The hidden financial costs of ERP software
Abstract
Purpose
The purpose of this paper is to detail how the adoption of enterprise resource planning (ERP) systems creates major distortions in the corporate decision‐making process.
Design/methodology/approach
The approach is to focus on the distortion in the capital – budgeting process of corporations emanating from the rigidity of ERP software. The rigidity negatively influences decision‐making because ERP software often dictates that the firm must change its core business procedures and processes to fit the software.
Findings
Lack of flexibility limits the introduction of new products, or targeting a new customer segment by increasing costs and imposing delays in implementation.
Research limitations/implications
Firms would benefit from performing detailed analysis of the impact of ERP systems on their ability to make operational decisions.
Originality/value
This paper focuses on the problem of decreased flexibility in making changes in the production and accounting components of the firm when purchasing and installing ERP systems that cannot accommodate minor or major changes in the corporation.
Keywords
Citation
Lindley, J.T., Topping, S. and Lindley, L.T. (2008), "The hidden financial costs of ERP software", Managerial Finance, Vol. 34 No. 2, pp. 78-90. https://doi.org/10.1108/03074350810841277
Publisher
:Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited