Master’s Thesis 30 credits Department of Informatics and Media Spring Semester of 2018 Date of submission: 2018-05-28 THE AI REVOLUTION A study on the present and future application and value of AI in the context of ERP systems Jacob Bergdahl Abstract Business leaders around the world are expressing equal amounts of excitement and urgency for implementing artificial intelligence (AI) technologies. Yet the upcoming AI revolution is clouded with uncertainties and misconceptions. In this thesis, the business value and application potential of AI were studied in a context of enterprise resource planning (ERP) systems through a case study at a consultancy firm with small- to midsize clients. Three research questions were posed and answered: how can, or do, organizational processes covered by ERP systems benefit from AI, what AI features do customers typically request when ordering ERP systems, and is AI adopted with the purpose of reducing costs or increasing revenue? Using a framework for data analysis, multiple organizational processes covered by ERP systems were explored through interviews with ERP experts. The results indicated that small- and midsize companies were still primarily requesting and working to implement basic, incremental AI with the purpose of reducing costs through automations. Future leaders may instead need to implement AI that fundamentally reinvents their business processes, with the purpose of increasing revenue through augmentations. Overall, while some organizational processes have already been improved with AI solutions, many processes have yet to be AI- powered in the ERP solutions sold by the consultancy firm examined in this study. However, the consultants of the firm express great positivity for the untapped potential of AI, and many further AI solutions are being developed. Keywords: artificial intelligence (AI), enterprise resource planning (ERP) system, business value Sammanfattning Affärsledare världen runt upplever såväl entusiasm som brådska för att implementera artificiell intelligens (AI). Men den kommande AI-revolutionen är fylld av osäkerheter och miss- uppfattningar. I denna uppsats undersöktes det affärsvärde och den användningspotential som AI har i en kontext av affärssystem (enterprise resource planning system, ERP) genom en fallstudie på en konsultfirma med små- och mellanstora kunder. Tre forskningsfrågor ställdes och besvarades: hur kan organisatoriska processer som täcks av affärssystem komma att gynnas av AI, eller hur gynnas de redan, vilken typ av AI efterfrågar kunder när de beställer affärssystem, och införskaffas AI i syftet att minska kostnader eller öka intäkter? Med hjälp av ett ramverk för dataanalys utforskandes ett flertal organisatoriska processer som täcks av affärssystem genom intervjuer med affärssystemsexperter. Resultatet tyder på att små- och mellanstora företag fortfarande primärt efterfrågar och jobbar med enkla, inkrementella AI- utvecklingar, med syftet att minska kostnader genom automatiseringar. Framtida ledare kan istället komma att vilja implementera AI som fundamentalt återuppfinner organisationens affärsprocesser, med syftet att öka inkomsterna genom att göra personalen kraftfullare. På det stora hela har enbart än så länge endast ett mindre antal organisatoriska processer blivit förbättrade med AI-lösningar i de affärssystem som säljs av konsultfirman som undersöktes i denna studie. Företagets konsulter uttrycker dock starkt positivitet för den outnyttjade potentialen som kan hittas i AI, och fler AI-lösningar för affärssystemen håller på att utvecklas. Nyckelord: artificiell intelligens (AI), affärssystem (ERP), affärsvärde Table of Contents 1 Introduction ............................................................................................................................ 1 1.1 Background ...................................................................................................................... 1 1.2 Problem ........................................................................................................................... 2 1.3 Research Purpose ............................................................................................................ 3 1.4 Demarcations ................................................................................................................... 4 1.5 Disposition ...................................................................................................................... 4 2 Theoretical Background ......................................................................................................... 6 2.1 Artificial Intelligence ...................................................................................................... 7 2.1.1 The Definition of AI ..................................................................................................... 8 2.1.2 The Technologies Powering AI: Machine Learning and Deep Learning .................. 11 2.1.3 The Organizational Impact of AI ............................................................................... 13 2.1.4 The Business Strategies of AI .................................................................................... 14 2.1.5 The Untapped Potential of AI .................................................................................... 15 2.2 Enterprise Resource Planning Systems ......................................................................... 15 2.2.1 The Components of ERP Systems ............................................................................. 16 2.2.2 The Business Value that ERP Provides...................................................................... 16 3 Method ................................................................................................................................. 18 3.1 Research Strategy .......................................................................................................... 18 3.2 Research Method ........................................................................................................... 19 3.3 Data Analysis ................................................................................................................ 21 3.3.1 The Framework for Creating Business Value with AI ............................................... 21 3.3.2 The Organizational Processes .................................................................................... 25 3.4 Validity and Reliability ................................................................................................. 25 3.5 Critical Review .............................................................................................................. 26 4 Results .................................................................................................................................. 28 4.1 The Present and Future of The Processes ...................................................................... 28 4.1.1 Invoice Management .................................................................................................. 29 4.1.2 Inventory & Warehouse Management ....................................................................... 30 4.1.3 Retail Management .................................................................................................... 31 4.1.4 Knowledge Management ............................................................................................ 31 4.1.5 Service & Support ...................................................................................................... 32 4.1.6 Purchasing .................................................................................................................. 32 4.1.7 Business Intelligence .................................................................................................. 34 4.1.8 Marketing ................................................................................................................... 34 4.1.9 Recruitment ................................................................................................................ 35 4.1.10 Human Resource Management ................................................................................ 35 4.1.11 Customer Relationship Management ....................................................................... 36 4.1.12 Other processes ........................................................................................................ 36 4.2 The Four Models of the Framework Explored .............................................................. 38 4.2.1 Efficiency ................................................................................................................... 39 4.2.2 Effectiveness .............................................................................................................. 39 4.2.3 Expert ......................................................................................................................... 40 4.2.4 Innovation ................................................................................................................... 40 4.3 Other Insights ................................................................................................................ 40 4.4 Conclusion ..................................................................................................................... 42 5 Analysis ................................................................................................................................ 43 5.1