Titilope Oladiran MSc. Information Systems
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ABSTRACT
With the development of the IT architect such as enterprise systems, projects failure
has become a controversial issue in the IS research area. Many large organisations,
these days tend leverage cost by employing the implementation of IS systems such as
ERP. Incredible facts shows projects failure can lead to catastrophic results in either
economic or social divisions. For example, FoxMeyer a leading drug company went
bankrupt after an ERP implementation. There is a vital need to fill the research gap
by investigating “what are the critical factors which contributes a lot to ERP
projects failure”.
This dissertation surveys the analysis and findings multiple case studies of large
organisations where ERP has been implemented. The study investigates the failure
factors involved with ERP projects, and analyses each of this factor in details. To
undertake this study, a checklist was developed after reviewing a number of
literatures. Several relevant headlines, which is consistent with the dissertation’s
objectives, are generated to analysis the conceptions of “ERP failure”. On the basis
of this checklist the 7 case studies, identified as ERP case studies, were analysed.
The study reveals that no organisation embarks on an ERP project with the mind to
fail, however failure is imperative when some factors come into play. Further the
study also helped in identifying these key issues. The dissertation highlights the
barriers to successful ERP migrations including: project management issues; poor
contingency planning; and organisation issues.
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It was observed that majority of the organisations used in the study failed to deliver a
successful project implementation. Further the study deduced the possible risks
involved with these project implementations. It was observed that some of these
factors were more detrimental than others; hence they were classified as Critical
Failure Factors of ERP implementations in large companies.
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ACKNOWLEDGEMENT Specifying and enlisting all the individuals whose contribution went into the
development this work is a very difficult task. My gratitude goes to my very sincere
but supportive supervisor and personal tutor Dr. Miguel J.B. Nunes, for his
encouragement and to research student Alex Peng. They both made this a personally
rewarding experience. I thank them for their unrelenting support and constant
inspiration, without which understanding the intricacies of the study would have
been very difficult. They not only taught the fundamentals for undertaking the
research but also helped me develop as an individual.
My heartfelt gratitude also goes to the University of Sheffield, UK, for providing me
with the opportunity to avail the excellent facilities and infrastructures. The values
inculcated and the management skills imparted to me as an individual will be of
immense help at the very start of my career. After undergoing these three months of
rigorous study, I can confidently say that this experience has not only enriched me
with academic and industrial knowledge but has also imparted the maturity of
thought, vision, the attributes required to be a successful professional. Special thanks
to Mrs T.Onipede, who took special efforts in proof reading this work.
I would also like to express my thanks to my parents, Prof T. Oladiran and Mrs W.
Oladiran and other family members, friends and colleagues, who have been helping
hands throughout. Last but not least, I express my thanks to God for seeing me
through the challenges of this project-I am forever grateful to you.
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TABLE OF CONTENTS
ABSTRACT ................................................................................................... 1
ACKNOWLEDGEMENT................................................................................ 3
CHAPTER ONE............................................................................................. 8
INTRODUCTION ........................................................................................... 8
1.0 Introduction.................................................................................................................................... 8
1.1 Background Information....................................................................................................... 8
1.2 Statement of the Problem ............................................................................................................ 10
1.3 The Research Question ................................................................................................................ 11
1.4 Objectives of the study................................................................................................................. 12
1.5 Relevance of Study ....................................................................................................................... 12
1.6 Research Gap................................................................................................................................ 13
1.7 Methodology ................................................................................................................................. 14
1.8 Limitation of the study................................................................................................................. 15
1.9 Outline of Dissertation ................................................................................................................. 15
CHAPTER TWO .......................................................................................... 16
ENTERPRISE RESOURCE PLANNING ..................................................... 16
2.0 Introduction.......................................................................................................................... 16
2.1 Overview of Enterprise Resource Planning ............................................................................... 16 2.1.1 What is Information Systems ................................................................................................. 17 2.1.2 What is ERP ........................................................................................................................... 18 2.1.3 Evolution of ERP.................................................................................................................... 20
2.2 ERP Functional areas .................................................................................................................. 21 2.2.1 Characteristics and Components ............................................................................................ 22 2.2.2 Applications............................................................................................................................ 24
2.3 ERP Vendors ................................................................................................................................ 27
2.4 Current Trends in ERP ............................................................................................................... 28
2.5 Summary....................................................................................................................................... 29
CHAPTER THREE ...................................................................................... 30
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ENTERPRISE RESOURCE PLANNING IN LARGE ORGANISATIONS.... 30
3.0 Introduction.................................................................................................................................. 30
3.1 Overview of ERP in large organisations .................................................................................... 30 3.1.1 Benefits of ERP to large Organisation.................................................................................... 32 3.1.2 Disadvantages of ERP to organisation ................................................................................... 35
3.2 Overview of ERP Project............................................................................................................. 37 3.2.1 Risks involved in ERP projects .............................................................................................. 40
3.3 Critical Susses factors of ERP Project........................................................................................ 42
3.4 Failure factors of ERP Project .................................................................................................... 45 3.4.1 Critic of Failures Definitions.................................................................................................. 46 3.4.2 Causes of ERP failure............................................................................................................. 50
3.5 Summary....................................................................................................................................... 53
CHAPTER FOUR ........................................................................................ 55
RESEARCH METHODLOGY ...................................................................... 55
4.0 Introduction.................................................................................................................................. 55
4.1 Research Methodology................................................................................................................. 55
4.2 Research Approach...................................................................................................................... 56
4.3 Research Method.......................................................................................................................... 59 4.3.1 Data from Past Research ........................................................................................................ 60 4.3.2 Desktop Research ................................................................................................................... 61 4.3.3 Case Study Analysis ............................................................................................................... 61
4.4 Research Design ........................................................................................................................... 62
4.5 Data analysis - Checklist development ....................................................................................... 66
4.6 Summary....................................................................................................................................... 70
CHAPTER FIVE........................................................................................... 71
DATA FINDINGS AND ANALYSIS ............................................................. 71
5.0 Introduction.................................................................................................................................. 71
5.1 Case Study of Fox Meyer .................................................................................................... 71 5.1.1 Introduction of Fox Meyer ................................................................................................ 71 5.1.2 Analysis of FoxMeyer ............................................................................................................ 72 5.1.3 Discussion .............................................................................................................................. 80
5.2 Case Study of Manco ........................................................................................................... 80 5.2.1 Introduction of Manco............................................................................................................ 80 5.2.2 Analysis of Manco.................................................................................................................. 81 5.2.3 Discussion on Manco ............................................................................................................. 87
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5.3 Case Study of Hershey Foods.............................................................................................. 88 5.3.1 Introduction of Hershey Foods ............................................................................................... 88 5.3.2 Analysis of Hershey Foods..................................................................................................... 89 5.3.3 Discussion on Hershey Foods................................................................................................. 94
5.4 Case Study of NIBCO.......................................................................................................... 95 5.4.1 Introduction of NIBCO ..................................................................................................... 95 5.4.2 Analysis of NIBCO ................................................................................................................ 95 5.4.3 Discussion of NIBCO........................................................................................................... 101
5.5 Case Study of Dell Computers .................................................................................................. 102 5.5.1 Introduction of Dell Computers............................................................................................ 102 5.5.2 Analysis of Dell Computers ................................................................................................. 103 5.5.3 Discussion on Dell Computers ............................................................................................. 107
5.6 Nestle ........................................................................................................................................... 108 5.6.1 Introduction of Nestle........................................................................................................... 108 5.6.2 Analysis of Nestle................................................................................................................. 109 5.6.3 Discussion on Nestle ............................................................................................................ 115
5.7 Case Study of Hewlett Packard................................................................................................. 116 5.7.1 Introduction of Hewlett Packard (HP).................................................................................. 116 5.7.2 Analysis of HP...................................................................................................................... 117 5.7.3 Discussion on HP ................................................................................................................. 121
5.8 Further Discussion ..................................................................................................................... 122 5.8.1 Strategic Goals ..................................................................................................................... 123 5.8.2 Top management’s Commitment to the system ................................................................... 125 5.8.3 Project Management............................................................................................................. 127 5.8.4 Commitment of the Organisation to Change ........................................................................ 128 5.8.5 Selection of Project Team .................................................................................................... 129 5.8.6 Education and Training of Users .......................................................................................... 131 5.8.7 Performance Measures ......................................................................................................... 132 5.8.8 Multi-site issues.................................................................................................................... 133 5.8.9 Technical difficulties ............................................................................................................ 134 5.9 Risks Associated with ERP implementation ........................................................................... 134
5.10 ERP Failure Factors................................................................................................................. 136
5.11 Summary................................................................................................................................... 138
CHAPTER SIX........................................................................................... 139
CONCLUSION........................................................................................... 139
6.0 Introduction................................................................................................................................ 139
6.1 Conclusion................................................................................................................................... 139
6.2 Future Research ......................................................................................................................... 141
REFERENCES .......................................................................................... 142
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CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter introduces the work undertaken in this dissertation. In section 1.1, the
background information lays a foundation for the research, and the subsequent
section 1.2 presents the statement problem. The next two segments 1.3 and 1.4,
discusses the research question and the objectives of the study. In order to affirm the
importance of the study, section 1.5 and 1.6 highlights the relevance of the study and
research gap respectively. A brief description of the methodology employed for this
study along with the limitations and constraints encountered are highlighted in
sections 1.7 and 1.8 correspondingly. Lastly in section 1.9, the author presents the
outline of the dissertation.
1.1 Background Information
Information technology and systems have tremendous impact on the productivity of
both manufacturing and service organizations. Martin (1998) noted that companies
have implemented systems such as enterprise resource planning (ERP) over time for
improving their productivity. ERP systems have received much attention lately
because of their ability to facilitate effective decision-making. Many companies are
implementing ERP packages as a means to reduce operating costs, increase
productivity and improve customer services (Martin, 1998). Black (1999) noted that
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ERP has grown as an integration tool, the aim been to integrate all enterprise
applications to a central data repository with easy and discrete access to all relevant
parties.
Bhattacherjee (2000) noted that SAP R/3 has been installed in over 20,000 locations
in over 107 countries. However ironically, many have concluded that these ERP
systems can cripple a company, if they are not implemented properly. Laughlin,
(1999) and Bancroft et al. (1998) noted cases of horror stories of ERP
implementations.
Bancroft et al. (1998), notes that the sole purpose of an ERP system is to integrate all
facets of the business enterprise under one suite of software applications.
Researchers such as Motwani et al. (2004), states that as more organizations move
from functional to process-based IT infrastructure, ERP systems are becoming one of
today’s most widespread IT solutions, however, not all firms have been successful in
their ERP implementations. They went on to argue that by evaluating ERP
implementations: “Factors affecting the resulting success or failure of ERP projects
can be understood better”
The works of Mandal and Gunasekaran (2003) concluded that for an ERP system to
give a competitive advantage to an organisation the pre-implementation strategies,
implementation strategies and post implementation strategies are very important and
if care is not taken when formulating these strategies, this may lead to critical
failure of the system project.
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Hong and Kim (2001) noted that an IT driven initiative such as ERP implementation
requires change of the organisation’s socio-economic system, which is intertwined
with technology, tasks, people, structure and culture. Thus organisational change is
critical in determining the implementation of ERP software.
1.2 Statement of the Problem
A project which is delivered on time and within budget with satisfied outcomes is
usually considered successful and on the contrary, project failure implies over
budget, out of schedule, undelivered or system dysfunction (Martin, 1998). Khafre
Systems International (KSI 2001) describes failure as “not meeting stated project
goals”.
According to Black (1999) failure is never so easy to be clarified. In reality, failure is
a very complex issue which contains a wide range of fixed and variable
determinations. Moreover, different types of failures can be acknowledged from
different views. The author found out from Davenpot (2000) that in order to qualify
and classify failure it might be important to understand and benchmark it against
success factors.
Nowadays, in the emerging ERP research area, the definition and measurement of
ERP implementation failure is a thorny issue (Black, 1999). Markus and Tanis
(2000) stated that failure and success means different thing depending on who
defines it. Thus, for instance, project managers and implementation consultants,
“often define success in terms of completing the project on time and within budget.
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But people whose job it is to adopt ERP system and use them to achieve business
results tend to emphasise having smooth transition to stable operations with the new
system, achieving intended business improvements like inventory reductions, and
gaining improved decision support capabilities ” (Markus and Tanis 2000, p2).
Clemons (1998) noted that this relative point of view for success can also be applied
to failure, and people also qualify an implementation as a failure according to their
expectations of the project.
ERP Systems are complex, and implementing one can be a difficult, time-
consuming, and expensive project for a company (Ghosh, 2002). They also noted
that it can take years to complete and cost as much as $500 million for a large
company. Furthermore, there is no guarantee of the outcome. The parameter of this
research is surrounded by the evaluation of failure factors and determining what
causes project to fail when implementing an ERP system.
1.3 The Research Question
• What are the failure factors, involved with the implementation of
Enterprise Resource Planning Systems (ERP) Systems in large
Organisations?
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1.4 Objectives of the study
The aim of the investigation is to:
1. To draw up a checklist of possible failure factors ERP based on success
factors
2. To find, qualify, and classify failure factors
3. To find out what causes failure in ERP implementation
4. To highlight some potential what risks that are involved these projects
5. To determine how failure factors can be avoided
1.5 Relevance of Study
The research was to examine the failure factors involved with the implementation in
ERP systems in large companies. Information systems are addressed in a number of
disciplinary fields, the most relevant being:
• Information Science (specifically relevant are the areas of information
organization and retrieval, and business information management),
• Computer Science (specifically software engineering, software design)
• Informatics (specifically systems analysis and design, and MIS or
management information systems).
Furthermore, the study examines the provision of management information in a
specific context relating to transfer and use of data across an organisation, therefore
this work is also relevant to logistics, marketing and other management disciplines.
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1.6 Research Gap
Information systems (IS) research emerged in the 1990s in the international context
(Dean 2001), before then, information systems had usually been seen as a domestic
issue and there was only a little research on large corporations level (Ross, 2000).
Similarly, Hong and Kim (2001) who studied activities in large companies relating to
information systems argued that there were only a few empirical studies in a large
company’s context. To a lesser degree, research linked specifically to information
sciences has materialized within the large enterprise management research streams;
therefore, there is a clear gap in current gap in the current research on large
companies, which creates an interesting research opportunity.
As supported by Davenport et al. (2000), the relationship between ERP
implementation in large companies and failure factors of these implementation is an
emerging topic, firstly because of increasing investment in ERP systems, secondly
because of reported failures in ERP system implementation, and thirdly because
implementing organisation structure changes and ERP are seldom combined in
research.
In information studies research, there are surprisingly few studies of the long term-
changes that enterprise resource planning systems may create for firms. The existing
research focuses on the adopting organisations, e.g. end-users in the line
organisations. Baskerville, et al. (2000) put forward that, in early research on ERPs,
the long-term impacts of ERPs on IT support and maintenance, and on other
elements of any participant organisation were unknown. However, the existing
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literature (for instance Davenport, 1998, 2000, Hall, 2002) acknowledges that
management, organisational structure, and corporate culture changes are connected
to ERPs.
