Int. J. Entrepreneurial Venturing, Vol. 3, No.

1, 2011

ERP selection through business relationships

adaptations or connections
Peter Ekman*
School of Sustainable Development of Society and Technology,
Mlardalen University,
P.O. Box 883, SE-721 23 Vsters, Sweden
E-mail: Peter.ekman@mdh.se
*Corresponding author

Peter Thilenius
Department of Business Studies,
Uppsala University,
P.O. Box 513, SE-751 20 Uppsala, Sweden
E-mail: peter.thilenius@fek.uu.se
Abstract: This article analyses how a generic form of information technology
(IT), enterprise resource planning (ERP) systems, can be selected by companies
to enhance their business. ERP systems are a means of becoming more efficient
through predefined standard functions called best practices. Following
the theory that markets are made up of business relationships in a network
context, managerial advice would be to assess the vendors existing business
relationships. A company can harvest the inherent functions that an ERP
system has from the vendors prior interaction with other customers. This
paper discusses how a company benefits from engaging in a new business
relationship with an ERP vendor to become more competitive. However, this
relationship is double-edged. A lesson is that the functions developed by the
ERP vendor and the customer only offer a temporal competitive advantage,
given that it can be used later in the ERP vendors other connected business
relationships.
Keywords: information technology; IT; enterprise resource planning; ERP
system; best practice; business relationship; adaptation; connections; network
infusion; case study; business network context.
Reference to this paper should be made as follows: Ekman, P. and
Thilenius, P. (2011) ERP selection through business relationships
adaptations or connections, Int. J. Entrepreneurial Venturing, Vol. 3, No. 1,
pp.6383.
Biographical notes: Peter Ekman is a Senior Lecturer and Researcher at
Mlardalen Universitys Marketing and IT Division, Sweden, and a Senior
Researcher at the Swedish Research School of Management and IT. He has
also been a Visiting Assistant Professor at the University of Richmond Robins
School of Business, USA. He is a member of the International Marketing and
Purchasing (IMP) Group. His research and teaching interest is the intersection
of business marketing and IT.

Copyright 2011 Inderscience Enterprises Ltd.

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P. Ekman and P. Thilenius

Peter Thilenius is an Associate Professor at the Department of Business
Studies, Uppsala University and also at Mlardalen University, Sweden. His
research interest is grounded on business networks and relationships and his
fields of research are related to international business and marketing. He has
published his research in books and in journals such as Industrial Marketing
Management, Journal of Business & Industrial Marketing and International
Business Review.

Introduction

The business landscape has been affected by different information technologies (IT) in
the form of computer-based information systems. One such IT is enterprise resource
planning (ERP) systems, also called enterprise systems, which have been described by
some researchers as the most important technology to emerge during the 90s, after the
internet (Seddon et al., 2003). ERP systems are standard information systems that are
usually acquired off-the-shelf (Davenport, 1998), i.e., they are bought as predefined
software packages (modules) for which the functionalities can be customised to a certain
degree by the customer. The advantage with ERP systems is that they can handle most of
a companys needs and unify an enterprise by demanding coherent concepts, as well as
treating all business data through one (virtual) central database (OLeary, 2000;
Davenport, 1998). Since their great boost in the 90s, the ERP systems have had rather a
bad reputation, given that research showed that a large percentage of the projects were
considered to be under-budgeted and unable to deliver what they originally promised.
Today, companies implement the core functionality first and the supporting processes
later (Davenport et al., 2004). Due to the nature of ERP systems, a technology made up of
both hardware and software (a product) that needs complementary external expertise to
be installed and managed (services), it is a good empirical entity to study when trying to
understand companies business processes.
The main reason for companies to implement an ERP system is usually to attain
greater efficiency by integrating all business data into one integrated system (Al-Mashari,
2002). This integration of data leads not only to increased productivity but, hopefully,
also to a better service responsiveness (Payne, 2002). But achieving such functionality is
not always easy. Sumner (2005, p.2) describes what companies need to consider when
selecting an ERP system:
To be competitive, organizations must improve their business practices and
share information with their suppliers, distributors, and customers. An ERP
system introduces best practices which are defined as simply the best way to
perform a process. The biggest mistake made in implementing ERP, especially
in a manufacturing environment, is to redesign the new system to work in the
old environment.

Getting an ERP system thus involves evaluating the vendors way of handling various
business processes through the predefined functions and software modules offered as part
of the ERP system. These functions and modules are, furthermore, not definite; the
customer has the opportunity of adjusting or customising them. Originally, the functions
and modules were formed for larger corporations; mainly in the manufacturing,
construction, aerospace, defence, and oil industries (Al-Mashari, 2002; Davenport, 2000).

ERP selection through business relationships

65

However, whilst the main customer segments used to be large corporations, they are
now also available to all companies irrespective of size. Depending on the customers,
some ERP vendors offer different versions of their systems. As frequently used within
the IT industry, the differences in versions can be those of various capabilities, speed
of operations, support, features, functions, product and technology coverage, and
so forth (Shapiro and Varian, 1999). Besides the large ERP vendors that aim at covering
all industries, e.g., SAP, there are also niched and local system suppliers that offer
less comprehensive packages, often aimed at a more specific customer group or
specific branch. In all, for the single business company the selection of ERP system
and vendor becomes a cumbersome issue involving not only the price and
implementation costs of the system, but foremost the necessity of finding the system that
best matches the companys operations. Moreover, when evaluating different vendors,
their financial solidity and market share also have to be considered will they be
around in five or ten years? (Sumner, 2005; Davenport, 2000). So what alternatives
does a company have when approaching the selection of an ERP system, given this
context?
To provide an insight into how this technology can be selected and implemented, this
study tries to answer the following research question: how do companies select their ERP
system to give themselves a competitive edge, and how can this competitive advantage be
understood? The aim of the article is to offer an insight into this selection process by
employing an business relationship and business network perspective, as well as offer
managerial advice on how to go about selecting a generic and comprehensive IT
environment in the form of an ERP system.
To empirically illustrate how ERP systems are brought into companies and how their
best practices are developed, two case studies are presented. Before the cases are
presented, an overview of a relational and network approach that will be used to analyse
the cases and to describe the managerial consequences of these studies will be given

