In this chapter the authors focus on the iterative process that occurs within the implementation phase of an ERP which they depict as a series of learning cycles: managers make decisions, identify mistakes, and accumulate experience (lessons learned). They examine these “learning cycles” through the lens of absorptive capacity and they use a case study and a qualitative perspective. The authors identify a number of tradeoffs that represent the learning paths of Alpha Co. and find that such learning process is path dependent, organizational memory plays a fundamental role, and double loop cycles contribute in the development of absorptive capacity seen as a dynamic capability.
TopIntroduction
According to Markus, Tanis, and Fenema (2000) Enterprise Resource Planning (ERP) systems are based on developing a common IT infrastructure and common business processes that will support the integration of an entire business activity. Use of ERP has spread rapidly since the late 1990s –and especially in large organizations where the need for efficiency and effectiveness of processes is crucial.
Practically, ERP systems are packaged software that has been developed and licensed out to clients. ERP systems typically have built-in standardized functionalities that allow organizations to integrate disparate data (Davenport, 2000; Cortada, 1998). Examples of popular application packages and their developers are SAP, Oracle, PeopleSoft, and JD Edwards (Jacobs and Weston Jr., 2007).
The main reason for the popularity of ERP systems is that they are perceived to improve both productivity and speed (Davenport, 1998). Their successful incorporation potentially brings huge economic benefits to firms, such as reduced cycle times, faster transactions, better financial management, and a foundation for the implementation of e-commerce, knowledge documentation, etc. (Davenport, 2000). While potentially ERP systems can help to improve organizational performance, many firms are unable to fully exploit this potential and realize all the benefits (Stein, 1998). In this chapter we focus on some of the problems that can arise in the implementation (for the first time) of an ERP system in a large organization.
Much of the research advocates ERP implementation as a sequence of linear phases, beginning with preparation and ending with actual deployment or “going -live”. This linear view is based on traditional innovation diffusion theory (Cooper and Zmud, 1990) that sees ERP implementation as part of the organizational effort to diffuse ERP innovation throughout a user community. Markus et al. (2000) introduce a process view of ERP implementation, which includes a maintenance phase that captures the “onward and upwards” efforts of users as they learn to exploit the ERP system to support their work once the package is implemented. Our definition of the implementation phase is consistent with Markus et al. (2000) as is our adoption of a process perspective of the implementation phase, that is, as an iterative rather than a linear process (Elbanna, 2006). In highlighting some of the problems than can arise during this process, we use a case study (Alpha Co.) approach and focus on a particular ERP system, that is, Customer Relationship Management (CRM). CRM systems are defined as ERP modules that specialize in capturing, integrating, managing, and analyzing customer data, such as how and when a particular customer interacted with the organization –the “who, what, when and how” of this interaction (Gefen and Ridings, 2002). CRM systems integrate and synthesize a broad array of activities related to customer services, sales, and marketing (Mankoff, 2001). Combining these activities into a single seamless interaction gives organizations a strategic tool to maintain and improve their customer relationships through customized integrated services (Davids, 1999). Like other ERP systems, CRM systems often involve prolonged and difficult phases of system design, development, implementation, and post implementation.