Week 2 : Shadow Systems

Shadow systems are frequently used as a justification for the implementation of ERPs.  Shadow systems are often, but not always, reflective of practice and data storage needs in particular functional silos.  Yet oddly, the implementation of an ERP doesn’t always eliminate these systems – sometimes, the number of them increases.  Suggest possible causes.

1. What threat do these systems pose to integration?
2. Who or what else might be threatened by the existence of these systems?

What is Shadow System?

In the past about 5 decades, every department has their own system, which is called functional silos. The system is not integrated with each other cross-departments. The examples of functional silos :

1. Human Resource (a.k.a HR Department or HRD) uses HR software,
2. Finance Department (FD) uses Accounting software and finance software,
3. Sales Department uses Sales software (e.g POS or Point of Sale).
4. Administration Department uses administration software.
5. And many more which depend on the scale of an organisation. 😀

This situation will create system system chaos in the business process in the organisation. Allen Square, Mayor Mitch Landrieu IT Chief (n.d., stated in Rainey, 2013) emphasized that “The current infrastructure is difficult to use, expensive to maintain, makes data access difficult, suffers from data inconsistency, and promotes the use of shadow systems due to a lack of fundamental integration.”

Shadow systems is a main information service to support some business processes. It can be any applications, which is not created by IT Department. Every software vendors; including ERP software vendors; are competing to offer their features for different business purposes in their application software, such as administration software, marketing software, HR (Human Resource) software, manufacturing, financial, and others.

Moreover, Enterprise Resource Planning (ERP) systems will replace all the single application software by integrating business processes (functionality) interdepartmental in an organization (see Fig. 1). The leveraging the ERP systems will give some benefits for business processes.

First, ERP system will make an organization’s business processes more simpler, more effective, more efficiently, more flexible and save their expenses to buy a lot of software for every department. It means the organisation can minimize the deficiencies of formal systems. A successful organisation, who implements it, will create a better B2B (Business to Business) environment (SCM system, as known as Supply Chain Management system). Those kind of organisation can survive in the competitive global market. Ulrich (2006), who is a President, and Founder of Tactical Strategy Group, Inc., and a Senior Consultant of Cutter Consortium; demonstrates through the survey from several respondents that the most off-the-shelf application software used in the organization is the ERP software. The following software that’s used by them are HRM (Human Resource Management), CRM (Customer Relationship Management), SCM, and Commercial off-the-shelf software (COTS).

Second, shadow system can advocate an ERP system in some elements in the academic organisations. Moreover, shadow systems can be any applications, such as :

1. Excel spreadsheets,
2. Access databases,
3. Informix,
4. Ingres,
5. Jasmine,
6. Cognos,
7. Hyperion,
8. SAS and others.

The examples of shadow system vendors are :

1. Oracle,
2. Sybase,
3. SAP,
4. Athena IT Solution,
5. FinLab Accounting Solution;
6. IT Works, Inc. (Accounting, Financial, and Personnel Management Solution);
7. and many more.

There are many shadow data systems come from the data warehouse (DW) and data mart in the organisation. The business person can perform their business using the Extract, Transform, and Load (ETL) in the Business Intelligence (BI) tool. They can analyse from that data for their business performance (Sherman, 2004). According to Neal (2011), there are three roles for ETL processes :

1. Extract some data from CRM or ERP systems.
2. Transform those data into the DW, such as Oracle, Teradata, IBM (large-scale company) and SAND technology (small-scale company).
3. Load / store the data from DW to the users for determining in advanced.

As a result, an organisation will obtain less complicated (Kumar, Mahashwari, & Kumar, 2003, p. 805).

Fig. 1: An ERP System integration.

Behren & Sedera (2004), and Behren (2009) explain that educational organisation; such as Central Queensland University (as known as CQUniversity or CQU), Australia; uses shadow system, which is called Webfuse. It supports the academic functionalities.

What is the cause factors an Organisation Leverage Shadow Systems?

• poor in business processes.
• lack of manage an organisation, its support systems and training.
• lack of good shadow system design.
• inter departmental collision, because poor testing and surveillance.
• Poor back up cycle business functionalities.
• poor business processes documentation, which might be stolen by staffs who resign from the organisation. As a result, an organisation will lose their business secret and also lose their money.

What threat do these systems pose to integration?

There are some benefits of using Shadow Systems, eventhough shadow systems have difficulties at the core business in some cases. Behren (2009) describes that there are some positive and negative aspects using shadow systems.

Positive	Negative
1.    Vigorous substances in creativity. For example, Webfuse at CQUniversity system, replies rapidly and tailors in the academic activities which entail the integration in the institution.	1.  Control. A shadow system, like CQU Webfuse, is a wild system due to uncontrolled and not belongs to IT Department (ITD). ITD only utilize it to perform the academic institution and avoid the system chaos.
2.    Competent resource of Innovation. Innovation is the way to answer the market demand, and can become a market leader.	2.  Stigma. Users and IT Support the use of Webfuse systems often wonder about condemnation from ITD and top level management. Their perception that Webfuse is having academic issues, which some data and functionality is reiterated. Nonetheless, they contend that none of another system can do all the processes same as Webfuse system.
3.    Potential to bring the stability and order in the systems. Webfuse, which is a CQU shadow System, can be minimized the anxiety their employees to minimize the slack time for uploading the course result data.	3. Organisational politics.

Who or what else might be threatened by the existence of these systems?

1.    Stakeholder.

2.    Customers.

3.    IT Department.

4.    And all people who work in the organisation structure.

References

Behren, S & Sedera, W 2004, “Why Do Shadow Systems Exist after an ERP Implementation? Lessons from a Case Study”, PACIS 2004 Proceedings, Paper 136, viewed 23^rd July 2013, http://aisel.aisnet.org/pacis2004/136.

Behren, S 2009, ‘Shadow Systems: The Good, The Bad, and The Ugly’, Communication of the ACM, vol. 52, no. 2, pp. 124 – 129.

Kumar, V. Mahashwari, B. & Kumar, U 2003, ‘An investigation of critical management issues in ERP implementation: emperical evidence from Canadian organizations’, Technovation, vol. 23, pp. 793-807.

Neal, H 2011, Business Intelligence 101 – A Beginner’s Guide to BI Software, viewed 29^th July 2013, http://plotting-success.softwareadvice.com/beginners-guide-to-bi-software-1113011/.

Rainey, R 2013, New Orleans is approaching the Digital Age, but still has a long way to go, viewed 28^th July 2013, http://www.nola.com/.

Sherman, R 2004, shedding Light on Data Shadow Systems, viewed 29^th July 2013, http://www.information-management.com/news/1002617-1.html.

Ulrich, W 2006, Application Package Software: The Promise Vs. Reality, viewed 28^th July 2013, http://www.cutter.com/content-and-analysis/journals-and-reports/cutter-benchmark-review/sample/cbr0609b.html.