1. The usefulness of ERP systems for effective
management
Charalambos Spathis
Department of Economics, Aristotle's University of Thessaloniki, Thessaloniki,
Greece
Sylvia Constantinides
Mediterranean ECS, University Studies, Thessaloniki, Greece
Keywords necessary tool for companies to survive this
Resource management, Benefits, Introduction highly competitive business environment.
Problem solving, Greece
In this highly automated, IT-led business The next section discusses the relevant
Abstract environment, companies are forced to keep literature followed by the research questions
Enterprise resource planning up-to-date with the new technologies to and the methodology adopted. Thereafter, the
(ERP) systems offer distinct research findings are presented. The final
advantages in this new business
remain competitive (Palaniswamy and
Frank, 2000; Siriginidi, 2000a; Al-Mashari, section discusses the conclusions drawn
environment as they lower
operating costs, reduce cycle 2001). ERP systems provide distinct from this research including potential issues
times and (arguably) increase advantages to companies adopting them as for future research.
customer satisfaction. This paper
examines, via a questionnaire, the they can integrate business applications
underlying reasons why using real-time information. Therefore, ERP
companies choose to adopt ERP systems provide the means for management Previous research
systems, their impact on
to respond to the increasing business needs ERP systems evolved from advanced
management process including
implementation problems in more effective and efficient ways. The manufacturing technologies (AMT) both of
encountered. The empirical main benefits of ERP systems are seen as the which were developed as a response to the
evidence confirms a number of production of real-time data shared across increasingly competitive environment. In
benefits derived from ERP systems
particularly for management the organization and consequently the particular, their purpose has been to increase
process but also, problems integration and automation of business quality, lower inventory levels and enhance
encountered. Results provide the processes. This is particularly important in customer service mainly via improved
basis for future research on the manufacturing flexibility (Slack, 1991; Drury,
this new business environment where
potential of ERP systems, for more
automation, effectiveness and efficiency in 1996; Palaniswamy and Frank, 2000;
effective business integration.
operations and real-time data are important Siriginidi, 2000b; Huang and Palvia, 2001).
factors for business success. The provision of Others report the year 2000 problem,
timely information improves the currency consolidation (Euro), integration of
decision-making process, planning and all business functions and processes and
Internet interface as additional motives for
control of ERP adopters. Consequently,
ERP applications (Gupta, 2000; Scott and
higher effectiveness and efficiency in
Kaindl, 2000). Within an ERP environment,
operations and improved customer
transactions are treated as part of the
satisfaction are the ultimate benefits derived
inter-linked business processes (Gupta, 2000).
from ERP systems (Duff and Jain, 1998;
In essence, business processes are integrated
Gupta, 2000).
and automated whilst, data is shared across
This study examines, via a questionnaire,
departments and particularly, real-time
the motives for companies adopting ERP information (Nah et al., 2001; Themistocleous
systems, the benefits derived including the et al., 2001). Therefore, one may expect that a
problems encountered. In essence, the aim is ``complete'' ERP system would incorporate
to evaluate the usefulness of ERP systems in ``modules'' relating not only to the traditional
meeting company needs in this demanding accounting information system but also,
business environment; that is, the success of stock control, MRP, and logistics. EDI
ERP systems in improving management systems and e-commerce might also be
process. The evidence presented would then additional dimensions of an ERP system
help to establish the best way forward in fully (Duff and Jain, 1998; Hardy and Reeve, 1999).
Industrial Management &
Data Systems exploiting ERP systems' potential as a Nicolaou (2002) reports on the effectiveness
103/9 [2003] 677-685
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[ 677 ]

2. Charalambos Spathis and in cost management systems of JIT and EDI ERP applications and assist management to
Sylvia Constantinides systems' use. Overall, the application of ERP achieve their full potential.
