This article was downloaded by: [National Agency of Science and Technology Information]

On: 12 January 2012, At: 04:29

Publisher: Taylor & Francis
Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House,
37-41 Mortimer Street, London W1T 3JH, UK

Information Systems Management

Publication details, including instructions for authors and subscription information:
http://www.tandfonline.com/loi/uism20

ERP Usage in Banking: An Exploratory Survey of the

World's Largest Banks
a b a c
Carolin Fuβ , Ralf Gmeiner , Dirk Schiereck & Susanne Strahringer
a
Banking & Finance, European Business School, International University, Schloss
Reichartshausen, Oestrich-Winkel, Germany
b
European Business School, International University, Schloss Reichartshausen, Oestrich-
Winkel, Germany
c
Information Systems, European Business School, International University, Schloss
Reichartshausen, Oestrich-Winkel, Germany

Available online: 10 Apr 2007

To cite this article: Carolin Fuβ, Ralf Gmeiner, Dirk Schiereck & Susanne Strahringer (2007): ERP Usage in Banking: An
Exploratory Survey of the World's Largest Banks, Information Systems Management, 24:2, 155-171

To link to this article: http://dx.doi.org/10.1080/10580530701221056

PLEASE SCROLL DOWN FOR ARTICLE

Full terms and conditions of use: http://www.tandfonline.com/page/terms-and-conditions

This article may be used for research, teaching, and private study purposes. Any substantial or systematic
reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to
anyone is expressly forbidden.