Previous views on the selection of ERP systems

The process of selecting an ERP vendor can be a struggle. Is the ERP vendor considered
strong in the companys industry sector, do they offer the necessary software packages
(modules) that the company can benefit from, and is the appropriate support available?
During the selection process the company making the implementation has to evaluate the
proffered ERP systems functionalities and modules, often promoted as best practices in
the marketing of the system. ERP systems are sometimes described as process-ware, i.e.,
the information that the ERP system offers allow the company to act in a more process
oriented way. The company searching for an ERP system has therefore to review the
functions that each vendor offers and branches within which the ERP vendor are
considered strong; e.g., steel and metal industry, food and beverage, automotive,
chemicals and petroleum, and so forth (Davenport, 2000). The ERP systems are also
clearly focused on efficiency gains within what in traditional strategy literature would be
described as enhancing the value chain and achieving cost benefits (Porter, 1985) as well
as contributing to better decision making (Newell et al., 2003). The process of selecting
an ERP vendor is thereby a multidimensional task where the technology, its functionality,
and the vendor per se have to be evaluated.

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During the selection process some ERP vendors will stand out as more promising and
suitable, depending on within which sector of industry the selecting company is active.
The functionalities and modules that the vendor offers as best practices are also seldom
definite many ERP systems allow modifications and adjustments, within limits, so that
the ERP system becomes adapted to that specific customer (Davenport, 2000; OLeary,
2000). Thus, the company seeking to select an ERP system needs to get in contact with
one or more of the potential ERP vendors to collect information about their ERP systems,
the potential adaptations of the functionalities, the support for getting the ERP system
implemented, and future maintenance requirements once the ERP system is up and
running. Depending on whether the company selecting is large or small, the functionality
and cost of the system will also differ. There are, for example, some ERP vendors that
primary direct their offers to smaller companies whilst others often larger ERP vendors
like SAP, Oracle, and Microsoft cover several customer segments with different ERP
versions. The selection process thereby involves a review of the functional and technical
details of the enterprise system (OLeary, 2000), as well as an evaluation of the
organisational and economic impact of the selected technology.
To illustrate a point, the previous description of how companies select ERP vendors
has been oversimplified and abbreviated. The bottom line is that the selection of an ERP
vendor has as its point of departure in the ERP vendors organisational resources and
their segmentation of markets. That is the normal approach when companies search for an
ERP system. A segmented market is, though, a rather anonymous entity. This paper
proposes another approach where the ERP vendors prevailing business network is taken
into consideration. Given that an implemented ERP system is based upon the interaction
between an ERP vendor and a customer, the development of new predefined functions
and software modules offered as part of the ERP is the result of extensive business
interactions. ERP systems are not atomic technologies but, rather, dynamic entities that
allow customisation, adjustment of software parameters, and so forth (Sumner, 2005;
Davenport et al., 2004; Davenport, 2000).

Business relationships and network connections

A companys selection of ERP vendor has previously, and typically, been depicted as a
problem of management strategic decision making or the result of inherited investments
in information technology. In this study, an alternative approach is outlined that would
enable companies to benefit from the development of industry-specific ERP modules.
Empirical studies of companies employing a business relationship view have shown that
recognising both the selling and buying parties as active in their business undertakings
provides deeper insights into the development of business (cf., Hkansson, 1982; Ford
et al., 2003). The notion of business relationships is founded on the observation that
specific suppliers and customers establish, develop and maintain long-term oriented
business with each other. Johanson and Mattson (1987) explicate some reasons for the
formation of business relationships. Companies business relationships may reduce the
costs of exchange and production, provide some control possibilities, induce the
development of knowledge, form a bridge to other firms and be used in mobilising
partners against third parties. The business relationship is, basically, best viewed as two
companies mutually orienting their business towards each other by means of interaction.
The interaction taking place between the parties is driven by the exchange processes of an