The usefulness of ERP In conclusion, the current study
systems for effective systems leads to increased efficiency and
management effectiveness in business processes determines the usefulness of ERP systems for
Industrial Management & permeating management decision-making at an effective management function including
Data Systems all levels (Duff and Jain, 1998; Shang and the problems encountered as an explanation
103/9 [2003] 677-685
Seddon, 2000; Hayes et al., 2001). Although of the former. As at the heart of an ERP
ERP system benefits have been examined in system is the accounting module, emphasis is
the past, their impact on management given on management accounting aspects.
process per se has not been considered.
Further, the motives for adopting ERP
systems including users' evaluation of ERP Research questions
systems are issues that remain unexplored. The literature review discussed the
Consequently, this study examines these advantages and the limitations of ERP
issues via a questionnaire. systems highlighting issues that warrant
In terms of the problems encountered in further consideration. This study examines
ERP implementations, researchers report on the following research questions based on
technical factors (Scott and Kaindl, 2000; evidence obtained via a questionnaire send
Siriginidi, 2000a; Lang et al., 2001; Light et al., to managers of companies (ERP adopters)
2001; Themistocleous et al., 2001). Others operating in Greece:
report softer factors for ERP system success RQ1. Why do companies choose to adopt
such as organizational culture (Al-Mashari ERP systems?
and Zairi, 1999; Stefanou, 1999; Aladwani,
RQ2. What are the benefits derived from
2001; Krumbholz and Maiden, 2001). Readers
the adoption of ERP systems on
are referred to the works of Stefanou (1999),
accounting information and
Bradford and Roberts (2001) and Krumbholz
management process?
and Maiden (2001) for ``critical success
factors'' in ERP system implementations. RQ3. Why do (not) companies
Substantial cost and time overruns, implementing an ERP system have
organizational problems including employee received substantial benefits from it?
resistance to change also appear important What were the problems encountered
barriers for ERP system success (Nah et al., in introducing ERP systems? To what
2001; Themistocleous and Irani, 2001; extent did they apply?
Themistocleous et al., 2001). Business process
re-engineering (BPR), the appropriateness of
business and IT legacy systems, management Methodology
culture, top management support and Preliminary interviews with managers in
communication are thought of as critical companies adopting ERP systems were
success factors in implementing ERP systems conducted in order to cater for the limited
(Gupta, 2000; Al-Mashari and Zairi, 2000; Nah empirical evidence available as well as, the
et al., 2001). Spathis and Ananiadis (2002) lack of underlying theories in this context.
examined the impact of ERP systems on Therefore, exploratory interviews were used
management accounting information as a facilitator of the research process and
systems at the Aristotle's University of particularly for the questionnaire design
Thessaloniki. Evidence shows that, users' (Sieber, 1973).
perceptions in descending order of Interviews with two major ERP providers
importance are focused on the following and four companies adopting ERP systems
factors: have helped establishing the relevant issues
. managerial; and determining the direction of this
. IT infrastructure; and research. Using open-ended questions the
. operational. interviews covered the following issues:
In brief, researchers have identified a
. ERP system adoption motives;
number of problems associated with ERP
. ERP benefits; and
. problems encountered in ERP system
applications as well as critical success factors
implementations (Spathis and
in ERP implementations. However, this
Constantinides, 2003).
study further examines those problems in the
Greek environment attempting to relate Interviews, together with the literature
those problems to the managers' perceived review, have generated a list of variables
success of ERP systems. This would then help relating to ERP benefits and problems
to determine the best way forward in future encountered (Teo and King, 1999). The
[ 678 ]

3. Charalambos Spathis and questionnaire includes multiple-choice Table I
Sylvia Constantinides questions on a seven-point Likert-type. The Demographic characteristics
The usefulness of ERP
systems for effective latter, aims at eliciting respondents' attitudes
Panel
management regarding the extent of the impact of ERP
Industrial Management & systems on accounting information and A: Respondents Per cent
Data Systems
management processes (Oppenheim, 1992; Position in the firm
103/9 [2003] 677-685 Information technology 71.1
Nachmias and Nachmias, 1996; Riley et al.,
Accounting 20.0
2000).