The publisher does not give any warranty express or implied or make any representation that the contents
will be complete or accurate or up to date. The accuracy of any instructions, formulae, and drug doses should
be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims,
proceedings, demand, or costs or damages whatsoever or howsoever caused arising directly or indirectly in
connection with or arising out of the use of this material.
 Information Systems Management, 24:155–171, 2007
Copyright © Taylor & Francis Group, LLC
ISSN: 1058-0530 print/1934-8703 online
DOI: 10.1080/10580530701221056
ERP Usage in Banking: An Exploratory
Survey of the World’s Largest Banks
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Carolin Fuß
Endowed Chair for Banking
& Finance,
European Business School,
International University,
Schloss Reichartshausen,
Oestrich-Winkel, Germany.
Ralf Gmeiner
Research Assistant,
European Business School,
International University,
Schloss Reichartshausen,
Oestrich-Winkel, Germany.
Dirk Schiereck
Endowed Chair for Banking
& Finance,
European Business School,
International University,
Schloss Reichartshausen,
Oestrich-Winkel, Germany.
Susanne Strahringer
Chair for Information Systems,
European Business School,
International University,
Schloss Reichartshausen,
Oestrich-Winkel, Germany.
Address corrrespondence to
Susanne Strahringer,
European Business School,
International University,
Schloss Reichartshausen,
65375 Oestrich-Winkel, Germany.
E-mail: susanne.strahringer@ebs.de
Abstract  As banking is currently considered a non-typical area for ERP
usage, the authors conducted a survey on anticipated benefits, potential
disadvantages and implementation success associated with ERP adoption
in banking. The results indicate that, despite a predominant usage of ERP
systems in back-office areas, banks see ERP systems as a long-term strategic
investment to support organizational effectiveness.
Keywords  enterprise systems, investments in IT
Because enterprise resource planning (ERP) systems developed from mate-
rial requirements planning (MRP) and later manufacturing resource planning
(MRP II) systems, ERP systems were initially deployed by large manufacturing
firms. Today, market saturation in capital-intensive manufacturing industries
is high as, according to Magnusson, Nilsson, & Carlsson (2004), 70% of the
Fortune 1000 companies already run ERP systems. Forrester Research (2004)
estimated that the total market for ERP systems (licensing­, maintenance, and
consulting) will reach the USD 20 billion mark in 2005. Compared to this
number, the USD 447 million market for ERP systems in banking (Gartner
Dataquest, 2004) appears quite small. Despite a considerably lower dis-
semination of ERP systems in banking as opposed to manufacturing, banks’
recent willingness to replace custom-built legacy applications with ERP sys-
tems has seen a steady growth (Berensmann, Keller, Pfaff, & Skiera, 2004).
As we argue in this article, ERP-adopting banks are not simply following
their manufacturing industry peers but have some unique information tech-
nology- (IT) and business-related motivations to use ERP systems.
ERP systems are large, integrated software packages that offer solutions
for administrative and, depending on the industry, also for core-business
processes. On the one hand, ERP systems provide integration at the data
level because they operate on a shared set of data (Hedman & Borell, 2003).
On the other hand, the modular structure of ERP systems also allows the
integration of different functional areas. Their integratability and extensi-
bility are two distinctive features of ERP systems vis-à-vis other types of
commercial off-the-shelf software. ERP systems thus enable a seamless inte-
gration between modules and avoid data redundancies (Davenport, 1998;
Poston & Grabski, 2001).
There is dissent on the scope of functionality provided by ERP systems
(Yen, David, & Chang, 2002; Al-Mashari, Al-Mudimigh, & Zairi, 2003). Some
155
 authors favour a (traditional) narrow definition of
ERP systems, claiming that ERP systems primarily
comprise industry-independent back-office func-
tionalities whilst leaving core-business processes
untapped. Others argue in favour of a broad ERP def-
inition that sees ERP systems include both industry-
specific core and generic administrative processes.
Which definition is suitable largely depends on the
industry analysed. Since ERP systems originate from
manufacturing industries, they can be assumed to
cover all core-manufacturing and supporting busi-
ness processes. Therefore, in manufacturing, a
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
broad ERP definition seems appropriate. In service
industries where the dissemination of ERP systems
is lower, the scope of ERP functionality is smaller
and rather focuses on non-specific processes, such
as accounting or human resources (HR). In services,
a narrow ERP definition would appear applicable
and consequently, we would expect ERP systems in
banking to embrace mainly back-office functional-
ities. However, in offering ERP systems to banks,
ERP vendors have gradually widened the scope of
functionality to also encompass some core-banking
processes (e.g., SAP, 2005). In our later analyses, we
explore large international banks’ understanding of
ERP system scope and their expectations towards
ERP systems to cover core-banking functionalities.
IT deployment in banking
Banks are widely acknowledged to heavily
depend on IT (Chowdhury, 2003). In the U.S., bank-
ing is the most IT-intensive industry as measured by
the proportion of computer equipment and software
to value-added (Berger, 2003), with IT spending aug-
menting to 8% of average revenue (the average ratio
of IT spending to revenue for all other industries is
approximately 2 to 3%), and IT spending represent-
ing about one third of average operating expenses
(Berensmann, 2005; Rebouillon & Müller, 2005). This
pattern of extensive IT usage in banking is assumed
to be similar across countries (Zhu, Kraemer, Xu,
& Dedrick, 2004). However, this high level of com-
puterisation has turned out to be a double-edged
sword for many banks.
Since the early days of electronic data processing,
banks have traditionally relied on in-house devel-
opment. After the birth of simple batch-processing
Fuß et al. 156
ERP systems can also
remarkably cut IT costs.
systems in the 1960s, the 1970s saw the emergence
of what is today conceived of as legacy applications
(Moormann, 1998). These legacy systems have his-
torically been built around banks’ product lines,
e.g. loans, deposits and securities, with very limited
cross-functional information flow (Chowdhury, 2003).
Although, in the following decades, many banks
abandoned mainframe-based technologies in favour
of client/server applications, old-days monolithic
legacy systems still largely shape today’s IT infra-
structure (Betsch & Thomas, 2004). Obviously, there
have been substantial IT-driven business innovations
in banking, such as automated teller machines and
electronic fund transfer, which not only increased
bank efficiency but also significantly benefited con-
sumers (Dos Santos & Peffers, 1995). Unlike other
industries, however, banks have not yet undergone
an ample transformation of business processes that
would ultimately force them to redesign their IT
infrastructure in a modular, integrated, and more
flexible manner (Betsch, 2005). As a consequence,
instead of seamlessly integrating business processes
and underlying information systems (IS), current IT
architectures frequently force banks to make use of a
number of isolated solutions in order to perform even
standard business activities, such as loan application
processing. But prevailing legacy systems are not
only problematic in terms of data processing. They
are also a major cost driver as approximately two
thirds of banks’ IT budgets go to the maintenance
of legacy applications (Rebouillon & Müller, 2005).
Thus, in spite of heavy investments in IT, existing
infrastructures are often an obstacle to efficiently
and effectively running a bank and to advancing the
industrialisation of banking, e.g. via outsourcing.
Even with their manufacturing industry back-
ground, modular and flexible ERP systems can alle-
viate some of the legacy application problems in
banks since ERP systems can help banks to more
efficiently align business processes and IT (Veitinger
& Löschenkohl, 2005). In addition to enhancing
bank-wide process integration, data availability and
accuracy, and decision-making support, ERP systems
can also remarkably cut IT costs. After a common
 multi-year implementation period and temporary
adjustment costs, Berensmann (2005) reports that
the German Postbank has not only been able to cut
operating expenses by one third thanks to its ERP
adoption but has also dramatically reduced time-to-
market of new products and services. The following
section highlights further ERP benefits which banks
may reap in times of massive restructuring of the
banking sector.
Beyond their legacy systems’ lack of flexibility
and functionality, many banks face severe industry-
specific pressures. Firstly, the deregulation of bank-
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
ing puts the profitability of traditional banks at risk.
