ENTERPRISE SYSTEMS MANAGEMENT AND INNOVATION

Impact on the Research Agenda

Charles Møller

Department of Business Studies, Aarhus School of Business,Fuglesangs Allé 4 DK-8210 Aarhus V, Denmark

Center for Electronic Business, San Francisco State University, 1600 Holloway Avenue, San Francisco, CA 94132-1722

Keywords: Enterprise Systems, Management, Innovation.

Abstract: This paper proposes that ERP-implementation lead to a new post-implementation management challenge:

Enterprise Systems Management and Innovation. Enterprise Systems Management and Innovation is a new

concept that deals with the management of the enterprise system as a resource, and as a potential for

transforming the organization by enabling innovative supply chain processes. The argument is rooted in

seven case studies, a survey on ERP adoption and a retrospective analysis on the development of ES. This

paper discuses the emerging issues and the implications for management. The paper concludes by outlining

the impact on the ERP research agenda.

1 INTRODUCTION

Few IT innovations have had as much impact on

business organizations in recent years as Enterprise

Resource Planning (ERP). ERP systems are

standardized software packages that can be

configured to manage every aspect of an

organization within any business. Here Enterprise

Systems (ES) are used as a more broad and generic

term than ERP.

It is estimated that organizations worldwide have

spent around USD18.3 billion every year on ES in

recent years (Shanks, Seddon, & Willcocks, 2003).

The adoption of ERP is often explained as phases or

waves (Willis & Willis-Brown, 2002). During the

first phase of ERP, the organizations struggle to

implement ERP and get the internal processes in

place. There has been a lot of interest in and critique

of ERP based on this phase, but attention has now

shifted from implementation issues towards post-

implementation. During a “second wave”

implementation the organizations deploy their new

tools in order to create and sustain competitive

advantage. This will often imply the integration of

processes in the supply chain.

Most organizations today are required not only

to establish effective business processes but they are

required to accommodate for changing business

conditions at an increasing rate. Many business

processes extend beyond the boundary of the

enterprise into the supply chain and the information

infrastructure therefore is critical. The rationales of

integrating ERP and SCM have been explored by

Tarn, Yen and Beaumont (Tarn, Yen, & Beaumont,

2002). They conclude that the industrial trend is that

ERP is becoming a subclass of a much larger and

broader enterprise business system or in general

Enterprise Systems (ES).

Today nearly every business relies on their

Enterprise System for process integration and the

future generations of Enterprise Systems will

increasingly be driven by business process models

(Dumas, Aalst, & Hofstede, 2005).

A recent published survey shows that the factors

most associated with achieving value from ERP are

integration, process optimization and use of the ERP

systems in decision-making (Davenport, Harris, &

Cantrell, 2004). Davenport and Brooks (Davenport

& Brooks, 2004) argue that ERP systems are

internally focused, but the greatest impact of ERP is

felt in the supply chain.

In a very broad sense we are facing an evolution

where businesses increasingly are focusing on their

external processes driven by a new breed of process-

aware enterprise systems. This presents a

tremendous management challenge, not only to

manage this new IT resource but also to deploy this

resource in the supply chain. It has been argued that

this is a new field and this paper will argue that we

are facing an emerging challenge regarding the

management of enterprise systems that include

Møller C. (2006).

ENTERPRISE SYSTEMS MANAGEMENT AND INNOVATION - Impact on the Research Agenda.

In Proceedings of the Eighth International Conference on Enterprise Information Systems - DISI, pages 87-94

DOI: 10.5220/0002473500870094

 SciTePress

business process innovation using advanced

enterprise system.

The arguments are established using the lessons

learned from seven Danish ES cases. The case

studies were initially prepared for a management

textbook on ERP implementation (Rikhardsson,

Møller, & Kræmmergaard, 2004). Here the cases are

used in an approach to illustrate the general pattern

of post-implementation issues.

The cases are presented in and ES and ES

adoption perspective. In the next sections the ERP

industry and the adoption of ERP in the Danish

market are summarized. Then the impact of the

ERP-implementation in seven specific organizations

is analyzed in the following chapter. Finally the

implications are discussed and in the conclusion the

impact on the ES research is suggested.

2 THE ENTERPRISE SYSTEMS

INDUSTRY

The notion of standard ES/ERP systems has

developed drastically during the last five years due

to the impact of the web technologies, among other

things. In order to fully comprehend the systems it is

necessary to look at the industry in a 50-year

retrospective.