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67

economic, administrative, technological and social character, as the business activities are
fundamentally embedded in a social setting (Granovetter, 1985).
Through the exchange processes the parties learn about each other but also test and
identify areas of hindrance, as well as identifying possible ways of further effectuating
their businesses (Johanson and Mattsson, 1987). The business relationship view therefore
also includes the recognition of adaptation processes, where the parties make adjustments
to facilitate the future continuance of the exchange processes (Johanson and Mattsson,
1987; Medlin, 2004). These adaptations that the buyer and seller make to facilitate their
mutually oriented business can be seen as distinguishing features for the specific business
relationship. The adaptations can be made to the exchanged product and service but they
can also be made to the administrative routines necessary for handling the exchanges
(Halln et al., 1991). Adaptations are thus not a necessity in the business relationship
other than in the sense that future exchanges are assumed to be hindered should changes
not be made. Clearly, the changes brought about by the adaptations made by either the
supplier or the customer, to adjust to circumstances allowing for continued exchanges,
are associated with costs. Adaptations are, in that sense, commitment activities of the two
parties as they make investments to better their businesses, thereby strengthening the
business relationship and making it more competitive against others (Halln et al., 1991).
Adaptation, even if recognised as a fundamental issue in business relationship
construction, has been given limited attention by researchers. The studies of Halln et al.
(1991) on reciprocity in adaptation, as the result of dependence and on differences in
adaptation associated with customer technology (Halln et al., 1993), though, provide
valuable insights through analyses of extensive quantitative data. Among later studies,
Brennan and Turnbull (1999) on motives and decision-making underlying adaptive
behaviour, Ahmad and Buttle (2001) on continuous supplier adaptations to retain
customers, Canning and Hamner-Lloyd (2001) on the process of adaptation to the
environment, Brennan et al. (2003) on mutual and unilateral actions by suppliers and
buyers, Schmidt et al. (2007) on the scope and calculation in decision and Mukherji and
Francis (2008) on the effect of relational exchange factors on mutual adaptations, extend
views on adaptation in business relationships. To conclude, in this study, adaptations are
approached as all changes made by either the supplier or the customer in order to
facilitate the continuity and efficiency of the business exchange between them. Further,
the adaptations made are partly driven by issues endogenous to the relationship but partly
also the response to threats and opportunities, stemming from the relationships
surroundings in terms of the business network.
For studies of business relationships, Anderson et al. (1994) define a business
network as a set of two or more connected relationships. The view on connection
commonly follows the distinction of Cook and Emerson (1978), who stated that two
relationships are connected to the extent that exchange in one is contingent on exchange
in the other. Consequently, earlier network views often specifically concern the supposed
interdependencies forged among the business relationships in the network, due to the
exchange of resources between business partners following a distributive channel.
Expanding on this view and following the development of the business network theory,
researchers like Axelsson and Easton (1992), and more specifically Easton and Araujo
(1992), emphasised the integration of other types of relationships into the business
network context. Araujo et al. (2003) introduce multiple boundaries and direct and
indirect interactions, including aspects like competition. Mouzas (2006) further discusses
widening the network to study the whole inter-organisational network to include aspects

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like competition and other relationships besides the industrial relationships in the context.
Accordingly, this study adjoins the research by Easton and Araujo (1992), Araujo et al.
(2003), Halinen and Trnroos (1998), Welch et al. (1998), Welch and Wilkinson (2004),
Bengtsson and Kock (1999, 2000), Hadjikhani et al. (2008), and expands the business
network boundary. In line with Johanson and Mattson (1987) and Anderson et al. (1994),
the study thus involves three interrelated areas:

the focal business relationship with

the connected relationships to business partners in the distributive channel

the connected relationships to competitors and ancillaries composing the network

context.

Thus, as an alternative perspective on how companies might select an ERP system, this
article puts forth a perspective where markets are seen as made up of business
relationships with a connected relationship in a network context. To get involved in a
business relationship can thereby be seen as an investment which needs to be managed;
but such investment also offers access to the other partners product, process and market
knowledge (Thomas and Ford, 1995; Turnbull et al., 1996). This means that the company
that knows how to manage its portfolio of business relationships can gain a competitive
advantage (Ford et al., 2002). The lessons learnt and adaptations made in one business
relationship often affect other business relationships, and that the business done with one
partner may enhance or limit the business with another (Cook and Emerson, 1984; Ritter,
2000; Hkansson and Ford, 2002). Basically, this means that what takes place in a
business relationship, e.g. the development of an information technology, can be used in
a companys other business relationships. It also means that a company can use the
lessons learnt by a partner in its other business relationships, i.e., an adaptation of an
information technology (IT) used in a seller-buyer relationship may also be used in the
sellers as well as the buyers other business relationships.
Companies are more or less aware of their business relationships and their position in
the overall business network, but those who acknowledge this view can actively work
towards sustaining or creating a position in the network. Given that each business
relationship is a kind of asset controlled by two partners, interdependency is introduced,
i.e., no company can navigate and affect its business relationships without the
surrounding partners acceptance. However, any company that actively works towards
securing business relationships that give access to the necessary know-how and resources
for its ongoing business and future strategies, has a better chance to succeed in its
business (Wilkinson and Young, 2002). That type of company consciously arranges their
activities so they can utilise their resources and use their available staff in an optimal way
in the interaction they have with all of their partners (Hkansson et al., 2009; Ford et al.,
2003). Following this articles aim, this means that a company can seek new business
relationships that give access to important resources, but in general it might also involve
terminating business relationships that require more investments than they bring in return.
When it comes to technologies such as ERP systems, they will require a business
relationship with an ERP vendor that offers the necessary implementation and
management services. Once in place, the ERP system will affect the companys way of
carrying out its business, and thereby also the companys other business relationships.
ERP systems are also a basis for inter-organisational use (i.e., e-commerce), which means
that they allow the adopting company to handle some of the ongoing business exchanges

ERP selection through business relationships

69

automatically (Gay et al., 2007; Davenport, 2000). Thus, assessing a companys network
context can be used for both understanding business practice as well as analysing the use
of IT between companies.

