Exploring the effects of ERP systems on organizational performance

Abstract

PurposePrevious research showed that there are payoffs from IT investments, but the question is when and why such payoffs occur. This paper aims to adopt an “inside the black‐box” approach to the analysis of economic benefits of ERP systems by examining what business process (BP) changes take place in companies that have different motives for implementing ERP systems. This explorative study seeks to further examine the influence of these BP changes on organizational performance.Design/methodology/approachIn Spring 2006, 14 semi‐structured interviews were made in mid‐sized Finnish companies that use an ERP system. An ERP scorecard framework was applied to assess the perceived benefits of ERP.FindingsCompanies that have a technologically‐led motivation perceive “improved service time in accounting tasks” as an internal efficiency benefit, “faster response to business change” as customer benefits, and financial benefits in terms of other improved efficiencies. Companies that have a business‐led motivation perceive “economies of scale” as an internal efficiency benefit, and financial benefits in terms of “lower headcount costs” and “lower selling, general and administrative costs.” Both groups of companies report BP changes in terms of “reassignment of financial management of business cases.”Research limitations/implicationsThe balanced‐scorecard approach offers a systematic analysis of the ERP effects in organizations, but it limits the interpretation of the interview data. The small number of ERP implementations studied means that the results are not directly generalizable, but they point out interesting avenues for future research.Practical implicationsThe insights in the paper about the relationship between how ERP projects are motivated and how benefits are perceived may be helpful to organizations that implement ERP systems. The findings support the importance of continued monitoring of ERP systems to leverage their effects in maximizing benefits for the implementing organizations.Originality/valueThe paper provides new insights into the interrelationships between the motivations for implementing ERP systems and the perceived ERP benefits.