Information technology (IT) is said to enhance business growth and also ensure profitability due to the reduced cost of operation encountered. This contribution is perceived to be the second most important issue for CIO’s (CSC, 2001). Strategic management researchers have studied this impact for decades together with the related theories but those that stand firm include the competitive strategy framework, which is based upon a market power imperative (Henderson and Mitchell, 1997). In this, IT is seen as a means by which the firm gains competitive advantage by altering the market forces that collectively determine industrial profitability (Porter and Millar, 1985). This enhancement is either seen in the reduction of the cost of operation or the degree of differentiation that IT brings.
Another study of the influence of IT to firm performance also adopts a resource-based view that defines the capabilities and competencies possessed by the firm. These two theories comprise the most widely used theories in strategy in defining the impact of IT to business growth and strategic positioning (Henderson and Mitchell, 1997), though in the past both have been viewed as competing theories. The resource-based view depicts the firm as comprising of ‘bundles of unique resources’ (Penrose, 1959). Also, to achieve a competitive position either through a reduced cost or differentiation, these bundles of resources need to operate in complex relationships, be inimitable, sustainable and rear (Penrose, 1959; Rumelt 1984). The two theories introduce two distinct ideas to strategy: competencies and capabilities, and also the understanding of the industrial structure. To operate and deliver in a niche, firms need to assume some strategic position within the market in which they operate. Putting these two theories together, it seems that resources are themselves valuable no matter what form they are seen. But according to Porter, this is too far from normal and that resources only become valuable if they are put into strategic use to fit the industry structures. Questions then arise as to the cost-benefits of an IT project let alone that of an ERP.
An ERP decision should be one that put the firm into a strategic position or niche and geared towards the attainment of certain ends. Currently, an ERP strategy could be strategic or an ad hoc adoption (a technochase). The decision need not be made by people who think they are powerful and that their decisions should be hitherto taken. ERP has the potential to altering the rules of competition by changing how the industry or a company operates, generates competitive advantage and providing opportunities to manage the customer life cycle and experience (Porter and Millar, 1985), but these could be achieved on the condition that, the technology is used in a unique way. From the resource-based view, a resource possessed by most of the competition does not contribute to competitive advantage. Adopting an ERP solution strategically does not mean that the organisational problems will be solved automatically or processes themselves will improve, it needs the addition of change and people orientation to the new facility. This analysis is in line with the fact that IT resources alone do not provide competitive advantage (Powell and Dent-Micallef, 1997), the realization of which is by ‘leveraging complementary between business and human resources’.
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