Assessing the Feasibility of Developing a Federated ERP System

TL;DR

This paper evaluates the feasibility of creating a federated ERP system by analyzing effort, effect, costs, and risks, comparing it to traditional ERP development to determine its viability.

Contribution

It provides the first structured feasibility assessment of federated ERP systems using strategic planning and analytical hierarchical approaches.

Findings

Federated ERP could reduce complexity and costs compared to traditional ERP.

A net present value analysis suggests potential economic viability.

Identifies key risks and obstacles for future exploration.

Abstract

In past years ERP Systems have become one of the main components within the corporate IT structure. Several problems exist around implementing and operating these systems within companies. In the literature one can find several studies about the problems arising during the implementation of an ERP system. The main problem areas are around the complexity of ERP systems. One vision to overcome some of these problems is federated ERP. Federated ERP systems are built of components from different vendors, which are distributed within a network. All components act as one single ERP system from the user perspective. The decreased complexity of such a system would require lower installation and maintenance cost. Additional, only the components which are needed to cover the company's business processes would be used. Several theories around this concept exist, but a feasibility assessment of developing a federated ERP system has not been done yet. Based on a literary analysis of existing methods for feasibility studies, this paper is applying strategic planning concepts and referential data from the traditional ERP development to provide a first assessment of the overall feasibility of developing a platform for federated ERP systems. An analytical hierarchical approach is used to define effort and effect related criteria and their domain values. The assessment as the criteria is done in comparison to the development of a classical ERP system. Using the developed criteria, a net present value calculation is done. The calculation of the net present value is done on an overall, not company specific level. In order to estimate the weighted average cost of capital, the values from successful software companies are used as a baseline. Additional potential risks and obstacles are identified for further clarification.