The industrial Enterprise Resource Planning

(ERP) market showed a positive growth in 2003

after years of decline, precipitated by the Y2K craze.

The worldwide market for ERP solutions to discrete

and process manufacturers was USD 9.10 billion in

2003 and is forecasted to be over USD 12.00 billion

in 2008, growing at a Compounded Annual Growth

Rate (CAGR) of 5.7 per cent over the next five

years, according to a recent ARC Advisory Group

study.

The concept of ES has often been explained

through the evolution of ERP (Chen, 2001; Klaus,

Rosemann, & Gable, 2000; M. Lynne Markus &

Tanis, 2000; Wortmann, 1998). The concept of

Enterprise Systems (ES) has evolved over almost

fifty years, driven by the changing business

requirements, new technologies and software

vendors’ development capabilities.

In this section the development of the ERP

market is analyzed from a technical point of view.

There are several sources describing this evolution.

This analysis is based on (Charles Møller, 2005;

Wortmann, 1998; Wortmann, Hegges, & Rolfes,

2000).

The root of most of today’s ERP systems may be

traced back to the fifties. In the fifties the first

inventory control systems were designed along with

invoice processors. This was the first wave of the ES

which was spurred by the appearance of the first

commercial computers which again triggered the

field of operations management to develop

mathematical models for planning and control (the

inventory control models).

During the sixties those systems spawned off to

sales and purchase systems as well as production

planning systems. When the bill-of-material was

invented and standardized, IBM introduced the

COPICS specification. This specification enabled

IBM to design their mainframe MRP package

COPICS (now TGF 2000) and later on MAPICS

(now an independent company). The MRP

techniques fuelled the second wave.

During the seventies the MRP systems were

“state of the art”, and APICS framed the

implementation wave “the MRP crusade”. MRP

systems were refined into MRP II. This was the first

time standard systems were successful but soon the

next wave hit the systems. During those days a

couple of former IBM employees founded a small

software company called SAP.

The Computer Integrated Manufacturing wave

hit industry in the eighties. The driver behind CIM

was the microcomputer, and the business value of

CIM was the automation of processes. Some CIM

projects went well but quite a large number of

projects didn’t. One of the important lessons learned

was the complexity of integration.

With the emergence of Enterprise Resource

Planning (ERP) in the nineties integration became an

issue. This development peaked in the early nineties

with the advent of the standard ERP systems – often

embodied in SAP R/3 (Bancroft, Seip, & Sprengel,

1997) along with other major vendors such as

Oracle, Peoplesoft, JD Edwards and Baan – the so-

called JBOPS. Although the ERP systems have other

legacies like accounting, the planning and control

philosophies are rooted in manufacturing.

ERP is a standardized software package

designed to integrate the internal value chain of an

enterprise. An ERP system is based on an integrated

database and consists of several modules aimed at

specific business functions. According to Nah (Nah,

2002) the American Production and Inventory

Control Society (APICS) defines ERP as: “a method

for the effective planning and controlling of all the

resources needed to take, make, ship and account for

customer orders in a manufacturing, distribution or

service company”. This definition emphasizes the

business purpose of the system.

The ERP market experienced a hype as a result

of the Y2K problem, but after Y2K the ERP market

soured, as it was doubted that traditional ERP could

meet the e-business challenge (Mabert, Soni, &

Venkataramanan, 2001). New vendors of “bolt-on”

ICEIS 2006 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

systems like e.g. i2 Technology with SCM and

Siebel with CRM emerged on the scene (Calloway,

2000). Application Integration (EAI) became a

serious issue (Themistocleous, Irani, & Keefe, 2001)

and new delivery and pricing methods like ASP

(Application Service Provider) and ERP rentals were

conceived (Harrell, Higgins, & Ludwig, 2001).

The ERP II concept is a vision originally

conceived by Gartner Group in 2000. Gartner

Group, who also tagged the ERP concept, define

ERP II as “a business strategy and a set of industry-

domain-specific applications that build customer and

shareholder value by enabling and optimizing

enterprise and inter-enterprise, collaborative-

operational and financial processes” (Bond et al.,

2000).

ERP II includes six elements that touch on the

business, the applications and technology strategy:

(1) the role of ERP II, (2) its business domain, (3)

the functions addressed within that domain, (4) the

kinds of processes required by those functions, (5)

the system architectures that can support those

processes, and (6) the way in which data is handled

within those architectures. With the exception of

architecture, these ERP II elements represent an

expansion of traditional ERP (Bond et al., 2000).