Based on this discussion of the research gap, this research focuses on hindrances to
business domain been integrated to the IT domain during the ERP implementation
and thereafter. The research analyzes what are the possible problematic areas during
an implementation that could result in a failure of implementation.
1.7 Methodology
In order determine the failure factors involved with ERP implementations in large
organisations, firstly the author identified the factors to be considered for the study.
In order to do this, an exhaustive literature review formed the basis of selecting the
checklist features. Secondly, the author evaluated these factors. Case studies of large
organisations that have implemented an ERP system were selected. Thereafter, an
analysis on these sample case studies was conducted using the checklist developed.
The case studies for the analysis were selected based on the criteria of selection of
case studies as stated by Yin (1993) and Stake (1995). In order to obtain sufficient
results the accepted sample size of 7 case studies were used. The sample data was
obtained from textbooks, journal and from individual websites by doing a desktop
research. Lastly the results and findings of the research were drawn.
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1.8 Limitation of the study
This study is constrained by some limitations, like any other research. In order to
demarcate this study and clarify the scope, the author highlighted the limitations to
this study. The major challenge was finding the appropriate cases, in order to
conduct a data analysis. The theory that is developed would have been more accurate
if tested, however this was not possible due to time constraints as this is a Masters
degree dissertation and it was done alone.
1.9 Outline of Dissertation
This dissertation is structured as follows:
Chapter 1- introduces the research work undertaken in this dissertation along
with the research question, objectives of the study, background information to
the topic and the importance of the research.
Chapter 2- evaluates literature in order to gain an understanding of ERP
systems.
Chapter 3- discusses enterprise resource planning systems in large
organisations.
Chapter 4- gives an overview of the methodology adopted for this study.
Chapter 5- presents the findings and analysis of data (individual case
studies) of the study. It also provides a further evaluation and discussion for
all the data(case studies) presented in the previous section of the chapter
Chapter 6- draws up conclusion around the topic area. It also proposes an
area for future research.
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CHAPTER TWO
ENTERPRISE RESOURCE PLANNING
2.0 Introduction
This chapter presents the epistemology of the survey of literature conducted by the
researcher with regards to ERP. The sole aim and rational behind this part of the
write-up is to give the reader a better understanding of Enterprise Resource Planning
Systems. It encapsulates concepts and theories surrounding ERP and guides the
design of study reported with a strong grasp of the overall concept. Firstly an
overview of ERP is discussed here. Then the author proceeds to evaluate what
functional areas of ERP are. The different ERP vendors, along with the current trends
in ERP are also highlighted in this chapter.
2.1 Overview of Enterprise Resource Planning
In the 1990s according to Davenport (2000), innovations in information technology
led to the development of a range of software applications aimed at integrating the
flow of information throughout a company, and these commercial software packages
were known as Enterprise Systems.
Holland et al., (1999) also stated that during this period a particular enterprise system
called ERP caught the attention of some of the world’s largest companies.
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As noted by Huang, and Palvia. (2001), until recently the major ERP vendors such as
SAP and Oracle were mainly targeting the high end of the market (companies with
more than 1000 employees); but this market has come close to saturation. Davenport
(1998) also estimated that businesses around the world have been spending almost
$10 billion per year on ERP systems.
2.1.1 What is Information Systems
Information Systems take inputs (business data) and transforms them into output
(business information) (Chaffey and Wood, 2005). Davenport (2000) defines
information system as a computerized or manual system to capture data and
transform them into information and/or knowledge.
The UK Academy for Information Systems (www.ukais.org) defines information
systems as follows: “Information systems are the means by which organisations and
people, using information technologies, gather, process, store, use and disseminate
information.” An information system (IS) is a formalized computer information
system that can; collect; store; process; and report data from various sources to
provide the information necessary for managerial decision making (Bancroft et al.,
1998).
Researchers such as Sumner (1999) and Davenport (2000) have argued that ERP
systems are a type of information systems.
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2.1.2 What is ERP
An ERP system is a set of integrated programs that is capable of managing a
company’s vital business operations, for the entire global enterprise. Although the
scope of ERP system may vary from company to company, most ERP systems
provide integrated software to support business functions of the organisation
(Davenport, 2000).
Kashef and Izadi (2001) put forward that ERP is a set of applications that help
manage and automate a business. A large database provides access to all application
programs and serves in all areas within a manufacturing enterprise. This is
accomplished by exchanging information with suppliers and customers directly or
through trading community portals and e-commerce links, and with outsourcing
partners (Wreden, 1999).
ERP incorporates all of the elements of a business from financial processes to
manufacturing and marketing activities, into a unified whole that operates more
effectively and efficiently in today’s competitive economy (Hill, 2000). Explanations
from the works of Kashef and Izadi (2001) highlights that these applications include
finance, human resources, management, manufacturing, logistics, and supply chain
management.
Enterprise resource planning (ERP) systems are commercial software packages that
enable the integration of transaction-oriented data and business processes throughout
an organization (Markus and Tanis, 2000).
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The diagram below is captured from the works of Adam and Sammon, (2004). It
gives a brief description of what other researchers in the field have defined ERP to
be.
Figure1: ERP description From Adam and Sammon (2004)
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2.1.3 Evolution of ERP
The first generation enterprise systems, MRP evolved in the 1970s and they gave
information about material basic number crunching, quantities and dates (Garther
Group 1999). As supported by Sandoe et al., (2001), the next decade ushered in the
emergence of the next generation enterprise systems, MRPII. These systems helped
to facilitate the improvement of master planning; it incorporated modules for
capacity management and shop floor control. These systems also integrated sales
orders, purchasing, work orders, and stock. Through these systems an organisation
was able to achieve full planning and control. In the 1990s, the enterprise resourced
planning system materialized. These systems included better financial integration
and distribution/warehousing Sandoe et al., (2001).
Its Evolution started in 1960.
1960-70’s MRP Manufacturing Resource Planning
1980’s MRPII Manufacturing Resource Planning II
1990’s ERP Enterprise Resource Planning
2000’s Extended ERP (Garther Group 1999)
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MRP ERP eERP
Figure 2: The Gartner Group View From Garner Group (1999)
2.2 ERP Functional areas
Researchers such as Boykin (2001) ands Chen (2001) noted that the ERP
functionality usually includes a set of mature business applications and tools for
financial and cost accounting, sales and distribution, materials management,
production packages and computer integrated manufacturing, supply chain, and
customer information.
1980s 1990s 2000s
Competitive
Focus
Manufacturing Enterprise Supply Chain
Enterprise
Strategy
Inventory
Reduction
Business Process
Efficiency
Revenue
Enhancement
Technology
Focus
Automation Integration Interoperability
Process Focus Departmental
Alignment
Enterprise-wide
Closed Loop
Customer
Differentiating
Organizational
Focus
Department Business Process Product/Market
Channel
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Gallagher (2005) explained that ERP functionality includes managing the key
elements of the supply chain operation-product planning, purchasing, production
control, inventory control, interaction with suppliers and customers, delivery of
customer service and keeping track of orders. He went further to state that it may
also include human resource models which maintain a central database of the
organisation’s people, which is critical to production and staff scheduling functions,
and staff payments.
ERP encompasses human resources, decision support applications, distribution,
maintenance support, quality and regulatory control and health and safety
compliance (Martin, 1998). An ERP system can be used as a tool to help improve the
performance level of a supply chain network by helping to reduce cycle times
(Gardiner et al 2002).
Davenport (2000) argued that with ERP, since the manufacturing modules and data
are integrated with other systems within a firm, all potential problems, such as data
reliability and consistency in both MRP and MRP II, likely no longer exists.
2.2.1 Characteristics and Components
1. Client/Server System: Enterprise Resource Planning systems depend on
client/server technology, which enable the users to access the information
from a central server. These enterprise applications typically reside on a
server and provide users access at the PC level. They invite greater access to
the non computer-literate end users. This concept has the ability to bring a
systematic computerized power to the desktop (Kashef and Izadi, 2001)
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2. Enterprise-wide Databases: ERP has one database that serves all the
application systems. These applications enable a company to automate almost
every aspect of its operations by tying the ERP database to its intranet and
extranet and thus allowing full browser access to them (Kashef and Izadi,
2001).
3. Applications/Modules: Each ERP vendor provides a number of ERP
applications (or modules) for their systems. These are the functional software
packages for each individual business unit like finance, human resources,
order processing and so on (Stevens, 1997).
4. WWW/ERP: To accomplish communication among multiple computers a
common software standard and a communication standard is needed. This
issue has largely been solved by the existing protocols and standards of the
WWW like Java and HTML. The ERP system collectively organizes a
company’s processes, communication systems, and management organization
to make seamless software paradigm embedded in the WWW. Hence,
companies can give customers access to their own records, give employees
control over their own benefits, and let financial departments control
purchases of office supplies in innovative ways (Alsop, 1998).
The works of Chan (1999) reflected that an ERP system should embody the
requirements of the following IT architectural components:
• network infrastructure;
• server operating systems (OS) /platform;
• database;
• data ownership;
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• client OS/ workstations;
• web enablement;
• prerequisite user skills;
• IT capacity.
Davenport (2000) noted that two tendencies evolving in the components of ERP are:
1. The state-of-art client/server architecture is being replaced by a more
versatile web-based.
2. As a tendency of failure, it has been seen to stick on “best practice” and rely
on a single software vendor that provides a standard process.
2.2.2 Applications
This section, discusses the application of ERP software. Most ERP systems start with
a set of core modules, and offer additional modules from which a company can select
as desired. All these applications are fully integrated to provide consistency and
visibility for all the activities across entire system operation (Baan, 1997). However,
ERP systems require users to comply with the processes and procedures as
implemented in the individual modules.
Finance functions:
According to Chan (1999), ERP can facilitate the following finance functions:
• General ledger: ERP can keep track of the centralized accounts and corporate
financial balances.
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• Accounts receivable: ERP can keep track of payment dues from customers.
• Accounts payable: ERP can schedule bill payments to suppliers and
distributors.
• Fixed assets: ERP can manage depreciation and other costs associated with
tangible assets such as buildings, property and equipment.
• Treasury management: ERP can monitor and analyze cash holdings, financial
deals and investment risks.
• Cost control: ERP can analyze corporate costs that are related to overhead,
products, and manufacturing order.
Human Resources:
The human resources (HR) division can be enhanced through the following ERP
process:
• HR administration: ERP can automate personnel management processes
such as recruitment, business travel and vacation time.
• Payroll: ERP can handle accounting process and preparation for checks
related to employee salaries, wages and bonuses.
• Self-service HR: ERP can allow workers to change their personal
information and beneficial allocations online.
Manufacturing and Logistics:
The manufacturing and logistics unit can benefit from the use of ERP for:
• Production planning: ERP can perform capacity planning and create a daily
production schedule for manufacturing plants.
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• Order entering: ERP can automate data entry, process customer ordering, and
keep track of order status.
• Warehouse management: ERP can keep track of goods and process
movements in corporate warehouses.
• Transportation management: ERP can schedule and monitor the delivery of
products to customers.
• Project management: ERP can monitor costs and work schedule on a project-
by-project basis.
• Plant maintenance: ERP can set the plan and oversee upkeep of internal
facilities.
• Customer service management: ERP can administer service agreements and
check contracts and warranties when customers needed.
Figure 3: ERP Application areas from Davenport (1998)
ERP Database & Systems
Sales & Marketing
Human Resource
Financial Applications
Data Analysis
Customer Service
Supply-chain management
In & out-bound logistics Manufacturing
planning
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Although the author discussed only three application areas of the ERP system, the
diagram above captures other application areas of the systems.
2.3 ERP Vendors
In accordance with Garner Group Report (Enterprise Resource Planning, 2004-2009)
ERP market revenues increased 14% in 2004. The report indicates that
approximately one-third of the growth in the overall market was due to fluctuations
in currency exchange rates.
Reilly (2005) noted that while the ERP market has grown in revenue, consolidation
continues to change the industry. He went further to explain that in 1999, the top
five vendors (J.D. Edwards, Baan, Oracle, PeopleSoft, and SAP) in the ERP market
accounted for 59% of the industry’s revenue. AMR Research expects the top five
vendors in 2005 (SAP, Oracle, Sage Group, Microsoft, and SSA Global) to account
for 72% of ERP vendors’ total revenue.
The Reilly (2005) report delivers revenue and growth rates for the top ERP players
as well as growth forecasts through 2009. The top ten ERP vendors ranked by 2004
ERP license revenue can be seen in the chart below.
Titilope Oladiran MSc. Information Systems
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Figure 4 :ERP Top Vendors in 2005 from Reilly (2005)
2.4 Current Trends in ERP
Even through the work of complementing “standard ERP” is still under way in many
organizations, as argued by Hong and Kim (1999), some trends have already
established themselves in the development of ERP:
Recently, ERP systems have expanded their reach into the “front office”,
supporting among other things Supply Chain Management (SCM) and
Customer Relationship Management (CRM). It can be argued that this is
driven both by customer demand as well as the ERP vendors to desire, to
keep revenue growth at continued high levels while their core market has
been saturated (Reilly, 2005).
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There are discussions concerning both the ROI (Return Over Investment) as
well as the business benefits to the organizations, but the issue of value is
complicated considering the huge impact of ERP on almost all parts of a
business (Reilly, 2005 ).
2.5 Summary
Innovations in information technology, has led to the maturity of a range of software
applications aimed at integrating the flow of information throughout an organisation.
These commercial software packages were known as Enterprise Systems.
The 1990s ushered in the emergence of ERP systems. ERP systems are known to be
are integrated software packages composed by a set of standard functional modules
(production, sales, human resources, finance, etc.) developed or integrated by the
vendor, that can be adapted to the specific needs of each customer.
ERP are a development of their predecessor software MRPII and MRP respectively.
The ERP application areas includes: manufacturing and logistic, finance; human
resources etc.
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CHAPTER THREE
ENTERPRISE RESOURCE PLANNING IN LARGE
ORGANISATIONS
3.0 Introduction
This chapter will introduce ERP implementation practices in large organisations. The
major overview of ERP project implementation along with the different type’s
implementation strategies is also highlighted. Moreover this section will discuss the
benefit of an ERP implementation to an organisation.
The aim of this chapter is to introduce definitions and themes that are important for
the reader to know in order to understand the ERP concept in relation to large
companies as a whole and not partially. The review will focus on the exploration of
important terms such as risks factors and critical success factors (CSF) and of course
a formal definition of failure factors.
3.1 Overview of ERP in large organisations
Past research put forward that organisational context is a determinant of Information
System (IS) success. Schultz and Slevin (1975) and Ein-Dor and Segev (1978) were
among the first in pointing the importance of organisational factors in managing
Information Systems. In their early work, Ein-Dor and Segev (1978) proposed a
framework after studying Information System in which they identified organisation
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size as one of the critical variables. Researchers such as Delone (1988b), Lai (1994),
Raymond (1985), and Raymond, (1990) have concluded that large organisations
have distinctive and unique needs compared to small organisations therefore the
research findings of small organisations cannot be generalized to large firms.
