Containing transaction costs in ERP implementation through identification of strategic learning projects

When implementing enterprise resource planning (ERP) projects, organizations must factor into the project's budget the costs associated with learning efforts. If not, they must manage these costs at the portfolio level as higher than planned costs which lower the costs of future projects. This paper examines how a Swedish ERP consultancy managed the costs of its learning projects, showing how organizations--by embracing a transaction-costs-economic (TEC) perspective--can lower their portfolio-level project costs in the long-term while managing budget overruns in the short-term, noting how organizations can use a model for short-term learning investments that lowers the risks of implementing future projects and that clarifies the long-term profitability of exceeding short-term time and budget targets. In doing so, it overviews the literature on ERP projects, looking at learning on ERP projects in relation to knowledge development; it reports the authors' literature review, which explored the problems involved with TEC, the control perspective in projects, and learning projects. It also defines three research propositions. It then outlines the results from analyzing the connection between transaction costs and knowledge creation within learning projects, a study that examined the long-term transaction costs for a multi-project ERP system developed within a buyer organization. It identifies this study's managerial and theoretical implications.