Implementing ERP Systems in Higher Education Institutions

Implementing ERP Systems in Higher Education Institutions Leo Zornada MSc., Tamara Bertok Velkavrh MSc. Faculty of Management Koper, Cankarjeva 5, SI-6000 Koper [email protected], [email protected]

Abstract. With the computerisation of business activities in higher education institutions ERP vendors quickly perceived a new market opportunity. Enhancements or mere adaptations of these solutions, which stemmed from the experience in business practice were not always successful. By taking a global view, the present needs and future expectations of higher education institutions on one side and ERP vendors on the other side in domestic higher education environment were analysed. The article presents research results in the field of ERP systems and their use in higher education institutions (universities, faculties and independent higher education institutions) in Slovenia and abroad. On the basis of the study of the supply on the market and by a thorough study of cases from practice we try to find similarities and differences between Slovenian higher education institutions and world trends.

Keywords. ERP systems, informatics, higher education institutions. 1. Introduction We live in times of ubiquitous presence of computers. Information and communication technology (ICT) have been present in our environment for quite some time. The opportunity for making profits from ICT was first perceived by manufacturing enterprises. These opportunities were later perceived by the state and its institutions. Today, the academic world is aware of the advantages of ICT too. Not only from the point of education and research activities, but also from business aspect, which uses ICT to support other business functions (administrative, organisational, accounting, etc.). An increasing number of higher education institutions have introduced ERP systems in order to improve their operations and make them manageable and more transparent. ERP vendors are also aware of this fact, which is the reason

they already expand their solutions in order to satisfy the needs of higher education institutions.

2. Risks in ERP system implementation ERP (Enterprise resource planning) systems or integral information solutions, often called in practice connected information systems or integrated application packages, enable us to control all key business functions in a company by using unified information architecture. Their main aim is to connect all business units and all business functions into a unified computer system that satisfies the needs of the whole organisation. By implementing such solutions users expect to improve company's efficiency and, consequently, to improve the quality, productivity and profitability of business operations [14]. There are commercial programme packages, which enable the integration of transactional-oriented data and business procedures throughout the whole organisation or within the whole supply chain extending over a number of organisations [1]. Despite promises for improved organisation and more effective management in the company, a number of research activities have shown a rather high failure rate in the implementation of integrated information solutions, which, in some cases, even involved a high degree of risk [5]. The reason for this can be found in the history or strategy of the development of ERP systems, which, following the principle of “best practices” analysed main business functions in most successful organisations and formed appropriate reference models. Consequently, this meant that the implementation of ERP systems involved a high degree of complexity and adaptation to different organisations [5]. The reasons for failure can also be found elsewhere [15]: • Strategic goals are not clearly defined; • Company management is not responsible for the system and does not participate in its implementation;

27th Int. Conf. Information Technology Interfaces ITI 2005, June 20-23, 2005, Cavtat, Croatia

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The project of implementation underestimates the scope, size and complexity of the information solution; • The organisation is not ready for changes brought about by the integral information solution; • The project team is not selected from among the most experienced and trustworthy professionals; • Inappropriate education of employees, who are thus not able to satisfactory manage the system; • Accuracy of data is not assured; • System efficiency measures do not allow for successful changes to take place (expectations of the organisation are not realistic); • Questions regarding the method of system implementation in many parts of organisation have not been appropriately resolved; • Technical problems. The success of the implemented ERP system depends on numerous factors, as it embraces all business operations of an organisation. The participation of the management, the modernisation of existing business processes, the possibility to connect the integral information solutions with other business information systems, cooperation between advisers and employees and, last but not least, highly educated staff are of key importance [2]. The implementation of ERP system may also represent huge financial costs for the company. According to some authors, expenses for the implementation of integral information solution for a medium-sized enterprise may amount to between $2m and $4m. On the other hand, the expenses for the implementation of ERP systems in a large enterprise can exceed $100m [14]. 3. ERP systems and higher education Lately, many higher education institutions want to take advantages of ERP systems. They invest tens of millions of dollars in ERP projects that may go on for two, three or even more years [13]. The investment in ERP systems represents the biggest investment in ICT for higher education institutions [9]. The basic idea behind the ERP systems lies in connecting the main functions of a typical enterprise in manufacturing. As late as in the nineties, the range of ERP systems broadened