On methodology

To gain an insight into how an ERP system is selected and implemented in a company,
this article uses two case descriptions to illustrate the phenomena. The cases are based
upon a research project, spanning 11 companies and over 100 interviews, carried out
from 2002 to 2008. Case studies are considered appropriate when aiming for theoretical
propositions, and in such circumstances the case selection is based upon theoretical
replication (Eisenhardt and Graebner, 2007). Given that the studies that laid the
foundation for the concepts and models of business relationships and business networks
were, to a large extent, carried out at industrial companies (Hkansson, 1982), the same
category of companies was selected for this study. The research project covered
companies of different sizes, from those with 40 employees to large multinationals, and
all of the participating companies can broadly be defined as industrial companies. The
two illustrative cases are Kanthal ABs implementation of an ERP system (the study was
carried out in 20022003 with 14 interviews) and CH Industry ABs selection of an ERP
system (the study was carried out in 20052008 with eight interviews). The average
length of the interviews was approximately one hour.
Case studies encourage multiple data collection methods, and during this study data
was collected through interviews (both recorded and written, depending on the
respondents preferences), non-participating observations, documents, web pages and
information systems, data schemes, and multimedia. The design of the cases was inspired
by Yins (2009) descriptive analysis. To extract the case description logic we used an
analytical coding procedure, where business relationship and technology aspects where
highlighted and collected from interview transcripts and other written or graphical
information. This analytical process was supported by a theoretical framework founded in
information systems and business relationship concepts.
The two cases that are used to illustrate the importance of connected business
relationships in this paper are representative when it comes to how companies can go
about getting an ERP system. The first case study illustrates a larger company that needs
to be highly involved in the creation of new best practices, given that the ERP vendor
initially couldnt offer the processes that the company needed. The other case illustrates a
smaller company that selects an ERP vendor based upon some of its existing customers,
which thereby gained access to the functionalities (i.e., best practices) that they had
developed in cooperation with the vendor. Some of the respondents have left the
companies and been replaced by new employees since the case studies. When necessary,
the former staff was contacted, via phone or email, during 2008 for clarifications. We
also presented drafts of the cases to the current management for comments and
complementary data. This complementary data has been collected as a means of getting
the case descriptions as adequate and correct as possible. The two cases have been
selected as representative cases given that the ERP system implementations have been
completed, i.e., the systems main functionality could be studied in the onward and
upward phase, where the extent of the ERP systems use can be seen (Markus et al.,
2000). This means that the respondents have been able to reflect upon the effects the ERP

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system has given their company. The case descriptions have been abbreviated and
clarified to fit the purpose of this paper.

Two illustrative cases of a companys ERP system selection

The following sections will describe how a larger company, Kanthal AB, selected their
ERP system and how the implementation process looked. This is followed by a
description of how a smaller company, CH Industry AB, selected and implemented their
ERP system. The cases both illustrate the process of obtaining an ERP system, their
interaction with the ERP vendor, and the effects of having an ERP system up and
running. It is worth mentioning that the cases give a historical perspective, i.e., both
companies may have continued upgrading and adjusting their ERP systems after the
interviews were conducted.

5.1 Kanthals need for a new ERP system

The first case presented is Kanthal AB, a Swedish industrial company within the Sandvik
Group that produces heating components. Kanthal is a global actor with more than 20
subsidiaries worldwide and a large number of partners. In the late 90s, Kanthal and their
legacy system faced the Y2K problem. Besides the need for an ERP system that could
handle Y2K, Kanthals IT-staff also felt that the existing legacy system did not develop
in a direction that was beneficial for Kanthals business. In this process they scanned
potential ERP vendors and decided to go with the ERP vendor Intentia, which was the
1
worlds seventh largest ERP vendor at the time of the study .
Once the ERP vendor had been selected, the hard work with getting a functional and
suitable ERP package began. Kanthal was moving towards a processoriented workflow
and that needed to be supported by the ERP system. An Intentia representatives
description was that Kanthal wanted a manufacturing system, i.e., the initial aim was to
get an ERP system that supported Kanthals manufacturing. Thus, the company needed
modules for procurement, material and resource planning, and logistics. Kanthals
intention was to go with standard solutions as far as possible, but there was one
fundamental problem with the Movex modules available and their best practices. Whilst
traditional industrial production means that several components are assembled into a final
product, Kanthal makes several products out of one large metal alloy. Whilst a
manufacturer often has thousands of articles that, together, make up a number of
products, Kanthal based their production of a limited number of alloys that, together,
made up a product flora of thousands of products with different dimensions, qualities,
and so forth. This resulted in a large number of product codes that had their origin in one
material i.e., based upon the reverse logic to a traditional manufacturer. This meant that
Movex had to be further developed to deal with Kanthals production. In the end, when
all the necessary changes had been completed, Intentia had made more than 200
customised adjustments in Movex to be able to fulfil Kanthals needs.
Kanthals IT manager that handled the implementation of Movex mentioned that the
errors that were encountered when Movex was implemented, and during its start-up
phase, were mainly problems originating from these adjustments. Kanthals customer
contact at Intentia admitted that these changes were necessary, but Kanthal was not an
extraordinary case. Changes are made in most projects. Even if some problems were

