Week 10

Week 10:

Week 10: The impact of enterprise systems on corporate performance:A study of ERP, SCM, and CRM system implementations (2006)Kevin B. Hendricks, Vinod R. Singhal, Jeff K. Stratman 1.IntroductionTotal of 406 implementations analyzed: 186 announcements of ERP implementations, 140 SCM implementations, and 80 CRM implementations at publicly traded firms.Performance effects are examined for both the implementation and post-implementation periods.More than US$ 38 billion in 2001 (Kraus and OBrian, 2002) in ES investments.Little empirical research that links investments in ES to financial performance using objective financial performance data.Key issues: metrics used, methodology used to estimate the performance effects, and time periods covered; most research focuses on aggregate IT investment.2. Literature ReviewCommonly used measures: Objective performance data:*stock returns*accounting metricsPrimary performance data:*surveys*experiments2. Literature Review Stock ReturnsShort window event study methods find 0.5% to 0.84% increase in stock returns, indicating that the market reacts positively to IT investment announcements.BUT: assessment may not be complete, and market may partially anticipate announcements -> need longer time periods.2. Literature Review ProfitabilityPoston and Grabski (2001) investigate effect of ERP adoption on profitability.BUT: They dont use any benchmarks -> Using benchmarks to control for normal changes in performance is a basic and minimum requirement in estimating performance effects.Matching sample and control firms on prior performance is also key to avoid confounding.2. Literature Review - ContributionsMore comprehensive assessment of the effect of ES adoption on financial performance.Use of both stock returns and accounting measures over long periods of time.Performance effects for both implementation and post-implementation.Authors control for prior performance.3. Benefits of enterprise systems - ERP systemsstandardized firm-wide transactions,centrally stored enterprise data greatly,facilitate the governance of the firm,clear view of the relative performance of the various parts of the enterprise.3. Benefits of enterprise systems - SCM systemsBetter operational and business planning,do not require iterative adjustments to the master schedule,real-time planning capabilities,increased revenue and productivity, operational cost savings, lower inventory, and reduced order-to-fulfillment cycle time.3. Benefits of enterprise systems - CRM systemsfacilitates long-term relationship building with customers,sales force automation, data warehousing, data mining, decision support, and reporting tools,provide a centralized firm-wide database of customer information independent of individual sales people,opportunity for increasing revenues through cross-selling.

H1 (2 and 3). Investments in ERP (SCM and CRM) systems lead to improvements in financial performance as measured by stock returns and profitability.4. Sample selection procedure and data descriptionNearly 98% of the announcements were made during 19951999.

5. Methodology for estimating performanceeffects of investments in ESChoosing the period over which to measure performance impacts.Methodology for estimating the long-term stock price effects.Methodology for estimating the long-term operating performance effects.6. Empirical results - for investments in ERP systems

6. Empirical results for SCM

6. Empirical results for CRM

6. Empirical results: Early Adopters

7. ConclusionSome of the research issues that may obscure the results are: the choice of the performance metrics (Bharadwaj et al., 1999), (2) the time period studied (Devaraj and Kohli, 2000), (3) the method of analysis (Robey and Boudreau, 1999), and(4) the presence of important intermediate variables (Barua et al., 1996; Bresnahan et al., 2002).