By enabling the establishment of financial holding
companies, the Gramm-Leach-Bliley (GLB) Act of
1999 has radically lowered the barriers to entry in
the banking industry (Mishkin, 2001). Banks which
have hitherto been protected from competition and
have operated rather inefficiently are now being
challenged by more profitable non-bank financial
services companies. To regain profitability, banks
can, over the short-run, pursue a cost-leadership
strategy. Adopting ERP systems and redesigning
business processes can help banks to streamline
operations and to enhance efficiency as operational
benefits (Oliver & Romm, 2002; Shang & Seddon,
2002). Under a long-term approach aiming at greater
organisational effectiveness as a strategic benefit
(Hedman & Borell, 2003), banks can increase rev-
enue and market share by an innovative differentia-
tion strategy (Holland, Lockett, & Blackman, 1997;
Shang & Seddon, 2002). Product differentiation can
also be supported by ERP systems because they
permit a more flexible product configuration (Bingi,
Sharma, & Godla, 1999; Betsch & Thomas, 2004).
Secondly, the tightening competition in banking
has caused a strong consolidation trend. In 2004,
mergers and acquisitions (M&A) led to a decrease in
the number of independently operating banks in the
U.S. (in Europe) by 2.3% (6.5%), (European Central
Bank, 2004; Federal Deposit Insurance Corporation,
2004). However, the fact that, in December 2004,
8975 (8836) independent banks (European Central
Bank, 2005; Federal Deposit Insurance Corporation,
2005) still existed in the U.S. (in Europe), suggests
that concentration in banking is still low compared
to other industries and that the next bank merger
wave may still lie ahead. Since many banks seek
external growth as a means to stay competitive, the
157 ERP Usage in Banking
 Since many banks seek external
growth as a means to stay
competitive, the role
of IT integratability becomes a
crucial factor in the post-merger
integration phase.
role of IT integratability becomes a crucial factor in
the post-merger integration phase. Typical features
of ERP systems are their integratability, modular-
ity and extensibility. Hence, the usage of ERP sys-
tems may greatly facilitate IT integration (Betsch &
Thomas, 2004). Berensmann (2005) estimates that
the deployment of ERP systems by merging banks
can shorten the post-merger integration phase by 12
to 18 months and may yield cost savings of USD 60
to 80 million. These and other virtues of ERP sys-
tems cannot be overstated in the context of bank
M&A as, upon completion of one post-merger inte-
gration, the next merger or takeover may be about
to take place.
Thirdly, the GLB Act and the consolidation wave
have not only brought about M&A between banks
but also between banks and non-bank financial
institutions, for example, insurance companies.
These mergers have led to large financial conglom-
erates whose member entities attempt to realise
returns by leveraging economies of scope and cross-
selling potentials (Chowdhury, 2003). So as to allow
the cross-selling of various banking and insurance
products, participating financial institutions can ben-
efit from (product and customer) data transparency
delivered by ERP systems as well as from the exten-
sibility of many ERP applications to satellite systems,
e.g. to customer relationship management systems
(Rashid, Hossain, & Patrick, 2002).
Finally, the globalisation of the banking industry
not only impacts on banks’ product and market strat-
egies, but it has also resulted in the standardisation
of banking regulation and compliance on an inter-
national level. Financial distress of some banks dur-
ing the banking and currency crises of the 1990s, as
well as the importance of a solid banking system for
the overall economic prosperity (Berger, 2003) have
made this integration of compliance and regulatory
 Large banks
Large ERP-adopting banks
Anticipated
benefits
ERP adoption
in large banks
Potential dis-
advantages
Figure 1  Overall framework.
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Figure 1: Overall framework
frameworks necessary. ERP systems largely possess
compliance and regulatory functionalities and can
assist banks in fulfilling their regulatory duties (Bet-
sch & Thomas, 2004).
These examples of ERP-related benefits in bank-
ing demonstrate that ERP deployment is no longer
restricted to industrial companies and that banks may
represent an important customer base for ERP sys-
tems. To the best of our knowledge, no previous aca-
demic research has dealt with ERP usage in banks. We
therefore conducted an exploratory research study by
surveying the 1000 largest banks worldwide on antic-
ipated benefits, potential disadvantages and imple-
mentation success associated with ERP systems.
The remainder of this article is organised as fol-
lows: In the following section, we present our over-
all research approach. After introducing research on
ERP benefits, disadvantages and implementation suc-
cess, we discuss how these concepts can be applied
to ERP research in banking. We then describe the
research methodology and sample statistics and
discuss our findings on the state of ERP usage in
banking — i.e., on expected benefits, potential dis-
advantages, and ERP implementation success. We
conclude by showing areas for future research.
This Study: ERP in Banking
As ERP in banking is an emerging field, we opted
for a descriptive exploratory research approach
based on the following framework (see Figure 1).
Prior research has argued that a resource that is
heterogeneously distributed among competing firms
can potentially become an enabler of competitive
advantage (Mata, Fuerst, & Barney, 1995). Hence,
executives in banks need to understand the degree
Fuß et al. 158
Implementation
success
(goals achieved
minus antici-
pated benefits)
and patterns of ERP penetration within their industry
to judge if ERP systems may yield a new source of
competitive advantage or if, in the case of an already
high diffusion, there is a need to retain parity with
competitors so as to avoid competitive disadvantage
(Beard & Sumner, 2004). We follow the suggestion
by Beard and Sumner (2004) and explore the adop-
tion of ERP systems within a specific industry to
gain a first understanding of ERP dissemination in
one of those industries where ERP usage cannot be
considered a standard yet (Zhu et al., 2004).
In selecting appropriate research objects, we con-
fined our study by focusing on large banks only.
Research by Mabert, Soni, & Venkataramanan (2003)
reveals the existence of substantial size effects, espe-
cially with regard to ERP benefits.
In order to investigate the motivations and inhibi-
tors of ERP adoption, we study anticipated bene-
fits and potential disadvantages of ERP systems as
seen by all banks surveyed, irrespective of their ERP
experience. As the experience of ERP users presum-
ably has a strong impact on further ERP adoption,
we measure the implementation success that ERP
adopters attribute to their ERP systems. In doing so,
we follow an approach proposed by Hong & Kim
(2002), who conceptualise ERP implementation suc-
cess as the deviation of anticipated benefits from the
actual achievement of these goals.
Anticipated benefits of ERP systems
Benefits to be realised from ERP usage are manifold
and can include an improved organisational effec-
tiveness through the integration of business proc-
esses and the realignment of corporate strategy with
ERP systems possibly offering new ­opportunities to
 do business. Similarly to most advantages related to
IT investments, benefits from ERP adoption are fre-
quently intangible and difficult to quantify, increas-
ing the complexity to precisely measure the return
on an ERP investment (Murphy & Simon, 2002). The
fact that most ERP implementations only commence
to pay off after a time lag adds to the complexity
of assessing ERP benefits (Al-Mashari et al., 2003;
Gefen & Ragowsky, 2005).
In our analyses on ERP benefits perceived by large
international banks, we pursue two goals. Firstly, we
attempt to get some general understanding of those
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
all ERP benefits that have no or little importance
in banking, e.g., a reduction of inventory. Of the
remaining ERP benefits, we selected ten ERP goals
that we believe to be most compelling to banks. This
final list was then presented to participating banks
for evaluation. The enumeration of these benefits in
this article (see Table 1) also includes a list of authors
who mention the respective benefits in their research
as well as a brief explanation why we reckon these
ERP benefits to be valuable to banks.
Secondly, we try to analyse whether ERP bene-
fits in banking can also be classified into different

ERP benefits which are most important to banks. To
this end, we searched the academic literature on gen-
eral, industry-independent ERP benefits and com-
piled a list of frequently-cited goals associated with
ERP adoption. In a subsequent step, we eliminated
dimensions. We decided to adopt the approach by
Hayes, Hunton, and Reck (2001), who classify ERP
benefits into efficiency (or operational) and effec-
tiveness (or strategic) gains. We explore if this dis-
tinction also applies to banks.