As explained by Davenport (1998) customarily large organisations tend to use ERP
software packages as they provide a generic, computer-based, enterprise-wide,
business-process support for many organizations. In the year 2000, it was reported
that over 70% of Fortune 1000 companies had or were in the process of
implementing an ERP system (Hillegerberg and Kumar, 2000). They went further to
note that flexibility and quick response are hallmarks of business competitiveness.
Hillegerberg and Kumar, (2000) noted that access to information at the earliest
possible time can help business serve customers better, raise quality standards, and
assess market conditions. He also described enterprise resource planning as a key
factor in instant access.
According to Davenport (1998) a large enterprise may have several units across
separate geographical locations with different degrees of freedom in activities,
therefore a large company is geographically, time-wise and environmentally (both
externally and internally) diverse.
Although researchers such as, Hong and Kim (2001) stated that ERP has packaged
processes for best business practises in the form of a business blue print. They went
further to explain that this blueprint guides firms from the beginning phase of
product engineering, including evaluation and analysis, to the final stages of product
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32
implementation. Hong and Kim (2001) argued that business units, headquarters-
subsidiary relations or business processes and operations in the units are
heterogeneous as local requirements or market conditions create differences in
business activities. There are still questions on how ERP system developed in a
different locality matches up to the organisational environment it proposes to serve.
3.1.1 Benefits of ERP to large Organisation
As affirmed by Rao (2000) the difference between a successful and profitable
organization and an average one is the quality of service. The quality comes when
companies undergo a “metabolic change” in the way they manage customers and
potential prospects. “The smart organizations today could anticipate and exceed
customer expectations that are evaluated on the basis of quality, time, service,
availability and efficiency. The one tool that innovative and progressive
organizations have come to increasingly depend on in this endeavor is ERP
solutions,” (Sarker and Lee, 2003).
As supported by Cadle and Yeates (2001) ERP through its various functional spheres
in an organization, works as a link through the entire enterprise. It is aimed at
adapting best industry and management practices for providing the right product at
the right place at the right time at least cost.
The works of Davenport (1998) reflected that the complexities of internal and
external factors have a significant influence on the management of a large company.
Particularly challenging for multinational enterprise is the balance between demands
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from business units world wide and the advantages of capturing cross-business
synergies. Information used in managing a large organisation originates in different
locations. Therefore, information is fragmented in a large organisation (Davenport,
1998). Davenport went further to noted that re-organization of an enterprise around
process, changes the way of doing business, eliminates the old nonfunctional
approach, and transforming into a strategic process-centric organization.
The table below shows how the ERP system affects business processes in an
organization.
Figure 5: New organization structure From Davenport (2000)
Hum
an Resourse
Marketing and Sales
Production
Finance and Accounting
ENTERPRISE
Functional Oriented
Production
M &
S
Finance and accounting
Order Processing
Hum
and Resourced
Production
Customer Service
F &C
Business Processes
Process Oriented
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ERP benefits include:
1) Easier Access to Reliable Information: ERP systems function utilizing a
common database management system. Thus, decisions on cost accounting or
optimal sourcing can be made across an enterprise. This bypasses the need to look at
separate operational units and then trying to coordinate the information manually, or
reconciling data across multiple interfaces with some other application (Kashef, et
al., 2001 and Baan, 1997).
2) Elimination of Redundant Data and Operations: Driven by business process
re-engineering, the implementation of ERP systems reduces redundancy within an
organization. With functional business units utilizing integrated applications and
sharing a common database, there is no need for repetition of tasks such as re-
entering data from one application to another (Kashef, et al., 2001 and Blanchard,
1998)
3) Reduction of Cycle Times: ERP systems recognize that time is a critical
constraint variable, for both the overall business and the business use of information
technology Minimizing delays in retrieving or disseminating information achieves
time reductions and cost savings (Kashef, et al., 2001 and Sheridan, 1995)
4) Increased Efficiency and Reducing Costs: ERP allows business decisions to be
analyzed enterprise-wide, hence this results in time saving, and an improved control
and elimination of extra operational costs (Kashef, et al., 2001 and Baan, 1997)
5) Easily Adaptable in a Changing Business Environment: Recognizing
companies’ needs to reduce their time to market for goods and services, ERP systems
are designed to respond quickly to new business demands and can be easily changed
or expanded without disrupting the course of business. Hence, the time required in
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deploying and continuously improving business processes will be greatly reduced
through the use of ERP (Kashef, et al., 2001 and Appleton 1997)
The table below is adapted form the works of Rashid, et al. (2002) and it captures the
benefits of ERP systems to an organisation.
Figure 6: ERP Advantages From Rashid, et al. (2002)
3.1.2 Disadvantages of ERP to organisation
Trimi et al., (2000) put forward that the greatest disadvantage of an ERP system,
even if installed to vendor preferences, is the staggering cost of implementation.
Implementation costs they went on to explain include software, hardware,
installation consultant fees, and in-house staff for installation. However, these are not
the only costs. There are also costs for staff to operate the system (to include help
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assistance to users) and the very large cost component of user training. ERP systems
are by their nature expensive.
ERP disadvantages: are shown below:
1) Implementation: The implementation of an ERP system is a very time
consuming, expensive and arduous task. In an interview with Information
Technology executives from Fortune 1000 companies that had implemented ERP,
44% reported that they had spent at least four times as much on implementation than
they did on the software license itself (Kashef, et al., 2001 and Michel, 1997).
2.) Conformity to the software processes: ERP systems force their customers to re-
engineer current practices to fit within the processes described by their modules.
Selecting the wrong ERP software could result in an unwilling commitment to
information architecture and applications that do not fit with the organization’s
global strategic goals (Kashef, et al., 2001 and Hecht, 1997).
3) Commitment to a Single Vendor: Letting one vendor provide all enterprise
systems is an attractive but risky proposition (Kashef, et al., 2001 and Weston,
1997).
Table below summarizes the ERP disadvantages from the works of Rashid, et al.
(2002).
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Figure 7: ERP Disadvantages From Rashid, et al., (2002)
3.2 Overview of ERP Project
Kashef, at al. (2001) noted in writing that, the large ERP providers have made many
promises, but many user companies are still asking, “what’s the payoff?’ the answer
is still unclear. Davenport (2000) reflected the fact that implementing wall-to-wall
software is not a matter of powering up the computer and installing a program from a
CD-ROM.
According to a survey carried out by Michel (1997) ERP is a huge investment in time
and money, and it can take years of work by numerous managers and cost millions,
or in some cases hundreds of millions of dollars.
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McKinney (1998) noted that the cost of implementing an ERP application depends
on the scope of the effort, size of the enterprise, the ERP application selected, and the
Information Technology environment required. Cost for a large system can run to
several hundred million dollars. Many large corporations are currently spending
between $5 million and $200 million to implement an ERP system (McKinney,
1998).
Companies are anticipating immediate returns on efficiencies in production and
inventories, with additional returns in other areas being realized over the long term.
The greatest return will be one that cannot be easily quantified. This is an integrated
system that provides timely information, better customer support and a competitive
edge; it addresses strategic goals and objectives, and takes a company into the 21st
century (Standish Group 2000).
Davenport (1998) explained that for many businesses, installing ERP was traumatic.
Following long, painful, and expensive implementations, some companies had
difficulty identifying any measurable benefits.
ERP Implementation Strategies
Shanks (2000) stated that there are two key decisions to be taken in determining the
module implementation strategy. The first decision concerns the selection of modules
as ERP systems are modular systems. The second decision is concerned with the
process of connecting each module to existing systems. There are two standard
approaches: either implement module-by-module, and as each is implemented
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connect it to the existing system, or alternatively implement all modules and then
connect them to the existing systems. The first option is less risky, but more resource
intensive. The second is precarious but a less time consuming. The table below
shows different types of implementation strategy, the time frame and the failure rate
for each strategy.
Strategy Months %
Big bang 15 41
Phased rollout by site 30 23
Phased rollout by module 22 17
Mini big bang 17 17
Phased rollout by module & site 25 2
Figure 8: Implementation Strategies From Source: Nah et al., (2001)
Above is implementation strategies put forward by Nah et al., (2001). The work
reflected that although the Big bang approach seems the cheapest they are:
• Dangerous
• Often makes sense in ERP if carefully planned
They went a step further to explain that the phased rollout strategy reduces risks,
especially for large organizations. Much has been said about “big bang” approaches
and gradual rollout of modules within a company. Davenport (2000) argued that
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40
there is no evidence that any one way is better than another as a whole; however, one
approach will be better for companies on an individual basis. There have been many
widely publicized “big bang” successes, and many failures. The same is true for
gradual (phased) rollouts, although these generally are not headline-grabbers
(Davenport, 2000).
3.2.1 Risks involved in ERP projects
A simple definition of “risk” is: a problem that hasn't happened yet but could cause
some loss or threaten the success of your project if it did (Wiegers, 1998). In the
words of Chaffey and Wood (2005), risk is defined as “the potential harm that may
arise from some present process or from some future event. It is often mapped to the
probability of some event which is seen as undesirable. Usually the probability of
that event and some assessment of its expected harm must be combined into a
believable scenario (an outcome) which combines the set of risk, regret and reward
probabilities into an expected value for that outcome.”
A clue to why Project implementations are often fraught with difficulties is alluded
to by Rivard et al., (1999) when they state that information technologies are neutral,
their impact depending on the way they are implemented and used in a given
environment. Correctly implemented, information technologies can facilitate and
initiate important changes. Echoing The Standish Group Report, Rivard et al., (1999)
mention the following factors:
• A clear vision
• A proactive and sustained Management implication
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• A good understanding of information technologies and their potential
impact.
The cost of downtime its one of the main risks that should be taken into
consideration and it has been ignore most of the cases. This cost should be address at
the begging of the project. On average ERP experience a 2.8 hours of unscheduled
downtime per week and according to a recent survey of 250 Fortune 1000
companies, the Standish Group reported that the average per minute cost of
downtime for an enterprise application sis $13000.
The table below is adapted from Sumner (1999). It summarizes the risk factors in
ERP system.
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Figure 9: Risk factors in ERP systems From Sumner (1999)
3.3 Critical Susses factors of ERP Project
Vidyaranya et al., (2005) inferred that the measurement and definition of ERP
system success are thorny issues. They explained that success is a quite nebulous and
extremely subjective assumption. Firstly, success depends on the viewpoint from
which an individual measures it. Even within a single organization, people will have
several opinions. It can either be a complete success, i.e. one in which everything
Titilope Oladiran MSc. Information Systems
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goes according to planned with no glitches; or one with a few configuration
problems, resulting in temporary setback (Vidyaranya et al., 2005).
A critical success factor in terms of ERP is an important issue that organizations
must put into consideration to successfully implement an ERP solution. In terms of
information system projects, a critical success factor is what a system must do to
accomplish what it was designed to do (Yingjie, 2005). The idea of studying critical
success factors behind ERP implementations is very similar to the techniques used in
several studies in Information Technology (IT) implementation research, and some
of these proposed factors have been identified to be important in other IT
implementations (Yingjie, 2005).
There are several factors to be considered when making the decision of whether and
how to implement an ERP. The technical aspect is not the only factor that requires
consideration. The analysis should consider both benefit/cost analysis and also the
non-financial factors. These non-financial benefits include flexibility and information
visibility (Sandoe et al., 2001). The human resources/personnel cost is normally the
largest and most expensive, however, it is an area that has been given the least level
of consideration (Zhang et al., 2002). The software and hardware costs are often
easily quantifiable; however, the “human” cost is not (Davenport, 2000).
Huang and Palvia (2001) identified ten factors necessary for ERP implementation by
comparing advanced and developing countries. These were subbed into two
categories: the national/environmental and organizational level. They observed that
information technology maturity, business size, computer culture, business process
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44
re-engineering experience, and management commitment were the organizational
level factors; while economy and economic growth, manufacturing strengths,
regional environment, infrastructure, and government regulations were the
national/environmental factors.
Similarly, in another study based on earlier papers, Nah et al., (2001), proposed 11
factors critical to ERP implementation success. These 11 factors include: top
management support; ERP teamwork and composition; change management program
and culture; business plan and vision; effective communication; project management;
software development, testing and trouble shooting; business process re-engineering
and minimum customization; monitoring and evaluation of performance; project
champion; and appropriate business and information technology legacy systems.
Further academic literature review of critical success factors from a national
perspective (in China and Finland), came up with about ten independent variables.
These factors responsible for ERP implementation success are indicated by Sandoe et
al., (2001), ABCD classification and user’s subjective satisfaction. They include: top
management support; suitability of software and hardware; re-engineering business
process; effective project management; education and training; data accuracy; vendor
support; company-wide commitment; user involvement; and organizational culture.
In accordance to the works of Umble et al., (2003), the author learnt that Critical
Success Factors for an ERP implementation fall under the following categories:
1. Clear understanding of strategic goals
2. Top management commitment
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3. Project management implementation
4. Great implementation team
5. Ability to cope with technical issues
6. Organisational commitment to change
7. Extensive education and training
8. Focused performance measures
9. Resolution of multi-sites issues
3.4 Failure factors of ERP Project
According to Lucas’s book “Why information systems fail?” he describes that many
information systems had to be regard as failures because some systems were
definitely unworkable while others cannot provide the proposed outcome (Lucas,
1975). As a result, many IS professionals (Ackoff, 1967, Lyytinen & Hirschheim,
1987; Lucas, 1975, Sauer, 1993) were involved in the failure studies.
Before taking a further look on the exist literatures of ERP failure issues, as
supported by Liu (2002) it is better to bear in mind that although there are plenty of
literatures which present the difference formations of failure. There is no right or
wrong answers for this concept. The discussions and comparisons of these works are
just aiming to provide a wide view on the background knowledge of failure study.
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3.4.1 Critic of Failures Definitions
From the works of Liu (2002) the author found out that the failure study began at
early 70’s when a range of traditional failure conceptions have come out constantly.
However, these conceptions have not been well-developed in a systemic way until
the end of 80’s. As one of the representatives in the failure study, Lyytinen and
Hirschheim (1987) summarized the former traditional works into three major
categories: correspondence failure, process failure and interaction failure.
1) Correspondence failure
“It main premise is that design objectives are stated in advance, and if these
are not met, the IS is a failure – hence the name ‘correspondence failure’. It is
generally believed hat the design objectives are objective and formal, and that their
achievement can be accurately measured” (Lyytinen and Hirschheim, 1987: 265).
The main disadvantage of this concept is ‘too idealistic’ to be valuable.
2) Process failure
“In many situations when the IS cannot be produced within given budget
constraints, it results in what is called a ‘process failure’” (Turner 1982, Brooks
1974, Gladden 1982, quoted in Lyytinen and Hirschheim, 1987). The concept of
process failure captures two related but distinct aspects of unsatisfactory
performance in producing the IS. One is non-workable system and the other is
largely over budget and time.