ERP II includes (Charles Møller, 2005): Supply

Chain Management (SCM); Customer Relationship

Management (CRM); Supplier Relationship

Management (SRM); Product Lifecycle

Management (PLM); Employee Lifecycle

Management (ELM) and Corporate Performance

Management (CPM). So in conclusion, ERP II is

essentially componentized ERP, e-business and

collaboration in the supply chain.

Throughout the ERP industry this new

philosophy of ERP and e-business has been

gradually incorporated into the ERP systems and the

system architectures were redesigned and

modularized, e.g. like SAP intends it with the

NetWeaver platform, like Oracle intends with the

Fusion platform, and like Microsoft intend with their

Dynamics platform. Therefore the contemporary

standard systems do incorporate ERP II. The ERP

industry survived the challenge and recent market

analyses do not render any signs of market

fragmentation.

Today all the major vendors have adopted the

ERP II concept, either partly or fully. The evolution

is driven by emerging business requirements and

new information technology as it has been argued in

the preceding chapters was the case of the evolution

of ERP. The technologies are not necessarily the

inventions of ERP vendors, rather the technology is

sourced from the market as components, e.g.

application frameworks (.NET or J2EE), databases

(Oracle or MS SQL) or Decision-Support Systems

(DSS) from third-part vendors, but when

incorporated in the ES, the business benefit

increases.

It has been argued that people, structure,

realignment and change management will prove

more important to fulfilling the ERP II vision

(Weston, 2003). In all the cases in this study the

process change was the main driver of the second-

wave projects and most important, the ERP II

concepts has enabled the transformation of the ERP

systems into general ES driven by process

models(Dumas, Aalst, & Hofstede, 2005).

We now have a new and better understanding of

the ES technology as developed by the ES industry.

The next step of the study is to understand the

adoption of this new technology.

2.1 The ES Market and the

Adoption of ES

The ES market and the vendors are important not

just because of their systems, but because their

research reports and the vendors’ consultants have

an enormous impact on the business decisions made

in companies adopting ES. The ES market is

however quite complex for the following four

reasons (C. Møller, 2005):

1) The ES market is not well-defined.

Sometimes it includes all kinds of enterprise

application software and sometimes only ERP. The

total 2002 revenue of the ERP vendors was USD 20

billion according to AMR Research, but the total ES

spending may be 5-10 times higher.

2) There are significant commercial interests in

defining, segmenting and measuring the market. The

authoritative sources of market sizes and segments

are large research organizations such as Gartner,

IDC, AMR Research or Forrester.

3) The market’s units of measurement are

unclear Sometimes the market is measured in

installed base, new license sales or total revenue.

According to Gartner Dataquest (June 2003) the five

largest ERP vendors in 2002 based on software

license revenue were 1) SAP (25.1%); 2) Peoplesoft

+ JD Edwards (9.2%); 3) Oracle (7%); 4) SAGE

(5.4%); and 5) Microsoft Business Solutions (4.9%).

4) The market is quite dynamic. The vendors are

constantly merging and consolidating. Since the

Gartner Dataquest report was published, Peoplesoft

bought JD Edwards, Oracle bought Peoplesoft and

Microsoft acquired Encore and tried to buy SAP.

Finally the systems are constantly developed, and

some of them are discontinued.

A different perspective on the ERP market is the

enterprise perspective: what systems do they have,

ENTERPRISE SYSTEMS MANAGEMENT AND INNOVATION - Impact on the Research Agenda

what do they invest in, and when do they acquire or

update their systems?

A recent survey on ERP in large Danish

Enterprises (C. Møller, 2005) concluded that (1)

ERP has become a pervasive technology; (2) ERP

has become a contemporary technology; (3) the ERP

market has matured; and (4) the dominant ERP

strategy is still the single vendor strategy. The study

was based on telephone interviews with ERP

managers in 88.4 per cent of the top-500 enterprises

in Denmark.

ERP has been adopted by Danish enterprises in

general. 93.4 per cent of the large companies had an

ES of some kind, and 13.6 per cent of the enterprises

had more than one ERP system. Only 6.6 per cent of

the companies have not adopted ERP, their financial

performance is poor, and their number is decreasing.