Table 1  Anticipated Benefits of ERP Systems

Cost reduction

Hayes et al. (2001) We selected cost reduction as a major ERP benefit in banking because banks spend approximately 8% of
Bajwa, Garcia, their average revenue or one third of their average operating expense on IT (more than any other
& Mooney (2004) industry). Berensmann (2005) estimates that, via the implementation of ERP systems, banks can
Berensmann (2005) reduce IT expenses by up to two thirds.

More efficient business processes

Ross (1999) Existing IT processes in banking are largely detached from business processes, making data processing
Sheu, Yen, tedious and complicated work. The compulsory reengineering effort prior to the introduction of an
& Krumwiede (2003) ERP application, along with the ERP system itself, can help banks to realign business processes and IT
Bajwa et al. (2004) and to increase business process efficiency and effectiveness.

Better information transparency and quality

Hayes et al. (2001) With information stored in several independent databases banks are poorly prepared to effectively cross-
Poston & Grabski (2001) sell products and services, e.g., in co-operation with an insurance or other financial services company.
Gattiker & Goodhue (2004) ERP systems’ central database enhances information transparency and quality and allows a better
grasp of the benefits of cross-selling.

Higher quality of business processes

Ross (1999) Current business processes in banking are mainly product-line-oriented, decelerating data processing
Poston & Grabski (2001) speed. As ERP applications allegedly incorporate best business practices, banks may improve the
Sheu et al. (2003) quality and effectiveness of their operations by adopting ERP systems.

Increase in organisational flexibility

Brown & Vessey (1999)
Poston & Grabski (2001)
Bajwa et al. (2004)
The low level of standardisation within and across banks’ existing IT infrastructures reduces
organisational flexibility and hampers reorganisation initiatives, such as bank M&A (growth strategy),
or the outsourcing of non-core activities (cost reduction strategy). Business process reengineering
(BPR) activities and an ERP introduction, on the contrary, increase organisational flexibility, and thus
provide a powerful support of corporate strategy.

Reduced complexity and better harmonisation of IT infrastructure

Ross (1999) The current IT infrastructure in many banks is very heterogeneous in terms of the technology deployed
Poston & Grabski (2001) and the age of applications (some systems are more than thirty years old). Obviously, these incoherent
Rajagopal & Frank (2002) IT architectures slow down and complicate data processing. Adopting ERP systems gives banks a lean
and harmonised infrastructure, decreasing complexity and maintenance efforts.

159 ERP Usage in Banking

 Table 1  Anticipated Benefits of ERP Systems (continued)

Improved integratability
Brown & Vessey (1999) Many banks’ monolithic legacy systems not only hinder cross-departmental information flow but also
Bajwa et al. (2004) render the integration of new applications complex and time-consuming. ERP systems, however,
Gattiker & Goodhue (2004) provide integration on the functional and on the data level, thus facilitating data processing on a
regular basis as well as the one-time introduction of new modules.

Improved security and availability

Ross (1999)
Rajagopal & Frank (2002)
Bajwa et al. (2004)
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Guaranteeing high security standards and 24/7 availability for many of their services is vitally important
for most banks. Therefore, they can strongly benefit from ERP systems that have been extensively
tested and are ready to undergo security audits. With continually decreasing maintenance windows
between trading sessions system downtimes need to be carefully planned and must be avoided as a
regular maintenance mechanism. ERP systems normally comply with high security standards and

enhance availability since maintenance can be performed without the need to shut down operations.

Better and faster compliance with legal requirements and frameworks

Betsch & Thomas (2004) Over the past years, legal requirements in banking have become more demanding both in breadth and
depth, taking the compliance and organisational risk management function to a new level of
complexity. ERP systems can assist banks to comply with legal requirements, such as Basle II,
International Accounting Standards or Sarbanes Oxley Act.

Fast amortisation of investment

Betsch & Thomas (2004) Up to today, in-house development is a common IT sourcing practice in banking. Adopting ERP systems
Berensmann (2005) may be beneficial to banks insofar as their licence fee is presumably much lower than the amortised
Rebouillon & Müller (2005) development expenses of banks’ proprietary applications.

Potential Disadvantages ERP adoption can be considered a success. Since

of ERP Systems
Although ERP systems have the capability to pro-
vide a great number of direct and indirect benefits,
potential disadvantages can be enormous and can
even repel banks from ERP adoption. To gain insight
into the factors which lead banks to reject ERP sys-
tems and continue with their legacy applications, we
followed the same procedure as in the identifica-
tion of anticipated ERP benefits, i.e., we performed
a literature search and chose the most commonly-
named disadvantages of ERP systems that we regard
as applicable to banks. Table 2 shows the compila-
tion of potential disadvantages that banks were to
evaluate.
Implementation Success
of ERP Systems
Once an ERP system has been implemented,
the ultimate question arises, namely whether the
a wealth of measures exist to assess ERP adoption
success, care is needed in selecting the appropriate
approach for analysing this construct in the case of
ERP implementations by banks. Banks’ changes in
productivity as a result of an ERP introduction are
very difficult to quantify as banks do not report
output or value-added in the fashion of industrial
companies. Choosing market valuation or financial
performance indicators as the dimensions by which
to measure banks’ ERP implementation success is
also not feasible because the majority of banks sur-
veyed are neither exchange-listed nor is sufficient
financial information available. For our study, we
chose to determine ERP implementation success as
the deviation of anticipated benefits from the actual
achievement of these goals, as put forward by Hong
& Kim (2002). This approach enables us to reveal
how well banks have been able to realise antici-
pated benefits. Furthermore, it highlights those
goals whose implementation needs to be managed
more actively during the ERP introduction process
to make the adoption of ERP systems by banks a
success.

Fuß et al. 160

 Table 2  Potential Disadvantages of ERP Systems

Substantial costs
Poston & Grabski (2001)
Bajwa et al. (2004)
Gattiker & Goodhue (2004)
Any ERP adoption by itself is multimillion USD undertaking, with consulting expenses frequently being
several times as high as the original ERP licence fee. Especially the consulting fee problem may be
aggravated in banking as ERP diffusion is presumably lower than in manufacturing, implying that
consulting skills may be a scarce resource and hence more expensive.

Problems with competitive advantage

Davenport (1998)
Shang & Seddon (2002)
Madapusi & D’Souza (2005)
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Previous research has pointed to the danger that standard processes embedded in ERP systems may
replace IT and business procedures that were formerly putative enablers of competitive advantage.
With very few IT infrastructure standards in banking, the erosion of a former competitive advantage
can represent quite a threat, in particular to those banks whose, albeit older, legacy applications
permitted a unique way to do business and to eventually achieve some differentiation vis-à-vis the

competition.

Loss of flexibility
Davenport (1998)
Poston & Grabski (2001)
Bajwa et al. (2004)
Although a potential increase in efficiency is one of the greatest virtues of ERP systems due to their
inherent best business practices, the necessary standardisation may come at the price of lower
flexibility. This loss of flexibility may ultimately harm competitive advantage in the case of those ERP-
adopting banks which were able to differentiate themselves from their competitors thanks to their
legacy systems.

Vendor dependence
Bernroider & Koch (2000)
Poston & Grabski (2001)
Shang & Seddon (2002)
The adoption of an ERP system represents a contract with a third party and ERP users depend on their
vendors not only at the time of the initial ERP implementation but also in the post-adoption era by
means of maintenance support. This vendor dependence may be accentuated by the fact that
concentration in the vendor market for ERP systems for banks is already quite high, possibly leading
to a decrease in competition between vendors and to the exertion of market power by large
vendors.

Effort and complexity of legacy systems replacement

Bernroider & Koch (2000) Any ERP roll-out is a high risk, high return project, irrespective of the implementation approach
Wei & Wang (2004) selected. This characteristic of ERP systems is particularly perilous in ERP adoptions by banks because
Madapusi & D’Souza (2005) banks much more heavily depend on IT than any other industry, implying a potentially even more
difficult transition to ERP systems.

