Jorge A. Romero

Implementing enterprise resource planning systems: organizational performance and the duration of the implementation

This paper examines the impact of the duration of ERP implementation on firm performance both during and after implementation. Organizations choose either an accelerated implementation approach or a traditional (longer) implementation approach. The former approach gives the organization the advantage of speed, but the disadvantage of fitting its processes to that of a packaged (thus, undifferentiated from competitors) ERP. The latter approach allows the organization to redesign strategy and processes, and thus, search for ways to be unique from its competition. The study uses a regression model to capture the changes in various performance measures during and after implementation between firms that implemented the ERP, using the performance measure of a matched group of firms that did not implement an ERP as a benchmark/control sample, on the basis of the duration of the implementation. Financial data from Compustat, and data on start date and end date of ERP implementation between 1990 and 2005 for firms in the Oil and Gas industry was collected from an ERP vendor. Results show that measures such as return on sales improved after implementation. However, measures such as inventory turnover, which reflect operational benefits, improve during implementation. We find that accelerated implementation confers both operational and strategic benefits. This study highlights the strategic consequences of the different choices of implementation.

ERP: drilling for profit in the oil and gas industry

Introduction Most large companies have adopted some form of enterprise resource planning (ERP) system. A survey of IT executives in the U.S. showed that ERP was the second most important key category for investment. In many cases, the implementation of an ERP system was a long and expensive ordeal that involved extensive restructuring of businesses and reengineering of processes. While the potential benefits of ERP have been extolled frequently and much has been written about individual company experiences, only limited evidence has been produced that implementation of ERP does, on average, lead to enhanced performance. To the best of our knowledge, this is the first industry analysis on ERP because previous work has been limited to case studies and industry cross-sectional analyses. Several research studies have validated that IT provides productivity and profitability advantages. However, questions remain because it is not clear whether advantages from IT contribute, and to what degree they might contribute, to operational efficiency and profitability. For example, if the same IT is implemented by all firms in an industry, will industry profits from IT disappear? Due to the fact that for many years large companies developed their information systems independently, there have been limited opportunities to evaluate the implementation of similar IT infrastructure across companies. This study seeks to extend prior work by performing a longitudinal study of implementation of ERP systems in a specific industry. According to Porter, each industry is affected by new information technology in different ways and drawing general conclusions about how new IT affects firms across industries would be a mistake. The oil and gas industry was selected because ERP plays a major role in standardizing business processes in this industry. In this role, ERP helps firms link global operations and supply chains. Also, a commodity-product industry, like the oil and gas industry, helps us control for other influences that may have affected the performance of oil and gas companies during the study period. The ERP adopting firms are those that adopted SAP. This research applies a new methodological approach toward understanding ERP implementation because rather than looking at ordinary measures of firm performance, we look at strategic performance measures (SPM) that can only be utilized if one delves into data that is not found on the financial statements. This is the first study that shows the sources of profitability after an ERP implementation, and will help managers understand the strategic and managerial implications of ERP implementations. Our analysis compares performance changes of ERP adopting firms versus non-adopting firms over a fifteen-year period (1990--2005), which is the period when this industry was being transformed by increased use of technology in the oil and gas industry. Therefore, we see how the implementation of ERP affected firm performance during this period in relation to non-adopting firms.

Recognizing Environmental Liabilities Surrounding CEO Turnovers

Abstract This study investigates whether CEOs exercise discretion in recognizing environmental liabilities surrounding their turnover. Extant theories on the agency problem predict that outgoing CEOs tend to boost or maintain the reported earnings in their final years (“Horizon” problem or “Cover-up”) and incoming CEOs sacrifice the reported earnings in their transitions year (“big-bath”). We find empirical evidence that incoming CEOs recognize significantly higher environmental liabilities in their transition year compared to the following years, supporting the “big-bath” hypothesis. This finding provides evidence that CEOs use environmental liabilities as a tool of earnings management surrounding their turnover in an attempt to maximize their accounting-based compensation.

Virtual Worlds and the Implication for Accountants: The Case of Second Life

While real world economies may be shaky, economies in virtual worlds keep growing as sites such as Second Life become more and more mainstream. Research firm Gartner Media estimates that by 2011, 80% of Internet users worldwide will be using Second Life (Gartner, 2007). This growing popularity has real world financial implications. On a typical day, Second Life members spend close to

Business Value of Information Technology: Measuring Performance and Sources of Profitability

1.5 million on virtual items and virtual real estate transactions (Alter, 2008), and some residents generate six-figure incomes in real world dollars (Hemp, 2006).Second Life is still in an early stage of development, and there are many financial and legal regulatory issues to be resolved. But with these challenges come opportunities; Second Life may be the impetus for a new accounting platform that may bring different practices together and provide new growth opportunities that financial communities have been looking for in the virtual world.