ERP impact on number of employees and personnel costs in small and medium sized enterprises a panel data approach

Enterprise Resource Planning (ERP) vendors have emphasized a positive impact of their ERP projects in company performance and in costs reduction. Recently, some researchers have started to analyze the impact on business performance of the organizational changes that complement IT investments. This study attempts to analyze the impact of ERP implementations in the SMEs' number of employees and personnel costs. We have collected information of 168 Spanish SME during the period 1997-2005, concerning the type of purchased ERP, implementation period, number of employees, personnel costs and some financial indicators. We use two panel data models to compare and analyze the number of employees' evolution and the related personnel costs, before and after ERP implementations. Our preliminary findings suggest that as bigger the SME as lower will be the decrease its number of employees. On the other hand, ERP impacts positively in personnel costs. This trend to increase personnel costs can be explained in the sense that SMEs using an ERP system need people not only with specific operative skills but also with a very holistic approach to understand and obtain maximum benefits to the ERP system.