from those supporting manufacturing activity to processes like orders, finance, assets management and human resource management. Lately, these systems have been offered for grants management, marketing automatisation, ecommerce, student systems and supply chain systems [13]. And what about the academic community? Most certainly, the solutions are a step closer, but still not entirely adapted to support business activities in higher education institutions. ERP systems for higher education develop in the direction of support for key administrative and academic services. The core of such a system usually supports minimal student administration (enrolment procedures and student enrolment, financial support for students, student data), human resource management (monitoring of employees) and finance (accounting, payments, investments, budget). It is possible to include some other programme add-ons, e.g. assets management (contracts, subsidies, grants, etc.) or for monitoring student and developmental services of institutions [10]. The main advantages of ERP for higher education institutions are, according to ECAR organisation, the following [6]: • Improved information access for planning and managing the institution; • Improved services for the faculty, students and employees; • Lower business risks; • Increased income and decreased expenses due to improved efficiency. The integration of all business functions in higher education environment represents the integration of systems for student administration, human resource management systems and financial systems that used to be supported by separate and often incompatible information packages. An integrated database shared by different business functions and, consequently, different business modules of a single integral information solution is of key importance. Data can be transferred between individual processes and accessible by various users in real time. The use of up-to-date information approaches (web technologies, mobile phones, on-line services, etc.) is an additional advantage, not only for the administration within a higher education institution, but also for people who constantly interact with the institution (students, teachers, researchers, etc.) [9]. Nevertheless, many higher education institutions do not implement integral information solutions ERP systems. The reasons

can be found in existing “good enough” information solutions, which are used by the institution and the unwillingness of institutions for changes and investments (other priorities, not being ready) [6]. Some authors describe the implementation of ERP solutions in higher education institutions as extremely difficult. Expenses and risks involved are high, whereas the return on investments is medium to long-term [3]. An answer to the question “Is it better to avoid the implementation of integrated information solutions?” should be, according to the chief information officer at the University George Washington, a definitive “NO”. He believes that integral information solutions give higher education institutions competitive advantages and adds that: “…institutions, which are unlikely to switch to integral information solutions, will find it difficult to retain their market share of students. Students will, sooner or later demand services, offered by other institutions…” [9]. The latter is stressed by Farrell in his contribution, which emphasises the importance of developing global economy and operations according to 24x7 principle, which directs the development of ERP systems. This is the direction followed by many higher education institutions (franchising, distance education, on-line learning and the introduction of self-services), which makes wide accessibility and the retention of market position possible [3]. Research in British higher education environment reveals a number of cases in which universities started projects for the implementation of integral information solution. Unfortunately, no results or conclusions stemming from this research are available, because the projects have not been finished yet [3]. Despite a limited number of implemented integral programme solutions in higher education institutions, some cases of unsuccessful implementation can be found in practice [11]: • At Cleveland State University they were almost forced to take legal action against the ERP vendor, after they had found out that only half of student requests can be dealt with in 1998. The University continued with the implementation of ERP system despite rising costs (the planned amount was exceeded by $10.8m and amounted to more than $15m). • Similarly, the planned cost of the implementation of integral information

solution at Ohio State University rose from the initial $53m to $85m. • The University of Minnesota had a similar experience, when the planned cost of $38m rose to $53m, and finally reached $60m. Risks related to the implementation of ERP systems in higher education institutions are relatively high, with the institutions not always being aware of them, and not anticipating all or at least the majority of eventual problems. Being aware of the advantages and threats involved in the implementation of ERP systems, PMFISHE (Project Management for Information Systems in Higher Education) initiative was presented at the University of Newcastle. The initiative aimed at preparing a document which would provide the guidelines for all higher education institutions faced with the problems surrounding the implementation of ERP systems in their business activities [4]. In order to improve the share of successfully implemented ERP projects in higher education environment, the initiators of PMFISCHE initiative wanted to create the conditions for a successful communication and cooperation between two completely different groups of people: the management of a higher education institution, who is not familiar with information systems and their implementation and development on one side, and IT experts, who usually do not have or lack experience related to the implementation of information solutions adopted to special needs of academia on the other hand [4].

