Assessing the Feasibility of Developing a Federated ERP System

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 theliterature one can find several studies about the problems arising during the implementation of an ERPsystem. The main problem areas are around the complexity of ERP systems. One vision to overcome someof 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 userperspective. The decreased complexity of such a system would require lower installation and maintenancecost. Additional, only the components which are needed to cover the company’s business processes wouldbe used. Several theories around this concept exist, but a feasibility assessment of developing a federatedERP 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 ERPdevelopment to provide a first assessment of the overall feasibility of developing a platform for federatedERP systems. An analytical hierarchical approach is used to define effort and effect related criteria andtheir domain values. The assessment as the criteria is done in comparison to the development of a classicalERP system. Using the developed criteria, a net present value calculation is done. The calculation of thenet present value is done on an overall, not company specific level. In order to estimate the weightedaverage cost of capital, the values from successful software companies are used as a baseline. Additionalpotential risks and obstacles are identified for further clarification.