There is a large group of companies, however, that

do not invest actively in ERP as well as a group of

businesses with aging ERP. Based on theoretical

studies we would have expected to find an aging

ERP base and a flourishing e-business market,

which, however could not be detected in the study.

ERP is the pervasive infrastructure because it is

so widely adopted. Based on the high percentage of

adopters and based on the non-adopters’ accounts

we conclude that ERP as a technology is a

prerequisite to run any business, and that it should

be considered an infrastructure rather than a new

technology. Therefore it will be interesting to

explore how the adopters have implemented and

developed their capabilities based on ERP.

However, it can not be concluded that the businesses

have developed streamlined, internal logistics

processes just because they’ve adopted ERP.

ERP is a contemporary technology because the

installed base is renewed. Based on the average age

of the systems (2.8 years), it is concluded that the

ERP technology now follows the normal IT

lifecycle. There are differences, however: the in-

house developed ERP systems are still to be

considered a legacy technology. The overall

conclusion is that the latest releases and technologies

are available to in the enterprises and is waiting to

be used. However it cannot be concluded that the

advanced collaborative supply chain functions have

been adopted and deployed.

ERP adoption is stable, because the market is

consolidated. Based on the adoption level, the

vendors’ market shares and the average systems’

age, it is concluded that the ERP market has

matured. Indications are that we end up with one

(SAP), maybe two or three major vendors, a handful

of global vendors, and a small number of vendors

specializing in specific industries or countries. A

similar pattern was found among the systems

suppliers and implementation consultants. This was

further reinforced by the fact that on average ERP

investments are below 1 per cent of the revenue.

However, it can not be concluded that the ERP

market is no longer innovative.

ERP adoption is converging towards a dominant

design due to the facts mentioned above. Only 13.6

per cent of the companies use more than one ERP

vendor. This indicates that the businesses pursue a

“single-vendor” strategy rather than a “best-of-

breed” strategy. Consequently, the new ERP II

functions are provided by the major vendors’

systems, and add-on modules or third part bolt-on

systems may only have a limited scope. This may

imply that supply chain planning will be dominated

by, e.g. SAP APO (Advanced Planning and

Optimization) modules, and consequently that the

reference models provided by the major vendors will

be the future supply chain templates. This might

imply that the variety in the applied logistics

concepts is reduced to the standards defined by the

major vendors. However, it can not be concluded

that inter-organizational integration will be much

easier with enterprises using the same platforms.

The general conclusions of the survey is that

large companies now have a common platform

based on the large vendors (in particular SAP) and

that the platform is kept up to date with the most

recent release. This conclusion conforms to the

experiences from the described cases. The survey

also supports the “continuity view” put forward by

Markus, Petrie and Axline (M. Lynne Markus,

Petrie, & Axline, 2000) who present a

complementary “discontinuity view” deemphasizing

ERP.

3 IMPACT OF ENTERPRISE

SYSTEMS IMPLEMENTATION

ERP enables close cooperation among supply chain

partners facilitating supplier-customer interactions

and minimizing transaction costs (Tarn, Yen, &

Beaumont, 2002). However, there is a risk of ERP

actually hampering progress in SCM (Akkermans,

Bogerd, Yücesan, & van Wassenhove, 2003).

Nonetheless, it is becoming clear that the greatest

impact of, and payback from, ES is in SCM

(Davenport, Harris, & Cantrell, 2004).

ERP researchers recognize the time-gap between

impact and effect (Shang & Seddon, 2002). The

benefits from ES implementation are best

understood in a lifecycle perspective. Several

authors applied a lifecycle view on ERP

implementation (Rosemann, 2003). The proposed

lifecycle models (Bancroft, Seip, & Sprengel, 1997;

ICEIS 2006 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

M. Lynne Markus & Tanis, 2000; Ross & Vitale,

2001) all emphasize the pre-implementation phase,

have less details on the post-implementation phase

and almost nothing on the use of ES. Ross and

Vitale (2000) describe an ERP journey as a

prisoner’s escape. The stages in the ERP journey are

(1) design, (2) implementation, (3) stabilization, (4)

continuous improvement, and (5) transformation.

The last stages: continuous improvement and

transformation are sometimes referred to as second

wave or the post-implementation stages. It is in the

post-implementation stages we find the impact of

ERP in the supply chain.

For many reasons most ERP research is

concentrated on implementation issues. An overview

of ES-related research showed that about 30 per cent

of publications deal with implementation issues

(Klaus, Rosemann, & Gable, 2000).

