Relationships Between ERP and Business Intelligence: An Empirical Research on Two Different Upgrade Approaches C.Caserio1 Abstract Many studies acknowledge the growing role of Business Intelligence Systems (BIS) deployment in supporting business decision-making processes. This development involves both transactional systems, such as the implementation of ERP, and BI models, as well as reporting tools, business analytics, and data miming. The hypothesis is that the decision making process depends on the quality of all the links before the BIS implementation, such as the ERP implementation and upgrade, the organization of the business data, the deep awareness of the business, the desired level of BIS to implement and upgrade (i.e. reporting, predictive analysis, data mining, and so forth). The aim of the research is to evaluate the main reasons that drive companies to implement and upgrade ERP and BIS, in light of potential relationships among them. A comparative case study, made for the purpose of this research, shows two different approaches to ERP/BIS. At the end, some considerations about them are discussed.
Introduction We define the upgrade as an addition, modification, review, customization or improvement made to the system. Generally, the implementation is a very large investment, but some authors consider the upgrade as the most important stage of post-implementation which should allow companies to obtain advantages from an ERP [1, 2]. In general, an ERP upgrade is mainly intended to take advantage of new technologies and strategies to allow companies to keep up with the latest business development trends. In this sense, once a company chooses to implement an ERP, it implements also a BIS to examine the data stored and to obtain an effective decisional support.
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Carlo Caserio is research fellow at University of Pisa. E-mail:
[email protected]
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Literature Review The ERP and BIS implementation and upgrade are embedded into the wider field of IT implementation [3] and IS change [4]. Because of the rapid change of IT, its implementation and upgrade need to be planned and selected [5, 6]. Many studies have been conducted in order to evaluate the role of the IT in supporting decisions [7], and the communication process inside the companies, evolving the concept of DSS from an individual decision support system (IDSS) to an organizational decision support system (ODSS) [8] and a group decision support system (GDSS) [9]. With regard to the upgrade concept, some authors affirm that it is either a choice depending on the needs perceived by a company [10] or a periodical activity, according to the availability of new version of vendors’ products [2]. With reference to the ERP upgrade, it is achieved to maintain an ongoing support from the ERP vendors, to solve any “bugs” or design weaknesses, and also to expand features [11]. Some empirical results show which are the critical factors for implementing and upgrading an ERP system [2, 10], and its impacts [12, 13, 14]. An ERP can be even considered as a sort of ODSS because the adopters perceive an appreciable level of decision support characteristics in their ERP systems [15], also called enterprise decision support [16]. Regarding relationships between BIS and ERP, the investment in BI is considered as an incremental cost to release the potential of the data stored in an ERP [17, 18] and an evolving process along the “BI chain” [19]. Thus, it is important to identify the relevant variables influencing implementation success [20]. Other studies demonstrate that the quality of the decisions depends on the quality of data produced by an ERP [21] and on the coherence between data architecture and business architecture [22]. The criticalness of data quality for these scopes has been also investigated by recent empirical studies [23]. Recently, several studies on the potentialities of BIS have been carried out. BIS has been observed under several perspectives: a) the capability to create knowledge warehouses for knowledge management [24]; b) the measure of the realized business value of a BI investment [25]; c) the possibility to collect and analyze information about competitors [26] and the capability to integrate and elaborate structured with unstructured data [27]; d) the different approach for the implementation [28] and the critical success factors [29] also referring to the use and user satisfaction [30]; e) the possibility to detect frauds and anomalies [31, 32]; f) the capability to improve business performance management [33].
Methodology The research methodology has been conducted through two different phases: at
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first, we have conducted telephonic and e-mail structured interviews on twenty medium-large size companies which have been using an ERP for at least three years, in order to investigate the causes that drove them to implement and upgrade an ERP, the problems they met, the advantages they obtained, since we consider ERP as a preliminary step for BIS implementation; after that, in order to conduct a more in-depth interview on the issues related to the relationships between ERP and BIS, the attention was focused on the two case studies which have been using BI for at least three years and both of them have already achieved at least one upgrade. About the first phase, the electronic interview is one of the methods used to conduct an analysis, because the quality of data gained is almost the same as responses produced through more traditional methods [34, 35, 36]. In the second phase, we have used the case study methodology because of its capability to furnish significant evidence [37] and even to support the proposal of theories [38]. The interviews have been held through unstructured questionnaires, through open questions concerning the reasons of implementation and upgrading of such systems, and the approach used. In holding interviews, we have tried to let emerge how the different implementation and upgrade approaches to ERP and BIS can influence each other.