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71

encountered in the start-up, overall Kanthal seems pleased with their new ERP system.
Kanthals Movex manager described his view of the outcome: (Movex) should support
our business considerably better than our old information system and it does. To our
favour, this has evolved very well!
Besides having to adjust Movex for working according to the logic of having a steel
alloy that became several products, Kanthal also needed to adapt a reporting function in
the ERP system. Given that Kanthal is a global company, they had to use several contract
and payment routines. For customers or countries where payment might not be secure,
they used letters of credit. That means that the customer had to engage a local bank that
held the sum of the payment until the products were delivered, and then the agreed
payment was transferred from the bank to Kanthal. However, to get the money
transferred, the delivery had to be precisely as stated in the initial letter of credit. In
practice this was impossible. The IT manager described that a sold 50 kg heat element
was usually a bit heavier in practice, e.g., 50.3 kg, and Movex registered the exact
weight. That meant that Intentia had to make a manual correction to Movex so that
Kanthals order staff could adjust the final shipping document manually, so it stated 50.0
kg (and then they gave the customer 0.3 kg). With this change, the ERP system could be
used for most of Kanthals markets.
Kanthal did not only implement Movex. They also acquired some OEM software that
complemented Movexs functionality. Some of Kanthals customers only required basic
business and product information in their quotations and delivery documents, whilst
others wanted a more comprehensive documentation with each order. Some customers
only wanted one copy and others demanded several copies with a specific layout, and so
forth. To solve these requirements, Kanthal acquired a software solution named
StreamServe and this software was used for dealing with all the customer demands.
Intentias salesmen explained that Kanthal considered this document functionality to be
important, i.e., it needed to be solved somehow. After a couple of years, Intentia made a
deal with StreamServe so this functionality became a standard function in Movex. Thus,
in future upgrades Movex could handle different printers as well as different customer
specific documents.
A couple of years after Kanthals implementation of Movex, Intentia launched a steel
module that could deal with alloys that were turned into several products. This was
something that Kanthals IT Manager thought was the result of Kanthals demand for an
application that had this reversed logic, i.e., which made several products out of one
alloy. A positive outcome from Kanthals customised solutions becoming a standard
module in Intentias Movex was that the errors encountered, which were based upon the
alternations Kanthal had made to the ERP system, became fewer.
Once Movex was implemented, Kanthal did not settle. Instead, they continued adding
functionality as interorganisational functionality via electronic data interchange (EDI)
and a web-shop. They also upgraded Movex, as soon as Intentia had a function, called
multiple unit coordination (MUC), which allowed Kanthal to integrate other plants into
their ERP system. The MUC functionality was not specifically developed for Kanthal. It
was a function that Intentia had learned that several larger customers needed. Kanthal
also implemented an e-commerce functionality with web access. With these changes,
Kanthal is available perpetually and worldwide, securing that orders and production runs
efficiently and without interruption. All this is made possible because of Intentia and their
Movex ERP system.

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5.2 CH industrys purchase of an ERP system

The second case presents CH industry that was founded by Carl Hellberg in 1948 as a
small supplier of welding parts to Munktells AB, that later became Volvo Construction
Equipment (Volvo CE). Today CH industry has grown to a company with more than 70
employees, which has a stable customer base with large multinational companies such as
Volvo CE, Ericsson and ABB. CH Industry specialises nowadays in the production of
metal products in small and medium batches, a segment where the competition from lowcost countries is not very strong. CH Industrys present CEO and owner is a grandchild of
Bengt Lindberg, who became a partner to the firm in the early 50s. The firm has thus
family ties back to the early days, even if todays employees are mainly hired labour. The
majority of employees at CH Industry are blue-collar workers and the administrative
overheads are kept to a minimum (nine out of 70 employees), something that seems to be
the result of the firms history as a small privately owned company and lately due to the
implementation of their ERP system.
The company has had a stable increase in orders with a 70 MSEK turnover at the time
of the case study in 2005, and they continue to grow with a 115 MSEK turnover in 2007.
The early business with Volvo CE has been nurturing when it comes to expansion. CH
Industry had 25 employees in 1980, 36 employees in 1996, and 70 employees in 2008. To
support a more efficient production and continuous growth, CH Industry invested in the
ERP system Movex from Intentia back in 2001. Prior to the investment, an investigation
of potential ERP vendors was made and after the initial contacts and negotiations two
candidates remained; the ERP vendor Intentia and a smaller Swedish ERP vendor. Whilst
Intentia was a larger ERP vendor, the smaller ERP vendor was primarily active in the
Swedish market with a clear focus on the segment small and medium-sized companies.
There were also differences between the two ERP systems Movex from Intentia was
clearly the more extensive system but also the more complex and expensive choice.
CH Industrys final selection of an ERP system was not an easy decision. Even if
Movex was considered a more competent solution, it was also a more costly technology.
However, there were reasons for considering Intentia as a supplier, given that they
seemed stable and had a broad customer base. From CH Industrys point of view, the
existing customer base was expected to generate new best practices with support of the
ERP system Movex. With the kind of customers that Intentia had, CH Industry was sure
that the ERP system would be further developed in a positive direction. As the IT
Manager at CH Industry described: Given that Intentia had (large companies successful
within the manufacturing and metal industry as customers) we do not need to worry that
Movex wont be further developed.
Thus, Intentia already had well-respected and demanding companies as customers,
which meant that CH industrys CEO and IT manager were assured that Movex would
continue to be an asset in the future. The IT manager described the selection and
implementation of the ERP system as a huge task, and pointed out that you dont want to
implement a new system like that after five years. Given that CH Industrys management
planned for further expansion, as well as anticipated increased customer expectations, it
was important to get an ERP system that also would stand the test of time. Movex was
probably four times as expensive as the smaller vendors ERP system, but CH Industrys
managers thought that this would yield a payoff during the coming years.

