ERP system upgrades: the impact of ERP system upgrades on business changes and organisational capabilities; a view from the Thailand business context

Enterprise Resource Planning (ERP) systems are packaged suites of business application software widely deployed by organisations in all industry sectors to support both local and global business operations. ERP systems comprise a whole set of business functions including finance and accounting, procurement, production and inventory planning, and sales and marketing, as well as the distribution and return of goods and services. Since their release in the 1990s, ERP systems are now being upgraded, with improved system performance abilities, to better support new business demands for the management of increased volumes of data, enhanced multi-technology integration functions, efficient management of global operations and for improved decision making.<br><br>Although research on initial ERP systems addressing numerous technological, organisational and management issues is vast, studies on ERP upgrades are sparse. Although upgrading ERP systems is a large investment for organisations this is a necessary requirement to replace old ERP systems to manage changing business demands. Upgraded ERP systems lead to improved performance abilities in many respects, including the capacity to handle large volumes of data from multiple sources, the capacity to integrate and process data across different fixed and mobile technologies with ERP modules and the enhanced capacity to efficiently process and disseminate data in real time. The upgraded systems also have the power to more effectively support global operations, thus allowing more effective data driven decision-making. ERP systems are being upgraded at an increasing rate to meet the demands of business growth and global expansion as well as big data management. However, due to lack of extensive and comprehensive research on ERP upgrades processes, upgrade types, motivations and requirements for upgrade, and outcomes achieved from upgrading the system such as enhanced organisational capabilities, there is limited understanding of how effective organisational capabilities are achieved through ERP upgrades. Since the cost of ERP system upgrades range from two to ten million dollars, upgrading ERP systems without identifying the requirements for, and expected outcomes from, these new and more capable systems can not only be a costly exercise for the adopting organisations, but the system may also not be fully utilised for more effective business management.<br><br>Therefore the aim of this study is to explore ERP upgrades with specific reference to the core motivations for upgrade, types of upgrade commonly adopted, the necessary requirements for effective upgrade and the outcomes, in terms of enhanced organisational capabilities.<br><br>The research is developed based on the underpinning theories of the Dynamic Capabilities and Benefits Dependency Network. A comprehensive review of existing literature is undertaken in order to appropriately frame the research aims and objectives. An ERP Upgrade Productivity Network is developed to establish the relationship between ERP upgrades (IT Enabler), business changes required for the upgraded system (Change Enablers), enhanced organisational capabilities (Capabilities) and outcomes (Benefits) achieved from the upgraded ERP systems.<br><br>Since little is known about ERP system upgrades, this is an exploratory study undertaken in two phases, which employs a qualitative mixed method approach. Phase One involves an online discussion panel with international ERP upgrade experts. The online panel discussions were developed in order to extract expert views on ERP upgrade issues. The panel comprised ERP consultants, vendor representatives and managers of organisations that recently upgraded their ERP system. After three rounds of discussion and an interpretive analysis of their responses, a set of ERP upgrade issues were identified that, alongside the literature review, helped formulate the interview tool for the second phase of the study. The second phase involved qualitative case studies developed around a selection of organisations identified to have recently upgraded their ERP systems. Five organisations were identified from vendor publications and organisational websites. Data for the case studies was collected through face-to-face interviews with a total of 24 middle and senior managers. More data was extracted from content analysis of organisational annual reports from the five large organisations. All data was interpretively analysed, guided by Miles, Huberman and Saldaña (2013) to understand ERP upgrade issues of types and motivation for upgrades, requirements and resulting outcomes.<br><br>The findings of this study show that upgrading ERP systems is necessary to support business growth, which requires management of the increased number of subsidiaries, larger volumes of data and increased number of employees. It is also noted that, with an upgraded ERP system, organisations gain ongoing vendor support for the system which is also a necessary requirement and very costly if outsourced. This study highlights that to take advantage of new business functions supported by the upgraded system business process changes is an important requirement to align business functions with the upgraded business modules. The most notable enhanced organisational capabilities achieved from upgraded ERP systems is improved data management for business decisions. Upgraded ERP systems allow for greater data visibility and analytics for timely reporting and decisions, better sharing of knowledge and information throughout the organisation, and enhanced flexibility to meet changing business and customer demands.<br><br>This research extends the knowledge on ERP systems by highlighting issues of types of and requirements for ERP upgrades, as well as resulting outcomes achieved from ERP upgrades. Since upgraded ERP systems are a type of new technology implementation, this research also contributes to theory on new technology implementation. It expands on the theories of the Dynamic Capabilities and Benefits Dependency Network from general IT system implementations to upgrading large IT systems. Practical implications of the ERP Upgrade Productivity Network are that business leaders upgrading ERP systems can use this as a guide to manage changes required in the organisations to gain maximum benefits from upgraded ERP systems.<br><br>This research on ERP upgrades is generally from one region of the world Thailand; therefore further research on ERP upgrades is required to understand the following: if the issues from this research are similar to those faced by organisations upgrading ERP systems in other regions of the world, if there might be cultural issues to consider when upgrading ERP systems and if the requirements for achieving enhanced capabilities and productivity outcomes from new IT systems are always dependent on process changes.