Findings and discussion From the first investigation on the ERP, different reasons why companies implement ERP have emerged. The results are shown in table 1, sorted by the interviewee according to recognized priority regarding the same motivation. Table 1. Summary of the main reasons of implementation and upgrading of an ERP Opportunities better management of business complexity
Problems radical changes in job modalities
facing of integration needs (fusions, incorporations)
it is impossible to have different point of views by the individuals, because of the access limitations
facing of hyper-customization:
change resistances along with access limitations can lead to produce information with data out of the system
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to avoid to keep linked to specific skills of a few IT
traceability of the operations can reduce the quality of organization
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experts -
to avoid to lose integrity caused by the “forced” customizations
climate it is not always preferable put the possessing information into the system
empowering the data quality for the internal control and for the quality of the financial disclosure (also to begin listing procedure)
in some cases they know the existence of data or procedures anomalies, but they don’t want put them in evidence, especially if stakeholders are not so critical
obtaining advantages by SOA (Service Oriented Architecture) and empower the decisional processes
in regulated sectors, as the decisional power is even more low, there are more strong impacts on moral
Focusing the attention on the two selected case studies, two different approaches have emerged. In the first case (A) the company has defined at first the knowledge needs, such as analytical data and unstructured information, the KPI to monitor, the frequency of reporting, the addressee of each information, and after that, the ERP system and the structure of the data have been parameterized according to the BI models and definitions. In the second case (B) the ERP system, at first, and subsequently the BIS have been implemented. In both cases upgrades have been performed throughout the years but according to different criteria. Below, the results of the two in-depth interviews held with managers of both companies: - Case A: the aim of the upgrades was the higher quality desired for output models, meant as timeliness of decisional support and completeness degree of the information. The upgrades in progress are oriented toward the management of unstructured information but actually there is not a complete unstructured information system yet. The upgrades carried out are also seen like iterative checks about the availability of the most critical data, the integrity and structure of them, which is fundamental to create BI models that pursuit efficiency – less time-expensive – and efficacy aims. In contrast with the initial attention vested on the definition of BI models and tools, the upgrades seem to pay much attention to the alignment of ERP to the BI needs. In other words, the upgrade of BIS can also play a key role in the empowerment of the ERP. Indeed, the effect of the upgrades will be a higher integration of internal data. Actually, the results of the interviews show that there is no integration of structured and un-structured data (i.e., the e-mails, the “voice of the customers”, the web) which are elaborated through subjective interpretations. This happens as a result of the power that some managers attribute to the information they possess exclusively. This phenomena is strictly linked to the organizational culture and could cause informative distortions and agency
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costs [39]; - Case B: the preliminary implementation of an ERP system led individuals to pay attention to the integration of accounting data and to the introduction of standardized procedures. In this phase the company at first mapped the business processes, and then identified its core businesses. These are both success elements for a BIS implementation [29]. Hence, this phase apart from allowing the implementation of an ERP, has also been a key element for implementing the BIS. In fact, the implementation of an ERP has prepared the company, at technical and organizational levels, to implement the BIS. Obviously, this relationship has to be considered in light of the possible difficulties shown in table 1. In this case in particular we have observed a strong culture in sharing information. In fact, it is a “must” do to not hold information to the self but to share it in order to burden the BIS with all the decision-making responsibilities. - Pertaining to both Cases: the different approaches followed by the two companies may depend on the different organizational culture inside the company, which also affects the different approach to the sharing of information. Even though dashboards and scorecards are considered specific BI tools, it has been observed a wide recourse to the individual spreadsheet programs, that become almost exclusive for the variance analysis and the business simulations. This demonstrates that the unstructured information are invested to test scenario hypothesis and to develop a participative simulation activity, even if they are not ever shared. The massive use of spreadsheet is much probably due to its acceptability and adaptability for most of the business tasks [40].
Conclusions and limitations of the research The results of this research show two different approaches to the implementation and upgrading of ERP and BIS. According to the first case, it starts from the definition of standard BI output needs to obtain an efficacy decisional support, and after that it defines the coding of data and parameters which customize the ERP, making it able, as much as possible, to fit the decisional aims. Conversely, according to the second approach, it starts from a standard ERP implementation and then it builds a more customized BIS to analyze the data. Many studies mentioned above indicate that the upgrade is important at least as much as the implementation. In fact, it represents the effort of the company to align its business processes to the IT evolution, both for competing and for optimizing their timeliness and accuracy of decisions and for managing the internal complexity. It is not just a technical process. At first, the implementation
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of an ERP makes it necessary to individuate the business processes and the data characteristics; after that, it can be a starting basis for implementing a BIS. Therefore, an effective approach to BI, must pay attention to the structure of the data, because they are the basis of all the decisional support systems. Even if the BI can lead to a flexible, adaptable and customizable decision support system, it always depends on the pre-fixed structure of data. The upgrade of a BI solution consists in a feedback on its functionalities by users and in an answer from the vendors. Through this interaction, the upgrade involves both final outputs and data structure. This is, in effect, aligned with the studies on the adaptive and evolving character of BIS. Furthermore, it emerges that the need to implement or upgrade a BIS for a decisional support, could be another critical factor to consider when we want to implement or upgrade an ERP. In fact, if the implementation or upgrading process starts from the definition of BI models, the decisional support becomes a new stimulus for investing in an ERP upgrade. It is also true that if the implementation of an ERP encounters one of the difficulties shown in table 1, it is more probable that the negative effects will affect also the quality of BIS and, at the end, of the decisions. One of the most important role of BI upgrade could be the management of the increasing complexity through less complex BI solutions. In order to do this, it can be useful to build a conceptual model representing the entire picture of the several businesses, to recognize the decision makers and their needs; to recognize the data to be elaborated; to maintain a part of the technical structure, i.e., the spreadsheet programs, since they allow to integrate the evolved software with ad hoc models created by the manager. For future researches, comparing the two cases discussed with other business realities should enlarge the theme regarding the relationships between ERP and BIS, both with reference to the first step of the implementation (i.e., from standard ERP implementation to BIS definition, or from BI model definition to the ERP implementation), and referring to the different approach to BIS. The main limitation of this research concerns the in depth study of only two cases. It suggests caution in generalizing the findings but it can help managers to understand the relevance of their business-vision in this phase, and to approach the BIS according to their specific, contingency needs. In addition, even if the two analyzed approaches may appear a common issue, considering the wide recourse to BIS from companies and the many different ways they adapt ERP to BIS and viceversa, we could find out other different modalities to build a transactional and analytical system. Therefore, further investigations on these matters could let emerge new interesting realities.
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