Identifying Four Key Means of Business Value Creation using Enterprise Systems: An Empirical Study

ABSTRACT Enterprise Systems (ES) is increasingly becoming the choice of IT platform for most large organizations in the world. As a result, the potential of such systems to create more business value is of key interest to both industry and academia. The aim of this study is to identify the key means of business value creation that Enterprise Systems can enable. The contribution of this paper is that it identifies and proposes four key means by which Enterprise Systems can create business value: (a) Operational Efficiency (b) Mergers and Acquisitions, (c) Innovation (in product and process), (d) Strategic Decision Making. This paper empirically tests and reports evidence of support for these propositions with empirical data from 100 success cases. This study paves way for further research to explore each of the four means to understand the mechanism of 'how' the value can be created along each of those four means. Also, another area of investigation is whether Enterprise Systems can enable business value creation through any other means, not mentioned in this paper. Keywords: Business value creation, enterprise systems, value creation INTRODUCTION Information Technology has become an integral and indispensable part of the world of business and commerce. In the past few decades, a variant of such technology, called 'Enterprise Systems', has become widely popular with large Australian and multinational organizations, and increasingly so with small to medium-scale businesses. Enterprise Systems (ES) can be defined as large-scale, packaged, application software systems that can be used to streamline and integrate the business processes of an organization, and considerably improve information and knowledge levels within the organization as well as with its customers and suppliers (Davenport, 2000). In modern times, ES has become an 'umbrella' term that includes a number of systems like Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Supplier Relationship Management (SRM), and Supply Chain Management (SCM) and so on. However, for the purpose of this research, the application of the term 'Enterprise Systems' is limited to Enterprise Resource Planning (ERP), its industry-specific variants, and/or Customer Relationship Management (CRM), with built--in Business Intelligence technologies associated with them. This choice is made because of their clear dominance, in scope of their functionality and the number of adopting organizations, over their counterparts (Davenport, 2004). The user base of Enterprise Systems has grown significantly in the last two decades with more and more organizations choosing to purchase such systems over developing their own custom software. Large and well-known organizations in Australia and the around the world such as Australia Post, University of Melbourne, ExxonMobil, Microsoft, Canadian National Railways, Colgate-Palmolive, Kraft Foods, BHP Billiton, and many others, now run their businesses using Enterprise Systems. Increasingly, medium-sized organizations are also adopting such systems. In the last two decades, the Enterprise Systems market was inhabited by many vendors, e.g., SAP, Oracle, Baan, PeopleSoft, JD Edwards, and so on. However, as a result of mergers and acquisitions, there are three key players who dominate this market at present: SAP, Oracle, and Microsoft. It should be noted that implementing these systems involves massive financial investments and significant periods of time and human effort. Given the highly complex nature of such systems, they require substantial and continuous involvement from the organizations that implement them. So organizations have to consider enormous cash outflows in their budgets if they intend to adopt such systems. Business organizations undertake all investments with one overarching goal in mind - business value. Value means the worth or desirability of an entity or object. …