In a recent book on ERP (Rikhardsson, Møller,

& Kræmmergaard, 2004) the ERP journey of seven

organizations was analyzed. These organizations all

implemented their ES around year 2000, and they

are now evaluating the impact. In the following their

experiences are summarized.

3.1 Cases

Lego Company is the well-known toy manufacturer.

Before launching their ERP project Lego had a large

number of legacy systems throughout their supply

chain. The ERP project was accelerated due to poor

financial results of 2000. One of the reasons was the

inability of the existing supply chain to adapt to

market demands. The major part of Lego’s annual

sale to consumers takes place at Christmas. With the

existing supply chain set-up, Lego was unable to

respond to market dynamics. During 2000 a large-

scale project aimed at replacing the existing systems

with a custombuilt ERP system based on

standardized global processes and Oracle was

introduced. By the end of 2000 the project was

abandoned and replaced with a new project based on

standard SAP. This project was concluded

successfully in 2001 with a new ERP platform called

LEGO Light. This project was followed by a number

of second wave projects aimed at improving process

effectiveness. Lego top-management has highlighted

ERP with an IT and process-governance structure,

which include sourcing considerations. The new

projects are driven by the people from the ERP

implementation team by with an emphasis on the

combination of process development and IT.

The municipality of Copenhagen (KK) is one of

the largest organizations in Denmark with 43.000

employees (FTE). KK implemented Oracle almost

ten years ago. The first wave was oriented primarily

towards the back-office function of financial control.

In 2001 KK initiated a second-wave project aimed at

e-procurement and project management, among

other things. One of the challenges was that these

projects touched on the more marginal actors in the

supply chain. For instance actors like small day-care

centres and their suppliers, who previously acted

independently from KK, were now included in the

scope of the ES. KK approached this project by

setting up a team focused on process development –

not as an IT implementation project. Consequently

the change was managed as a learning process, but

following the standardized new ES processes. This

enabled KK not only to implement the new modules

but also to unleash the energy of new ideas for

improvement.

Martin Professional develops and manufactures

intelligent lighting for the entertainment and

architectural markets. The founder of Martin, a

charismatic entrepreneur was replaced by

professional management in 1999 when the success

and growth was about to choke the company. Since

the existing legacy systems (very rudimentary

systems) could not cope with Y2K, an ambitious

plan for implementing a new ERP platform based on

Baan was launched in 90 days. With some disruption

the ERP system was in place throughout the group

by the end of 2001 when Martin started their venture

into second generation projects. This, of course,

included new modules but also a lot of different

“best-of-breed” systems, like Business Intelligence

(BI), Supply Chain Management (SCM) and many

others. It also included the implementation of a

different ERP platform (Axapta) in the sales

companies forcing Martin to reconsider and unify

their ES architecture. One of the problems is

integration issues when deploying more platforms.

Dell took a different approach to integration in

the supply chain. Dell set out early in the nineties

with an ambitious SAP project. In the mid-nineties

Dell abandoned the ERP path after some heavy

investments resulting only in a functional HR

system. Dell developed a new strategy called G2

where they specified the architecture of the ES in

Dell’s supply chain. The essence of this architecture

is an ES based on Enterprise Application

Integration. The outcome of this strategy is Dell’s

ability to rapidly deploy new business models and

closely coordinate and integrate with partners in the

supply chain.

Hydro Automotive Structure (HAS) is a first-tier

supplier in the automotive supply chain. HAS is part

of the Hydro Group; they develop and manufacture

aluminium components for the automotive industry.

As a supplier HAS have limited influence on the

business model and must conform to the

ENTERPRISE SYSTEMS MANAGEMENT AND INNOVATION - Impact on the Research Agenda

requirements of the dominating actors. In 1999 HAS

replaced an old industry-specific system and was

facing a group policy on SAP as a preferred vendor.

Due to the cost and resource requirements of a SAP

project, HAS selected Axapta from Microsoft

Business Solutions and a small local consulting

company to run the implementation. After a long-

winded implementation process, the system was

operative in 2000 and HAS started their quest for

process improvements. Today they have developed a

high-performing, integrated supply chain and they

are, for example, able to track and trace every piece

of material. A lot of the process improvements are

actually not a result of the ERP system (e.g.

KANBAN) but HAS are convinced that the ERP

system has provided the platform for the

improvements.

