Enterprise Resource Planning (ERP) – part 5
The following are the advantages of centralization of data by ERP systems in one place:
- Problem of synchronizing changes between multiple systems is eliminated
- Business processes that cross functional boundaries can be controlled
- Complete top-down view of the enterprise is visible
- Since a single structure contains multiple permissions and security models, loss of sensitive data is greatly reduced
ERP system also has some security features for protection against both outsider crimes like industrial espionage, and also insider crimes like embezzlement. It has functions for implementation of internal controls. It provides better integration with other kinds of information security tools.
But the ERP system also has its own disadvantages. Problems mainly arise due to insufficient investment on training the employees on the ERP system, as well as absence of data protection policies regarding ERP systems. Some disadvantages are listed below:
- ERP software can be customized only to a limited extent
- Redesign of business processes as suggested by ERP system may effect loss of competitive advantage
- ERP system implementation can be quite expensive
- The rigidity of ERP to adapt to a specific workflow required by some organizations leads to its failure
- There are many integrated links which are effective only if other applications are accurate
- Switching costs of ERP system is very high and reduces flexibility and strategic control at corporate level
- If errors are made with regard to company boundaries, it will affect employees’ morale, accountability, and lines of responsibility
- Resistance of departments to share sensitive internal information among them may render the ERP system ineffective
- In case of large organizations where there are multiple departments, each having their own mission, resources, chains-of-command, etc., consolidating them as a single enterprise would not fetch much benefits
But the advantages of ERP system outrun the disadvantages, and ERP vendors are bringing out more sophisticated system patterns which are sure to benefit organizations.
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