Risks involved in legacy systems replacement

Davenport (1998)
Hong & Kim (2002)
Barker & Frolick (2003)
In the discussion of ambiguous effects of ERP adoption on corporate strategy, the business risk of losing
a source of competitive advantage has already been mentioned. However, ERP implementations also
entail a significant project risk. This is even more problematic in the case of banking since banks have
to guarantee a continuous availability of their applications as statutorily required for risk
management and data protection purposes.

Non-availability of appropriate ERP package

Scott & Kaindl (2000) According to Scott & Kaindl (2000), ERP users find that approximately 20% of functionalities needed
Gattiker & Goodhue (2004) are missing in ERP systems. In banking, as a non-typical ERP-deployment area, this rate may arguably
Zhu et al. (2004) be even higher, possibly creating the impression that ERP systems with an appropriate functionality
coverage are not available at all.

Pressure from ERP vendor to upgrade

Davenport (2000) The pressure from ERP vendors to upgrade has become a problem of late due to recent architectural
Shang & Seddon (2002) changes that systems of major ERP vendors face; e.g., with the announcement of mySAP ERP as the
successor of SAP R/3 and its arrival in 2004, SAP’s maintenance strategy was extensively discussed
and users feared a strong pressure to upgrade.

161 ERP Usage in Banking

 Methodology and Survey
Sample Statistics
Methodology
We used a questionnaire as our research instru-
ment and selected the 1000 largest banks worldwide
as our research objects. Our decision to survey the
1000 largest banks worldwide was motivated by
several reasons: ERP implementations require sub-
stantial capital investment large organisations are
more likely to undertake (Akkermans & van Hel-
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
den, 2002). Consequently, manufacturing industries
where ERP systems stem from saw large firms to be
the first ERP adopters with mid-size companies only
becoming ERP users after the advent of small-scale
ERP systems (Madapusi & D’Souza, 2005). Assuming
the subsistence of a similar ERP adoption sequence
with respect to firm size in banking, choosing very
large banks as research objects is reasonable insofar
as smaller banks may have no ERP experience at
all. Our determination of the world’s largest banks
was based on the ranking by The Banker (2003).
The Banker annually publishes a list of the world’s
1000 largest banks, ranked by previous year-end
total assets. Basing our sample selection upon The
Banker’s 2003 ranking thus offered the advantage
of using data that have formerly been validated in
academic research.
Each of the 1000 banks received two question-
naires in paper format, one addressed to the “head
of IT” and one addressed to the “head of finance/
accounting” because we attempted to receive infor-
mation from those top executives who are most likely
to be involved in the decision whether to adopt an
ERP system (Frantz, Southerland, & Johnson, 2002).
Most questionnaire items were closed-end ques-
tions with an additional “others” category, aiming
at the respondent’s personal assessment of a topic
and using a five-point Likert scale as the format for
answer options.
Prior to sending the questionnaire to our target
sample, it was pre-tested with a large German bank.
The pre-test revealed that the respondent had no
difficulty in understanding the content of the ques-
tionnaire. The main round of data collection took
place between March and August 2004. By the
end of August 2004, 162 questionnaires had been
returned of which we eliminated 37 since they were
Fuß et al. 162
Banks participating in our
survey are headquartered
in 44 countries.
incomplete, leaving 125 utilisable questionnaires.
Eleven times, we received questionnaires from both
a bank’s head of IT and from its head of finance.
In these cases, we picked the questionnaire which
we had received first and discarded the second one.
This move led to the exclusion of another 11 ques-
tionnaires. Hence, with questionnaires answered by
114 different banks, we were able to achieve a 11.4%
response rate. Respondents used mail (28.1%), fax
(28.9%), and the survey’s website (43.0%) to provide
data.
Survey Sample Statistics
Banks participating in our survey are headquar-
tered in 44 countries (see Figure 2). In 2002, these
banks’ average total assets amounted to USD 41.6
billion (with a range from USD 653 million to 795.3
billion), and their average number of employees was
5040 (with a minimum of 1103 and a maximum of
63,700). 55.3% of participants reported retail banking
to be their main field of activity, followed by com-
mercial (51.8%) and mortgage banking (33.3%).
Of the 114 questionnaires returned, 41.2% were
completed by a senior manager in an IT-related
position; 18.4% of respondents said they occupied
a top-level position in finance or accounting. Other
positions represented included general top-manage-
ment functions and areas such as operations (19.3%).
21.1% did not classify themselves.
59.3% of participating banks indicated best-of-
breed to be their preferred IS sourcing approach while
40.7% reported using a single sourcing strategy.
Survey Results
In a first step, we analyse ERP usage by the
world’s largest banks. About half of participating
banks (49.5%) are using an ERP system, with an
additional 2.8% planning to adopt an ERP system in
the near future. By the terms “ERP usage” or “ERP
 Banks' regional distribution Participating managers' functions
Finance/Accounting
18.4%

Asia-Pacific Others
11.4% 19.3%
EMEA
78.1%
IT
Americas 8.8%
41.2%
Not specified
Not specified
1.8%
21.1%
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012

Banks' main fields of activity (multiple answers allowed)

Retail Banking

Commerical Banking

Mortgage Banking

Universal Banking

Investment Banking

Wholesale Banking

Other

0% 10% 20% 30% 40% 50% 60%

Figure 2  Figurestatistics.
Sample 2: Sample statistics

adoption,” we understand that a bank is running at dence may therefore play a significant role in banks’
least one module of an ERP system. 14.0% of our decision whether to implement an ERP system.
participants have already given ERP deployment a The latest market consolidations with J.D. Edwards
thought, 10.3%Human
areResources
against the usage of51.4% ERP sys- 28.6%
and Peoplesoft now belonging to Oracle will prob-
tems, and 23.4% of respondents have not yet thought ably further stimulate this concern. Possibly, in an
Accounting 51.4% 24.8%
about an ERP adoption. attempt to avoid the dependence on a large ERP
Banks that stated that they use ERP systems vendor, 21.4% of ERP adopters stated that they had
ERP in place
Reporting 38.8% 29.6%
strongly favour SAP (53.6%) as their ERP vendor of purchased their ERP system ERP planned a different ven-
from
choice. Oracle (19.6%) follows as the second most dor from those mentioned above. The existence of
important vendor,Procurement
with PeopleSoft 26.3%
(10.7%), and 34.7%
a larger number of presumably smaller ERP vendors
J. D. Edwards (1.8%) being ranked third and fourth, may, however, also be explained by the fact that the
Strategic Planning 13.9% 34.7%
respectively. The market for ERP systems for large majority of banks (59.3%) reported using a best-of-
banks appears to be, according 0%
to10%our 20%
survey, 30%
much40% 50%
breed60%
sourcing
70%
strategy,
80% 90%
arguably buying specialised
more concentrated than the market for ERP systems products from specifically-focused vendors.
for manufacturing companies where SAP’s market As for the scope of functionality associated with
share is estimated
Figure at 3: 26.6%
Areas in (PeopleSoft
which ERPand Oracleare deployed
systems ERP systems,or will53.6%
be usedanswered that they had a tradi-
hold a 7.1% and 6.8% market share, respectively) tional understanding of ERP applications as indus-
(Gartner Dataquest, 2004). The fear of vendor depen- try-independent solutions, whereas 40.9% of banks

