Benefits and Value of Investments in Information Systems: The Case of Enterprise Resource Planning (ERP) Systems in the Hospitality Industry

Benefits and Value of Investments in Information Systems: The Case of Enterprise Resource Planning (ERP) Systems in the Hospitality Industry

Paula Serdeira Azevedo (University of Algarve, Portugal), Carlos Azevedo (University of Algarve, Portugal) and Mário Romão (University of Lisbon, Portugal)
DOI: 10.4018/978-1-5225-1054-3.ch011
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Abstract

Organisations constantly have to address the problem of identifying tangible and intangible benefits that can be achieved in result of investments made in Information Systems/Information Technology (IS/IT). This paper has the objective of approaching the problem in the perspective and context of Enterprise Resource Planning (ERP) systems in the Hospitality Industry. It focuses on implementation project strategies, namely in the particular and relevant aspects of their return on investment as well as benefits expected and delivered. When an organisation is confronted with the question of knowing if a certain investment in IS/IT may obtain a considered positive financial revenue, and if that investment means valuable benefits for the business, the answer is often far from being conclusive. Projects are often implemented on-time, on-budget and are technically appropriate, nevertheless the expected benefits are not achieved. This paper seeks to answer these questions in the context of ERP systems, in particular in the sector of hospitality industry, through a case study developed in Portugal. The investigation was developed on a group of hotel units, held by a Portuguese company, for which ERP meant an opportunity to harmonize and improve business processes.
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Introduction

Organizations have sometimes serious doubts about a conclusive answer, when asked for the benefits of IS/IT investments, namely: does it have a positive ROI (Return On Investments) or how will the business benefit from those investments?

Although many IS/IT projects (but not limited to this area, we can feel the same problem on other areas such as infrastructures, construction, urban projects, among others) are criticized for not achieving their goals, promises, budget and schedule, many others are often implemented within the expected time frame and budget, and are technically adequate, but nevertheless the expected benefits are not achieved.

One of the objectives of the chapter is to draw attention to this fact, normally absent in project evaluation.

Enterprise Resource Planning (ERP) systems are packages of software:

  • Oriented for the organization as a whole,

  • Claiming for the benefits of a holistic approach,

  • Integration of data and processes,

  • Dramatic improvement of valuable information,

  • Reporting and finally an alignment with business strategy, dissolving the barriers of technology towards simple and efficient business processes.

In the case of ERP systems, the projects expand through the whole organization, even to customers and suppliers sometimes, and as such they have wider goals than traditional IS/IT projects focused on smaller areas of the organization´s value chain. Normally, ERP projects create expectations resulting from:

  • 1.

    Discontinued processes,

  • 2.

    Process improvement, or

  • 3.

    New processes.

In other words, the context in which investments of this kind are made may be oriented towards existing tasks or innovative ones.

This chapter deals with these matters, in the context of an investigation developed on a group of hotel units, held by a Portuguese corporation, to which ERP meant an opportunity to harmonize and improve business processes.

The Application Portfolio technique used in the investigation (and described later in this chapter) focus on the view the organization has on their strategy towards IS/IT systems and in what degree they are aligned (or are not aligned at all) to business strategy.

The other contribution of this chapter is the identification of directions to evaluate how the organization obtains value from their IS/IT investments, with particular emphasis in the case they are using ERP systems.

The chapter also refers to future directions in similar research projects.

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Erp Systems In The Hospitality Industry

The modifications offered by the impulse of technologies, forces the change in the way business is conducted in the hospitality industry. IS/IT in the hospitality industry must provide the required flexibility and efficiency by facilitating the understanding of customer needs and adapt consequently (Beldona, Cai, & Pearson, 2001).

ERP Systems emerged as a way to automate repetitive processes and provide managers with a global vision and real-time all operations, solving the problems of disintegration and fragmentation of information (Beldona, Cai, & Pearson, 2001). The problem of fragmentation of information is felt, as in other activities, within the hospitality industry (Heart, Pliskin, Schectman, & Reichel, 2001).In this industry, ERP Systems have a particular relevance for the diversity of applications and specific systems for various functions. The predominance of legacy systems, of difficult upgrading, maintenance and incompatibility, makes its updating more complex (Beldona, Cai, & Pearson, 2001).

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