wipawee.uppatumwichian@ics.lu.se

CONFENIS 2012

Ghent, Belgium

September 21, 2012

Understanding the ERP system use in

budgeting

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Agenda

• Introduction

• The ERP system literature review

• Theoretical background

• Research method and case description

• Analysis

• Conclusions and implications

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Introduction

• Research calls on how ERP systems support

– Decision-making

– Management control (Grandlund, 2011; Rom & Rhode, 2007)

• Context - The dual role of budgeting

– Decision making flexibility

– Management control integration (Simons 1994)

• Research aim

– Uncover how ERP system is used/ not used

– Explain why that is the case

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

The ERP system literature review

• Flexibility

• (-) ERP stabiles org. (Light et al. 2001, Soh et al. 2000)

• (+) ERP improves flexibility from modular infrastructure

(Shange & Seddon 2002, Brazel & Dang 2008)

• Integration

• (-) ERP does not define what integration is (Mouritsen 2005,

Dechow et al. 2007)

• (+) ERP central database enables integration & control (Quattrone & Hopper 2005, Chapman & Kihn 2009)

• No consensus whether ERP promotes/prohibits flexibility &

integration

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Theoretical background

• Structuration theory

– Explain system use from a ulitarian perspective

– ST focuses on process so it’s suitable to study

budgeting seen as a “process”.

• Conflict and contradiction

– Oppositions can reveal tensions & ambiguity

– Conflict activity level

• “struggle b/w actors and collectives in social practices”

– Contradiction structural level

• “opposition of structural principle” (Giddens, 1979)

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Research method & case description (1/2)

• Research design

– Interpretative case study

– Multiple case study

• 11 for-profit organizations from Thailand

• Criteria: Listed org. which use ERP & budgeting

• Data collection

– Primary: interviews with 21 business controllers

• e.g., CFO, Accounting VP, Planning VP

– Secondary: internal documents, annual reports

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Research method & case description (2/2)

No. Case Industry Main activities Owner ERP Spreadsheets BI

1 A Energy Power plant Thai SAP Yes Magnitude

2 B Energy Oil and Petrochemical Thai SAP Yes Cognos

3 C Energy Oil refinery Thai SAP Yes -

4 D Food Frozen food processor Thai SAP Yes -

5 E Food Drinks and dairy

products

Foreign SAP Yes Magnitude

6 F Food Drinks Foreign SAP Yes Own BI

7 G Food Agricultural products Thai BPCS Yes -

8 H Automobile Truck Foreign SAP Yes -

9 I Automobile Automobile parts Thai SAP Yes Own BI

10 J Electronics Electronic appliances Foreign JDE Yes Own BI

11 K Hospitality Hotels and apartments Thai Oracle Yes IDeaS

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Empirical data and analysis (1/5)

• Flexibility

– Definition: discretions over the use of budget system for

decision making through IS technology (Ahrens and Chapman

2004)

– Flexibility is driven by bottom up budgeting to reflect

environmental changes at local unit level.

• Integration

– Definition: standardization of data definitions and structure

using common conceptual schema across collection of data

source (Goodhue et al. 1992)

– Integration is driven by management control to compare

performances against pre-determined standards

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Empirical data and analysis (2/5)

Budgeting

Construction

Consolidation

Monitoring

Reporting

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Empirical data and analysis (3/5)

• Conflict to examine flexibility

– Budget construction

• ERP system is not used (0/11)

– Too generic to support budgeting

– Not flexible to accommodate environmental changes

» More practical to use SSs

– Budget reporting

• ERP is not used for advanced financial report (11/11)

– Not flexible for advanced financial report

» More practical to use SSs

Construction

Reporting

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Empirical data and analysis (4/5)

• Conflict to examine integration

– Consolidation

• ERP system is not used for consolidation (0/11)

– Not the norm to consolidate on ERP

» More practical to use SSs

– Monitoring

• ERP system is used for monitoring (3/11)

– Complication to set up budgeting along with ERP

» More practical to use SSs

Consolidation

Monitoring

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Empirical data and analysis (5/4)

• Contradiction to examine budgeting & ERP

– Budgeting operates in term of flex. & intrg.

– ERP operates in term of intg. alone

Integration

1.co

nstruc

tion

2. Consolidation 3. Monitoring

4.reporting

Flexibility

ERP systems

Other IS technologies Other IS technologies

Bu

dg

etin

g

Lund University / Department of Informatics / Wipawee Uppatumwichian / June-2012

Conclusions and implications

• ERP system is not used to support budgeting

– A contradictory relationship b/w ERP & budgeting

– ERP supports intg. but budgeting calls for flex. & intg.

– Result SSs and BI used in budgeting

• Implications

– Academics

• Explains limited ERP use in budgeting

• Explains that controllers recognizes ERP limitations

– Practitioners

• Take informed decision in IS investments

• ERP is not good for everything