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73

CH industry started by acquiring modules for ordering, production and logistics in

2001, and added the HR module the following year. In contrast to Kanthal, CH Industry
did not make as many adjustments in Movex. CH Industry went instead with a standard
solution, and then complemented the ERP system with other information systems. Thus,
besides the ERP system, CH Industry also used a Lotus Domino document management
system for storing and handling customers drawings. This information system was not
integrated with Movex as that would have been too costly, but Movex could hold
document references in its production descriptions so that the workers could see what
drawing they should open in a Microsoft imagine application when they manufactured a
new order.
Once CH Industry had the Movex system from Intentia up and running, changes
could be made to the organisation. The manager at CH Industry, who had been
responsible for the Movex implementation, described how Movex took care of the most
of their business transactions, from orders and order notifications to delivery and
invoicing. One radical change made possible by Movex was to reduce the number of staff
that managed the orders and instead by automatically transform the orders into
manufacturing instructions. Given that Movex made the MRP run automatically, the
order staff was initially halved from six to three people and later reduced to two and a
half people dealing with orders (as efficiency increased when the staff became more
familiar with the system). The activities required for dealing with the delivery schedules
was heavily decreased what used to occupy two to three people was now automatically
checked and dealt with by Movex. With the new ERP system, CH Industry also went
from daily production schedules to updating the production schedule four times per day.
This was a change from having papers that were transferred manually and displayed in
the workshop to having monitors located at the different production lines. The
manufacturing therefore became more flexible, and nowadays it is possible to alter the
scheduled production when necessary.
Movex has not only reduced the need for order handling staff, it has also made the
manufacturing process more efficient. One example of this is the welding department
where the plant holds four rigs, and where automatic welding takes place. The rigs and
the welding equipment can all carry out basic welding tasks but there is only one rig that
can do more complex tasks. Traditionally, the welding was only seen as one production
task and this lead to the production sometimes being stopped, when a complex part had to
wait for the advanced rig to complete a standard component. By giving the four welding
rigs different identities in Movex, the bottleneck was removed. Movex takes into
consideration the differences between the rigs when doing the MRP runs and the advanced rig can thereby be used more efficiently.
CH industrys ERP system also became a central factor when it came to the
companys quality work. As a supplier to the vehicle and telecom industry, standards
such as ISO9000 and ISO14000 must be followed. Movex is frequently mentioned in the
ISO-standard documents that describe different procedures, but Movex also has functions
that can increase the quality itself. As the quality manager described:
Quality is A and O (implying utmost importance) (and) Movex is a part of the
quality work. Movex was expensive, not to mention the annual fees, but it has
made our manufacturing more efficient.

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P. Ekman and P. Thilenius

Movex can, e.g., automatically send a signal when a tool has made 5000 holes and needs
replacing. The Quality Manager sometimes referred to Movex as the most important
machine we have. Today, CH Industry has hired a new Quality Manager and his primary
task is to attain TS16949 (an extension and development of the ISO9000 quality
standard), which is the current industry requirement. Here Movex procedures will be
even more apparent. Through the standardised procedures in Movex the workers can
more easily rotate between tasks, and this prevents a stop in production due the absence
of a key worker.
The ERP system also allows CH industry to be interorganisationally connected to all
its customers via EDI, and this has affected their business transactions that now run more
smoothly as well as allowing all orders to be handled more quickly. Some of the larger
customers require the supplier to use EDI if they want to be considered an A-supplier.
With Movex, CH industry fulfils such a demand. The former IT Manager also describes
how, even if Movex was more expensive than the smaller ERP vendors system, another
company that implemented the less extensive and less expensive ERP system, aimed at
smaller businesses, spent three months and 25.000 on a new EDI connection, whereas
CH industry only needed a day to set up an EDI connection to a new customer. Movex
has thereby paid for itself, given that it is a more complete ERP system.
Intentia offers support when CH industry needs expertise regarding the technical
aspects of Movex. Intentia may, e.g., join CH industrys sales representatives when they
discuss technical interorganisational connections (such as EDI) with large and demanding
customers. CH Industry can thereby focus on their core business activities and leave ERP
related questions to Intentia. But Movex, and the support by Intentia, does not only help
CH Industry to fulfil formal aspects such as supplier requirements. It also gives proactive
support when it comes to being correctly evaluated by their customers. The previous
quality manager mentioned that Movex signals when a new order arrives with a delivery
date that is shorter than contracted. In these cases one of the customer managers can
contact the customer and inform them that they have registered an incorrect order. With
this function CH industry avoids getting bad delivery statistics due to inaccurate
specifications from the customer and the customers also notice that CH industry is an
attentive and active supplier.
CH Industry has not migrated from Intentias Movex to Lawsons later ERP version
M3, as the CEO does not feel that an upgrade will provide such great benefit. Movex has
performed well, even if the number of sales and hence transactions have steadily
increased. In 2008, Movex handled an order pace of approximately 20,000 order-lines per
week. If there is a change of ERP system in the future there could be an upgrade or
replacement of vendor. CH industry does not feel obligated or locked-in by Movex even
if they are pleased with the ERP system and the support the vendor Intentia offers. One
minor flaw is that Movex is regarded as more function-oriented than process-oriented,
and that is where a future update could make a change. Besides that, Movex is doing its
job and the investment that seemed huge in 2001 has paid off.

Discussion

An ERP system is IT in the form of standardised company-wide information

systems offered by various ERP vendors. The functioning of these ERP systems is
partly adjustable to the ERP vendors customers needs, i.e., usually some technological