Bang & Olufsen (B&O) is a manufacturer of

high-end audio/video equipment for the consumer

market. B&O has been through a long phase of

process improvements due to a near-fatal financial

situation in the eighties. This includes outsourcing a

high number of activities and therefore B&O depend

quite heavily on their supply network and have

developed exceptional partnerships with suppliers

and customers over the years supported by in-house

developed IT systems. Y2K made B&O decide to

replace their customized legacy system with SAP.

The implementation of the finance and HR modules

went very well but logistics and production planning

presented considerable problems. B&O developed

“Mass-Customization”-inspired processes for

manufacturing customer-unique products, and the

implementation of SAP would jeopardize this

process. When B&O had to make a stock

announcement on an expected loss due to problems

with SAP, they got SAP’s full attention leading to

the development of a B&O solution which later

became part of the standard system. Today B&O is a

happy SAP user seeing it as a strategic platform for

B&O’s development. Recently they have started

integrating the supply chain planning further by

using the APO (Advanced Planning and Optimizer)

module.

Fritz Hansen (FH) is a manufacturer of exclusive

design furniture. The furniture includes designs from

architects such as Arne Jacobsen and Piet Hein. FH

has used Movex, an ERP system from Intentia, since

1993; in 2000 they decided to upgrade their systems.

FH used to be a traditional furniture manufacturer

but due to the success of designer furniture they

were forced to outsource a number of activities. Also

they put an emphasis on demand management.

Consequently supply chain coordination was high on

the agenda, and modules like product configuration

and supplier management were critical to FH. FH’s

ES ended up as a combination of an ERP system, a

CRM (Customer Relationship Management) system

and a data warehouse. As a consequence of the new

ES platform FH has been transformed from a

traditional manufacturing company to a

decentralized, process-oriented organization where

collaboration takes place across the entire supply

chain. In particular the use of smaller suppliers to

create flexibility is mainly a result the ERP platform.

3.2 Lessons Learned

The cases are alike in the sense that the motivation

for introducing ERP was almost identical. Y2K

combined with a need for a common platform drove

management to move into ERP. Also the expected

benefits from ERP conform to Ross and Vitale’s

motivations for ERP(Ross & Vitale, 2001). The

cases also report on serious stabilization issues, for

some organizations it was measured in years, but the

cases render interesting insight into the post-

implementation stages.

The research literature on implementation e.g.

Ross and Vitale(Ross & Vitale, 2001) has little

details on their “transformation stage” and none of

the companies in their study felt that they had yet

transformed themselves. In a workshop for logistics

managers in large Danish enterprises the relationship

between ERP and SCM was emphasized(Sørensen,

2002). The observations were quite similar to those

in a Dutch Delphi study(Akkermans, Bogerd,

Yücesan, & van Wassenhove, 2003). The managers

responsible for the supply chain pointed out that

although the ERP systems were the key to future

supply chain developments the inherent inflexibility

of ERP was also a major roadblock for SCM

initiatives.

The organizations’ general reflection was that

the second-wave projects were oriented towards

process improvements, and therefore the

organizational dimension is emphasized. A second

observation is that the second-wave project took the

organizations places they never intended to go. The

second generation projects were aimed at the supply

chain but the new ES suddenly opened roads that the

organizations initially did not consider. Their new

ERP systems became instrumental in this change.

This suggests a more subtle relationship between

the business, the enterprise systems, and the supply

chain processes, where the enterprise system holds

the potential to leverage (or to destroy) business

opportunities. Consequently, the time is now ripe for

a new management perspective on enterprise

systems.

ICEIS 2006 - DATABASES AND INFORMATION SYSTEMS INTEGRATION

4 IMPLICATIONS FOR

MANAGING ENTERPRISE

SYSTEMS

Enterprise systems are under constant development.

Current ERP systems reflect fifty years of

aggregated business requirements and innovations.

Future ES, ERP II or whatever they evolve into, will

continue this evolution. Consequently the

contemporary standard systems from one of the

major vendors will include extended functions for

integration supply chain processes. Based on the

retrospective analysis it is also feasible that future

critical requirements will be provided in the standard

systems and thus will be made available to existing

users as a part of normal upgrades.

Based on the survey data it can be concluded that

large enterprises have the most recent ES from the

major vendors. Also the age profile of the

installations can lead to the conclusion that ES is a

technology that is kept up-to-date with the most

recent release. Then it is feasible to deduce that the

overall ES architecture is determined by the

architects of the major vendors.

