Managing information is a key element for the success of an enterprise. Firms are increasingly incorporating emerging information technologies. The aim of adopting these technologies is to enable these firms to improve on their information management processes. One of the technologies that are being considered includes the Enterprise Resource Planning system (ERPs). This paper involves a critical analysis of the Enterprise Resource Planning system. The articles considered include; Enterprise resource planning and the post-bureaucratic organization by Alan and Joanne, work, organization and enterprise resource planning system by Derry, Grant, Harley and Wright, ERP and organization innovation: a management perspective by Mcadam and Alan, and implication of the fit between organization structure and ERP: a structural contingency theory perspective by Hu and Morton. The objective of the paper is to identify the opportunities provided by ERP in a business. Arguments and factors concerning Enterprise Resource Planning (ERP) system are also analyzed. The success and failure factors together with the advantages and disadvantages of ERP are also analyzed. In addition, the main differences in their research approach are also considered.
Enterprise Resource Planning (ERP)
ERP refers to a software system that enables sharing of data and information across the various functional departments of an organization. It ensures that there is an ease of access and production of information in a real-time environment. It also integrates business processes and information thus enabling organization-wide sharing of information. This is because data and processes in a firm are integrated into a single system through a computer local area network which enhances sharing (McAdam & Galloway, 2005, p.381).
Opportunities Presented by the ERP
Implementation of the ERP provides an opportunity to different departments in an organization since they can be interconnected enabling all the information to be shared. This transforms the management, nature, and structure of work throughout the organization resulting in an improvement in the coordination of activities. In addition, processes and workflows are streamlined by the different functional areas while cycle time is reduced (Morton & Hu, 2008, p. 391). This increases productivity and efficiency in the firm (Dery et al, 2006, p. 203).
ERP system enables efficiency and effectiveness in managing human resources in a firm. In addition, an ERP system can also enable firms in the manufacturing industry to well plan their production and manufacturing processes. Integrating an ERP system with a well-implemented Information Technology infrastructure can avail a firm of several opportunities. For instance, ERPs can enable a firm to conduct effective marketing through the incorporation of electronic commerce. A firm can also improve its supply chain management through the incorporation of supply chain systems. This results in an improvement in the inter-organization relationship (McAdam & Galloway, 2005, p. 281).
ERP can also enable a firm to achieve a high level of efficiency through a reduction in its operation cost. This will result in an increment in the firm’s level of profit (Dery et al, 2006, p. 200). Other areas that will help in reducing cost include reduced direct and indirect labor, sale strategies that are more effective than the ones that existed before the implementation of the ERP, and reduced procurement costs.
Success factors of ERP system
Training staff and management is paramount during the implementation of ERP. This is because the ERP system will represent numerous changes for the organization and hence the need for an effective transition. Training will ensure that various parties in the organization understand ERP effectively.
In addition, effective implementation depends on the availability of good technical support. This means that the organization has to have well-equipped in-house expertise. This will ensure that ERP is well implemented and maintained. In-house technical expertise will help in the reduction of the cost of maintenance.
Before implementing the ERP system, the management team should research the software vendor to determine the reliability of the ERP software. This will help in the creation of the trust (Lowe & Locke, 2008, p. 375).
Factors causing failure of ERP
Increased delegation by the top management on the implementation of ERP is one of the causes of ERP failure. This results in an inadequate understanding of the ERP system requirements and a lack of commitment. Poor specification of ERP is one of the factors that accounts for numerous failures of ERP. This occurs if the firm has not adequately defined its ERP functional requirements. This means that there will be a poor selection of the ERP system. In addition, ERP failure is also associated with inadequate resources and a lack of change management in the process of its implementation.
Advantages and disadvantages of ERP system
Implementation of ERP results in increased integration within the business by reducing data redundancy. ERP also results in cost reduction concerning accounting and reporting. This is achieved if the organization had a well-established manual system of reporting. Cost is also reduced in that a few personnel will be required. In addition, the ERP system will result in an increment in the degree of accuracy in reporting.
However, the implementation of ERP is costly. The organization will incur various costs such as the cost of infrastructure in terms of software and hardware, cost of training, and consultation. In addition, some of the ERP systems implemented may not be flexible and hence the difficulty in updating them.
Main arguments that these authors are putting forward
Dery, Grant, Harley, and Wright
Dery et al (2006, p. 200) argue that there is a gap that exists in various pieces of literature that have been advanced concerning ERP systems. The findings of the study conducted by Dery and his colleagues reveal a technical-functionalist or managerial type of orientation. More emphasis is given on the effect of ERPs concerning effectiveness, efficiency, and business performance. They also argue that there is a need to analyze the impact of ERPs to work and organization. In addition, despite the increased implementation of ERP systems in many organizations, there are no studies that have been conducted concerning the effect of ERP on work to the organization. These authors mainly concentrate on designing and implementation of the ERP system to change the entire organization.
Lowe and Locke
Lowe and Locke argue that most firms are breaking from the bureaucratic type of leadership. In addition, the implementation of ERPs in post-bureaucratic organizations (PBO) culminates in increased conflicts in their operation. ERP system results in increased pressure on the organization’s structure and relationships. Implementation of ERP system is viewed to result in an increment in the rate of standardization, formalization, and centralization which affects employee empowerment in a PBO. Lowe and Locke (2008, p. 381) argue that ERP results in an increase in formalization which harms the trust relationship between the employees in a PBO setting. According to Lowe and Locke, implementing the ERP system in an organization is complex and results in a disruption of the routine work and systems (2008, p. 381). However, the adoption of ERP results in the incorporation of ‘best practices’ and increased reliability in the operation of a firm. This results in an improvement of the various organization’s team performances.