ERP selection through business relationships

75

adaptations are made (Al-Mashari, 2002; OLeary, 2000; Davenport, 1998). However,
these regular adaptations are also beneficial for the ERP vendor in that they update the
ERP system, thereby improving its functioning and application range. The two cases
presented in this paper are based upon the same ERP vendor, Intentia, and their ERP
system, Movex, but this is seemingly the only resemblance. Kanthal, a large, globally
operating actor and part of the Sandvik Group, could afford to select an ERP vendor that
did not fully comply with their needs but where the vendor seemed competent during the
negotiations. When the decision on Movex was made, Intentia did not have a set of
predefined functions or a module that supported Kanthals manufacturing, i.e., several
products derived from one single alloy. Nor did they have a function that could handle
the weight of data for Kanthals letters of credit This meant that before Kanthal could
reach the onward and upward phase and be fully utilised (Markus et al., 2000), Intentia
had to make more than 200 changes to the system at significant costs. A representative at
Kanthal also pinpointed that it was these software adaptations that initially caused errors,
which resulted in Kanthal having to invest time and efforts to solve. However, the
necessary adaptations were not that unusual according to Intentias representative the
errors that occurred were of a temporary nature given that afterwards Intentia could
launch a steel module, i.e., a standardised set of functions directed towards companies
with similar products and production as Kanthal. The experiences from the business
relationship with Kanthal meant that the ERP vendor Intentia could offer new functions
to other customers features that meant that the procedures developed in the adaptation
process with Kanthal had become standardised solutions (i.e., best practices) in the ERP
system Movex. This standardising of best practices lowered the risk for errors given
that the earlier customising had now had become standard functionalities thoroughly
tested with other companies.
In the case of Kanthal, new functions were created through the adaptations made to
Movex based upon the interaction between Kanthal and Intentia. Once Intentia had
developed all the necessary procedures, following the reversed logic for creating many
products from one alloy, such functions became parts of Intentias Movex Steel module.
This means that the ERP vendor Intentia could use the development efforts from the
adaptation process in the business relationship with Kanthal in other (current or new)
customer relationships. Conceptually, this can be viewed as a connected relationship
phenomena; what happens in one business relationship can be used in other business
relationships (Hkansson and Ford, 2002; Ritter, 2000; Cook and Emerson, 1978). In
effect, Intentia might get future customers (marked with dotted lines) with similar needs
as Kanthal, and the former will then have the opportunity of selling the Movex Steel
module, and the functions that are the result of the business relationship with Kanthal
(business relationships are represented by a thick line in Figure 1).
Thus, initially the process of adaptations made to develop a customised solution gives
Kanthal a competitive advantage, given that they can perform their business activities in a
more efficient way. However, this advantage is of a temporary nature, given that once the
functions are developed they can easily be transferred by the ERP vendor in its new
business relationships. There was also a reversed flow of practices Intentia chose to
acquire the StreamServe functionality, which thereby became a standard feature in
Movex and eliminated Kanthals need for another IT vendor. Kanthal could also upgrade
to a new functionality (MUC) that allowed them to coordinate their different subsidiaries
and plants in one ERP system; a functionality that had been developed in Intentias other
business relationships. Any adaptation made in one business relationship can thereby be

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P. Ekman and P. Thilenius

used in connected business relationships, whether it is with a partner, an ancillary or a

competitor.
Figure 1

An illustration of how the ERP functions and modules (best practices) that Kanthal and
Intentia developed can later be used in Intentias other business

Potential ERP
system customers

Supplier

Kanthal

Intentia

Competitor

Customer

Potential ERP
system customers

Customer

Supplier

Business
relationships

New functions:
(best practices)

CH industry, on the other hand, is a smaller company with less financial means and
therefore does not have the same opportunity to develop a customised ERP system
through costly adaptation processes. However, CH Industry identified a chance to get the
functionality that larger companies had by selecting an IT vendor with large and
successful customers. CH industry acknowledged its dependency on the wider business
network, and by creating a bond with an ERP vendor they got access to what the vendor
had created in cooperation with other successful customers. CH Industrys management
was networking (Hkansson et al., 2009; Ford et al., 2003) to get a business relationship
that would secure their future access to new functions and know-how. By assessing the
ERP vendors in that way, CH industry got the same ERP system and function as other
companies involved in extensive interaction and adaptation processes with Intentia.
The CH industry case illustrates a situation that clearly differs from that of Kanthals.
CH Industry was in a sense leapfrogging its way to new technology through the access
to a new business relationship that allowed them to tap into current functionality and
know-how (see Figure 2). This strategy means that the company seeks a new business
relationship where the partners connected business relationships, and the adaptations
these connected business relationships bring, provide offers and opportunities that

ERP selection through business relationships

77

increase the companys competitive edge. In the case of a technology such as an ERP
system, it means that more aspects than the price and main functionality of the system
have to be considered, e.g. issues like what services become available, what know-how
and expertise does the vendor represent, and what is the vendors wider customer
network.
Figure 2

Example of how CH industry acquired ERP functions and modules (best practices)
from Intentias interconnected business relationships

Supplier

Development of functions
(best practices)

Development
of functions
(best practices)

Offered functions
(best practices)

CH industry

Supplier

Intentia

Competitor

Business
relationships

Customer

Development of functions
(best practices)

Customer

As illustrated in Figure 2, the result of forming a business relationship with an ERP

vendor is to tap into its other prevailing business relationships, and hence gain access to
the functions that the vendor has developed in the business relationships with others.
Thus, the prevailing technology is the result of a history of committed partners making
adaptations that have lead to a more competitive position for the client company (Halln
et al., 1991, 1993). These other companies might be partners of the focal company, i.e.,
companies following the distributive channel, but they can also be ancillaries, other
external companies or even competitors. When a company is selecting an ERP system
and is choosing between two or more vendors, it can assess the vendors customer base
and find the vendor that has customers deemed to have a competitive and efficient
business process. It is most likely that these customers are important to the ERP vendor
and will demand regular updates and new versions of their ERP system, driving the
adaptation processes in the business relationships forward. This process is also beneficial
for the vendor lessons learned in one business relationship might also be used in other

