Understanding the Impact of ERP Standardization on Business Process Performance

International Journal of Business, Spring 2009 by Chtioui, Tawhid

ABSTRACT

Enterprise Resource Planning (ERP) systems have currently become tools that enable organizations to standardize business processes. They offer rich functionalities based on best practices. The purpose of this chapter is to study the impact of this standardization on organizations with reference to the different theoretical hypotheses linked to the relation Information Technology / organizational change and according to four firm's cases (Airports of Paris, Pechiney, France Telecom and L'or�al).

JEL classification: M49

Keywords: Business processes; Enterprise resource planning; Standardization; Organizational change

I. INTRODUCTION

Enterprise Resources Planning (ERP) is currently a great success with companies and its implementation has entailed remodelling management information systems (MIS), and above all, reconsidering management procedures within the organization. Henceforth, ERP systems are now tools that enable companies and multinationals to standardize their management processes. They offer rich and proven functionalities, based on best practices. Thus, most global companies are already equipped with ERP systems1 and more and more medium-sized companies are trying to build up unified information system based on this software package. �ERP meet the requirements of universality: that everyone should work in his own language and understand each other� (Mourlon & Neyer, 2002).

The introduction of ERP systems in organizations then induces a standardization of management processes that has been called for by organizations to help them lay the foundations of an international system and assist them with their globalization strategy.

However, this standardization of organizational cultures can fail to produce the expected results. "The implementation of ERP aims to change the organization but this process can prove risky" (Besson, 1999). So, then what are the effects of this standardization induced by ERP-Systems on organizations?

To answer this question, we conduct an empirical study in four firm's cases (Airports of Paris, Pechiney, France Telecom and Lor�al).

After attempting to illustrate and define the ERP concept, this chapter shows the standardization potential of this tool. It then presents the effects of this standardization in accordance with the different theoretical approaches to the relation information and communication technologies versus organizational change.

II. THE ERP CONCEPT

Nowadays, ERP systems appear to have made their mark and become the standard for company information systems. Historically, company functional systems were developed on different equipment with different methodologies: realizations were thus generally heterogeneous both in terms of data representation and processing modes. This entailed many communication problems and some difficulties to control processing operations. Thus, the concept of ERP appeared in the form of integrated software packages whose purpose was to improve global coherence while contriving some form of modularity. It is thus an information system composed of standard functional modules directly linked to a single data base and that covers all the company's processes. Moreover, an ERP system is more often than not a solution with an international dimension, capable of managing multilegislation, multilingual, and multicurrency contexts. Information feedback from the subsidiaries of a group, which are in different countries, has become possible. This is a major advantage in a globalization context since legal and linguistic environments are structuring levers for companies.

In parallel, other software packages have been developed to complement ERP to improve certain low performance functions or to add new ones. Most of these applications concern decision support: the whole system is then called SO-ERP or System Organized around an ERP.

In spite of the diversity of ERP systems offered on the market, the architecture and the functioning of these software packages are similar. They are organized in modules, each module covering one of the major functions of the company, including the data processing for the different management processes involved2. The accountancy or the financial modules often form the core around which the other modules are organized.

III. ERP AND STANDARDIZATION

The characteristics described below, have led corporations and multinational groups to consider ERP as tool that standardize processes within their organizations. Indeed these tools meet the requirements of local regulations (accounting plan, legal statements and multilingual management). ERP systems have thus enabled multinationals to lay the foundations of an international system, and support their globalization strategy.

A. The Evolution of Standardization in Organizations

The basic purpose of standardization is to achieve the most efficient use of resources. The most important resources being the employees, standardization has always focused on the best use of human resources. Adam Smith mentions work standardization in his book "A guide to the wealth of nations". The next great step came with Taylor's research, in which he talked about standardizing all types of work. Eventually, as work became more and more complicated, people were trained to perform specific tasks. This was the beginning of the era of professionalism: it meant standardizing people. Nowadays, with the development of economic activity, increasingly large companies and the modernization of management methods, we are witnessing the standardization of organizations.