This paper presents a model of the Enterprise Resource Planning (ERP) software acquisition process that reflects the findings from the four cases examined in this study. This ERP acquisition process model includes six distinctive, yet interrelated, processes (planning, information search, selection, evaluation, choice, and negotiations). This paper depicts the principal processes and many of the constituent activities, issues, dynamics, and complexities that pertain to the acquisition of ERP software. The results from this study contribute to the identification of processes that are part of this type of acquisition. Further, this model also suggests complexities that are worthy of further investigation, in and of themselves, if for no other reason than that they could prove the limit of generalizability of the model.
Since the early to mid-1990s, the Enterprise Resource Planning (ERP) software market has been and continues to be one of the fastest growing segments of the information technology (IT) industry with growth rates averaging from 30% to 40% per year (Eckhouse, 1999). With worldwide sales of ERP software estimated to exceed US$22 billion by the year 2001 PricewaterhouseCoopers, 1999 and Yankee Group, 1998, it has been further estimated that by the year 2002, packaged applications would represent a significant portion of most IT portfolios (Meta Group, 1998). With costs equaling several thousands, hundreds of thousands, and even millions of dollars, ERP packaged software purchases are high expenditure activities for organizations that consume significant portions of their capital budgets. While overall IT expenditures already represent a significant portion of ongoing capital expenditures for many organizations and will continue to increase, little is known about how these expenditures are made, or more precisely, what organizations have to go through when they buy IT such as ERP packaged software Verville, 1998, Verville, 2000 and Verville & Halingten, 2001. Indeed, what processes do organizations use and what are the specifics involved in those processes?
In recognition of the importance of this issue and of the sizable risk that organizations take when they decide to buy this type of technology, the study that is presented herein focused on how organizations go about the task of acquiring ERP packaged software applications.
Taken beyond the bounds of studies carried out in organizational buying behavior (OBB) on the influencing factors mitigating the buying process, this study focused on the buying process itself and identified its (the process's) major components. It also revealed several issues relevant to the need and readiness of the organization both for the acquisition process as well as for the new ERP software. Further, it revealed issues relevant to the implementation of the ERP and brought to light the complexity of the process at the detail level. The results of the study prove, contrary to the wide-standing belief that IT acquisitions are done routinely and fairly simply, that acquisitions of this nature (for ERPs) are complex, involved, demanding, and intensive.
Prior to proceeding with the study, a brief review of the literature on ERP from the field of management information systems (MIS) and OBB was carried out. A methodology was then selected, and other appropriate tools were used to carry out the analysis and draw conclusions, all as presented below.