Information technology and accounting 4.4
The sampling frame of this study was
Administration 4.4
generated after consultation with major ERP 100.0
providers in Greece who provided us with a Gender
client list. Using probability sample design, Male 96.0
systematic sampling was applied drawing a Female 4.0
sample of 98 companies. Following telephone 100.0
conversations with contact persons Mean(years)
(managers of companies adopting ERP Age 35
systems in Greece) in charge of ERP-systems, Total work experience 11
45 agreed to participate in the study. The Current post 5
questionnaire forms were send via post, fax B: Companies Per cent
or e-mail. All questionnaires were returned Type of industry
completed (45.9 per cent). Manufacturing 60.0
The empirical evidence is solely obtained Commerce 28.9
via the questionnaire however; the Services 8.9
triangulation of research methods Other 2.2
(interviews and postal questionnaire) 100.0
enhances the reliability, validity and the Type of company
generalizability of the results (Kirk and Independent 73.3
Associate 13.3
Miller, 1986; Gildchrist, 1992; Nachmias and
Parent 11.1
Nachmias, 1996). Additional confirmatory
Other 2.2
evidence on the validity of the scale used is 100.0
presented in the following sections on the
Company size Mean
factor analysis results. Further, regarding
Number of employees 215
the reliability of those factors, Cronbach's
Total assets (millions Euros) 37.56
alpha is estimated. Total annual sales (millions Euros) 37.27
The demographic characteristics of the
respondents are presented in Table I.
As shown in Table I above, the average age Results and discussion
of the respondents is 35, most of them are
The survey results are presented in two main
male (96.0 per cent) and working in the IT
sections namely:
department (71.1 per cent). They have 1 ERP system benefits which, examines
relatively an extensive experience and work RQ1 and RQ2; and
in the manufacturing sector. The 2 ERP system implementation problems
respondents work in relatively big exploring RQ3.
organizations and the majority of the
companies are independent (73.3 per cent). It ERP system benefits on accounting
should also be noted that, the companies are information and management processes
both Greek and foreign companies The most highly rated perceived benefits
(associates) operating in Greece. Overall, achieved via ERP systems involve:
sample details indicate its . increased flexibility in information
representativeness and therefore the ability generation;
to draw generalizations from the survey
. improved quality of reports-financial
findings with one caveat. That is, as some of statements;
these companies have only recently
. increased integration of applications;' and
. easy maintenance of databases.
introduced ERP systems (average 18.5
months), one should expect that more This clearly suggests that ERP systems have
benefits are accrued in the future for those an important if not a decisive impact on
companies but also, implementation legacy systems and particularly on
problems to become less important. accounting ones. Further, the evidence also
[ 679 ]

4. Charalambos Spathis and reinforces the argument that ERP systems information on operating modules in ERP
Sylvia Constantinides have been successful in fulfilling their environment is presented in Table III.
The usefulness of ERP
systems for effective purpose for the business as a whole as In specific, although all companies are
management discussed in the earlier sections. That is, the operating financial and management
Industrial Management & integration of applications, the production of accounting modules, not all of them operate
Data Systems real-time information and particularly fixed asset register, costing and
103/9 [2003] 677-685
information for decision making are clearly stock/purchases modules. It is also
affecting not only company's accounting surprising that only 13 companies (29 per
information systems but also, business cent) operate the payroll module.
operations in general. In addition, ``increased A link between ERP system modules
user-friendliness of information systems'', operated and the perceived benefits achieved
time reductions for accounts closure and relates to the underlying reasons for
preparation of financial statements are also adopting such systems. Increased demand for
perceived as benefits derived from ERP real time information, information
applications. Further, ``improved generation for decision making and
decision-making process'', ``improved integration of applications are reasons for
co-ordination between departments'' and adopting ERP systems indicated by the
``improved internal communication'' have majority of the respondents. This finding
also been highly rated further reinforcing the reinforces the argument that ERP systems
above argument. Additional information on have been successful in fulfilling adopters'
the benefits achieved is summarized in needs. Additional information on reasons for
Table II. adopting ERP systems is presented in
Overall, the benefits achieved by ERP Table IV.
