Descriptions and Prescriptions
SAP R/3 manuscripts advocate a variety of management concepts such as for example (ABC) ‘activity based costing’ (Horngren et al., 1999), (BSC) ‘balanced scorecards’ (Norton and Kaplan, 1996) and (VBM) ‘value based management’ (Rappaport, 1997). Each of these provides an agenda for management. ABC describes the segmentation of costs and revenues; BSC describes how the firm navigates towards its future, and VBM describes value development. Each concept describes a possible meaning for corporate integration through the ERP system (Dechow, 2001) because they frame transparency and ‘getting things right’ differently. Where ABC talks about the organization of work, the balanced scorecard talks about the organization of linked performance measures and VBM centres on decentralization and business units (Mouritsen, 1998). They are Table 7.2: Four types of manuscripts (Latour, 1992)
Descriptions Define actants, endow them with competences, make them do things and evaluate the sanction of these actions.
Prescriptions Define what is presupposed from those social and technical actors that are transcribed by the description.
Circumscriptions Organize resources in the setting of their own limits and demarcations. Conscriptions Mobilize well-aligned resources to render their behaviour predictable.
different narratives (Boland and Schultze, 1995). First, they define relevant entities, which in ABC is a cost driver, in BSC is a performance driver and in VBM is an investment centre. Second, they endow them with competence to drive costs (ABC), several types of sequentially linked performance indicators (BSC) or residual income (VBM). Third, they allow entities to be compared and evaluated; and fourth, and finally, they prescribe how managers should make changes to their corporations. Each concept invites ERP as information system to speak up as illustrated by the following quotes on each concept (italics added):
The Whale Curve Report … is one of the most important management reports generated by an ABC system. The curve shows the accumulated ABC profit (profit including process costs) for the elements of a market dimension such as ‘all customers of a customer group’ or ‘all products of a product family’. The most profitable element of the dimension is at the left end and the least profitable one at the right end. The accumulated ABC profit is calculated by adding the profit contributed by one element to the profit contributed by all previous (more profitable elements). (SAP AG, 1998, R/3 System – The Impact of Activity-Based Costing (CO-OM- ABC) on Profitability Analysis (CO-PA), p. 3)
As well as being used to capture cost and revenue data for traditional profitability accounting, profit centers can also be used to collect balance sheet items, such as fixed assets, receivables and payables, and inventory. Used in this way, it becomes possible to calculate shareholder value metrics such as EVA: profit centers become value centers. (SAP AG, 1997, Profitability Analysis, p. 22)
The Management Cockpit is an innovative approach to management meetings using the concept of an ‘Enterprise War Room’. In a Management Cockpit, the balanced scorecard is displayed with appropriate visuals and graphics on the walls of an ergonomically designed meeting room. Using the ‘Flight Deck’ of the Management Cockpit, interactive measurement drill-downs and simulation capabilities support performance assessment and decision making. (SAP AG, 1999,
SAP Strategic Enterprise Management Translating Strategy into Action: The Balanced Scorecard, p. 15
As the italicized text passages illustrate the management concepts are not only about ‘getting things right’ as the accounting voice says. The information system can also project them into an organizational role where information on costs, performances and residual income allows the information system to be a resource. This can be illustrated by the association of the balanced scorecard to the Management Cockpit (see Figure 7.1).
ERP manuscripts of accounting and information systems 101
ERP provides functionality since the Management Cockpit can inform. It:
allows a two-way flow of information: corporate strategists can monitor performance continuously using feedback from the business execution systems, and adjustments to the strategy can be driven down to the operational level via new targets and KPIs. (SAP AG, 1999, SAP Strategic Enterprise Management Translating Strategy into action: The Balanced Scorecard, p. 3)
The manuscript illustrates how accounting through ‘getting things right’ help the information system articulate what it can do. Activity- based costing; the balanced scorecard and value-based management all provide narratives that require the functionalities of information systems. Without the IS functionalities, however, the narratives are worthless, and this functionality is structured in ERP as a configuration across five different system levels (Figure 7.2).
The first level concerns the choice of technology, i.e. the scope and scale of hardware. Once the platform has been chosen four additional levels of configuration work emerge. As Figure 7.2 illustrates, the first two concern an accounting structure and the last two concern a logistics structure. This technological representation of ERP is from materials not provided by SAP AG, but from the SAP training academy. The written materials from SAP AG instead introduce the relational database technology through the following analogy.
We can represent Accounting and Logistics in R/3 as pyramids with three different segments … The segments of the pyramids, in each case, Figure 7.1: The Management Cockpit SAP AG, R/3 System SAP Strategic Enterprise Management, Enabling
Value-Based Management.
White wall
Strategic project monitoring
Black wall
Key financial ratio + critical success factors Status + trends Blue wall Internal processes Quality improvement Red wall Market customers Competitor watch
vary in size. In Logistics, business processes are of decisive importance. In Accounting the focus is on information acquisition for internal and external reporting requirements. (SAP AG, 1997, BC The R/3 Process Model, release 3.1G, p. 11)
The difference between Figure 7.2 and Figure 7.3 is interesting. Figure 7.2 provides a sequential story of the technology of ERP while Figure 7.3 presents an atemporal model of how ERP can get things done. The difference is about the constraints of ERP. In the following sections we discuss how these constraints are circumscribed and conscribed by information systems technology. We first look at the ways that IS technologies are used to circumscribe the firm where its local specificity Figure 7.2: The 5-ring configuration architecture of an ERP system based on relational database technology.
Based on SAP Academy handout, 1998.
