporating Internet technologies to perform
transactions through a browser and these vendors
renamed themselves as e-business vendors. By
2000, the market saw the proliferation of e-business
suites which could even engulf other functions like
Customer Relationship Management (CRM) and
Supply Chain Management (SCM) which were not
present in traditional ERP. This made the ERP in
the Internet era really support the e-business wave
and the palm top for ERP connectivity from remote
locations really changed the way how the business
was carried out. Real time connectivity and
centralized data repository became features of the
ERP system. Moreover, ERP vendors maintained
the various versions of the system and its interfaces
developed were by them thereby relieving the users
who go for best-of-the-breed. E-business and ERP
integration really boosted the concept of digital firm
which was catching the wave during that time.
Digital firm in terms has to have a digitally enabled
environment for the interaction and processing
among customers, employees, employer and the
stakeholders [1].
ERP II superseded ERP and its two lesser known
iterations called extended ERP and Enterprise
Application Suite (EAS) [7]. The most apparent
change from ERP to ERP II is a change in focus
from one that is totally enterprise-centric and
preoccupied with internal resource optimization and
transactional processing to a new focus on process
integration and external collaboration. ERP II
application deployment strategies relates to
information that is exchanged between two or more
businesses over the Internet. This exchange of
information electronically via the Internet is known

as collaborative commerce or c-commerce. So it

can be concluded that ERP II has c-commerce
features. ERP II has also expanded to include
areas such as Supply Chain Management (SCM),
Customer Relationship Management (CRM),
Knowledge
Management
(KM),
business
intelligence (BI), and inventory optimization (IO).
The features in ERP II is very much in line with the
Gartner research paper which predicted that ERP II
would take ERP foundation and extend it outward
to position the enterprise in the supply chain [6].
The following are the notable differences between
ERP and ERP II [4]:
ERP II is web enabled where as ERP was
not;
ii. ERP was giving selected intensive
coverage or wide extensive coverage in its
modules. But ERP II gives the right mix of
the macro and the micro and provides
users with remedial measures after
detecting the error;
iii. ERP
was
targeted
more
towards
manufacturing and the problem is
overcome in ERP II by offering solution for
all industries and sectors as well;
iv. ERP could not integrate different functions
from different departments but ERP II could
integrate
different
functions
across
departments as well as from different
industries;
v. ERP II has embraced CRM & SCM
functionality in addition to being web and
WAP enabled;
vi. ERP II revolutionalized the function to an
external one and facilitated better networks
than remaining as internal application.
i.

3.0 Survey on the evolution of ERP

An international survey was floated by the authors

to study the status of the use of latest
technologies like Artificial Intelligence (AI) and
tools in building intelligence in the modern day
ERP [3]. Some of the newer disruptive
technologies like managed code, extensible
mark-up
language
and
component
architecture, born out of Object Oriented
programming, are worth studying to establish
the level of exploitation in developing and
using such technologies in building ERP
systems. The survey response analysis based
on responses from 92 subjects helps to
conclude that 84.8% agreed that ERP requires
intelligence for making use of ERP systems in
strategic decision making which confirms the
existence of a reengineering path through
incorporation of AI techniques in ERP. It can
be inferred that ERP is already in the path of
evolution since 75% disagreed that ERP is
good for transaction processing alone. In the
era of web-enabled systems only web-enabled
software can survive and the same is depicted
in the result since 80.1% agreed that webenabled ERP helps the evolution of ERP.
Though it is found that ERP is in its
evolutionary path, it is evident that sufficient
scope exists for the application of AI
techniques as 71.7%
disagreed
that
widespread use of AI techniques are available
in present day ERP. Evolution is inevitable for
ERP since 87.5% disagreed that ERP will
remain only as a transaction processing
system. Majority (79.3%) disagreed that
difficulty in building intelligence in ERP is due
to lack of availability of web tools which gives a
clear indication that technology is ready for
building intelligent ERP. Also it may be noted
that 75% disagreed that intelligence is not
integrated in ERP due to security reasons
which implies that no security related issues
impedes incorporating intelligence in ERP.
About half the respondents (48.9%) disagreed
that major ERP vendors does not want to risk
by developing intelligent ERP in the market.
The real reason for lack interest of ERP
vendors in developing intelligent ERP can be
attributed to some other reason other than
financial risk since 36.96% were unsure of this
cause. Majority (85.9%) disagreed that ERP
being a mission critical real time system,
intelligence should not be integrated which
means mission criticality of the real time ERP
system does not stand in the way of making
intelligent ERP. Relatively good percentage of
respondents (59.8%) disagreed that AI
techniques and web tools are not ripe enough
for integration in ERP indicating that AI

techniques and web tools are ripe enough for

integration in ERP.
4.0 Conclusions
The world class competition, modern business
environment and the availability of the Internet are
the premises which stress the need for ERP. The
evolution of ERP is presented briefly starting with
Pay roll and Bill of Materials in the 1960s to Web
enabled ERP in the 2000s. The salient features of
ERP II which makes it different from ERP are
presented in addition to presenting some of the
disruptive technologies which help reengineer ERP
systems fast. The results of an international survey
pertaining to the embedding of intelligence in the
modern day ERP are also presented.
References
1. Laudon, K C and Laudon, J P., Managing
Information Systems: Managing the digital firm,
7th Edition, Prentice Hall of India, New Delhi,
2002.
2. Shields, Murrell G., E-business and ERP, John
Wiley & Sons, USA, 2001.
3. Suresh Subramoniam, Shehzad Ghani, K. and
Krishnankutty, K V. (2006), Current trends in
enterprise
information
systems,
Applied
Computing and Informatics, Saudi Computer
Society Journal, Vol.5, No. 2.
4. www.erpwire.com/erp-articles/erpII-vs-erp.htm
5. www.exactamerica.com
6. www.gcis.ca/english/cdne-077-aug-16-2001.html
7. www.vendorshowcase.com/Research/ResearchHighlights/Erp
/2004/06/research_notes
/TU_ER_XSW_06_18_04_15.asp