adopters are strongly influencing accounting
information but also, organizational Table III
planning and decision making at all levels. Operating modules in the ERP environment
Nonetheless, there is still room for
Number Per cent
improvement as individuals' perceptions are
not that strong on the above benefits. Financial accounting 45 100
Further, as production and logistics modules Management accounting 45 100
are operated by half or less of the Fixed asset register 42 93
respondents (23 and 22 companies
Costing 42 93
Stock ± purchases 41 91
respectively) might also provide an
Production 23 51
explanation for this. That is, not all business
Logistics 22 49
operations have been integrated yet,
Payroll 13 29
suggesting further room for improvement
Quality management 4 9
and particularly more changes in the E-commerce 1 2
accounting information. Additional
Table II
ERP systems benefits
Mean Standard deviation
Increased flexibility in information generation 5.60 0.86
Improved quality of reports ± statements 5.33 0.93
Increased integration of applications 5.31 1.06
Easy maintenance of databases 5.16 1.07
Increased user-friendliness of IS 4.89 1.23
Reduction of time for issuing of reports ± statements 4.87 1.14
Improved decision-making process 4.82 1.30
Improved co-ordination between departments 4.64 1.17
Reduction in errors in logistics 4.51 1.47
Increased internal communication 4.49 1.29
Reduction of time for transaction processing 4.40 1.18
Improved delivery times 4.27 1.42
Reduction of stock levels 3.91 1.49
Increase in stock turnover 3.78 1.29
Reduction of total operating and administration costs 3.67 1.41
Notes: 1 = not at all; 2 = very low degree; 3 = low degree; 4 = average; 5 = high degree; 6 = very high degree;
7 = perfect
[ 680 ]

5. Charalambos Spathis and Table IV
Sylvia Constantinides Reasons for ERP implementation
The usefulness of ERP
systems for effective Number Per cent
management
Industrial Management & Increased demand for real-time information 44 98
Data Systems Information generation for decision making 41 91
103/9 [2003] 677-685 Integration of applications 38 84
Business process re-engineering 22 49
Cost reduction 22 49
Increase sales 16 36
Taxation requirements 15 33
Introduction of EURO 10 22
Application of new business plan 9 20
Competition 8 18
Development of activities into new areas with business contacts 7 16
Internet development 6 13
Integration of information systems 4 9
Stock Exchange requirements 3 7
Year 2000 problem 3 7
Government funding ± subsidization 2 4
In essence, Table IV confirms that, ERP indicated 5.56 for 16 in total. Statistically
system implementations were initiated for significant correlations exist between,
the ``correct reasons'' and that, the benefits modules operated and perceived benefits but
derived are in line with ERP adopters' also between the latter and reasons for
expectations. Additional information on ERP adopting ERP systems. These findings
system benefits, modules operated and further confirm the strong link between
reasons for adopting ERP is provided in these variables in this context. However, the
Table V and VI. cost of ERP systems and firms' assets are not
As shown in Table V, the sum of perceived correlated with the sum of benefits. Company
benefits of ERP systems is 69.64 (for a size and the cost of ERP systems are not
maximum value of 89). The average number related to the number of modules that ERP
adopters choose to operate.
of modules operated is almost seven out of
Booth et al. (2000), report on ERP users'
ten and the average number of reasons
perceptions of the quality of accounting
Table V information systems in financial and
Descriptive statistics on ERP benefits, ERP modules adopted, reasons for management accounting as ``adequate'' in
ERP implementations, cost of ERP systems and company assets (n = 45) terms of reporting and decision support and
``good'' in terms of transaction reporting.