163 ERP Usage in Banking

 Human Resources
Accounting
Reporting 38.8%
Procurement 26.3%
Strategic Planning 13.9%
0% 10%
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Figure 3  Areas in which ERP systems are deployed or will be used.
Figure 3: Areas in which ERP systems are deployed or will be used
recognise the possibility of using ERP systems in
core-banking activities, such as loan business, sav-
ings and deposits, collateral management, brokerage
and transaction banking. 5.5% stated that they have
yet a different understanding of ERP systems. The
conception of ERP systems as potential core-bank-
ing applications by 40.9% of participants seems very
high, given the fact that ERP systems do not have
a typical banking origin and supposedly only offer
full core-business coverage in manufacturing.
The analysis of ERP deployment by departmen-
tal area (see Figure 3) reveals that ERP systems are
most widely used in traditional back-office functions,
namely accounting and HR (51.4% diffusion rate,
respectively). ERP usage is lowest in procurement
(26.3%) and in strategic planning (13.9%) although
these two areas display the highest potential for
future ERP system investment (34.7%).
This evidence should be borne in mind throughout
the interpretation of our survey results: the finding
that nearly 50% of participating banks already run
an ERP system suggests, at first sight, that ERP dis-
semination in the banking industry is quite substan-
tial and that banks are only closely behind the 70%
ERP adoption rate in manufacturing. However, as
opposed to manufacturing, ERP systems are mainly
deployed in banks’ back-office areas, indicating that
ERP penetration within individual banks is probably
much lower than the degree by which ERP systems
cover core-business functionalities in manufactur-
ing. The high approbation of ERP systems to also
include core-banking functionalities rather seems to
point at a possibly greater future diffusion of ERP
systems with core-banking add-ons which is not yet
reflected in current numbers.
Fuß et al. 164
51.4% 28.6%
51.4% 24.8%
ERP in place
29.6%
ERP planned
34.7%
34.7%
20% 30% 40% 50% 60% 70% 80% 90%
Anticipated Benefits  
of ERP Usage in Banking
Ten potential ERP benefits were presented to
banks for evaluation. On a five-point Likert scale,
answer options lay between one (complete disagree-
ment with the statement that a particular benefit is to
be attained) and five (complete agreement).
Results indicate that banks deem a better infor-
mation transparency and quality (average score of
4.29) and more efficient business processes (4.26) as
the most important benefits of ERP usage. A higher
quality of business processes (4.07) and an improved
integratability (3.88) are ranked third and fourth,
respectively. Cost reduction (3.83), one of the most
frequently-named potential benefits of ERP systems,
is only claimed to be the fifth most important ben-
efit. Possible advantages which banks consider to be
somewhat less important are an increase in organi-
sational flexibility (3.36) and a fast amortisation of
investment (3.03). Figure 4 shows banks’ evaluation
of all potential ERP benefits.
As mentioned before, ERP benefits can be clas-
sified into efficiency gains as direct effects of an
ERP implementation which are usually quantifiable
and effectiveness gains as indirect, intangible and
mostly non-quantifiable outcomes of ERP usage. In
order to explore if this categorisation also applies to
anticipated ERP benefits in banking, we conducted
a factor analysis. Table 3 shows the results of this
analysis.
The factor analysis led to the extraction of two
factors. On the one hand, factor one represents
those benefits which are presumably indirect effects
of ERP deployment and whose value is difficult to
 (a) Better information transparency and quality

(b) More efficient business processes

(c) Higher quality of business processes

(d) Improved integratability

(e) Cost reduction

(f) Improved security and availability

(g) Reduced complexity and better harmonisation of IT infrastructure

(h) Better and faster compliance with legal requirements and frameworks

(i) Increase in organisational flexibility

(j) Fast amortisation of investment

Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Figure 4  Figure
Anticipated benefits of ERP systems. Notes: A five-point Likert scale was used as the format for answer options with
4: Anticipated benefits of ERP systems
one = I completely disagree (with the statement that a particular ERP benefit is to be attained) and five = I completely agree.
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
pletely disagree (with the statement that a particular ERP benefit is to be attained) and five = I
completely agree.
Table 3  Factor Analysis of Anticipated Benefits of ERP Systems
Loss of f lexibility
Factor 1 Factor 2
Anticipated benefit V endor dependenc e
effectiveness efficiency
Problems w ith competitiv e advantage

(a) Better information transparency and quality

Non-availability of appropriate ERP package
0.819
(d) Improved integratability 0.734
Pressure f rom ERP vendor to upgrade
(c) Higher quality of business processes 0.733
Ef f ort and complex ity of legac y systems replacement
(h) Better and faster compliance with legal requirements and frameworks 0.693
(g) Reduced complexity and better harmonisation of IT infrastructure 0.642 0.330
Subs tantial costs

(b) More efficient business

Risks involved processes
in legacy systems replac ement 0.609
(f) Improved security and availability 1.00 1.50 2.00 2.50 3.00 3.50 0.544
4.00 4.50 5.00

(i) Increase in organisational flexibility 0.382  

(j) Fast amortisation of investment   0.884
Figure 5: Potential disadvantages of ERP systems
(e) Cost reduction   0.753
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
For the purpose of thisdisagree
pletely factor analysis,
(with wethe
applied principal that
statement components as the technique
a particular for factor extraction.
ERP disadvantage Principal components
is important) and five =isI the typical
method to be used in exploratory factor analyses, assuming the pre-extraction communality between variables to be equal to unity. As a rotation
completely agree.
procedure, we used the Direct oblimin rotation technique which extracts oblique, i.e., correlated, factors. This choice seems appropriate with
regard to the nature of the variables analysed since Shang & Seddon (2002) observe that the different dimensions of ERP benefits interact.
(a) Better inf ormation trans parenc y and quality

appraise by financial indicators. (b) More Weef f icthus reckon

ient bus ines s proc es s esfac- come of BPR activities and an ERP implementation
tor one as the dimension of (f“effectiveness ) Improved security and availabilitygains” represent a valuable intangible asset to the adopter
of ERP usage. Factor two, on the other hand, com-(c) Higher quality of bus ines s proc es s es which is complicated to assess in financial terms.
prises those benefits which have a direct (d) Improvedimpact
integratability on The finding that more efficient business processes
ERP adopters’ (g)financial
Reduc ed complexperformance
ity and better harmonisation of and is ture
IT inf rastruc hence are associated with effectiveness is also in line with
deemed “efficiency
(h) Better and f astergains”. Commenting
compliance w ith legal requirements and f ramew onorksfactor the vast literature on IT productivity (e.g., Brynjolfs-
composition and loadings, we first see more efficient
(e) Cost reduction son, Hitt, & Yang, 2000) who see the “true” contri-
business processes load on factor (i) Increaseone, i.e.,f lexbelong
in organisational ibility bution of IT investments conveyed by the degree of
to the dimension of effectiveness(j) Fas gains although
t amortis ation of inv es tment the business process redefinition rather than by mere
wording of this benefit would suggest an affiliation 1.00 1.50 quantifiable
2.00 2.50 accounting
3.00 3.50 and
4.00 efficiency
4.50 5.00 gains. Sec-

with the factor of efficiency gains. In spite of this ondly, the benefit of complexity reduction and bet-
seeminglyFigure
contradictory classification,
6: Goal achievements through ERP usage
we believe ter harmonisation of IT infrastructure loads on both
this ERP benefit to rightly contribute to effectiveness factors. An interpretation of this may be that the
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
because more efficient business processes as an out- gains brought about by complexity reduction and
pletely disagree (with the statement that a particular ERP benefit has been attained) and five = I
completely agree. Answers given by ERP adopters only.
165 ERP Usage in Banking
 ­ etter ­harmonisation of IT infrastructure, such as the
b Given banks’ strong belief in ERP systems to
streamlining of operations, may not be measurable
per se, implying a loading on factor one. If, however,
complexity reduction and harmonisation of IT infra-
structure lead to the identification and abandonment
of obsolete IT capacities, potential maintenance sav-
ings may well be quantifiable, justifying a simul-
taneous loading on factor two. Finally, the item of
increase in organisational flexibility is problematic.
Even though it does load on the effectiveness fac-
tor, its loading is weak and below the conventional
cut-off for item retention. We cautiously decide to
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
improve business processes and to eventually facili-
tate the reorganisation of banking, it is astonishing
to see that the banks surveyed largely deploy ERP
systems in back-office functions only. In the fol-
lowing section, we investigate the causes of banks’
reluctance to implement or to make more extensive
use of ERP systems.
Potential Disadvantages  
of ERP Usage in Banking