3) Interaction failure
A range of researchers have suggested that “a low level of IS use can be used as a
surrogate for IS failure” (Lucas 1975, King and Rodriguez 1978, Robey and Zeller
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47
1987, quoted in Lyytinen and Hirschheim, 1987). In other words, a successful
information system is reply on the user’s interaction totally. However, Lyytinen and
Hirschheim (1987) also points that there is little empirical evidence which can
directly support this conception. Hence, the conception is too theoretical to use in the
reality.
In the words of Liu (2002) to recapitulate, the ‘correspondence failure’ is
corresponding with the design objectives failure. The process failure refers to
‘system input does not generate efficient system output’. The interaction failure
occurs when users is not so satisfied to the information system which lead to a low
level system performance.
Traditional issues, proposed by Lyytinen & Hirschheim create a new account of
definitions ‘expectation failures’ under the stakeholders’ model consideration. It is
supposed to combine all the traditional failure’s characteristics together. It defines
failure as “inability of an IS to meet a specific stakeholder group’s expectations”
(Lyytinen & Hirschheim, 1987). They went further to develop this concept by
identifying failure into two types: objective failure and consequence failure. The
‘objective failure’ is similar as the ‘expectation failure’ which agreed that failure is a
kind of disappointed result among the designers, users or supporters. While
consequence failure indicates that even though expectations are satisfied, system can
still be seen as unsuccessful because the effort or the output which system generated
is unacceptable.
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Bignell & Fortune present failure in another view by arguing that “a system that has
failed to achieve its original goals may become successful when measured against
newly defined criteria” (Bignell & Fortune, 1984: 165). In order words, failure can
not be surely confirmed until a period time of using. It can occur in the past, present
and future.
Liu (2002) noted that it is obviously that ‘expectation failure’ concentrates on
fulfilled the stakeholders’ expectations. Although a project is most likely to be
failed when there is no users’ satisfaction in the project, considering too much to
the stakeholders’ expectation is a disadvantage for the entire failure study as
well.
The works of Sauer (1993:26) challenges Lyytinen & Hirscchheim’s ‘expectation
failure’ and argues that “…expectation failure does not respect the difference
between the situations where a system is terminated and serves nobody and the
situation where it serves some and not others”. Consequently, there is always a
question mark when the expectation failure is treated more than ‘a basis for
taxonomy’. To be more specified, he elucidates this argument by three criticisms:
1) The difference between the expectations
2) Expectation failure ignores intention
3) The difference between the stakeholders
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He further noted that: “…failure is a failure of the information process. What
counts is that the project organizations obtain sufficient support to enable it to
continue to exist and to continue to service its information system. If it cannot
mange this, then it is a failure,” (Sauer, 1993: 18).
Failure is clarified as partial failure or total failure. In a partial failure, the project has
failed to meet some goals, but still provides enough value so that it makes sense to
continue with the project. In a total failure, the project has failed to meet certain
strategic goals and thus should be shut down completely (Khafre Systems
International, 2001).
A Standish Group Report entitled Chaos speaking about Information Technology
soft-ware projects in general, points to various failure factors resulting in cost or time
overruns, unfulfilled objectives, cancelled projects etc. The percentage of
“successful” projects in large companies was estimated at an unflattering 9 %
(STANDISH GROUP 1995). Davenport (1998) concluded that there are as many
success stories as there are failures related to the implementation of ERP systems. In
one failure case, Dell Computer cancelled their ERP contract in January 1997 after
spending $115 million dollars (The original cost of the project was estimated at about
$150 million). According to The Gartner Group, 70 percent of all ERP projects fail
to be fully implemented, even after three years (Khafre Systems International, 2001).
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3.4.2 Causes of ERP failure
The reason of why project failure has been argued in a very early stage. A range of
themes (Lucas, 1975 and Liu, 2002) believe that people’s behaviours and
communications are the vital reasons for the project failure. The key persons who
involved in the projects include team top leaders (e.g. senior MIS Executive)
designers, end users and so on. Ackoff (1967) notes that, “No MIS should ever be
installed unless the managers for whom it is intended are trained to evaluate and
hence control it, rather than be controlled by it”. (Ackoff, 1967: 147-156)
Lucas stated that: “The success of information system is highly dependent upon the
relationship between users and the information services department and on the use
of the system. Concentrate on the technical aspects of systems and a tendency to
overlook organizational behaviour problems and users are the reasons most
information systems have failed.” (Lucas, 1975:2)
He went on to argue that the primary cause for the system failure is organization
behavioural problems (Lucas, 1975). He uses a descriptive tool, which focuses on
organization behaviour variables to illustrate his predication. A simplified descriptive
model was presented in the diagram below.
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Figure 10: Causes of failure From Liu (2002)
This model above illustrates three essential classes of variables (Lucas, 1975:19-27):
1) User attitudes and perceptions (Proposition 1-6): The factors which will affect
user’s attitudes and perceptions are presented in the red area. It is general includes
system quality, user reactions, user contact, user involvement, technical quality, and
finally, management support.
2) The use of systems (Proposition 7-11): The blue area contains a wide range of
variables which influence the use of systems: favourable user attitudes, decision
style, different personal and situational factors, system quality and action
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3) Performance (Proposition 12-16): The yellow area which determines the
performance contains: decision style, personal and situational variables, low
performance, problem-solving information and action and irrelevant information.
As supported by Liu (2002) from the above analysis, it is not difficult to conclude
that the failure comes out easily when a problem occurs in one of the variables. It can
further leading to a range of linked dissatisfactions which increases occurrence
proportion of failure.
Markus, and Tanis (2000), finally summarized it is "an interaction between the
characteristics related to the people and characteristics related to the system" cause
project failures.
The author found out that although there has been a lot of research into failure of
ERP projects, the area of failure factors is still a buzz area. Therefore for this
research, the author would develop a checklist based of CSF and risk factors defined
earlier, in order to deduce possible failure factors.
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53
3.5 Summary
In summary the author found out that large organisation have distinctive needs with
regards to their information system. There is a significant investment and cost of
ERP systems on organisations. The benefits that a system like an ERP provides to an
organisation includes easier access to reliable information, elimination of redundant
data and operations, reduction of cycle time and easily adaptability to changing
business environment.
While these system seem to be very promising to organisation as noted by Davenport
(2000) they are not risk free. Some of the challenges these system offer as proposed
by Sumner (1999), include lack of a project champion, lack of integration, failure to
mix internal and external personnel etc. Researchers such as Rashid et al., (2002)
altogether stated that the disadvantages of ERP systems include time-consumption,
cost, conformity to modules, vendor dependence, features and complexity etc.
The critical success factors of ERP implementation was described by Umble et al.,
(2003). However although researchers such as Davenpor (1998) have reported of
failure of ERP project, as supported by Liu (2002), the area of distinct failure factors
are still a fuzz area. As portrayed by the diagram below, the CSF for successful
implementations are known, thus, is an interesting need to define failure factors.
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Figure 11: Model for CSF From Vidyaranya, et al., (2005)
Resources
Implementation project team (s)
Critical success factors of ERP implementation
Successful ERP implementation
Non Successful ERP implementation
specialists
+
-
Return to original organisation
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CHAPTER FOUR
RESEARCH METHODLOGY
4.0 Introduction
This chapter presents the research process used for this investigation. Survey of Case
study methodology was adopted. The research was divided into four phase ; finding
case studies; analyzing the case study findings; extend an overall discussion of the
discussion and develop the conclusion and further research area. This chapter
includes six section including Research Approach, Data Source, Case Study
Analysis, and the Research Design, In line with all that would be discussed in this
chapter a brief Summary is also included.
4.1 Research Methodology
Walliman describe research as “a term loosely used in every day speech to describe a
multitude of activities.” (Walliman, 2001: 6). The research methodology is one of the
most power tools to achieve a successful research. Furthermore methodology helps
to produce a reliable conclusion. The intention of this chapter is to provide a very
brief description of a range of research methodologies which has been used in
collecting, analyzing data and finally, generating innovative findings. It is pertaining
why these methodologies are particularly selected in fulfilled the research purpose.
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Saunders et al., (2000) explained that research methodology can be classified into
four different categories, namely: quantitative; qualitative; inductive and deductive
approaches. The dissertation the author is embanking on, will adopt the inductive
research approach. The further discussion of inductive approach, and the justification
for choosing it, would be elaborated further.
4.2 Research Approach
In order to outline the research in an appropriate way, Inductive approach is
employed for the study. Inductive approach is where theory is developed as a result
of data analysis (Saunders et al., 2000). The writings of authors like Walliman
(2001) and Ford (2002) explain that through inductive argument we infer general
truths from the particular (Specific cases→ Theoretical conclusion)”.
Glesne and Peshkin (1992) noted that inductive approach starts with a question or
‘problem statement’, and then generates a conclusion from the existing data. In other
words, it is likely to obtain the academic concepts from the existing data or cases.
Therefore, under the intention of obtain the reasons why ERP projects fail, the
inductive approach is definitely more appropriate for the dissertation’s development.
Induction permits the data to determine the key concepts to be discussed, rather than
vice versa. Conclusions are drawn from the empirical data. (Bell 1987, quoted by
Ford 2002). Accordingly, it is better for this case-study related dissertation to use
inductive approach.
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According to the arguments presented above, a methodology framework is likely to
be extremely helpful with the intention of getting a concise research strategy. The
figure 12 portrays the methodology framework, which suits this dissertation
appropriately. It is outlined from inductive standpoint to facilitate the results from the
background knowledge and specific cases. In order to obtain the final answer of the
dissertation question ‘why the failure factors of ERP implementation in large
companies?’ there are four main inductive steps applied in the framework:
1) A critical look at the existing research and theories. After doing this, a
background knowledge can be well-established.
2) Select three valid, representative and reliable cases in order to obtain empirical
knowledge of the research question.
3) Discuss the results of the case studies by using the former theoretical and
empirical knowledge.
4) Create the final theoretical conclusion.
The author would adopt the frame work of Galliers and Land (1988), which states
that: Research question → Survey research→ Theory building→ Case study
survey→ Theory testing→ Theory extension.
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Figure 12: Dissertation Frame work
To be more precise, two main methods are involved in this research. One is data
collection methods, such as secondary data collection. The other is data analysis
methods, e.g. content analysis and case study. It is notable that case study is
particularly important for this dissertation’s development.
Background (1) Secondary data
collection and analysis
(2) Case studies Analysis and Comparing
Theoretical Conclusion
(3) Result discussion
Background Study
Background Knowledge
New Findings
Survey of Empirical study
Analysis using Empirical Knowledge
Dissertation Frame Work
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4.3 Research Method
McNeill (1990) explained that there are two kinds of data which are involves in the
sociological research. They are primary data and secondary Data.
He characterizes that: “Primary data is collected by the researcher at first hand,
mainly through surveys, interviews, or participant observation. Secondary data is
available from some other source, and comes in various forms,” (McNeill, 1990:99).
He went further to denote secondary data as “being available from other source and
comes in various forms”
There is no directly interview or survey involves in this dissertation. Therefore, the
author will concentrate on the secondary data collection and analysis in this research.
A range of secondary data such as reports, surveys and several case studies (e.g. Dell
computers and FoxMeyer) are utilized for analysis in the chapter five.
McNeill’ went further to explain that, secondary data collection and analyzing can be
divided into four forms: Data from earlier sociological research, statistics, documents
as secondary data and content analysis (review of case studies) and desktop research.
After carefully consideration, some aspects of these forms were applied in this
dissertation.
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4.3.1 Data from Past Research
Busha and Harter (1980) acknowledged that literature review is essential to carry out
a research, as it helps to establish the background knowledge by identifying the
concepts and themes and trends of the topic. As also supported by McNeill (1990), it
is generally accepted to use data from previous studies as the basis of new work. This
is a key method in this dissertation, as it facilitated in defining the problem situation
more clearly and effectively. It also enables researchers to formulate the research
question by identifying the knowledge gaps, significant issues and possible
questions.
Nevertheless, it has always been a parametric part of research report. For instance,
the literature review not only presented as two of the main chapters (2 & 3), but also
provided evidence for other sections including introduction as well as discussion
section of this study. On the basis of the literature review a set of questions were
developed. Using previous studies, however is not aimed at capturing a collection of
the old works, rather it is aimed at forming a platform in order to obtain a new result
to satisfy the research question, detail discussions will be given by using 7 typical
case studies of large companies. The literature was collected from various sources
however more emphasis was given to literature from scholarly journals, text books
and scholar websites.
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4.3.2 Desktop Research
Saunder et al., (2000) stated that desktop research, involves the accessing of
information from published resources and non-published sources via the computer.
It relies on secondary sources of information, therefore can be classified as a form of
secondary research. It differs from a literature search in that authors review and
summarise the information, cite the actual documentation, and provide an overall
report on the search topic. They went further to explain that desktop research is
advantageous because, it is less expensive than original research; takes advantage of
research already undertaken saves time and money.
4.3.3 Case Study Analysis
Bryman (2000) articulated that some of the classic studies in organisational research
have been derived from the detailed investigation of organisations. One school of
thought such as the likes of Alavi and Carlson (1992) believe that case study research
is the most common qualitative method.
“A case study is an empirical inquiry that investigates a contemporary phenomenon
within its real-life context especially when the boundaries between phenomenon and
context are not clearly evident”, (Yin, 1994). It is vital to pint out that the author
would be surveying case studies that have been already documented.
Saunders et al., (2000) went a step further to define a case study as the “development
of detailed, intensive knowledge about a single case or a small number of related
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cases”. As supported by Bhandari et al. (2005), this strategy is particularly useful for
this type of dissertation as it provides with an in depth understanding of the context.
This research the author carried out focused on finding different case studies of
different organisations (as data), which have participated in an ERP implementation
failure.
The next section focuses on how the case studies were identified in order to carry this
investigation.
4.4 Research Design
Every type of empirical research has an implicit, if not explicit, research design. The
works of Yin (1994) defines research design as, “an action plan for getting from here
to there, where “here” may be defined as the initial set of questions to be answered,
and “there” is some set of conclusions about the questions”. Between “here” and
“there” may be found a number of major steps including the collection and analysis
of relevant data. The works of Yin (1993) also stresses that a well articulated
research design might be one of the most important ingredients in doing a good case
study analysis. A case study is an empirical inquiry that; “investigates a
contemporary phenomenon within its real life context when the boundaries between
phenomenon and context are not clearly evident and in which multiple sources of
evidence are used” (Yin, 1993).
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Below is a figure that illustrates the four types of case study designs proposed by,
Yin (1994). The one adapted for this study is the multiple-case (embedded) design,
that is, Type 4.
Single-case design multiple case design
Holistic (single unit analysis)
Embedded (single unit analysis
Figure 13: Basic Types of design for case studies adopted from Yin (1994)
The author would employ from the works of Yin (1994), the survey of multiple-case
(embedded design), for the purpose of this research. The reason for using multiple
cases is that a detailed understanding of issues relating to the topic area is required
for the investigation.
