ERP Systems and Organisational Change

Enterprise Resource Planning (ERP) systems are now the backbone of the information systems in most large and medium companies, but also in many administrations. According to a study by ARC Advisory Group Inc., Dedham, Mass., the worldwide market for ERP systems is expected to grow at a 4.8% compound annual rate, rising from $16.7 billion in 2005 to more than $21 billion in 2010. This success is linked to several factors, and mainly to their expected ability to address the main limitations of former legacy systems — most of them interrelated — including coexistence of pieces of heterogeneous software, difficult evolution, lack of data and process integration, or high cost of maintenance. Moreover, the libraries of business processes included in the ERP packages are supposed to make possible the adoption of “best practices” allowing strong improvements of company performance.

Enterprise Resource Planning (ERP) systems are one of the most important developments in corporate information systems (Davenport, 1998; Hitt et al. 2002; Upton and McAfee 2000) and in Information Infrastructure (II) (Hanseth and Braa 2001) during the last decade. The business interest in ERP systems can be explained by the benefits associated with the implementation and utilisation of ERP systems (Robey et al., 2002). The benefits are related only in part to the technology, most of these stemming from organisational changes such as new business processes, organisational structure, work procedures, the integration of administrative and operative activities, and the global standardisation of work practices leading to organisational improvements, which the technology supports (Hedman and Borell, 2003).

An important theme in the ERP (Enterprise Resource Planning) systems literature is the integrative dimension of this type of technology. In this chapter, we investigate technological integration using distributed cognition. In the framework of Hutchins (1995), founder of this approach, human action is based on the ability of human beings to integrate the various elements of the context in which they function. Drawing on Hutchins’ conceptual framework, we see how the material structure of integrative technologies changes the relationship between workers and their contexts as well as how they conduct work activities.

This chapter addresses the problem of implementation of an ERP system, and more precisely the adaptation of the system to the organisation by mean of the implication of the users in the implementation phase. It is shown that the implementation method may generate harder constraints than those coming from the system itself. Also, the explicitation of implicit transversal processes seems to allow an increased control of the individual’s work, through standardisation of the spaces of confrontation. Information is extracted from its context and is supposed to be meaningful on its own; its standardisation according to global issues can be contradictory with local process, dealing with situated action, the necessary answer to unpredictable events, and context specificities. A question can be whether a relative local inefficiency is not considered as acceptable in comparison with a better global efficiency.

In 1994, the journal Computer Supported Cooperative Work (CSCW) featured a debate between two acknowledged “stars” in the field: Lucy Suchman, then a researcher at PARC (the Xerox Palo Alto Research Centre), with a background in ethnography, and Terry Winograd, a professor of computer science at Stanford University, also located in Palo Alto, California. Suchman led off the polemic with an article entitled “Do categories have politics?” In her paper, she opened up for argument the validity of all computer-based systems that claim to be “tools for the coordination of social action“ (p. 177). She questioned in particular how “the theories informing such systems conceptualise the structuring of everyday conversation and the dynamics of organisational interaction over time“ (p. 178). Her explicit target was a system, called “The Coordinator,“ that Winograd had been instrumental in developing. It based its protocols on a theory of organisational communication derived from earlier work in philosophy, linguistics and discourse analysis known as “speech act theory“ (SAT). SAT proposed a categorisation of utterances, based on how they contribute to a set of presumed standard organisational transactions, which The Coordinator proposed to make explicit and incorporate as part of a computer-based protocol. In this way, it claimed, the supporting technology it offered would render the communicative exchanges of the organisation more transparent, and thus—by implication—would make them increasingly regular and efficient.

Enterprise Resource Planning (ERP) software typically takes the form of a package that is licensed for use to those in a client organisation and is sold as being able to automate a wide range of processes within organisations. ERP packages have become an important feature of information and communications technology (ICT) infrastructures in organisations. However, a number of highly publicised failures have been associated with the ERP packages too. For example: Hershey, Aero Group and Snap-On have blamed the implementation of ERP packages for negative impacts upon earnings (Scott and Vessey, 2000); Cadbury Schweppes implemented plans to fulfil 250 orders where normally they would fulfil 1000 due to the increased complexity and the need to re-train staff post-implementation (August, 1999) and FoxMeyer drug company’s implementation of an ERP package has been argued to have lead to bankruptcy proceedings resulting in litigation against SAP, the software vendor in question (Bicknell, 1998). Some have even rejected a single vendor approach outright (Light et al., 2001). ERP packages appear to work for some and not for others, they contain contradictions. Indeed, if we start from the position that technologies do not provide their own explanation, then we have to consider the direction of a technological trajectory and why it moves in one way rather than another (Bijker and Law, 1994). In other words, ERP appropriation cannot be pre-determined as a success, despite the persuasive attempts of vendors via their websites and other marketing channels. Moreover, just because ERP exists, we cannot presume that all will appropriate it in the same fashion, if at all.

This paper aims to put forward a preliminary model for defining the legitimisation process of functions within organisations. To address this issue, we shall discuss the role of functions within organisations and explore the concept of legitimacy itself.

Enterprises that implement ERP systems aim at controlling their global performances through formalisation and standardisation of their processes, using tools dedicated to information processing and to exchanges and communication between actors. The results are a huge amount of information available in the organisation.

The business process re-engineering phase is recognised as a crucial step of an ERP implementation, supposed to make possible the mapping between the company activity and the ERP standard processes. Implementing the standard processes included in an ERP is indeed considered in the literature as a major condition of success of the implementation. Moreover, these standard processes, defined after multiple implementations in various sectors, are often seen as “best practices” allowing one to increase company performance, and providing a powerful tool for change management. On the other hand, many authors point out the difficulties of adoption of such external processes, and the question of knowing whether standard processes may lead to a competitive advantage is becoming widely addressed. In spite of its inconveniences, customisation of ERP package is considered by many authors as a possible solution to both adoption and competitive advantage issues.

Companies have invested considerable resources in the implementation of Enterprise Resource Planning (ERP) systems, but the outputs are strongly dependent on the process alignment maturity because of continuous change within organisations. Commonly, the initial implementation rarely gives the expected results and the post-project phase becomes of research interest (Section 10.2). Making efficient use of such information systems is nowadays becoming a major factor for firms striving to reach their performance objectives. This is a continuous improvement process where companies learn from failure and success to acquire a “maturity” in information system management. This concerns the mapping of reengineered processes to changing organisations, the set up of software packages and technologic hardware, but also the organisation of roles, skills and responsibilities, performance control through indicators, scorecards, sometimes called “orgware”.

Enterprise Resource Planning (ERP) systems play an important role in integrating information and processes across departmental boundaries (Reimers, 2003; Klaus et al., 2000; Sankar et al., 2005). Organisations, especially in developing countries, have adopted these information systems extensively to overcome the limitations of fragmented and incompatible stand-alone and legacy systems (Huang and Palvia, 2001; Sharma et al., 2002; Robey et al., 2002). Even though the inherent appeal of ERP systems has not gone unnoticed in developing countries (Xue et al., 2005), ERP is still in its early stages in countries in Asia/Pacific, Latin America and Eastern Europe (Huang and Palvia, 2001; Rajapakse and Seddon, 2005).