leave the factor association as is since an increase in 25

organisational flexibility clearly enhances effective- A loss of flexibility (average score of 3.88) is con-
ness. As to its low factor loading, though, we can sidered the most important potential disadvantage
only hypothesise that banks were struggling to rate of an ERP introduction, followed by vendor depen-
this benefit as it may only become visible after
(a) Better inf ormation transparency and quality a dence (3.37) and problems with competitive advan-
long transitional period of readjustment and organi-
(b) More ef f icient business process es
tage (3.34). Effort and complexity of legacy systems
sational redesign has elapsed. replacement, substantial costs and risks involved in
(c) Higher quality of bus ines s proc esses
From the factor analysis, it becomes evident that legacy systems replacement are ranked lowest, with
the distinction between efficiency (d) andImproved integratability
effective- average scores of 3.09, 3.09 and 3.08, respectively
ness gains also holds for ERP benefits evaluated by
(e) Cost reduction (see Figure 5).
large international banks. Comparing factor analysis
(f ) Improved s ecurity and availability These results indicate that the major disadvantages
results to the original
(g) Reduced ranking
complex ity and betterof ERP benefits
harmonisation (see
of IT inf rastructure which banks associate with the adoption of ERP
Figure 4) yields another remarkable insight. Banks
(h) Better and f aster complianc e w ith legal requirements and f ramew orks
systems are mainly software- and strategy-related.
assess possible ERP contributions to effectiveness to This finding is confirmed by the high ranking of loss
(i) Increase in organisational f lexibility
be much higher than efficiency gains which increase of flexibility (3.88) and problems with competitive
(j) Fast amortisation of investment
financial performance, as indicated by the somewhat advantage (3.34). Whereas it has been shown that
low ranking of the potential ERP benefits of cost 1.00 ERP 1.50 systems
2.00 are frequently
2.50 3.00 3.50 considered
4.00 4.50 to5.00be sup-
reduction and fast amortisation of investment. These portive of organisational effectiveness and corporate
findings may indicate that large international banks strategy, failure to properly implement ERP systems
Figure 4: Anticipated
see ERP systems as a long-term investment and an benefits of ERP systems and to fully seize their advantages may also pro-
enablerNotes: A five-point Likert scale was used as the duce
of innovative corporate strategies rather than format a negative
for answer leverage,
optionsthus
withhampering
one = I com-effective-
pletelytodisagree
as a means (with the statement that a particular
achieve cost-leadership. nessERP and benefit
strategy.is Similarly
to be attained) and five =
to our analyses onI ERP
completely agree.

Loss of flexibility

Vendor dependence

Problems with competitive advantage

Non-availability of appropriate ERP package

Pressure from ERP vendor to upgrade

Effort and complexity of legacy systems replacement

Substantial costs

Risks involved in legacy systems replacement

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Figure 5  Potential
Figure disadvantages
5: Potential of ERP systems.
disadvantages ofNotes:
ERPAsystems
five-point Likert scale was used as the format for answer options with
one = I completely disagree (with the statement that a particular ERP disadvantage is important) and five = I completely agree.
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
Fuß etpletely
al. disagree (with the statement that a particular ERP disadvantage is important) and five = I 166
completely agree.

(a) Better inf ormation trans parenc y and quality

 (b) More ef f icient business process es

(c) Higher quality of bus ines s proc esses

benefits, costs and issues of risk and (d) effort involved

Improved integratability Implementation Success  
in legacy systems replacement only constitute minor of ERP Systems in Banking
(e) Cost reduction
disadvantages of ERP usage.
(f ) Improved s ecurity and availability
The ranking of potential drawbacks may be help- Given a number of important benefits and dis-
ful in explaining why ERP systems are primarily used
(g) Reduced complex ity and better harmonisation of IT inf rastruc ture
advantages of ERP systems, the final question of
in banks’ back-office
(h) Better areas.
and f aster complianc e w Highly-ranked
ith legal requirements andpotential
f ramew orks interest is how well ERP adopters have reached their
disadvantages pointing to ERP(i)vendor-related prob-
Increase in organisational f lexibility stated goals through the usage of ERP systems and
lems (vendor dependence, non-availability of appro-
(j) Fast amortisation of investment
what these goal achievements indicate about ERP
priate ERP package) may express participants’ worry implementation success of the world’s largest banks.
1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
that the market for ERP systems suitable for both Banks which had already implemented an ERP sys-
administrative and core-banking functionality cov- tem were presented with the same list of gains as
erage Figure
is not sophisticated enough to permit
of ERPasystems safe in the section on anticipated ERP benefits and were
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012

4: Anticipated benefits
implementation of ERP systems across all functional asked to grade them according to their degree of
Notes: A five-point Likert
banking areas. In addition to these ERP supply-side scale was used as the format for answer options with one = I com-
accomplishment.
pletely disagree (with
problems, the fear of negative outcomes of substan- the statement that a particular ERP benefit
Better information is totransparency
be attained) and andquality
five = (4.07)
I
completely agree.
tial organisational changes due to an ERP adoption is the goal that has been achieved best. More effi-
(e.g., loss of flexibility, and problems with competi- cient business processes (3.89), improved security
Loss of f lexibility
tive advantage) may result in an important lack of and availability (3.89) and higher quality of business
V endor dependenc e
demand for multi-module ERP implementations, process (3.88) are ranked second, third and fourth,
encompassing core-banking activities. Apparently,
Problems w ith competitiv e advantage
respectively, while cost reduction (3.18), increase in
there are several supply- and demand-driven poten-
Non-availability of appropriate ERP package
organisational flexibility (3.18) and fast amortisation
tial disadvantages which may explain participants’
Pressure f rom ERP vendor to upgrade of investment (2.90) are the goals receiving lowest
reserve Eftowards a broad ERP introduction
f ort and complex ity of legac y systems replacement and their scores. All scores are reported in Figure 6.
preference for back-office ERP Subsusage.
tantial costs Still, the finding Having retrieved this information about goal
that 40.9% of banks surveyed expect
Risks involved in legacy systems replac ement
core-banking achievements, we let ERP implementation success
coverage by ERP systems may indicate that a greater constitute, as suggested by Hong & Kim (2002), the
1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
penetration of ERP systems within banks may be a deviation of the ex-ante importance of the respective
matter of time and that, at the time of the survey, benefit from its ex-post degree of realisation. This
banksFigure
are just5:starting to become
Potential disadvantages of ERP systems ERP users. deviation analysis yields the following results (see
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
pletely disagree (with the statement that a particular ERP disadvantage is important) and five = I
completely agree.

(a) Better information transparency and quality

(b) More efficient business processes

(f) Improved security and availability

(c) Higher quality of business processes

(d) Improved integratability

(g) Reduced complexity and better harmonisation of IT infrastructure

(h) Better and faster compliance with legal requirements and frameworks

(e) Cost reduction

(i) Increase in organisational flexibility

(j) Fast amortisation of investment

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Figure 6  Goal
Figure 6: achievements through ERP usage. Notes: A five-point Likert scale was used as the format for answer options with
Goal achievements through ERP usage
one = I completely disagree (with the statement that a particular ERP benefit has been attained) and five = I completely agree. Answers
given by ERP adopters only.
Notes: A five-point Likert scale was used as the format for answer options with one = I com-
pletely disagree (with the statement that a particular ERP benefit has been attained) and five = I
167 completely agree. Answers given by ERP adopters only. ERP Usage in Banking

-0.34
-0.43
-0.44
-0.47
-0.49
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
- 0 .5 - 0 .4
Figure 7  Figure
Implementation success of ERP
7: Implementation systems.ofNotes:
success ERP Deviations
systems of anticipated ERP benefits from actual goal achievements
through ERP usage.
Notes: Deviations of anticipated ERP benefits from actual goal achievements through ERP us-
age.
Figure 7): improved security and availability (–0.11)
and fast amortisation of investment (–0.13) represent
those goals that have been met best, whereas devia-
tion in the areas of cost reduction (–0.43), higher
quality of business processes (–0.44), better and
faster compliance (–0.47), as well as more efficient
business processes (–0.49) are quite substantial.
The finding that all differences are negative indi-
cates that ERP adopters have on average not been
able to fulfil their expectations of an ERP imple-
mentation. This result holds for both efficiency and
effectiveness gains (e.g., accomplished cost reduc-
tion (efficiency gain) and more efficient business
processes (effectiveness gain) both show great
negative deviations as to the respective anticipated
benefit). One explanation of this rather low ERP
implementation success may be the fact that banks
have started to introduce ERP systems only recently
whose benefits (whether relating to efficiency or
effectiveness) require some time to unfold (Hitt,
Wu, & Zhou, 2002). Another reason for missing the
target level of goal achievements may lie in the
limited functional scope of ERP systems used: as
shown before, banks see ERP systems as a part of a
long-term strategy to change business processes and
to augment organisational effectiveness. However,
under a predominant focus on back-office usage
of ERP systems, ERP adoptions can merely bring
about some efficiency gains in peripheral admin-
istrative areas but forgo the capability to transform
the banking organisation as long as core-bank-
ing activities continue to be performed on exist-
ing legacy applications. Furthermore, with a strong
Fuß et al. 168
-0.11 (f) Improved security and availability
-0.13 (j) Fast amortisation of investment
-0.24 (d) Improved integratability
-0.26 (g) Reduced complexity and better harmonisation of IT infrastructure
-0.30 (i) Increase in organisational flexibility
(a) Better information transparency and quality
(e) Cost reduction
(c) Higher qualtiy of business processes
(h) Better and faster compliance with legal requirements and frameworks
(b) More efficient business processes
- 0 .3 - 0 .2 - 0 .1 0 .0
fear of losing flexibility and possible sources of
competitive advantage that arguably drives banks
to ERP adoptions of narrow functional scope, this
avoidance of the downside potential of ERP imple-
mentations undermines the chance to realise a pos-
itive leverage, e.g., some beneficial organisational
realignment with IT, and eventually a better ERP
implementation success.
Suggestions for
Future Research
While this article has given an overview of ERP
usage in the world’s largest banks and their assess-
ment of potential ERP benefits, disadvantages and
implementation success, more research is needed to
understand the role of ERP systems in the transfor-
mation of banking. To this end, we propose three
research approaches.
Firstly, a (single) case study can be used to anal-
yse the impacts of an ERP introduction with a broad
functionality coverage, i.e., the adoption of an ERP
system in a bank’s core-business areas. Points of
interest may be the elaboration of critical factors
influencing ERP implementation success, as well
as the derivation of measures of ERP impacts on
the intermediate, i.e., process level in addition to
overall performance indicators. The establishment
of such intermediate level performance measures is
of utmost importance since most ERP benefits are
claimed to be intangible in nature and are seen as
potential enablers of organisational effectiveness.