The case studies exemplify the impact of ES

architecture on the supply chain. The cases all

illustrate the staged development approach. A few

years after the initial ERP implementation effort,

when the ERP infrastructure is in place, the focus of

the development extends into the supply chain. The

driver of this change is effectiveness in the supply

chain, which is very specific to the organizations,

but information-based collaboration is central to all

the cases.

These arguments suggest that many

organizations are facing transformation triggered by

ES adoption. This transformation is a new kind of IT

diffusion process based on standardized ES and

“best-practice” processes. Until now, mainstream

ERP research has mainly focused on isolated issues

in this transformation. The new diffusion process

goes beyond the traditional system lifecycle

thinking, and the implementation phase is just an

intermezzo in the transformation. What is proposed

here is that the enterprise transformation is

considered in relation to the ERP market and the

evolution of ES.

The implications of the ES transformation for

practice are enormous. If the technology and

processes acquired by the ES impact the supply

chain, managing the transformation is of strategic

importance. This paper therefore proposes a new

area of management, Enterprise Systems

Management and Innovation. Except during

implementation, IT and ERP is not considered top

management issues, and supply chain development

is considered logistics and operations management

responsibility. This paper suggests that SCM and

ERP are to be considered in tandem. Enterprise

Systems Management and Innovation is a new

challenge and an issue that needs to be brought to

the attention of top management.

Another issue is ES as a source of process

innovation. Before acquiring an ERP system, an

organization typically spends a good deal of

resources in evaluating the suitability of the standard

processes of the system and the strategic match.

What happens after a few years? The new releases

are accepted more or less as a routine or based on

operational criteria. Who is responsible for the

strategic evaluation of the new features, and who

initiates a decision to discontinue an ES? This

should be the challenge of the Enterprise Systems

Manager.

5 CONCLUSION

The paper proposed that ES implementation based

on standardized ES and “best-practice” processes

lead to a new management challenge: Enterprise

Systems Management and Innovation. The argument

is rooted in seven case studies, a survey on ERP

adoption and a retrospective analysis on the

development of ES. The paper discussed the

emerging issues and the implications for

management.

Having reviewed the ERP research literature

little support for this new challenge has been found,

and we propose that ES management and innovation

is explored and put on the research agenda.

This paper contributes to ERP research by

exhibiting the importance of ERP management. The

paper draws a direct line from the achieved benefit

in the supply chain, second-wave ERP projects to

ERP implementation and to ES development.

Consequently ERP can be considered a source of

innovation in the supply chain.

The research implies that the ERP industry itself

is to be considered an object for further research.

The ERP industry contributes significantly to the

value chain and to ES transformation of the

enterprises.

ERP research has not dealt explicitly with this

diffusion process. Many authors have dealt with

ERP implementation, a few authors have dealt with

the ERP journey, but no one has considered the ES

transformation process in all entire aspects. Many

enterprises are now organizing their ERP activities

towards second-wave projects. This will present

many new practical challenges as well as research

ENTERPRISE SYSTEMS MANAGEMENT AND INNOVATION - Impact on the Research Agenda

challenges. In future managers must be prepared to

manage ES – or the large vendors will set the agenda

for them.

REFERENCES

Akkermans, H. A., Bogerd, P., Yücesan, E., & van

Wassenhove, L. N. (2003). The impact of ERP on

supply chain management: Exploratory findings from a

European Delphi study. European Journal of

Operational Research, 146(2), 284-310.

Bancroft, N. H., Seip, H., & Sprengel, A. (1997).

Implementing SAP R/3: How to introduce a large

system into a large organization. Greenwich: Manning.

Bond, B., Genovese, Y., Miklovic, D., Wood, N.,

Zrimsek, B., & Rayner, N. (2000). ERP is dead - Long

Live ERP II (No. Strategic Planning SPA-12-0420):

GartnerGroup.

Calloway, E. (2000). ERP-The Next Generation: ERP is

WEB Enabled for E-business. South Carolina:

Computer Technology Research Corporation.

Chen, I. J. (2001). Planning for ERP systems: Analysis

and future trend. Business Process Management

Journal, 7(5), 374-386.

Davenport, T. H., & Brooks, J. D. (2004). Enterprise

systems and the supply chain. Journal of Enterprise

Information management, 17(1), 8-19.