McAdam and Galloway
Galloway and McAdam (2005, p.281) argue that innovation is one of the ways through which a firm can attain a higher competitive edge. Many issues should be considered in the process of implementing change through an ERP system. According to Galloway and McAdam, the management should consider the impact of the ERP system on its global and local scale of operation. Consideration of the various issues will ensure that the ERP system is well implemented in an organization. Despite the improvement of business processes by many firms through the implementation of ERP systems, there are many business processes and structures that ERP systems have not resolved. This means that there is a need for more studies to be conducted concerning enhancing the performance of a firm through ERP systems.
Morton and Hu
Morton and Hu (2008, p. 391) argue that despite the benefits of the ERP system, many failures are associated with the ERP system. Morton and Hu assert that many factors are associated with these failures. The authors greatly associate ERP systems failure with the poor design of the software. They also argue that the standardization and integration which results from implementing ERP systems do not fit in all organizations. As a result, the management must consider the ‘fit’ in its effort to implement the ERP system. This will ensure that the ERP system adopted is in line with the standardized business processes and designs that are to be adopted. Morton and Hu assert that this affects the likely hood of success or failure upon implementation of the ERP system (Morton & Hu, 2008, p.391).
Agreement with the authors’ views on ERP implementation
I agree with Dery and his colleagues’ views that the management of an organization should consider work and organization before implementing an ERP system. This is because ERP will result in a change in the operation of the organization which may affect the productivity of the employees. Implementation of the ERP system may result in conflict between the management and the employees, therefore, analysis of work and organization will ensure that a good relationship is maintained. The effect is that workflow will be efficient within the organization.
I also concur with Morton and Hu’s view that the management of the organization should determine the fit between the ERP system and the organization. Determination of ‘fit’ will minimize the probability of ERP system failure. In addition, I agree with McAdam and Galloway’s view that change management is a key element to consider before designing and implementation of ERP system. This is because it will enable all parties in the organization to utilize ERP to the maximum. I also concur with Lowe and Locke’s view that trust should be considered in implementing ERP in a Post Bureaucratic Organization (PBO). The creation of trust will help in the minimization of conflicts within the organization.
Differences in Research Approaches
Morton and Hu have integrated the concept of structural contingency theory in identifying various dimensions of ERP systems and organization structure. Many companies have been considered in their case study on ERP implementation. These include Motts North America Incorporation, Norvartis Pharmaceuticals, and Guide Corporation. Structural contingency theory enables the effective gauging of the various characteristics of an organization to enable the determination of ‘fit’. Studying the diverse organization characteristics enables the success of ERP upon its implementation.
Dery et al (2006, p.203) have considered many orientations in the research approach. These orientations include empirical, theoretical, pragmatic-interventionist, and critical-emancipatory. In studying the various orientations, Dery and his colleagues conducted an empirical study of Pemex which is a Mexican oil corporation. Incorporating the concept of ‘orientation’ is based on the fact that there are various dimensions through which ERP can be viewed. The literature review on ERP as presented by Dery and colleagues (2006, p. 203) indicates that even as the number of organizations and amount of work that relates to ERP appears to have multiplied over the years, nonetheless, the corresponding studies on the aforementioned subject (that is, ERP, remains underrepresented). Nonetheless, by examining organization literature and work relating to information technology on ERP, we get the impression that IT indeed is capable of providing a research agenda on ERP that is more expansive, and which entails their fundamental research questions. The authors contend that those studies that are aimed at addressing the research questions likely to be raised might as well be anticipated to provide new ways that ERPs can influence employees in organizations, and their work, not to mention the likely reaction when confronted with this novel type of technology in their place of work.
The study by McAdam and Galloway (2005, p. 280) has incorporated diverse research approaches. These approaches relate to case study researchers such as the use of semi-structured interviews, questionnaires, and participant observations. The case study involved an analysis of management’s views on ERP systems. The company considered in the case study is GUDV NI. Electronic questionnaires were administered to managers of this company.
Lowe and Locke incorporated the concept of the qualitative case study method in the study of various issues concerning formalization and solidarity of ensuring trust in the system. The company considered in the case study is Tautara Limited. Various research methods have been incorporated. These include data collection through observations and interviews, training sessions, and pilot runs of the ERP software.
Information sharing plays a significant role in the process of the firm achieving a competitive edge. ERP enables data integration into one system and thus effective sharing culminating in the efficiency of operation. There are many opportunities which are associated with implementing an ERP system. These include reduction in the cost of operation, achievement of a lean organization structure, and improvement of marketing process through incorporation of electronic commerce. ERP Systems provide also present an opportunity to businesses and companies in ensuring effectiveness and efficiency in information management. This means that there is a high probability of ERP revolutionalizing the operation of firms. However, proper implementation is required for the system to work effectively. Many factors must be considered for the success of the ERP system. These include prior training of the staff, availability of technical support and employees, and market research on the software vendor. The authors have presented various arguments concerning ERP system implementation.
Dery, K., Grant, D., Harley, B. & Wright, C. 2006. Work, organization and ERP systems: an alternative research agenda. New technology, Work, and Employment. Vol. 21(3), pp. 199-214. Oxford: Blackwell Publishing Limited.
Lowe, A. & Locke, J. 2008.ERP and the post-bureaucratic organization: ‘Formalization’ as a trust in the system versus ‘solidarity’ as trust in individuals. Information Technology and People. Vol. 21(4), pp. 375-400.Birmingham, UK: Birmingham Business School.
McAdam, R. & Galloway, A. 2005. ERP and organizational innovation: a management perspective. Industrial Management and Data Systems. Vol. 105(3), pp. 280-290
Morton, N.A. & Hu, Q. 2008. Implications of the fit between organizational structure and ERP: a structural contingency theory perspective. International Journal of Information Management. Vol. 28, pp. 391-402.Florida: Florida Atlantic University.