In order to determine the failure factors in ERP implementation in large
organizations, the author had to find out what factors should be investigated in the
study, the author then carried out an extensive literature review in order to identify
what these are. The researcher then had to select case studies of organizations that
have implemented ERP by evaluating, if these factors are in the cases studies.
Type 1 Type 3
Type 2 Type 4
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Thereafter, analysis on these sample case studies were conducted using the checklist
developed.
The case studies for the investigation would be selected based on the criteria of
selection of case studies as noted by Stake (1995). In order to obtain sufficient results
the author wanted to use 10 case studies however getting studies organisation ERP
failure proved a very difficult therefore the accepted sample size of 7 case
studies was used. The data (case studies) for the sample would be obtained from
textbooks and from individual websites of the various ERP companies.
The criteria that were taken into consideration for selecting the cases were adapted
from the works of Yin (1993) and Stake (1995). They are:
Every case was demonstrated before coming to a final selection.
The type of organisations taken into consideration
The cases will cover different regions of country emphasising on different
economic conditions
Understanding the maximum learning’s one can get from the cases.
These case studies were mainly from “enormous” organisations, like Dell, Nestle,
Hewlett Packard, and more. The cases were also from the varied continents such as
“InformationWeek” and “CIO”. These were able to emphasise on different economic
as well as working conditions of organisations. Finally the cases were able to provide
answers to all the questions of the checklist developed from the literature review and
are further discussed in the chapter.
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The approach taken for the dissertation in analysing the data is shown in the figure
below.
Figure 14: Multiple case study approach adopted From Yin (1994)
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4.5 Data analysis - Checklist development
This section draws on how the checklist was developed for the study as a framework
for evaluation of failure factors in order to achieve the objectives defined in chapter
one. The approach to this development involves investigation of several case studies
as stated above in earlier section of this chapter and gain valuable insights for
scenarios of use from work conducted by leading practitioners in this field.
Below is the frame work that was developed, based on the understanding of the
literature review. As supported by Bryman, (2002) a checklist can contribute
substantially to the improvement of validity, reliability and credibility of an
evaluation and to obtain some useful knowledge about a domain.
In accordance to the works of Yin (1984) checklist would ensure uniformity in the
analysis of data by
been generic enough not to slant on one organisation;
been unbiased with the intention to highlight both the strengths and the
weaknesses of the organisation;
been simple and intuitive so as not to pose difficulties even for a person
unfamiliar with the domain; and
focus on features and functionalities, which have direct impact on knowledge
management.
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Guided by the design considerations, the following checklist was developed:
Factor Evaluation Implemented CSF Comments
1.) Are strategic Goals clearly defined?
-Does the strategy align investment in IS
with business goals?
-Does the strategy exploit IT for
competitive advantage?
-Does the strategy execute direct efficient
and effective management of IS resources?
-Does the strategy facilitate the
development of technology polices and
architectures?
-Has the ERP version been strategically
selected for the company?
2.) Are Top management committed to
the system?
-Does management builds confidence and
buy-in from all stakeholders?
-Does the project have senior management
support?
-Is there effective communication?
-Does management realize the benefits
sought from the ERP implementation in the
timescale required and deliver the necessary
return on investment?
-Is there proper management and control
structure?
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3.) How effective is the implementation
project Management?
-Is there a competent project champion?
-Is there an appropriate
implementation strategy chosen? -Is there a formalized project
plan/schedule?
-Is the project delivered within the specified
project plan?
-Is there adequate knowledge of legacy
systems?
-Is there necessary skills in-house
to facilitate the project
implementation
4.) How committed is the organisation to
change?
-Has business processes been effectively
redesign?
-Are users actively involved?
-How well is ERP adoption been promoted
in the organisation?
-Is there sensitivity to user resistance?
5.) Was a great selection team selected?
-Are the staff and consultants dedicated?
-Is there appropriate usage of consultants?
Are there sufficient technical expertise?
-Is there adequate application of
knowledge?
-Are there competent business analysts on
the team?
-Is there adequate project team
composition?
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-Is there trust between Partners?
6.) Was there adequate education and
training of users?
-Was training of end-users sufficient?
-Was there effective communication with
users?
-Is there commitment of customers to the
project management and project activities?
7.) Are performance measures effectively
adapted
-Has performance measures that assess the
impact of the new system been carefully
constructed?
-Where effective change agents and change
managers incorporated/
-Did the organisation seek the expertise of
external consultants?
-Has an enterprise-wide design
which supports data integration
been followed for quality control?
-Did the organisation effectively
seek the expertise of external
consultants?
8.) Are multi-site issues properly
resolved?
-If there are any multi- site issues, have they
been well managed?
9.) Are there technical difficulties?
-Is there adequate software configuration?
-Is there an integrated technology strategy
for supporting client-server
implementation?
-Are there any software or hardware
difficulties?
Figure 14 Check list adapted for study
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4.6 Summary
In summary this chapter, was totally cantered or the research methodology employed
for this dissertation. The approach was inductive. In addition case studies analysis
and literature review were the vehicle used to deliver the methodology stated. A
checklist was developed after critically reviewing the literature. This provided a
framework to analyse the case studies in order to gain an in depth understanding to
the subject.
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CHAPTER FIVE
DATA FINDINGS AND ANALYSIS
5.0 Introduction
This chapter is pivoted on presenting and the findings of the study. The author would
first of all start by briefly introducing the company. Secondly present analysis of the
case. Thirdly draw up a brief discussion. This process would be repeated for each of
the case. Lastly the author presents further discussion on the topic. The full details of
the analysis captured by the checklist for each case study, is found on the appendix.
5.1 Case Study of Fox Meyer
5.1.1 Introduction of Fox Meyer
FoxMeyer Drugs was a $5 billion company and the nation's fourth largest distributor
of pharmaceuticals before the fiasco. With the goal of using technology to increase
efficiency, the Delta III project began in 1993. FoxMeyer conducted market research
and product evaluation and purchased SAP R/3 in December of that year.
FoxMeyer also purchased warehouse-automation from a vendor called Pinnacle, and
chose Andersen Consulting to integrate and implement the two systems.
Implementation of the Delta III project took place during 1994 and 1995. In 1996,
FoxMeyer Drug, the drug distributor, declared bankruptcy after failing to implement
an ERP system over a three-year period.
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FoxMeyer sued SAP, the world’s leading supplier of ERP software, for $500 million,
stating that its system was a “significant factor” that brought about the company’s
financial ruin (this despite the fact that FoxMeyer only spent $30 million dollars on
the ERP project) (Davenport, 1998).
5.1.2 Analysis of FoxMeyer
Are strategic Goals clearly defined?
The case pointed out that FoxMeyer had poor strategic goals. The strategy did not
align investment with business strategy. The case noted that since company was
competing on price it needed a high volume of transactions to be profitable, however
with the new contract of UHC, the focus of the project dramatically changed, this
contributed to rising project costs, lowering FoxMeyer’s already narrow margins and
erasing its profitability.
The strategy did not execute direct and efficient and effective management of IS
resources. This is proven by the fact that the company chose to go with different
vendors for two of the company’s most important system. Keil (1995) describes this
as an error in strategic information processing.
The ERP version that was selected for the company was not done strategically. The
system was customized before it was implemented; this raises a question as to how
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effective the business requirements were taken into considerations when choosing
this software.
The company did not formulate strategies that exploit IT, for competitive advantage.
From the work of Jesitus (1997), the author learnt that the chief operating officer at
Pinnacle (who on the project team), confessed that the FoxMeyer mess was “not a
failure of automation. It was not a failure of commercial software per se. It was a
failure to strategically incorporate IT in order to increase profit margins” (Jesitus,
1997).
Are Top management effectively committed to the system?
Top management are not effectively committed to the system. The case noted that
though both FoxMeyer’s CEO and CIO were strong advocates of the project, in
February 1996, Thomas Anderson, the health president and CEO (and champion of
the company’s integration/warehouse automation projects) were asked to resign due
to delays in the new warehouse. This reflects that top management did not build
buy-in and confidence from all stake holders. This also reflects lack of trust between
management.
Although the case indicated that the project had senior management kept on
supporting the project financially, management did not take control of project; rather
it relied so much on the external consultant to take control of its project. The
feedback and communication system was very ineffective; hence there is a question
as to how appropriate decisions take by management was. The work of Bancroft et
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al., (1998), echoes this when it noted that: “feedback at FoxMeyer was not effective
because the communication and attention necessary for fast and effective feed back
were missing”.
Management did not realize the benefits sought from the ERP systems. The CIO at
FoxMeyer felt a high degree of personal responsibility to the project when he stated
that: “we are betting our company on this” (Cafasso, 1994). The building of the
system was all a bet to CIO. He did not realize the true cost and time needed to gain
the benefits sought by the company. A proper management and control structure was
not established at FoxMeyer.
How effective is the implementation project Management?
The project implementation was not very effective. It can be argued that the
company did not have a formalized project plan. This is supported by the warnings of
Woltz consulting during the early stages of the project that the schedule for the entire
implementation to be completed in 18 months was totally unrealistic. Hence it is no
wonder the project was not delivered on time.
Reports noted that although FoxMeyer used an implementation partner, the in-house
skill and knowledge was a problematic area. Therefore there was inadequate
knowledge of the legacy systems.
An appropriate implementation strategy was not chosen, as the one-step approach
(big bang) used did not leave the company with much room for organisational
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learning, this also left little time for the company to transfer all its organisational
memory, from the old to the new system. This strategy was also inappropriate as it
left little time for the company to measure attitudes and reception of the new system.
Evidence also points to the fact that an appropriate team was not selected. The staff
and consultants were not dedicated. There was insufficient technical expertise in the
project. The consultants were not used properly, as the case noted that the company
did not have necessary skill in-house and was relying on Andersen Consulting to
implement R/3 and integrate the ERP with an automated warehouse system from
Pinnacle. The fact that the scope of the project was risk and the company was one of
the early adapters of SAP R/3, the company should have thought carefully about
signing the contract with University Health System Consortium (UCH) this event,
lead to an unprecedented volume of R/3 transactions. This reflects poor risk
mitigating plan on the part of the company.
How committed is the organisation to change?
The organisation was not committed to change. At FoxMeyer, although the senior
management were committed to change, high reports revealed that some users were
not as committed. The company did not have adequate change management and
procedures. The users were not actively involved in the change process.
An appropriate user buy-in plan was not properly implemented at the organisation.
The company was not open with users, effective communication channels were not
established with users, and there was poor sensitivity to user resistance. For example
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its labour problems exploded when workers began leaving their jobs en masses from
three Ohio warehouses, which were scheduled to be replaced by the automated
Washington Court House centre. The debilitating morale problem among departing
workers caused them to dump a lot of merchandise into trucks with packages
damaged or broken. ERP adoption was not well promoted in the organisation.
Was an appropriate team selected?
Analysis of the case study shows that an appropriate team was not selected for the
project execution. The staffs were not dedicated to the project and the consultants
were just playing politic, because of the publicity of the project.
The company relied so much on the third party companies to help it take ownership
of its project. The company did not utilize the consultants effectively. Cafasso,
(1994) noted that “although at the height of the project there were over 50
consultants at FoxMeyer, many of them were inexperience and the staff turnover was
high.” The case went further to state that the execution of the project was an issue
that was not rightly justified due to shortage of skilled and knowledgeable personnel.
These points to the fact that the project team was not well equipped with sufficient
technical expertise and therefore there was inadequate application of knowledge.
The case highlighted that appropriate user requirements were not carried out; hence
this highlights the fact that the team did not have competent business analysts. The
team composition in general was inappropriate. According to FoxMeyer, Andersen
used trainees and used the Delta project as a “training ground” for consultants who
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where very inexperienced (Bancroft et al., 1998). It also claimed that SAP treated it
like its own research and development guinea pig. This indicated that there was lack
of trust between partners.
Was there adequate education and training of users?
There was inadequate training of users at FoxMeyer. Case noted that FoxMeyer
overspent and bit off more than they could chew, since they lacked available users on
project team, with the sophistication to handle a fast-track installation. More time
should have been given to incorporate user training.
The company did not adopt an open culture with its employees; hence effective
communication could not be established. The case also noted that feedback at
FoxMeyer was not effective because the communication and attention necessary for
fast and effective feedback were missing.
Although managers claimed to be committed to the project the workers, however
were not committed to project management and project activities, as they felt that
their jobs were been threatened.
Are performance measures effectively adapted?
Performance measures were not effectively adapted at the company. This is evidence
from the fact that the automated warehouse did not perform as planned. It was
estimated that the company sustained an unrecoverable loss of $15 Million from
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erroneous shipments .It should have been closely monitored in order to ensure that it
met up with performance standard.
There was no accurate measurement of quality assurance of the new system. The pre-
implementation testing was inadequate, partly because the UHC contract was added
afterwards. The system should have been tested more, in order to verify and validate
that the system would meet up to quality standards.
The warehouse automation multiplied the project risk and interactions between R/3
and Pinnacle's automation; this took FoxMeyer into uncharted waters. Using just one
vendor would have reduced the risks and complexity of the project, as it would have
facilitated the company in following an enterprise-wide design which supports data
integration.
The case points out that FoxMeyer should have avoided the morale problem in the
warehouses by training the employees, helping them develop new skills, putting
some of them on the implementation team and using appropriate change management
techniques. This shows that effective change agents and managers where not
introduced to the system project.
The case noted that FoxMeyer should have made an effort to become less dependent
on the consultants. For example, knowledge transfer should have been written into
the consulting contract. FoxMeyer needed to ensure that project knowledge was
transferred to the organisation from the consultants so that they could develop in-
house skills for maintenance of the system after the consultants left. Therefore it
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could be deduced that the organisation did not seek the expertise of external
consultants effectively.
Are multi-site issues properly resolved?
Multi-sites issues were not properly managed, and this led to an increase in staff
turnover. The case noted that as a result of multi site issues that were not managed
properly, the company faced uncounted problems with its workers in three of its
Ohio warehouses. These issues should have been foreseen and appropriate
calculations to manage them should have been employed.
Are there technical difficulties?
The project team tried to customize the software in order to suit the company’s
business needs, however, there were technical problem such as bugs in the software.
Furthermore the case noted that the risks escalated when design and customization
coding enter the equation.
The case noted that the system could not process the required number of daily
transactions, as the client could not facilitate the increased number of transactions.
This raises a question as to whether the two systems from the different vendors
where actually integrated.
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5.1.3 Discussion
The above case study indicates that FoxMeyer’s ERP (delta project III) project failed
for a number of reasons. This analysis points out that although a lack of management
commitment can result in project failure, management over-commitment can be even
more disastrous. It can cause errors in judgment and lead to project escalation.
Overall, the expected payoff from the Delta III project was probably overestimated,
given that benefits are often intangible.
FoxMeyer failed on all the checklist factors drawn up for this study. The failure
factors that were diagnosed includes: poorly defined strategic goals, poor change
management, poor strategy formulation, unresolved technical issues, poor
management of project, poor user training and user involvement.