4. ERP Vendors for higher education institutions The main ERP Vendors for higher education in the world are Oracle, SCT, PeopleSoft, SAP, Jenzabar and Datatel. Despite this year's merger between PeopleSoft and Oracle Corporation, the latter will keep the development department of PeopleSoft and their products, thus these two companies will be dealt with in our article separately. According to research carried out by ECAR organisation it can be noticed that none of these vendors is a market leader [6].

Challangers

Leaders

SCT

80 Other SCT

60

SAP PeopleSoft

40

Oracle

Datatel

Ability to execute

Percentage of implementations

100

PeopleSoft

Oracle SAP

Jenzabar

20

Datatel

Jenzabar

0 Financial

HR

Student

ERP Module

Niche players

Visionaries

Completeness of Vision

Figure 1. The share of ERP systems implementation [6]

Figure 2. ERP in US higher education institutions [10]

According to Gartner Group the consolidation of vendors and the return to basic business operations had a crucial influence on ERP solutions in the area of higher education [17]. ERP vendors are divided by Gartner Group according to their vision and the possibility of solution implementation. Their "Magic Quadrant” comprises four groups of vendors[10]: • “Leaders”: enterprises with a good market position and an excellent vision regarding future business activities. SCT (Banner solution), Datatel (Colleague solution) and PeopleSoft belong to this group. • “Challengers”: enterprise with a good market position, but without a deeper understanding of future development trends. • “Visionaries”: enterprises with a good vision regarding their operations in future, but slightly worse present business operations. Oracle belongs to this group, yet the merger with PeopleSoft can change the situation in the future. • “Niche players”: enterprises which are successful in certain market segments. SAP belongs to this group, as they are a leading company in the field of integral information solutions. But Gartner assesses their vision and strategy in the field of higher education as rather questionable.

Solutions of these companies embrace the majority of main functions of ERP systems (managing study process, managing human resources and finance). Advantages of individual solutions can be noticed in different areas. PeopleSoft emphasise the role of Internet and web technologies (reaching virtual organisation through portals), SAP is in favour of ERP systems centred on users (student part which is student-oriented, etc.), Oracle connected the Internet and back-office operations in E-Business package. It is difficult to find any of the mentioned ERP systems in Slovenian higher education environment. Even though some vendors of ERP systems for higher education are present and easily recognisable in Slovenia (SAP, Oracle), they are mainly found in manufacturing, the higher education segment of the Slovenian market remains unknown to them.

5. Higher education information system On the basis of the analysis of business activities in a higher education (HE) institution [19] and strategic plans regarding computerisation of HE institutions in Slovenia [7,12], business activities and information support for HE institutions can be defined as shown on Figure 3. For each of the basic activities of an institution, business activities and information support is divided into: • the implementation of the basic processes (education and research), • administrative support for the implementation of the basic processes.

Inter-university national and international cooperation, higher education at the level of country, lifelong learning BUSINESS ACTIVITIES IN HIGHER EDUCATION INSTITUTIONS Business reports, controlling, decision support systems, quality assurance THE IMPLEMENTATION OF EDUCATION ACTIVITIES portals, forums, systems for e-learning, virtual libraries, library system, laboratories, teaching equipment, simulations, etc.

THE IMPLEMENTATION OF RESEARCH ACTIVITIES Research equipment, library system, support for project work, laboratories, research software, etc.

ADMINISTRATIVE SUPPORT FOR EDUCATION PROCESSES SIS – student information system

ADMINISTRATIVE SUPPORT FOR RESEARCH PROCESSES RIS – research information system

OTHER BUSINESS ACTIVITIES HRIS – human resource information system, financial and accounting IS, administrative IS (including document system), marketing IS, publishing IS, sales IS, etc.