The respective institutional
setting may have a great impact
on the success or failure
of an ERP adoption.  Our analyses have shown that, on the one hand,
Secondly, given the global focus of our survey,
future research can use a comparative case study
approach and analyse important differences in ERP
implementation success across a few banks. The
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
respective institutional setting may have a great
impact on the success or failure of an ERP adop-
tion. Possible intervening factors of interest can be
cultural differences or the stratification of banks
by ownership (e.g., privately-held vs. state-owned),
which may have an enormous influence on the orig-
inal organisation of banking and hence the chances
of a successful ERP adoption. Furthermore, we also
recommend to more explicitly address differences in
banks’ main fields of activity because an investment
bank’s business processes presumably greatly differ
from those of a retail bank.
A third option would be to reuse this or a simi-
lar instrument in several years to explicitly survey
banks on the state and implementation success of
ERP usage in core-banking areas. This approach
would allow the researcher to sample a larger popu-
lation of banks while circumventing the fallacies of
financial ratio- or productivity indicator-based analy-
ses, which are especially problematic in precisely
assessing ERP contributions to effectiveness. Since
substantial improvements in effectiveness would be
at the centre of studies on ERP implementations in
core-banking functions rather than efficiency gains
(which can also potentially be achieved by ERP
deployment in back-office areas), this technique
of measuring perceived ERP implementation suc-
cess would be the best strategy for extracting this
information for a sample larger than a few banking
cases.
Conclusions
The motivation for this article has been the appar-
ent need of many banks to radically modernise their
IT infrastructure and to align business processes
169 ERP Usage in Banking
and IT. We believe ERP systems to be supportive
of banks’ reorganisation efforts because far-reach-
ing BPR activities are frequently necessary prior to
an ERP implementation. Additionally, a successful
ERP adoption is assumed to greatly reduce IT costs.
large international banks share these views on the
qualities of ERP systems. On the other hand, banks
are still shy to extensively use ERP systems outside
of typical back-office areas, such as accounting and
HR. However, the fact that 40.9% of banks postulate
ERP packages to also encompass core-banking func-
tionalities seems to point at a possibly higher future
dispersion of ERP systems within banks.
Given the prevailing silo-type IT architecture in
many banks, using ERP systems as a starting point
for creating a modern strategic IT platform as the
basis for the full range of core-banking applications
appears to be a reasonable move. With ERP systems
progressively making use of web service technol-
ogy and their transformation into systems based on
service-oriented architectures, they turn into open
application backbones that can flexibly be extended
and integrated. The shift in ERP technology from
applications to comprehensive system and integra-
tion platforms can best be demonstrated by SAP’s
strategic product launches. The release of NetWeaver
as an integral part of SAP’s ERP system, along with
the introduction of the Enterprise Services Archi-
tecture (SAP, 2004), provides evidence of this trend
and foreshadows that these platforms may become a
fully-developed and mature concept in the years to
come. With banks still facing the great challenge of
a large-scale core-banking system overhaul adopt-
ing this technology today and moving ahead with
ERP vendors may be a viable approach for banks to
steadily modernise their entire IT infrastructure.
References
Akkermans, H., & van Helden, D. (2002). Vicious and virtuous cycles in
ERP implementation: A case study of interrelations between criti-
cal success factors. European Journal of Information Systems, 11 (1),
35–46.
Al-Mashari, M., Al-Mudimigh, A., & Zairi, M. (2003). Enterprise resource
planning: A taxonomy of critical factors. European Journal of Opera-
tional Research, 146 (2), 352–364.
Bajwa, D. S., Garcia, J. E., & Mooney, T. (2004). An integrative frame-
work for the assimilation of enterprise resource planning systems:
phases, antecedents, and outcomes. Journal of Computer Informa-
tion Systems, 44 (3), 81–90.
 The Banker. (2003). Top 1,000 world banks. The Banker, 153, 221–253.
Barker, T., & Frolick, M. N. (2003). ERP implementation failure: A case
study. Information Systems Management, 20 (3), 43–49.
Beard, J. W., & Sumner, M. (2004). Seeking strategic advantage in the
post-net era: Viewing ERP systems from the resource-based perspec-
tive. Journal of Strategic Information Systems, 13 (2), 129–150.
Berensmann, D. (2005). Die Rolle der IT bei der Industrialisierung von
Banken (“The role of IT in the industrialisation of banking”). In Z.
Sokolovsky & S. Löschenkohl (Eds.), Handbuch Industrialisierung der
Finanzwirtschaft (pp. 83–93). Wiesbaden: Gabler Verlag.
Berensmann, D., Keller, G., Pfaff, D., & Skiera, B. (2004). Die Industrial-
isierung einer Retailbank mittels Standardsoftware: Profitabilität im
Kerngeschäft (“The industrialisation of a retail bank via commercial
off-the-shelf software”). Geldinstitute, 35, 10–11.
Berger, A. N. (2003). The economic effects of technological progress:
Evidence from the banking industry. Journal of Money, Credit, and
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
Banking, 35, 141–176.
Bernroider, E., & Koch, S. (2000). Entscheidungsfindung bei der Aus-
wahl betriebs­wirtschaftlicher Standardsoftware: Ergebnisse einer
empirischen Untersuchung in österreichischen Unternehmen
(“Deciding on ERP deployment: Empirical evidence from a survey of
Austrian firms”). Wirtschaftsinformatik, 42 (4), 329–338.
Betsch, O. (2005). Die Zukunft der Bankindustrie (“The future of the
banking industry”). In Z. Sokolovsky, & S. Löschenkohl (Eds.),
Handbuch Industrialisierung der Finanzwirtschaft (pp. 3–19). Wies-
baden: Gabler Verlag.
Betsch, O., & Thomas, P. (2004). Industrialisierung der Kreditwirtschaft:
Informationstechnologie und Managementkonzepte (“Industri-
alisation of banking: Information technology and management
approaches”). Wiesbaden: Gabler Verlag.
Bingi, P., Sharma, M. K., & Godla, J. K. (1999). Critical issues affecting
an ERP implementation. Information Systems Management, 16 (3),
7–14.
Brown, C., & Vessey, I. (1999). ERP implementation approaches: toward
a contingency framework. Proceedings of the 20th International
Conference on Information Systems, 411–416.
Brynjolfsson, E., Hitt, L. M., & Yang, S. (2000). Intangible assets: How the
interaction of computers and organisational structure affects stock
market valuations. Working Paper, Cambridge, MA: ­Massachusetts
Institute of Technology, Sloan School of Management.
Chowdhury, A. (2003). Information technology and productivity payoff
in the banking industry: Evidence from the emerging markets. Jour-
nal of International Development, 15, 693–708.
Davenport, T. H. (1998). Putting the enterprise into the enterprise sys-
tem. Harvard Business Review, 76 (4), 121–131.
Davenport, T. H. (2000). Mission critical: realising the promise of enter-
prise systems. Boston, Massachusetts: Harvard Business School Press.
Dos Santos, B. L., & Peffers, K. (1995). Rewards to investors in innovative
information technology applications: First movers and early follow-
ers in ATMs. Organization Science, 6 (3), 241–259.
European Central Bank. (2004). Monetary financial institutions statisti-
cal report, Frankfurt, Germany. Total number of MFIs.
European Central Bank. (2005). Monetary financial institutions statisti-
cal report, Frankfurt, Germany. Total number of MFIs.
Federal Deposit Insurance Corporation. (2004). Quarterly banking pro-
file: Fourth quarter 2003. Washington, District of Columbia.
Federal Deposit Insurance Corporation (2005). Quarterly banking pro-
file: Fourth quarter 2004. Washington, District of Columbia.
Forrester Research (2004). ERP applications: Market maturity, consolida-
tion, and the next generation. Forrester Research, Inc., Cambridge,
MA.
Frantz, P. S., Southerland, A. R., & Johnson, J. T. (2002). ERP software
implementation best practices. Educause Quarterly, 25 (4), 38–44.
Gartner Dataquest (2004). Market trends: Enterprise resource planning,
worldwide, 2003–2004. Gartner, Inc., Stamford, CT.
Gattiker, T. F., & Goodhue, D. L. (2004). Understanding the local-
level costs and benefits of ERP through organisational information
processing theory. Information & Management, 41 (4), 431–443.
Fuß et al. 170
Gefen, D., & Ragowsky, A. (2005). A multi-level approach to measuring
the benefits of an ERP system in manufacturing firms. Information
Systems Management, 22 (4), 18–25.
Hayes, D. C., Hunton, J. E., & Reck, J. L. (2001). Market reaction to ERP
implementation announcements. Journal of Information Systems, 15
(1), 3–18.
Hedman, J., & Borell, A. (2003). ERP systems impact on organisations.
In G. Grant (Ed.), ERP and data warehousing in organisations: Issues
and challenges (pp. 1–21). Hershey, PA: Idea Group Publishing.
Hitt, L. M., Wu, D. J., & Zhou, X. (2002). Investment in enterprise
resource planning: business impact and productivity measures. Jour-
nal of Management Information Systems, 19 (1), 71–98.
Holland, C. P., Lockett, A. G., & Blackman, I. D. (1997). The impact of
globalisation and information technology on the strategy and profit-
ability of the banking industry. Proceedings of the 30th Hawaii Inter-
national Conference on System Sciences, 1–10.
Hong, K. K., & Kim, Y. G. (2002). The critical success factors for ERP
implementation: An organisational fit perspective. Information &
Management, 40 (1), 25–40.
Mabert, V. A., Soni, A. K., & Venkataramanan, M. A. (2003). The impact
of organisation size on enterprise resource planning (ERP) implemen-
tations in the US manufacturing sector. Omega, 31 (3), 235–246.
Madapusi, A., & D’Souza, D. (2005). Aligning ERP systems with interna-
tional strategies. Information Systems Management, 22 (4), 7–17.
Magnusson, J., Nilsson, A., & Carlsson, F. (2004). Forecasting ERP imple-
mentation success: Towards a grounded framework. Working Paper,
University of Gothenburg, Gothenburg, Sweden.
Mata, F., Fuerst, W., & Barney, J. (1995). Information technology and
sustained competitive advantage: A resource-based analysis. MIS
Quarterly, 19 (4), 487–505.
Mishkin, F. S. (2001). The economics of money, banking, and financial
markets, 6th Ed. Boston, MA: Addison Wesley.
Moormann, J. (1998). Stand und Perspektiven der Informationsverar-
beitung in Banken (“Status quo and perspectives of information
processing in banking”), Working Paper, Hochschule für Bank-
wirtschaft, Frankfurt, Germany.
Murphy, K. E., & Simon, S. J. (2002). Intangible benefits valuation in ERP
projects. Information Systems Journal, 12 (4), 301–320.
Oliver, D., & Romm, C. (2002). Justifying enterprise resource planning
adoption. Journal of Information Technology, 17 (4), 199–213.
Poston, R., & Grabski, S. (2001). Financial impacts of enterprise resource
planning implementations. International Journal of Accounting Infor-
mation Systems, 2 (4), 271–294.
Rajagopal, P., & Frank, T. G. (2002). Oracle ERP and network computing
architecture: Implementation and performance. Information Systems
Management, 19 (2), 53–69.
Rashid, M. A., Hossain, L., & Patrick, J. D. (2002). The evolution of ERP
systems: A historical perspective. In L. Hossain, J.D Patrick, & M.A.
Rashid (Eds.), Enterprise resource planning: Global opportunities and
challenges (pp. 1–16). Hershey, PA: Idea Group Publishing.
Rebouillon, J., & Müller, C. W. (2005). Kostenmanagement als strategische
Herausforderung (“Cost management as a strategic challenge”). In Z.
Sokolovsky & S. Löschenkohl (Eds.), Handbuch Industrialisierung der
Finanzwirtschaft (pp. 693–710). Wiesbaden: Gabler Verlag.
Ross, J. W. (1999). Surprising facts about implementing ERP. IT Profes-
sional, 1 (4), 65–68.
SAP. (2004). Enterprise services architecture: An introduction. (SAP
White Paper.) Retrieved August 1, 2005, from http://www.sap.com/
solutions/netweaver/pdf/ WP_Enterprise_Services_ Architecture_
Intro.pdf
SAP. (2005). Enterprise resource planning for banks. (SAP White Paper.)
Retrieved Autust 1, 2005, from http://www.sap.com/industries/
banking/pdf/BWP_OB_ERP_in_Banking.pdf
Scott, J. E., & Kaindl, L. (2000). Enhancing functionality in an enterprise
software package. Information & Management, 37 (3), 111–122.
Shang, S., & Seddon, P. B. (2002). Assessing and managing the benefits
of enterprise systems: The business manager’s perspective. Informa-
tion Systems Journal, 12 (4), 271–299.
 Sheu, C., Yen, H. R., & Krumwiede, D. W. (2003). The effect of national
differences on multinational ERP implementation: An exploratory
study. TQM & Business Excellence, 14 (6), 641–657.
Veitinger, M., & Löschenkohl, S. (2005). Übertragbarkeit industriel-
ler Methoden auf die Prozesse der Finanzwirtschaft (“Applicability
of industrial practices to the business processes of banks”). In Z.
Sokolovsky & S. Löschenkohl (Eds.), Handbuch Industrialisierung der
Finanzwirtschaft, (pp. 397–408). Wiesbaden: Gabler Verlag.
Wei, C. -C., & Wang, M., -J. J. (2004). A comprehensive framework for
selecting an ERP system. International Journal of Project Manage-
ment, 22 (2), 161–169.
Yen, D. C., David, C. C., & Chang, J. (2002). A synergic analysis for web-
based enterprise resource planning systems. Computer Standards &
Interfaces, 24 (4), 337–346.
Zhu, K., Kraemer, K. L., Xu, S., & Dedrick, J. (2004). Information technol-
ogy payoff in e-business environments: An international perspective
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012
on value creation in the financial services industry. Journal of Man-
agement Information Systems, 21 (1), 17–54.
Biographies
Carolin Fuß is a Ph.D. student at European Business
School (EBS) and a research assistant at the Endowed
Chair for Banking and Finance. She studied business
administration at EBS, at San Francisco State University
171 ERP Usage in Banking
and at Ecole Supérieure de Commerce de Toulouse, and
graduated from EBS in 2003.
Ralf Gmeiner is a research assistant at the Department
of Supply Chain Management & Information Systems at
EBS. He graduated from the University of Mainz with a
degree in business administration in late 2003 and started
his doctoral studies at EBS in 2004.
Dirk Schiereck is Professor of Banking and Finance. He
holds a diploma in economics from the University of Kiel
and obtained his Ph.D. in business administration from
the University of Mannheim where he also completed his
habilitation thesis in 2000. Prior to his appointment at
EBS, he was the Chair for Capital Markets and Corporate
Governance at the University of Witten/Herdecke.
Susanne Strahringer is Professor of Information Sys-
tems at EBS. She graduated from Darmstadt University of
Technology where she also obtained her Ph.D. and com-
pleted her habilitation thesis in 2001. Before joining EBS,
she worked at the University of Augsburg as the Chair for
Business Administration, especially Information Systems.
Downloaded by [National Agency of Science and Technology Information] at 04:29 12 January 2012