Decision Making for ERP Investments from the Perspective of Organizational Impact -Preliminary Results from an Empirical Study

This study addresses the complex relationship between decision making for ERP investments and the consideration of organizational impact under 2 different perspectives: Enterprise Resource Planning (ERP) system decisions in organizations with Business Process Improvement (BPI) in particular Business Process Reengineering (BPR) efforts and ERP decisions without BPI/BPR efforts. On the basis of a questionnaire sent to 813 austrian middle und large scale organizations, this paper shows that companies have weighted the inquired decision aspects very differently. ERP decisions are frequently made without a complete consideration and evaluation of all inquired aspects. Furthermore mainly standard financial measures have been used to support the decision. We propose that ERP decision making models can be based on the concept of bounded rationality and satisficing. Conceptual Background An Enterprise Resource Planning (ERP) system is an organizational and management solution based on information technology towards challenges and problems in the business environment (Laudon et al. 1998). The power and potential of such systems need to be understood from the business perspective in order to choose the most appropriate ERP solution. This is a semistructured decision problem because only part of the problem can be handled by a definite or accepted procedure such as standard investment calculations and on the other hand the decision maker needs to judge and evaluate all relevant (and intangible) business impact aspects. There is no agreed-upon and formal procedure for this important task (Laudon et al. 1998; Hecht 1997). Nevertheless the corresponding decisions strongly influence long-term business success. This paper investigates, i) how managers in Austrian middle and large scale businesses have weighted the inquired aspects of this decision problem, ii) what the most important aspects concerning organizational impact for these decision makers were, and iii) to what degree process characteristics in the case of a supplementary Business Process Improvement (BPI) initiative have been considered. We attempt to answer the questions i) and ii) under 2 different perspectives: ERP investments in organizations with Business Process Improvement in particular Business Process Reengineering (BPR) efforts and ERP investments without BPI/BPR efforts. In order to maximize the benefits of ERP investments the supplementary redesign of business processes promises the highest ROI but also increases the level of complexity, risk and costs especially in the implementation stage of any ERP system (Kirchmer 1998). For this reason the combination of ERP and BPI/BPR initiatives intensifies the problem to meet all necessary requirements, i.e. considering and evaluating all important aspects imposed by the environment of the organization.