Mean Standard deviation Minimum Maximum
Therefore, the empirical results between the
Benefits 69.64 10.95 41 89 two studies are comparable indicating that
Modules 7.04 1.38 4 10 there are still benefits accrued for ERP
Reasons 5.56 1.89 3 10 adopters (see also Spathis and
Cost 1.26 1.43 0.10 9 Constantinides, 2003). Stefanou (2002) also
Assets 37.58 92.41 3.22 585.22 reports that the integration of accounting
Notes: Benefits: sum of perceived benefits scale; Modules: number of modules; applications, information exchange and
Reasons: number of reasons for ERP implementation; Cost: percentage of acquisition reporting capabilities are notable
and installation cost to sales; Assets: total assets in millions Euros advantages/strengths of ERP systems.
The variables concerning the benefits of
ERP systems were also factor analysed using
Table VI
principal component analysis (PCA) with
Pearson correlations on ERP benefits, ERP modules adopted, reasons for
varimax rotation as a commonly used
ERP implementations, cost of ERP systems and company assets
technique for summarizing a set of variables
Variables Benefits Modules Reasons Cost Assets into independent subsets (Tabachnick and
Benefits 1.000 Fidell, 1996). The results are presented in
Modules 0.339* 1.000 Table VII.
Reasons 0.420** 0.208 1.000 PCA revealed five dimensions involving:
Cost 0.086 0.132 0.178 1.000 1 effective logistics function;
Assets 0.093 0.000 0.023 ±0.121 1.000 2 effective communication function;
3 effective decision-making process;
Notes: * Significant at the 0.05 level (two-tailed); ** Significant at the 0.01 level 4 efficient data processing; and
(two-tailed)
5 information systems.
[ 681 ]

6. Charalambos Spathis and Table VII
Sylvia Constantinides Factor analysis of ERP system benefits
The usefulness of ERP
systems for effective Loadings Per cent of variance Cronbach's alpha
management
Industrial Management & Factor 1: Effective logistics 21.868 0.922
Data Systems Improved delivery times 0.884
103/9 [2003] 677-685 Increase in stock turnover 0.859
Reduction in errors in logistics 0.855
Reduction of stock levels 0.851
Factor 2: Effective communication function 19.261 0.838
Increased internal communication 0.898
Improved co-ordination between departments 0.865
Increased integration of applications 0.670
Factor 3: Effective decision-making process 14.220 0.693
Improved quality of reports ± statements 0.814
Increased flexibility in information generation 0.745
Improved decision-making process 0.633
Factor 4: Efficient data processing 12.570 0.697
Reduction of time for transaction processing 0.842
Reduction of total operating and administration costs 0.734
Reduction of time for issuing of reports ± statements 0.584
Factor 5: Effective information systems 10.394 0.646
Easy maintenance of databases 0.899
Increased user-friendliness of IS 0.667
Total variance explained (per cent) 78.313
KMO 0.655
Bartlett's test of sphericity
Approx. 2 447.003
df 105
Significance 0.000
The factors are clearly reflecting the main benefits have not been fully achieved by the
reasons for adopting ERP systems but also, companies concerned. It may also provide an
their impact on accounting and management insight of the potential of ERP systems.
processes. However, respondents rated implementation
The factors explain over 78 per cent of the problems at a low or average degree not
variance and the Kaiser-Meyer-Olkin raising any issues of concern. The two major
measure of sampling adequacy is high problems arising relate to delays in
suggesting that factor analysis is appropriate implementation and employee resistance to
for this data set. Bartlett's test of sphericity is change both of which are in accord with the
large and the associate significance level is literature findings (Al-Mashari and Zairi,
small (zero) therefore, it is unlikely that the 1999; Aladwani, 2001). Additional information
population matrix is an identity. Further, the on the ERP implementation problems are
factors have high alpha values confirming presented in Table VIII.
their high reliability. PCA results further It is also evident that, personnel training,
confirm that the adoption of ERP systems has increased costs, adaptation and integration
successfully fulfilled its purpose problems are the most prevalent ones (Nah
demonstrating a significant impact on the et al., 2001; Themistocleous and Irani, 2001;
accounting information and management Themistocleous et al., 2001). Implementation
processes. problem variables were also factor analysed
The next section examines the problems using PCA with varimax rotation resulting
encountered in ERP implementations, in four factors reinforcing the above (see
possibly explaining the relatively low rating Table IX).