Figure 3: Business activities of HE institutions and higher education ERP system

The strategic targets (developmental strategy, business excellence and the quality of all business operations, based upon the vision, mission and strategies of a higher education institution) can be reached only by incorporating a suitable information strategy, based on the implementation of the model shown on Fig. 3. The development of ERP systems was and still is the only possible way for reaching these targets, because it comprises [15]: • a common view on business operations, • a common database for data and transactions.

6. Computerisation of higher education institutions in Slovenia Slovenian higher education institutions (universities, faculties and independent higher institutions) almost simultaneously initiated strategic planning of IT. At the University of Ljubljana (UL), the strategic plan for the computerisation was ready in 2001 [12], at the University of Maribor (UM) the project for the renewal of information system was prepared in the same year [7]. The Faculty of Management Koper (FM) should be mentioned from among the independent higher education institutions. The FM, formerly called Higher School of Management in Koper initiated its computerisation in 2000 [19]. In 2004, FM

became a member of the newly established University of Primorska (UP). The FM’s computerisation development represents the basis for the computerisation of the UP. These three strategic plans for computerisation reveal that their development was similar, regardless of different implementations. They stemmed from the existing situation in the field of informatics with the following characteristics: • satisfactory ITC equipment, • the existence of independent unconnected or only partially connected functional information solutions in the field of accounting and human resource management, • the existence of a good, but technologically outdated solution Fnisid, which was used almost at all higher education institutions in Slovenia at that time [8], • unconnectedness of solutions with other information systems in the field of education and research. Based on a number of independent studies that analysed business operations of higher education institutions and their information needs plans for computerisation were made with the following common characteristics: • at least three aspects for the support of processes in higher education institutions were defined: educational process, financial and accounting function, human resource management, • the demand for a technologically up-todate solution used in a variety of contemporary business operations: e-commerce, mobile commerce, etc., • insuring independence, upgradeability, connectiveness, stability and security of solutions, • within the framework of all three strategies the creation of a single data warehouse or a central database was planned, • the support of the education process was made a priority. The aim of all these plans was to create an ERP system in support of business operations carried out by higher education institutions. As there were no solutions available on Slovenian market that would support education activities, the decision to develop an in-house solution was sensible. Such an approach involves:

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in-house development of information subsystem in areas, which are peculiar to higher education institutions and for which there are no competitive solutions available on the Slovenian market, • the integration of a commercial solution, available from a vendor of functional information system, into the higher education information system, with a possibility to develop an in-house solution later. The UL, UM and UP have already developed and still use individual information subsystems. The UM develops the most centralised information system based on common information solutions for all faculties, the UL develops a much more heterogeneous system, as individual faculties use information solutions provided by different vendors, all of which are connected to a common data warehouse. The UP adapted the system used at the FM, which now represents the basis for university information system that is founded on the same distributed support for business processes on the level of individual faculties and the creation of a common university database. Independent higher education institutions show different degrees of computerisation and rarely develop their own information solutions. Usually they use a solution provided by one of the university or which was bought from a commercial vendor.

7. Conclusion Considering the amount of money spent for the development of these three uniform information systems in higher education in Slovenia, it is difficult to expect that any of the systems might be replaced or abandoned. It is also rather unlikely that in such a small and unique market as the market for ERP information systems for higher education, a development of a new system would be financially viable (despite the fact that some solutions occasionally appear, they are mainly of local character and do not have many users). The merging of existing systems, the introduction of a globally recognised vendor of ERP systems or a development of a new solution is reasonable and probable only at the level of university (UL), more universities or the state. ERP systems were first recognized as useful in manufacturing. With the introduction of global ERP solutions, enterprises have to organise and standardise their business activities. The end

users are most often adapted to the information solution during implementation phases. Higher education environments are extremely dynamic, especially in Slovenia, where the education system has been fundamentally changed. A consequence of the wish to build up-to-date information support for business activities, but with material and regulatory inability to introduce a global solution, we are faced with the development of three equivalent integral information solutions in the field of higher education. Despite the differences of individual approaches it can be expected that the future will bring a convergence of systems (at least from the functional point of). The role of the state could prove decisive, because it finances the development of individual solutions through projects. Higher education institutions and the state should leave behind the question of information support for business processes and should focus on informatics as one of the key factors of quality assurance in higher education.

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