Furthermore, why was the project allowed to escalate to the extent of contributing to
FoxMeyer's bankruptcy? It is obvious that regardless the expectations, for FoxMeyer
it was not worth taking the risks that it did. In conclusion, FoxMeyer's experiences
provide valuable lessons on what cause ERP failures.
5.2 Case Study of Manco
5.2.1 Introduction of Manco
The works of Sarker and Lee (2003), explain that Manco group is a well-established
company that, over its three decades of existence, had earned a worldwide reputation
in the air pollution and dust-collection markets. Unfortunately, Manco had become
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increasingly dysfunctional in recent years, primarily due to the “territorial” culture
created and encouraged by the Vice Presidents (VPs) of Engineering, Sales, and
Operations. There was little sharing of information among the functional areas
because of territorial attitudes and poor technological infrastructure. The resulting
coordination problems led to unreasonable lead-times and deteriorating quality of
products. Hence the company decided to embark on the journey of implementing an
ERP system. Data findings from the MANCO Group are available in the appendix.
5.2.2 Analysis of Manco
Are strategic Goals clearly defined?
There was an attempt at Manco to clearly define its strategic goal. However, from the
model, it is portrayed that the strategy could have been enhanced in order to
incorporate the management of IS resources. Evidence of this is found in the case
when it noted that: the decision to pull out manpower and financial resource was a
miscalculation in the strategic management of IS resources.
The strategy should also have facilitate the development of polices and architectures.
This was not the case at Manco, as the case noted that the MORE management got
carried away by immediate organizational problems and the daily business demands,
as a result, concentrated on less important optimization and automation aims.
The case reflects that the strategy exploits IT for competitive advantage, when it
stated that the Manco Group IT strategies were formulated based on the status
assessment of the legacy systems, applications, and data structures, along with the
analysis of the business model developed by the re-engineering team in order to help
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the company increase productivity. Furthermore it also indicates that the ERP
version had been strategically selected for the company.
Based on a comparison carried out by Bitco on the possible risks and benefits of the
two alternatives, the company chose to go to the global software market to select a
world-class package that best suited its current needs, and would serve future visions
and trends. This shows that the strategy align investment in IS with business
strategies.
Are Top management effectively committed to the system?
There are questions as to how committed the top management was to the project. The
case noted that at the initial stage strong and committed leadership was in evidence
in the different functional areas. This may reflect that initially they sought buy-in
from all stake holders; however they did not incorporate a structure that would aid
them to gain full control of the project. This observation is made from the case when
it stated that: during Phase III, the leadership for the organization as well as for the
configurator implementation fell into complete disarray when the CEO left the
company.
One of the issues that could be deduced from the research is that management was
not full committed to the project due to the fact that they did not fully understand the
benefits sought from the ERP system.
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How effective is the implementation project Management?
The project had a formalized project plan. This can be observed from the fact that the
project was divided into three phases and each phase was expected to elapse for a
specified period of time. The project however was not delivered on the due date, as
the case noted that the configurator was not implemented three years after the
original deadline.
Adequate knowledge of the legacy system, and necessary in-house- was not ensured
throughout the project. One can observe from the case that two junior engineers (in
experience) were left on their own to complete the project, without regular
supervision of a project manager or a senior manager, or without regularly scheduled
interaction with representatives of other functional areas or the implementation team
members.
From the words of the IT manager it is obvious that appropriate quality assurance
measures and risk mitigating plans were not effectively employed. He noted that:
“The IT department began monitoring those services it provided to end-users and
those which could be related to legacy systems and which related to office
automation. A help desk was established for monitoring purposes, to provide some
statistics on performance. However, from the BPR point of view, there were no such
efforts, because the issue was not thought to be a corporate matter with a strategic
concern” (Sarker and Lee, 2003). These setbacks could be related to the fact that a
competent project champion, was not present through out however, there was an
appropriate implementation strategy.
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How committed is the organisation to change?
Commitment to organisational change seems poor at Manco. The company did not
re-design its business process effectively in order to fully accommodate the ERP
system. This is reflected in the explanation given by the BPR manager when he
stated that: “Changes in the market situation were so drastic and so massive that
they even had to resort to other measures which did not, in fact, complement the
efforts and caused BPR failure by, for example, reducing manpower and reducing
salaries. Therefore, interest in the BPR project began to wane, it began to lose
resources and people became nervous because they thought their jobs were on the
line and they could be fired at any time”( Sarker and Lee, 2003).
The case noted that initially the user groups were actively involved; however as the
project progressed, the team did not carry them through. The team developed a full
listing of the business processes needed to carry out business transactions with out
consulting the users of the system. This reflects a poor user involvement on the part
of the project management. In addition, the case noted that the strong resistance
engendered by the manpower reductions resulted in BPR-related change principles
being compromised; this can be traced to poor sensitivity of user resistance.
Was an appropriate team selected?
Selection of project team was very poor at Manco. The staff and consultants were not
dedicated. While it is widely believed that help from an external consultant is
important to inject the concerned organisation with new skills and expertise, the
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Manco Group experience contrasted belief and revealed several problems. This
points to the fact that the consultants where not appropriately used. The team did not
compose of sufficient technical expertise, project champion and business analyst
thence there was no adequate application of knowledge.
Was there adequate education and training of users?
The Manco group did not offer its users sufficient training. The case noted that
scarcity of experienced staff, lack of training, education, and increasing overload all
contributed to failure of project efforts. The case went further to state that SAP R/3 is
a complex application, which places on IT staff the responsibility of supporting end-
users on a daily basis. This requirement was underestimated at the beginning, and
end-users resisted the new system. This resulted from ineffective communication;
they were not given enough skills to work with it. This illustrates the poor
communication of the project team with the users.
In addition the study shows that employees had a negative perception of re-
engineering, and increased sensitivity towards change efforts, hence it can be
acknowledged that there is poor commitment of customers to the project
management and project activities.
Are performance measures effectively adapted?
The performance measures were poorly adapted. This is reflected from the case
when it noted that The MORE project manager said that: “The progress of the
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MORE project and its resulting benefits were not measured. Although some
parameters were developed, such as turnover, manpower, collection (cost reduction),
inventory, cycle time and benchmarking, they were not followed up” (Sarker and
Lee, 2003).
The absence of progress and performance measures, led the consultants to making
decisions that, transparently and negatively, influenced other major roles in the
company. This reflects a very poor measurement of quality within the system.
From the case the author learnt that although project manager instituted programs
(quality, profit-sharing, etc.) to help foster a cooperative culture in Manco, and
personally monitored the progress, towards the end of the project there was
indications that bills-of-materials produced were different from the once used by
manufacturing. This reflects that an enterprise design which supports data integration
had been followed. Performance was not accelerated due to lack of change agents.
Are multi-site issues properly resolved?
The company tried to resolve all muti-site issues. The first phase of the initiative at
Manco, in preparation for the implementation of the ERP system, involved the
recognition of territorial walls in the organization and dismantling them through the
implementation of radical changes in the organizational structure, the reward
systems, and the organizational culture (Sarker and Lee, 2003)
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Are there technical difficulties?
The case noted that there were software difficulties. These difficulties were not
solved. The fact that the bills-of-material (BOM) created by the two engineers were
useful for engineers (designers), but were different from the ones used by
Manufacturing reflects a poor integrated technology strategy for supporting client-
server implementation. The technical problems that were faced were not properly
resolved, hence the implementation of the project failed.
5.2.3 Discussion on Manco
The study presents the analysis of the Manco case study. The MORE project
management had adopted a technical perspective, viewing IT as a force affecting,
and leading to, a certain organizational form. This state of affairs indicates a lack of
alignment between business strategy and IT strategy. This might be put down to lack
of developing adequate business requirements.
The major problem that the case points out includes: poor change management, poor
management of technological difficulties, poor project management, insufficient
training and education for users, lack of top managements commitment to project,
poor selection of project team and poor performance monitoring. Overall it can be
seen that the company embarked on destructive goals.
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5.3 Case Study of Hershey Foods
5.3.1 Introduction of Hershey Foods
The Hershey Company is noted by the case to be a leading snack food company and
the largest North American manufacturer of quality chocolate and non-chocolate
confectionery products. Hershey incurred revenues of over $4 billion and more than
13,000 employees worldwide.
Reports from the works of Katz (2001) noted that Hershey went online in June 1999
with a new enterprise resource planning (ERP) system that cost $112 million.
Forecast indicated the project should have taken 48 months but was pushed through
in just 30. Consequently, there were major problems with order fulfilment and
shipping meaning that many customers didn't get their candy and warehouses
remained over-full. In total Hershey reported a 19% decrease in candy sales for the
1999 Halloween season and anticipated that it would also take a considerable loss
during the Christmas season as well. Making matters worse was the fact that three
separate software vendors were being employed to put into practice different parts of
the ERP system. The new system required "enormous" changes in the way Hershey
workers do their jobs. There was also evidence that insufficient user testing took
place before the new system was rolled out. (Katz, 2001)
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5.3.2 Analysis of Hershey Foods
Are strategic Goals clearly defined?
The analysis from the check list entails that at Hershey, the strategy aligned
investment in IS with business strategies. This can be observed from the case, when
it argued that the company knew that in order to achieve its business goals it needed
to improve its IS infrastructure.
However the strategy adopted by Hershey was quite poor, as it does not exploit IT
for competitive advantage. This can be portrayed from the fact that the company
wanted to get the system ready in time for the peak period, but the strategy did not
take into consideration the demands the project would have on business activities.
The strategy does not effectively manage IS resource and the strategy does not
facilitate the development of technological policies and architectures. The company
was information poor yet they did not a have strategy in place to help with in-house
maintenance of the new system. It is also self evident from the case that the ERP
version used was not strategically selected for the company. Indications from the
cases suggest that Hershey did not consider its user requirements and the business
processes that need changing before selecting the software.
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Are Top management effectively committed to the system?
The analysis from the model noted that the project had senior management support
throughout based on the fact that the project was actively sponsored by the
management; however analysis from the model also indicates poor management
commitment to the project. This is deduced from the fact that management did not
build buy-in from all stake-holders due to the fact that management did not play an
active role in the project life cycle.
The fact that management did not get involved with what was happening in the
project, could be put down to the fact that management did not establish effective
communication channels; inadequate management structure and control; and lastly
management did not realize the benefits of the ERP system.
How effective is the implementation project Management?
Support from the case suggested that Hershey had a poor project management. The
author learnt from the case that people involved in the project felt that the lack of a
CIO wasn't necessarily the issue in 1999 so much as a lack of management
understanding of how much effort, both in systems development and organizational
change, would be required for success. This, points to the fact that there was no
competent project champion.
The implementation strategy employed was inappropriate, because the
implementation plan was to roll out the system all at once, leaving little room for
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organisational learning. With three different vendors providing pieces to the puzzle,
the system should have been rolled out piecemeal and each piece should have been
tested extensively before moving on to the next, but with a shortened project
calendar there was not time. There was no formalized project plan for the team to
follow. The team did not have necessary in-house skills to facilitate the
implementation and there was no adequate knowledge of the legacy system on the
team.
How committed is the organisation to change?
The case noted that, Hershey’s CEO admitted that the project was a failed
implementation of new business processes. This portrays that the business processes
were not effectively redesigned at Hershey. The case went further to indicate that
much of the design did not efficiently incorporate a user group; therefore pointing to
a poor user involvement strategy.
In retrospect, of the data analysis, the researcher found out that Hershey was not
committed to change. ERP adoption was not promoted in the company as one of the
manager noted that Hershey had always over the years been very good at crisis
management, however they weren't used to dealing with computers. Users were not
actively involved in project activities, it can also be seen that users were not
committed to the project.
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Was an appropriate team selected?
One consultant from vendor IBM Global Services pointed out that the business
process transformation underway at Hershey is an enormously complex undertaking.
However the consultants and employees are working hard to making sure that users
are using the business process/software correctly. This points out that staff and
consultants are dedicated.
Hershey executives wanted to supplement principal integrator IBM Global Services
with another consulting firm that had more experience with the SAP-Manugistics
interface. Hershey's management chose not to take that step. This shows an
appropriate usage of consultants. The choice of three vendors proved to have a
negative impact on the company. This was because the technical expertise, needed to
facilitate the project was not well organized.
Was there adequate education and training of users?
The training and education were poorly delivered to users. The case noted that
without proper user communication, the complexity of the IT system hindered
coordination among processes within the organization. However the fact that users
work actively to get use to the system, shows a strong commitment of customer to
project management and project management activities.
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Are performance measures effectively adapted?
Performance measures were not adequately incorporated. This is reflected when at
times Hershey saw itself unable to accommodate even the smallest portion of its
orders. The performance measures that assess the impact of the new system were not
carefully constructed. The implementation strategy chosen did not leave much room
for testing; this emphasizes a poor quality assurance of the new system.
The case noted that process should have been redesigned to facilitate an enterprise
wide integration, however they were not, resulting in a poor enterprise-wide design
which does not supports data integration
Are multi-site issues properly resolved?
The case did not made mention of muti-site issues.
Are there technical difficulties?
Hershey also experienced some technical difficulties. The case noted that the
problems caused by the abrupt transition (implementation strategy) weren't
immediately apparent, but essentially orders began falling through the cracks.
Despite having plenty of inventories on hand, Hershey couldn't get it to customers as
its data was not fully integrated. The software was not properly configured; there was
no integrated technology strategy for supporting client-server implementation. The
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case also noted that there were a lot of software bugs that put a lot of demands on
software engineers.
5.3.3 Discussion on Hershey Foods
The above case, describes Hershey Foods Corp. a relatively low-end IT user with an
annual IT budget of only 1% of total revenue (Katz, 2001). In early 1996, Hershey
began an “Enterprise 21 Initiative,” a $112 million enterprise systems investment to
improve inventory management and ensure Y2K.
Prior to its Enterprise 21 Initiative, Hershey’s last major IT project was a barcode
scanning system in the 1980s. As a result, upon initiation of the new project, its
technological infrastructure was below industry standards. Its IT infrastructure
consisted of mainly mainframe-based hardware. The existing inventory management
system lacked the business functionality to support a seamless supply chain process.
In spite of its low IT capabilities, Hershey still made ambitious plans to implement
major IT systems concurrently: an enterprise system from SAP, a customer
relationship management system from Siebel Systems, and an inventory management
system from Manugistics (Songini, 2000).
Some of the problems that was indicated from the analysis includes poor change
management, poor strategy formulation, unresolved technical issues, poor
management of project, poor user training and user involvement.
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5.4 Case Study of NIBCO
5.4.1 Introduction of NIBCO
The works of Brown and Vessey (2001) described NIBCO Inc. as a large
manufacturer of valves and pipe fitting with a workforce of about three thousand.
