A Comprehensive Framework for Classifying the Benefits of Erp Systems

Topics: Enterprise resource planning, Management, Case study Pages: 26 (6748 words) Published: February 20, 2009
A Comprehensive Framework for Classifying the Benefits of ERP Systems

Shari Shang, Department of Information Systems, The University of Melbourne, sshang@jeack.com.au Peter B. Seddon, Department of Information Systems, The University of Melbourne, p.seddon@dis.unimelb.edu.au

Abstract

This paper presents a framework for assessing the business benefits of Enterprise Resource Planning (ERP) systems. After analyzing the features of ERP systems, the literature on IT benefits, data from 233 ERP-vendor success stories published on the web, and interviews with 34 ERP cases, we have produced a consolidated framework of five benefit dimensions. This framework tries to classify the types of benefit that organizations can achieve by using ERP systems and provide a comprehensive foundation for planning, justifying, and managing the system. The framework focuses on benefits only, from the point of view of management as stakeholders; it does not consider costs.

Introduction

According to AMR Research, total revenue in the Enterprise Resource Planning (ERP) software and services market in 1999 was US$18.3 B (Gilbert, 2000). ERP system implementation costs are often reported to be five to ten times the cost of software licenses (Davenport, 2000). If so, organizations world-wide spent something like US$90-180 billion on ERP systems in 1999. Most organizations that have implemented ERP systems expect to continue using them for many years.

ERP systems are integrated, enterprise-wide, packaged software applications that impound deep knowledge of business practices accumulated from vendor implementations in many organizations. ERP systems are evolving to incorporate new technologies, such as E-commerce, data warehousing, and customer relationship management. ERP software is a semi-finished product with tables and parameters that user organizations and their implementation partners configure to their business needs. Implementation of ERP systems therefore involves both business and IT managers who work together to define new operational and managerial processes.

If organizations around the world spent US$100B or more on ERP systems last year, what sorts of benefits did they, or can they, achieve? To answer this question, this paper presents a comprehensive framework of benefits that organizations might be able to achieve from their use of ERP systems. This framework provides a meaningful benchmark of ERP benefits for comparing benefits across different firms. The framework could be used as a good communication tool and checklist for consensus-building in within-firm discussions on benefits realization and development.

The Literature on ERP System Benefits

The focus of this paper is on the business benefits of ERP systems only, not the costs. Seddon et al. (1999) argue that is not meaningful to talk of benefits of IT systems without identifying the stakeholder group in whose interest benefits are judged. Our goal in this paper is to develop a benefits classification that considers benefits from the point of view of an organization’s senior management.

We were forced to develop our own classification of ERP system benefits because there do not appear to be any rigorous methods for comparing benefits from ERP systems across organizations. In the 1980s, Ives, Olsen, and Baroudi (1983), Davis (1989), Baroudi and Orlikowski (1988), and Doll and Torkzadeh (1988) developed a number of general-purpose measures of success of information systems. However, these measures are too general purpose for benchmarking. In addition, they all focus on benefits from the point of view of individual users as stakeholders, not management, so they are inappropriate for our purposes.

Our search for a way of structuring the benefits management might expect to gain from use of ERP systems began with a wide-ranging review of the IT value literature since 1970. The result of this stage was the list of five different types...

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