Company code(s) Business areas Personnel area Purchasing
organization(s) Plant(s) organization(s)Sales
Sales area Sales office Sales person group Loading point Purchasing group Chart of
accounts Controllingarea control areaCredit
Storage location Shipping
point
Distribution
channel divisionSales Level 1 Level 2 Level 3 Level 4 Level 5 Client or Clients Accounting Logistics HR
Figure 7.3: The accounting–logistics structure of an ERP-system architecture Source: SAP AG, 1997, BC The R/3 Process Model, release 3.1G, p 11.
Information Organizational units Business Processes Information Organizational units Business processes Logistics Accounting
ERP manuscripts of accounting and information systems 103 is transformed into a global (simplifying) format, as resources become organized by means of a system of graphical system objects.
Circumscriptions
ERP systems have often been emphasized for their ability to turn organizational attention from functions to processes – they circumscribe or organize resources. This has been achieved largely through object- oriented language, which in the SAP R/3 dialect is known as an ‘event- driven process chain’ and is based on four objects illustrated with each their icon in the graphic below (Figure 7.4).
The four ‘objects’ each defines one question. The function object concerns the question what should be done; the ‘event’ object asks the question when should something be done. The question of who should do something is the concern of the ‘organization unit’ object and the ‘entity type’ finally asks, what information is necessary to do something.
In the words of SAP AG, business objects accomplish ‘a high degree of abstraction without detailed information, allowing project team members to communicate at a business level that does not require special technical knowledge of the system’. (SAP AG 1997: BC The Process Model, release 3.1G, p. 2–6), and the main point here is that the objects circumscribe reality:
Business people benefit from business objects as a means of abstraction. They are not at all interested in the details of a ‘purchase requisition’ programming code, for example. Much more important is the fact that business people can continue to use their own language in order to efficiently communicate their business needs. Therefore, business and IT people can both talk about identical business objects from two completely different points of view. Business objects close the communication gap between IT and business… (SAP AG 1996, R/3 System – SAP Business Objects, pp. 3 & 4)
Figure 7.4: The EPC Diagram – An Implementation Technology. Source: Keller (1999)
Entity type Entity type Function Event Org. unit XOR Event Event
The EPC diagram presents configuration work as a liberal (horizontal) process, where it is possible to start from many angles as long as the management ‘functions’ (the things that need to be done) are accorded primacy. Through the object of ‘organizational units’ EPC- diagram integrates with the five configuration levels introduced before (Figure 7.2). But as stated in the quotations, the idea is to keep business people at a distance from the actual configuration work. Instead of learning about relational database technology through the five configuration levels (Figure 7.4), business people merely have to recognize four objects and then business and IT people can talk about identical business objects from two completely different points of view. The process looks liberal, but via EPC diagrams the reality of the locality is circumscribed into a simplifying, global format. Here, the resources of the locality are generalised according to the logic of the EPC diagram and therefore it is questionable just how far cultivating (Dahlbom and Jalbert, 1996) it can be. It not only allows the local to be made visible; it creates visibility along the simplifying effects of the four objects and therefore also crafts visibility.
Enterprise models provide effective support for the re-engineering phase, which often precedes configuration of R/3. The intuitive visualization method for representing enterprise models allows the specialist departments and management to be incorporated at an early stage in the project without requiring in-depth knowledge of R/3. This leads to greater reliability when R/3 is implemented, since a binding framework for the entire project phase is provided. (SAP AG – 1997, CA Reference Model, release 3.0F, pp. 1–2)
This process serves ‘getting things connected’. The narratives provided by accounting produce descriptions and prescriptions to ‘get things right’, but the object-oriented representation preferred by IS helps to create new possibilities in favour of a new set of connections. This is where information systems stand in for accounting. Information systems help accounting as it handles more of the complexity of the business situation as it provides a lens that may be even clearer in its process and connections than accounting’s ‘general bottom line’ developed via de- and prescriptions. The EPC diagram represents business activities in a process structure as if it was inherent to these activities (Preston, 1991) where often, however, the structure provided is a series of variables with orderly and determinate rules given only by technology.
Conscriptions
The circumscriptions (the enrolment of resources) performed by the EPC diagram have to be mobilised through the relational database where ERP is conscripted (made to be stable) to perform certain actions predictably.
ERP manuscripts of accounting and information systems 105
In their materials, SAP AG understands configuration work by means of three technology scenarios (see Table 7.3). The ‘basic set-up’ represents a very efficient but also very inflexible set-up, the multiple-systems set- up provides a maximum of system flexibility, although at the cost of reduced performance (because of multiple data-redundancies across the system) or increased costs (due to the need for larger investments in hardware technology).
Kagerman (1993) refers to these three configuration alternatives as a choice between ‘management holdings’; ‘financial holding companies’ and ‘strategic alliances’. As illustrated in Table 7.3, there are three different ways to align corporations through information technology and thus they also display technology in three different roles between ‘getting things right’ and ‘getting things connected’.
Table 7.3: Three technology scenarios at the first of 5 ERP configuration levelsa Control
configuration Basic
1 system set up for one company
Advanced 1 system set up for X companies Multiple systems 1 enterprise with X company systems Logistical integration Within location of business Focused at the level of strategic business units across legal entities
Only to a limited extent across business units and enterprise Technologies and process Standardised to a large degree Different in various business units Different in various business units Markets Uniform by structure Varying by structure Varying by structure Internal transactions
No internal pricing Transfer pricing Market-based customer/ vendor relationships Operational
control
Standard reporting Independent operative and strategic control
Full BU autonomy: system master data, open items management and controlling General
reporting
Reports for external rendering of accounts Autonomous SBUs in relation to profitability and cost reporting Independent
New business Legal entities should not be planned in short term Legal entities planable in medium term
Legal entities planable ‘any time’
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