The company’s headquarter is in the US, and is reported in 2001 to have generated
an annual revenue of $460 million. The NIBCO management found it crucial to
break away from its existing legacy systems and replace them with a common,
integrated system for its finance, materials management, production, and
sales/distribution, operation which was offered in the Enterprise Resource Planning
(ERP) packages of major vendors by the second half of the 1990s. Contrary to the
advice of their consultants about taking a slower, phase-in approach, NIBCO’s
management developed plans for a Big Bang implementation of all modules (except
HR) with a $17 million budget and a project completion date 15 months r that
allowed for only a 30-day grace period.
5.4.2 Analysis of NIBCO
Are strategic Goals clearly defined?
The strategic goal at NIBCO to a large extent was not clearly defined. The fact that
the case noted that “in order to quickly put in place the systems to execute the new
supply chain and customer-facing strategies, which had come out of the strategic
planning process, the company would had to commit a significant portion of its
resources” (Brown and Vessey, 2001), reflects that there was effective management
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of IS resources. The strategy however did not align investment in IS with business
strategies. The case noted that the IS strategy that NIBCO was embarking on could
be described as being poor because it does not seem to link up with the business
objectives.
From the case study, it is stated that there was a poor knowledge transfer from the
consultants to the IT staff at NIBCO. This might be a paramount setback in the
development of technology policies as staffs are information poor, hence it can be
argued that the strategy does not promote the development of technology polices and
architectures.
Inadequate information strategy is reflected by the fact that the IT department was
under finance department. This raises question as to weather NIBCO viewed IT as an
essential strategic tool for gaining a completive advantage or as a liability on the
company
The case clearly states that NIBCO as a company would like to grow nevertheless
their choice of information systems package does not seem to reflect much of this
desire to grow, as they did not seem to take into consideration the business demands
in the future would have on their system. Many writers such as Davenport (2000)
highlighted that ERP can prove very difficult to manage when a company starts to
diversify, especially into areas of different region, country and culture. The vanilla
version chosen is known for being very inflexible.
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Are Top management effectively committed to the system?
By informing employees of the project initiative and the choice to go for an ERP
package reflects that management obtained buy-in from all stakeholders. The
analysis also portrays that project management had the senior management support,
through out the project life. This can be noticed from the way management
financially supported the project. However data from the case supported the fact that
the management team were not communicating with users regularly. This reflects
ineffective communication.
The case went further to state that The NIBCO management found it crucial to break
away from its existing legacy systems and replace them with a common, integrated
system for its finance, materials management, production, and sales/distribution,
operation in order to cut down on costs. This shows that management realized the
benefit sought from the ERP system
The project meant that there was an organisational restructuring. NIBCO took up the
form of a matrix structure. Johnson and Scholes (1988) explained that this structure
has some very good advantages that include: quality of decision-making where
interest conflict; direct contact replaces bureaucracy; increases managerial
motivation; development of managers through increased involvement in decisions.
This shows that a proper management and control structure was established.
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How effective is the implementation project Management?
The fact that Beutler, the project champion set up a cross-functional team to select an
ERP package early in 1996 argues that there was a competent project champion on
the NIBCO’s tiger team.
Though the choice to go with Big-Bang approach did not leave much room for
organisational learning, but at the end of the day it was appropriate for NIBCO,
pointing to the fact that the implementation strategy was effectively choosen.
NIBCO had a formalized project plan; however it did not follow it through as the
case reported that the organisation had restructured its supply chain process whereas
it was not initially planed for (diversion of plain in the middle of project). Hence it is
no wonder why the project was not delivered on schedule. NIBCO’s Go-live date
was postponed and the cost of the whole project implementation was more than what
was budgeted for.
There was inadequate skill in-house (NIBCO was information poor), the case noted
that the size of the IS department consisted of only 30 people out of 3000 associates.
There was adequate application of knowledge of legacy system, as the project team
constituted of divisional members who understood the system.
How committed is the organisation to change?
NIBCO had to restructure the company’s supply chain processes to better serve its
customers. Centralised all accounts payable where they were decentralised at first.
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This shows that business processes had been effectively redesigned. From the case it
was explained that the choice to go for an ERP package did not evolve users,
pointing to a poor user involvement strategy.
Later on in the case it is noted that user’s attitudes did not change; till the end they
were reluctant to change and consolidation. This illustrates that ERP adoption had
not been effectively promoted through out the project life.
Was an appropriate team selected?
The project team was not appropriately selected. Staffs worked long hours, even
staying away from their families, showing that they were dedicated to the project.
NIBCO relied too much on its consultants. There was poor knowledge transfer from
consultants to staff. This indicates that consultants were not used appropriately.
However the presence of the consultants on the project team ensured that there was
sufficient technical expertise on the project team.
The case noted that there was no doubt that NIBCO needed to improve its
information wealth, however a poor knowledge application strategy is portrayed
when NIBCO decided to cut loose from its existing system.
Though there was mention of a business analyst, the case reflects that the only
feasibility study NIBCO went by was the one proposed by the consultants at the
Boston Group, bearing in mind that the feasibility study was for the phased in
approach rather than the Big Bang approach, that the company later embanked on.
This raises a question as to if there were competent analysts on the project team
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Was there adequate education and training of users?
The training and education offered to end users was inadequate. New organisational
structures, working spaces and environment for the change were created however
management did not concentrate on educating, training, and motivating the future
users of the system. Staffs were just told what to do. There was no proper
communication channel, where users can raise their concerns. Evidence from the
case noted that the staffs were committed to project activities.
Are performance measures effectively adapted?
Performance measures that assess the impact of the new system were not carefully
constructed, as it did not involve input from users. On the go life date the
consultants were gone and users were left to deal with the change. This highlights the
fact that accurate measurement of quality assurance of the new system was not taken
into consideration. One of the first tasks that the project team embanked on was to
design an enterprise-wide design. This was to incorporate a design which supports
data integration.
The study showed that NIBCO depended on outside capabilities for their change
management. Chaffey and Wood (2005) argued that any organisation wanting to
have a competitive advantage should take ownership of its change management as
change is the only true constant in any business environment.. From this, it can be
argued that effective change agents and managers were not introduced to the project.
Are multi-site issues properly resolved?
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The multi-site issues were properly resolved through the matrix structure adapted by
the company.
Are there technical difficulties?
The case noted that although the project management team faced some difficulties,
these challenges were resolved properly; this indicates that software was also
configured properly. An integrated technology strategy for supporting client-server
implementation had been followed. This is proven by the fact that an integration
strategy was adopted for the company.
5.4.3 Discussion of NIBCO
In review of all that has being discussed so far, the author believes that the most
important thing that would help NIBCO to deal with all the future uncertainties and
changes its environment holds, would to develop strategies and cultures that would
elevate it to a learning organisation, where people at all levels, individuals and
collectively, are continually increasing their capacity to produce results. NIBCO
must be aware that learning is necessary before they can develop into a Learning
Once the company has excepted the need for change, it is then responsible for
creating the appropriate environment for this change to occur in.
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One may wonder why is it that a company that had so many problems and set backs
during the implementation of its System project can be come a market leader within
its choice of information systems, against the all odds? What made NIBCO sail high?
After close evaluation of the case study analysis the author found out what made
NIBCO scale through all the mistakes and setbacks laid during the Information
Systems Project was that it had a Risk management program in place that worked
very well for it. Although they decided to cut loose from its legacy system, they had
a back-up in place. After the project, NIBCO (had had hands on experience) learnt
about how to manage risks and gained problem solving skills from the whole
experience.
5.5 Case Study of Dell Computers
5.5.1 Introduction of Dell Computers
Dell Inc., a leading computer manufacturer delivers innovative technology and
services they trust and value. Enabled by its direct business model, Dell sells more
systems globally than any computer company, placing it No. 25 on the Fortune 500.
Revenue for the last four quarters totalled $56.7 billion and the company employs
approximately 69,700 team members around the world (http://www.dell.com). Dell
Computers, after months of delay and cost overruns, abandoned their ERP project,
because they found that the new system was not appropriate for its decentralized
management model (Stefanou, 2000).
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5.5.2 Analysis of Dell Computers
Are strategic Goals clearly defined?
The analysis from the model pointed out that the strategic goals at Dell were not
clearly defined. Dell did not declare any operational goals other than a general desire
to support its growth. The strategy does not align investment in IS with business
strategies. Lack of continuous monitoring of the system, meant that Dell upgraded its
servers twice, this portrays a poor and efficient management of IS resource. The
business objectives where not clearly reflected in the choice of IT strategy. Hence it
can be argued that it does not exploit information technology for competitive
advantage.
Are Top management effectively committed to the system?
Though the top management builds confidence and buy-in from all stake holders, as
in a letter to employees, senior vice-president and chief operating office explained
why the ERP project was a cornerstone two corporate priorities-infrastructure and
systems, and globalization, however analysis from the model reflects poor
commitment of top managers.
The project did not have senior management support through out. This is evidence
from that fact that the board began to get jumpy and eventually cut back on the
project, when they noticed the system was not working as it should. A proper
management and control structure was not established. The case went on to indicate
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that management did not actually realize the benefits sought from the ERP system
and the time frame required in order to, achieve this benefits.
How effective is the implementation project Management?
The management of the project implementation was also poor at Dell. There was no
competent project manager; an appropriate implementation strategy was not chosen;
though there was a formalize project plan, this plan was not followed through. The
project implementation also suffered as there was no adequate knowledge of the
legacy system and necessary skill in house to facilitate the project. Appropriate
quality assurance and risk management plan were not followed through.
How committed is the organisation to change?
Analysis from the checklist reflected that Dell had a poor commitment to change.
The business process had not been effectively redesigned to accommodate the ERP
system. In order to create a single view, Dell needed to standardize its business
processes around the world and capture them in R/3. This phase was not thoroughly
executed. Users were not actively involved in the change process and there was poor
sensitivity to user resistance. When employees at the company began to tinker with
prototypes of the new system, they did not like what they saw, however nothing was
done about this.
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The ERP adoption was generally not well promoted at the company. This is deduced
from the fact that the new project champion did not reconcile the vision Dell with the
continuing SAP project of several years
Was an appropriate team selected?
The team worked very hard to get the system working; however case study indicated
that the staff and consultants were not dedicated. There is strong evidence pointing to
poor selection project team.
This is deduced from the fact that consultants were not appropriately used as the case
noted that as a result on undefined goals, the SAP team had difficulty focusing on
clear achievable benefits.
There was in sufficient technical expertise and business analyst, there was inadequate
project team composition. The case noted that the management realized that, the
technical staff did not know what they were doing.
The case noted that management pulled out the plugs on the project, as they did not
believe that the team was capable of safe delivery, this shows that there was lack of
trust between partners.
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Was there adequate education and training of users?
As noted by one of the employees, they felt that Dell was embarking on this project
just because it was what competitors were doing. Staff at Dell questioned the need of
such a project. This reflects that staff did not really believe in the project or project
activities. Though analysis also pointed out that the staff and consultants worked
very hard and were dedicated to project activity, one can argue how committed could
they have been to a project they had little or no faith in.
Though there was communication with users it was not effective enough, hence it
could be highlighted that the communication plan with users was inadequate. The
case noted that users still struggled to come to terms with what was going on around
them, this reflects that the training provided for the users, was not adequate enough.
Are performance measures effectively adapted?
As communication was vague, and there was no competent project leader, adequate
performance measures where not put in place. As a result of insufficient testing, the
system did not function as it was meant to. This reflects that there was inaccurate
measurement of quality assurance of the system
Effective integration of process in order to support the new system has not been
followed. The performance measure strategy adapted at Dell was generally a poor
one.
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Are multi-site issues properly resolved?
The case noted that the company had multi-site issues; however they were not
appropriately managed. The company needed to solve its organisation structure
before implementing the ERP
Are there technical difficulties?
The case noted that the system began to route information all around the company,
causing havoc and wreck to the network of the company. This could be put down to
inadequate configuration of software.
The data from the various entry points were not full integrated; hence it caused a lot
of strain on the users, reflecting a poor integrated technology strategy for supporting
client-server implementation.
5.5.3 Discussion on Dell Computers
The above is the analysis of the case study on ERP implementation at Dell
Computers. The case presents a series of factors that caused the implementation to
fail. The training of end-users at Dell was poor. The performance measures were
poorly adapted at Dell; an enterprise wide approach which supports data integration
had not been followed. There was also poor measurement of quality of the system.
Change agents were not used to boost up performance at Dell and the organisation
did not effectively seek the expertise of external consultants. The multi-site issues at
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Dell were not well managed. Dell experienced some technical problems during the
project management, however these problems were not well resolved; the
configuration of the software was inadequate; and an integrated technology strategy
for supporting client-server implementation had not been followed.
5.6 Nestle
5.6.1 Introduction of Nestle
Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri
Nestlé and is today the world's biggest food and beverage company. Sales at the end
of 2005 were CHF 91 billion dollars, with a net profit of CHF 8 billion dollars.
Nestlé currently employs around 250,000 people and have factories or operations in
almost every country.
Reports from the Dieringer, (2004) noted that in June 2000, Nestle signed a much
publicized $200 million contract with SAP-and threw in an additional $80 million for
consulting and maintenance--to install an ERP system for its global enterprise. The
consumer goods giant intended to use the SAP system to help centralize a
conglomerate that owns 200 operating companies and subsidiaries in 80 countries.
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5.6.2 Analysis of Nestle
Are strategic Goals clearly defined?
As reflected from the results of the analysis at Nestlé, the strategic goal were clearly
defined. The strategy aligned investment in IS with business strategies. Executives at
Nestle realized that the company needed to standardize its business processes if it
wanted to be competitive, this replicates that the strategy exploits IT for competitive
advantage.
There were plans made by the project champion, as to how the IS resource would be
effectively managed, this mirrors that efficient management of IS resources was at
the heart of the project activities. The strategy laid considered that there would be a
need future policies and architecture. Management consider a number of ERP
vendors before choosing the one that best fit their business strategies, this shows that
the ERP version was strategically chosen.
Are Top management effectively committed to the system?
The stakeholders team presented a blueprint for major changes they thought could
be made in three to five years. Management made it very clear that the project
would be a business process reorganization and that the company could not do it
without changing the way it did business. This shows that the top managers built
the stake-holders confidence and buy-in.
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Evidence from the case indicated that management believed in the project and
supported it financially. However although the company tried initially to build
communication, communication was not effectively established with users, and
divisional executives though out.
Management realized the benefits sought from the ERP as the case stated that Nestle
was at a severe competitive disadvantage and realized that it needed one system used
by all in order to be more efficient and survive in the global economy. However the
fact that by June 2000, Nestle was forced to halt the rollout and the project manager
was removed from the project and reassigned to Switzerland, shows that the top
management structure and control during the project was not stable.
How effective is the implementation project Management?
The project was lead by a competent project champion; however analysis of the case
shows that an appropriate implementation strategy was not chosen. The case noted
that Nestle needed to realize that the implementation of software will not solve every
organizational problem and not every process in the company can be re-engineered
to fit the software.
The rollout was scheduled to take three years for Nestle largest sites with the others
to follow, hence there was a formalize plan for the project implementation. The
system was not delivered within time as so many things happen during
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implementation that it was impossible to stay on target during a particular year, let
alone the life of the project.