on the benefits of ERP systems. All factors have high alpha values
confirming their reliability and the total
ERP implementation problems variance explained is over 74 per cent. The
The previous section discussed the benefits results suggest that problems in ERP
derived from the application of ERP systems implementations may be classified as
focusing on the accounting information and technical, financial and organizational.
management processes. Examining the Therefore, a close co-operation both within
problems encountered in implementing ERP the organization and between the
systems may explain why ERP system organization and the ERP provider is
[ 682 ]

7. Charalambos Spathis and Table VIII
Sylvia Constantinides ERP system implementation problems
The usefulness of ERP
systems for effective Mean Standard deviation
management
Industrial Management Delays in implementing the ERP system 4.20 1.44
Data Systems Employee resistance to change 4.13 1.58
103/9 [2003] 677-685 Difficulties in transferring data from previous applications 3.98 1.73
Personnel training in ERP environment 3.96 1.26
Increased costs in operating the ERP systems 3.84 1.45
Difficulties in adapting applications to the ERP environment 3.80 1.59
Cost overruns in acquiring and installing the ERP system 3.76 1.61
Increased difficulties in using the new system 3.64 1.23
Difficulties in integrating existing applications with the ERP system 3.44 1.56
Difficulties in restructuring personnel 3.44 1.32
Delays in installing the system 3.36 1.57
Friction with the ERP provider 3.00 1.85
System security 3.00 1.58
Friction within the board of directors 3.00 1.78
Increased errors 2.62 1.01
Notes: 1 = not at all; 2 = very low degree; 3 = low degree; 4 = average; 5 = high degree; 6 = very high degree;
7 = perfect
Table IX
Factor analysis of ERP systems implementation problems
Loadings Per cent of variance Cronbach's alpha
Factor 1: Friction and delays 29.229 0.912
Friction with ERP provider 0.845
Friction with the board of directors 0.845
Delays in implementing 0.773
Delays in installing 0.729
Cost overruns in acquisition and installation 0.711
System security 0.643
Increased costs in operating ERP 0.630
Factor 2: Personnel 18.914 0.842
Difficulties in restructuring personnel 0.847
Employee resistance to change 0.800
Personnel training in ERP 0.708
Increased errors 0.566
Factor 3: Integration 13.395 0.801
Difficulties in transferring data from previous applications 0.851
Difficulties in integrating existing applications 0.813
Factor 4: Adaptation 12.698 0.719
Difficulties in adapting applications 0.796
Difficulties in using the new system 0.762
Total variance explained (per cent) 74.236
KMO 0.767
Bartlett's test of sphericity
Approx. 2 462.248
df 105
Significance 0.000
essential in achieving a smooth ERP focusing on the latter's impact on accounting
implementation (Gupta, 2000; Al-Mashari and information and management processes.
Zairi, 2000; Nah et al., 2001). Although researchers have examined the
benefits and the problems of ERP systems,
this was done on an ad hoc basis. Further,
Conclusions and recommendations studies have not adequately focused on ERP
This study has presented evidence from systems' impact on accounting and
Greece on companies adopting ERP systems management processes. In addition, except
[ 683 ]

8. Charalambos Spathis and from the study of Stefanou (2002), this is the nowadays, need to have good IT skills in
Sylvia Constantinides first evidence available on ERP systems in order to retain their role in this constantly
The usefulness of ERP Greece. The survey results confirm that the
systems for effective changing IT-led work environment.
management benefits derived from companies adopting Therefore, examining these new skills and
Industrial Management ERP systems have fulfilled individuals' abilities required by accountants to cope
Data Systems expectations but not that strongly. In with this demanding role, might also be an
103/9 [2003] 677-685 specific, increased flexibility in information issue that warrants further research.
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