Davenport, T. H., Harris, J. G., & Cantrell, S. (2004).

Enterprise systems and ongoing process change.

Business Process Management Journal, 10(1), 16-26.

Dumas, M., Aalst, W. M. P. v. d., & Hofstede, A. H. M. t.

(2005). Process-Aware Information Systems: Bridging

People and Software through Process Technology:

John Wiley & Sons Inc.

Harrell, H. W., Higgins, L., & Ludwig, S. E. (2001).

Expanding ERP Application Software: Buy, Lease,

Outsource, or Write Your Own? Journal of Corporate

Accounting & Finance, 12(5), 37-43.

Klaus, H., Rosemann, M., & Gable, G. G. (2000). What is

ERP? Information Systems Frontiers, 2(2), 141-162.

Mabert, V. A., Soni, A., & Venkataramanan, M. A.

(2001). Enterprise resource planning: common myths

versus evolving reality. Business Horizons, 44(3), 69-

76.

Markus, M. L., Petrie, D., & Axline, S. (2000). Bucking

the Trends: What the Future May Hold for ERP

Packages. Information Systems Frontier; special issue

of on The Future of Enterprise Resource Planning

Systems, 2(2), 181-193.

Markus, M. L., & Tanis, C. (2000). The Enterprise

Systems Experience-From Adoption to Success. In R.

W. Zmud (Ed.), Framing the Domains of IT Research:

Glimpsing the Future Through the Past (pp. 173-207).

Cincinnati, OH: Pinnaflex Educational Resources, Inc.

Møller, C. (2005). ERP II: a conceptual framework for

next-generation enterprise systems? Journal of

Enterprise Information Management, 18(4), 483-497.

Møller, C. (2005). Unleashing the Potential of SCM:

Adoption of ERP in Large Danish Enterprises.

International Journal of Enterprise Information

Systems, 1(1), 39-52.

Nah, F. F.-H. (Ed.). (2002). Enterprise Resource Planning

Solutions and Management. Hershey, PA: IRM Press.

Rikhardsson, P., Møller, C., & Kræmmergaard, P. (2004).

ERP Enterprise Ressource Planning - Danske

erfaringer med Implementering og anvendelse.

København: Børsen Bøger.

Rosemann, M. (2003). Enterprise System Management

with Reference Process Models. In G. Shanks, P. B.

Seddon & L. P. Willcocks (Eds.), Second-Wave

Enterprise Resource Planning Systems: Implementing

for Effectiveness: Cambridge University Press.

Ross, J., & Vitale, M. (2001). The ERP Revolution:

Surviving Vs. Thriving. information Systems Frontier,

2(2), 231-241.

Shang, S., & Seddon, P. B. (2002). Assessing and

Managing the Benefits of Enterprise Systems: the

Business Manager's Perspective. Information Systems

Journal, 30(1), 38-46.

Shanks, G., Seddon, P. B., & Willcocks, L. P. (Eds.).

(2003). Second-Wave Enterprise Resource Planning

Systems: Implementing for Effectiveness. Cambridge:

Cambridge University Press.

Sørensen, M. (2002). Trends og tendenser for fremtidens

forsyningskæder. Aalborg: Center for Industrial

Production, Aalborg University.

Tarn, J. M., Yen, D. C., & Beaumont, M. (2002).

Exploring the rationales for ERP and SCM integration.

Industrial Management + Data Systems, 102(1/2), 26-

34.

Themistocleous, M., Irani, Z., & Keefe, R. M. O. (2001).

ERP and application integration. Business Process

Management Journal, 7(3), 195-204.

Weston, E. C. T. (2003). ERP II: The extended enterprise

system. Business Horizons, 46(November/December),

49-55.

Willis, T. H., & Willis-Brown, A. H. (2002). Extending

the value of ERP. Industrial Management + Data

Systems, 102(1/2), 35-38.

Wortmann, J. C. (1998). Evolution of ERP systems. In U.

S. Bititchi & A. S. Carrie (Eds.), Strategic

Management of the Manufacturing Value Chain.

Amsterdam: Kluwer Academic Publishers.

Wortmann, J. C., Hegges, H. M. H., & Rolfes, S. (2000).

Embedding enterprise software in extended enterprise

models. Computers in Industry, 42, 231-243.

ICEIS 2006 - DATABASES AND INFORMATION SYSTEMS INTEGRATION