78

P. Ekman and P. Thilenius

business relationships. Following a logic where business relationships themselves are

seen as a valuable resource (Wilkinson and Young, 2002), they can thereby be an entity
that leads to the establishment of other, new business relationships.
Conceptually, this means that the result of an adaptation process in one business
relationship might later be used in other connected relationships. The origin of these
functions may also be known or unknown. The company that becomes involved in a
business relationship with an ERP vendor will also, to a varying extent, require
adaptations that might later become a standard function available to all even
competitors. Thus, a company can evaluate their vendors relationships with other
customers; i.e., what connected business relationships does the vendor have, what
demands might the vendors customers have, and what are the results of the adaptation
processes in these connected business relationships? In contrast to just evaluating the
ERP vendors segmentation of markets and their solvency, a networking approach moves
the focus to discrete, and existing connected business relationships that are not static but
continuously changing through the exchange and adaptation processes.
Figure 3

Four flows of information

Supplier

(d) Knowledge
drainage

(b) Ancillary or supporting

knowledge

Supplier

(c) Competitor
knowledge

(a) Partner
knowledge
Focal
company

ERP
vendor

Competitor

(b) Ancillary or supporting

knowledge
Customer

Customer

The alternative approach proposed for the company selecting an ERP system involves
considering four different flows of information, and the business process (best
practices) these might support, stemming from the ERP vendors network context of
connected relationships, as illustrated in Figure 3. The first flow would be information
infusing from:

ERP selection through business relationships

a

79

Business partners, i.e., suppliers or customers that might have good solutions that the
company can use. When such information is exchanged it falls within the frame of
traditional business relationship adaptation processes, but with the IT vendor as a
mediating or facilitating partner. With technologies such as ERP systems, that might
be used for interorganisational communication through EDI and XML standards,
which might make the ongoing business exchanges even more efficient.

The second information flow to be considered, concerns infusion from:

b

Ancillaries/supporting companies known or unknown to the company. Thus, the

origin of the received information is less important and they are probably described
as branch or de facto standards.

The third knowledge flow originates from:

c

Competitors. This form of information infusion means that a company can invest in
catching up with a competitor, and thereby reduce the competing companys
competitive advantage. Such a venture does not offer the company any advantage but
it can bring the company and its competitor to a status quo. Finally, there is also a
downside to becoming involved with a vendor of generic technologies.

The focal company will, through the business relationship with the ERP vendor, also be
diffusing information through:
d

Drainage, i.e., the companys best practices, and knowledge will be exposed through
the technology structure and functionality, and thereby be available to others.
Whether this is acceptable or not must be up to the company to decide. An initial
assessment can therefore be to examine which business relationships the vendor has
and which of the knowledge flows mentioned that will be dominant.

Through these information flows, a focal company in a business relationship with an ERP
vendor providing generic technology will, to some extent, benefit from the results of
development in the adaptation processes in the business relationships the vendor has with
others. However, the business relationship with the ERP vendor is double-egged.
Eventually, the ERP vendor will offer the results of the focal companys investments in
adaptation processes to all its other customers including the focal companys
competitors.

Conclusions

This article has put forward ERP systems as a form of IT that is developed as a solution
for a wider customer segment. There are many such generic IT-solutions, such as
customer relationship management (CRM) systems, business intelligence systems,
web-shops, and so forth; technologies that are designed in cooperation with customers
and aimed at a broader customer base. Thus, adopting standardised IT that is used by
other successful companies, means gaining access to business processes that are
embedded in this technology. However, being connected to a vendor of a generic IT can
have both pros and cons worth considering. IT as an ERP system is the result of the
vendors business relationships and the resulting adaptations which means that the
present functionality is a compound of earlier interactions. Given that the continuous

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P. Ekman and P. Thilenius

development and future versions of the IT are descended from the vendors business
relationships and general technology advancements, the IT thereby becomes a
representation of the strivings that are present in that specific network context.
Companies that want to get a head start in the technology race can thereby apply a
plug-and-play strategy by getting involved with a vendor that has ongoing business
relationships with other high-performing customers. Thus, the connected business
relationships and their effects on what the vendors is offering will indicate what to
expect now and in the future, when it comes to the ITs functionality.
This kind of vendor mediated technology transfer of best practices and knowledge
probably comes with a temporal delay, and the adaptations made are also probably
further modified by the vendor so they fit a wider group of customers. Thus, there will
not be an identical installation of any ERP system, nor of other similar complex and
company-wide technologies. Many companies will also put the new technology in a
present technological infrastructure containing other, more or less integrated,
technologies that thereby comprises their individual information structure, which is hard
to copy. Furthermore, the competitive advantage with implementing a generic solution
must be seen as momentary, and partly open and reusable.

Future studies

The structure and logic of ERP systems offer researchers an excellent opportunity to
carry out studies of business relationships and networks change processes. Given that
their final manifestation of the IT is a mix of the vendors prior business relationships and
the new customers needs, it becomes a changing entity formed by the current and
historical adaptations. To fully understand this process, the IT vendors role in this
network setting needs to be further studied. How does the vendor package the knowledge
it has gained and how does a business relationships specific adaptation become a
solution that can be used in other connected business relationships? A process study of
how generic technologies are diffused by cooperating and competing companies would
also be interesting; is this form of IT creating a level field and how do the individual
companies act in order to gain a competitive advantage in this setting?

Acknowledgements
The research was partly funded by the European Union (Project Automation Region) and
by Handelsbanken Research Foundations.

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Notes
1

Intentia was acquired by the American ERP vendor Lawson in 2006 and the updated Movex
system is labeled Lawson M3. The former names Intentia and Movex will be used throughout
this article, given that this is the labelling that was used by the respondents at the time of the
case studies.