There was adequate knowledge of the legacy and there were necessary in-house
skills to facilitate the project. Nevertheless the rush in the installation meant that the
some modules were not talking to each other, therefore this points to the fact that
there appropriate quality assurance measure were not put in place.
The case also noted that accurate update of budget projection at regular intervals,
was not incorporated. It was not a common practise at Nestle to frequently revisit
numbers in order to help minimize troublesome surprises, this could be put down to
lack of an appropriate risk mitigating plan.
How committed is the organisation to change?
Project champion noted that if she was to do it over again, she would first of all focus
on changing business processes; this reflects that the business processes at Nestlé
were not redesigned properly. The fact that the case noted that none of the groups
that were going to be directly affected by the new processes and systems were
represented on the key stakeholders’ team, reflect a poor user involvement strategy.
It was stated that much of the employee resistance could be traced to a mistake that
dated back to the project's inception, however nothing much was done about this.
This reflects that there was poor sensitivity to user resistance.
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In general ERP adoption had not been well promoted in the organisation, as the case
noted that even before the SAP modules were rolled out, there was rebellion in the
ranks.
Was an appropriate team selected?
The case noted that fifty top business executives and ten senior IT professionals had
been assembled to implement the SAP project. The team's goal was to come up with
a set of best practices that would become common work procedures for every Nestlé
division, this illustration shows that the dedication on the part of the project team to
the project activities. The team was well equipped with sufficient amount of
technical staff, the IT Staff (including outside consultants), amounted to two hundred
and fifty.
The fact that business re-engineering was not placed in priority, cast doubt as to
whether there was appropriate application of knowledge. Nestlé did not realize on
time that it would need to redefine the business requirements of the project until after
conducting a meeting with nineteen key stakeholders, this instance from the case
study reflects that business analysts were not competent.
Lack of trust between partners is displayed when the director of information systems,
noted that the retreat organized by project champion with nineteen Nestlé key
stakeholders and business executives started off as a gripe session.
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The overall team composition could have been improved. The team should have
ensured that the software met users’ requirement. The case stated that by the time the
implementation began in 1999 Nestle already had problems with its employees’
acceptance of the system.
Was there adequate education and training of users?
Worthen, (2002), explained that not only did workers not understand how to use
the new system; they didn't even understand the new processes .This could be
put down to the fact that they were not adequately trained and educated on the
new system.
Divisional executives were just as confused as their employees as they had been
left out of the planning and development of the new system (Worthen, 2002).
This occurrence shows that the communication with users of the system was poor
at Nestle.
The case went further to note that divisional executives were less willing to assist
in straightening out the mess that had developed (Worthen, 2002). This shows
that the users were not fully committed to the project management or project
activities.
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Are performance measures effectively adapted?
The works of Worthen (2002) put forward that the performance of the new system
was not adequately monitored, hence performance measures that assess the impact of
the new system not been carefully constructed.
The testing of the system was not followed through; hence there was no accurate
measurement of quality assurance of the new system. The case went further to noted
that business processes where not full integrated, this raises a question as to if an
enterprise-wide design which supports data integration was followed. The change
management plan was inadequate, as key change agents were not introduced to the
system.
Are multi-site issues properly resolved?
The project champion later noted that “what I should have been done was to first of
all achieving universal buy-in from all its multi-sites and then and only then on
installing the software” Worthen (2002). This statement demonstrates that the multi-
sites issues that existed in Nestle were not well resolved through the project life.
Are there technical difficulties?
In accordance to the case, in the rush to beat the Y2K deadline, the Best project team
at Nestle had overlooked the integration points between the modules. This reflects
poor configuration of software.
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The case went further to state that though all the purchasing departments now used
common names and systems, and followed a common process, their system was not
integrated with the financial, planning or sales groups. It can be seen from this
illustration that an integrated technology strategy for supporting client-server
implementation was inadequate. The technical problems emerged during the
implementation, though the case noted that although the installation was successful
the implementation was a failure.
5.6.3 Discussion on Nestle
The analysis of the Nestle case study was an interesting one. It points out issues that
the company did well and points out to some failure of the processes undertaken
during the project implementation. The project champion Dunn noted that if she
were to do it over again, she'd focus first on changing business processes and
achieving universal buy-in, and then and only then on installing the software. "If you
try to do it with a system first, you will have an installation, not an implementation,"
she says. "And there is a big difference between installing software and
implementing a solution” (Worthen, 2002).
The words of this project manager, sheds a clear light to the fact that if a system
works on the go life date does not mean the project implementation was successful.
A successful implementation as supported by writers such as Chaffey (2005) is one
that proves useful to the users and the system owners. Though the system worked at
Nestle, the users did not find it useful. Project manager noted that she should have
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focused more on the change management of the project in order to ensure a
successful implementation.
5.7 Case Study of Hewlett Packard
5.7.1 Introduction of Hewlett Packard (HP)
Hewlett-Packard (HP) is a large, successful company with over $31 billion in 1995
revenues. Its fast annual revenue growth of approximately 30% from such a large
base has astounded observers. HP delivers vital technology for both business and
life. The company competes in many markets, including computers and peripheral
equipment, test and measurement devices, electronic components, and medical
devices. HP’s $4 billion annual R&D investments fuel the invention of products,
solutions and new technologies, so that they can better serve customers and enter
new markets. HP invents engineers and delivers technology solutions that drive
business value, create social value and improve the lives of its customers. HP has a
dynamic, powerful team of 142,000 employees with capabilities in 170 countries
doing business in more than 40 currencies and more than 10 languages. HP was
described as the second largest computer manufacture in the world by 2001
(Chaturvedit and Gupta, 2001). It emerged to become the market leader desktop
computers, servers, peripherals and services such as system integration. Besides
computer related products and services, which accounted for more than 80% of sales
the company also made electronic products and systems for measurement, computing
and communication.
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As a result of merger with Compaq Computer Corporation, in December 2003, the
top management at HP decided to re-organize their organisational model, hence they
embarked on a SAP implementation project.
5.7.2 Analysis of HP
Are strategic Goals clearly defined?
The case noted that business objectives were not taken into considerations when
embarking on the project, therefore this reflects that the strategy align investment in
IS with business strategies. The main rational for the project was that management
saw is as an opportunity to cut costs, increase transparency, and equip HP to
embrace new business models rapidly. Based on this notion it could be accepted that
the strategy exploit IT for competitive advantage.
The implementation of the SAP solution was meant to reduced the huge costs
incurred in IT support and deployment, therefore the strategy execute direct efficient
and effective management of IS resources.
The strategy does not facilitate the development of technology polices and
architectures as insiders from the company explained that a real-time ordering
mechanism was being forced onto a system that was not capable of handling it. The
system would not be able to cope with future architectures. Though a number of
vendors were considered, HP chose the SAP integrated R/3 suite of client/server
applications software as it provided a high level of functionality for global use. This
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points towards the fact that the ERP version had been strategically selected for the
company. It can be seen that the strategic goals at HP were not clearly defined.
Are Top management effectively committed to the system?
Users were not involved or informed appropriately of project initiation. This reflects
that management did not build confidence and buy-in from all stakeholders. The
project have senior management support through out, as the case noted that
management were not fully interested in the project. The case noted that ERP
benefits were not fully understood by management. The case noted that a proper
matrix structure should have been established in order to cope with the organisation
complexity at HP. This indicates that management did not a proper management and
control structure. In review all that has been discussed the project did not have the
full commitment of management.
How effective is the implementation project Management?
A competed project champion was not on the team, as the case explained that
management complained that champion was not performing well. Though there was
a formalized project plain, the project was not delivered on the due date. Evidence
from the study indicated that the implementation ran server months behind schedule.
The project did not have adequate knowledge of the legacy systems. The case noted
that problems arose between the legacy system and the new system because users
were not actively involved. The necessary skills in-house, to facilitate the project
implementation was poor. The staffs were not technically skilled enough to facilitate
the project. The case noted that the testing of the system was inefficient. Several
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bugs arose from the system as a result of this. This shows that appropriate quality
assurance measure was not put in place. Overall the project management at HP was
poor.
How committed is the organisation to change?
From the case, the researcher found out that problems surfaced as result of business
processes that had not been integrated to the new system. This indicates that business
processes had not been effectively redesigned. The users were poorly adapted to the
project team. The case noted that the user group were not present on the project team.
The organisation was generally not ready for the ERP system. There no sensitivity to
user resistance. The case noted that nothing much was done to ease the fears
employees expressed with regards to loosing their jobs. Overall the efforts of the
project management were poor.
Was an appropriate team selected?
The fact that the case stated that many VPs left the company during the project
implementation, shows that the staffs and consultant might not have been fully
dedicated. The consultants were not appropriately used. The case noted that there
was a high level of dependency team members on the consultants. There was trust
between partners as SAP and HP had history of effective working relationship. The
division could not predict the actual demand for customized server product; this
shows poor application of knowledge. As the system requirements were not
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adequately constructed, it could be inferred that competent business analysts were
not employed.
In review of all these, the team composition was poor.
Was there adequate education and training of users?
The IT personnel did not have adequate time for training and to develop their skills
for the new system. There were problems of communication between the varied
groups. Users had fears of being laid off, so they were not committed to project
activities
Are performance measures effectively adapted?
When the system went live, some sales orders that went through were not accounted
for. The contingency plan was inadequate to handle the new system as it was an old
plan which had been used for earlier migrations and did not involve in-depth
assessment of the IS division. The case noted that there was data redundancy. The
different applications were not talking to each other
Are multi-site issues properly resolved?
The study points out that the territorial walls that existed in the company were not
broken, therefore the company did not resolve it multi-sites issues.
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Are there technical difficulties?
Marketing team at HP failed to envision all the configurations, customers could
order. This shows that the software configuration was inadequate, it was some how
lacking processes that needed to be incorporated.
Problems surfaced between integration of the new SAP system that was
implemented. This reflects that an integrated technology strategy for supporting
client-server implementation was not employed. The team was tested for
standardised orders but not for customized orders; hence they faced technical
difficulties that were too late to be resolved.
5.7.3 Discussion on HP
ERP implementation failure at HP was a demonstration of how much failure could
impact overall business performance. HP spent huge amounts of money in speeding
up delay orders. Experts were of the opinion that every implementation of an ERP
package warrants a fresh approach and if it is not mapped to detail, it might miss its
objectives. The major issues that were brought to light was the inadequacy fo
existing business processes. From the investigation, some of the major challenges
that caused the implementation to fail were: poor project team constitution, data
integration problems, strategic forecasting problems, poor planning, improper testing
and inadequate implementation support and training. This case provides a valuable
lesson on failure factors of ERP implementation.
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5.8 Further Discussion
The diagram below represents the overview of findings of the case study survey
conducted by the researcher. This section is aimed at discussing the global resulting
findings of this survey.
Figure 16: Global results
Note that factor 1-9 correspond with question 1-9 of the checklist respectively.
Colour Code
Good:
Average:
Failed:
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Factors 1
Factors 2
Factor 3
Factors 4
Factors 5
Factor 6
Factors 7
Factors 8
Factors 9
Outcome of Implementation
F
F
F
P
F
F
F
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5.8.1 Strategic Goals
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Strategy align investment in IS with business strategies
X
√
√
X X √
X
Strategy exploit IT for competitive advantage
X √
X X X √
√
Strategy execute direct efficient and effective management of IS resources
X X X √
X √
√
Strategy facilitate the development of technological policies
X X X X X √
X
ERP version chosen strategically.
X
√
X X X √
√
Figure 17: Strategic Goals
Manco, Hershey Foods, and Nestle all aligned their investment in information
systems (IS) with business strategies; however they still experienced a failed ERP
implementation. On the other hand FoxMeyer, NIBCO, Dell computers and HP all
failed to align investment in IS with business strategies. Nevertheless NIBCO still
managed to achieve a successful implementation. This proves that while it is
important to align investment in IS with business strategies, failure to do so might
not be critical to a project implementation.
Fox Meyer, Hershey Foods, NIBCO and Dell computers all embarked on strategy
that did not effectively exploit IT for competitive advantage. With exception of
NIBCO all of these companies experienced a failed implementation. Though Manco
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and Nestle incorporated a strategy that took full advantage of IT for competitive
advantage, this did not guarantee them in delivering a successful implementation.
This pinpoints that while it is good to develop strategy that uses IT for a competitive
advantage, it is not a sure banker for preventing ERP implementation failure.
NIBCO Nestle and HP employed strategy that effectively and efficiently managed
their IS resources. Though HP did not deliver a working system NIBCO and Nestle
were the only companies that did, though the implementation at Nestle was
considered a failure. The others did not develop plans that would effectively
managed there is resources; hence this could be considered as a critical failure factor.
All the companies with exception of Nestle, did not utilize strategy that would
facilitate the development of technological polices. While many researchers such
as Davenport (2000) suggested that this is a good practise, it is not a guarantee to
successful ERP implementation as evidence in the case of Nestle.
Nestle, HP and Manco were the only companies that strategically selected their ERP
version. This is very important as cautioned by Sumner (1999), however as reflected
from the study putting this in place alone is not an assurance to avoid a project
failure.
From the study it is evidence that only Nestle had a good information strategy
formation; however it failed in delivering successful ERP implementation. Though
the ERP implementation at Manco failed, the strategy formation was average. The
research also points that the ERP implementation at NIBCO was successful;
nevertheless, the formation of a poor strategy is clearly stated. As also supported by
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writers such as Chaffey and Wood (2005) a lack of clearly defined strategy could
lead to failure of an ERP implementation, however from the research pointed out that
there are other failure factors in ERP implementation.
5.8.2 Top management’s Commitment to the system
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Management builds confidence in buy-in from all stakeholders
X X
X √
√
√
X
Project have senior management’s support through out
√
X √
√
X √
X
Effective communication
X X X X X X X
Management realize the benefits sought from the ERP implementation in the timescale required
X X X √
X X
X
Proper management and control structure
X
X X √
X X X
Figure 18: Top management’s Commitment to the system
NIBCO, Dell and Nestle were the only companies where management builds
confidence and buy in from all users. Though NIBCO was the only one that
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delivered a successful implementation, Nestle delivered a working system. This
suggests one of the factors that affect system failure is buy-in of all stakeholders.
FoxMeyer, Hershey, NIBCO and Nestle were the only companies that ensured
project had senior management’s support through out the system development.
NIBCO and Nestle were the only ones that had a working system at the end of
project life. This could indicate that for a failure to be avoided project management
support is vital.
None of the companies incorporated effective communication and only NIBCO
realized the benefits of ERP system and established a proper management and
control structure. Hence it is no wonder why it sailed safe through the delivery of its
project implementation.
From the research, the author found out that only two of the organisations used for
the study, actually sustained senior management’s commitment (NIBCO and Nestle).
Both companies were both graded average for top management commitment, which
means that this could have been further enhanced. On the Go-live date, both systems
worked (though the implementation at Nestle was regarded as a failure), and for the
other companies that failed in this particular factor (top managers commitment) their
implementation was a complete failure. This indicates that this factor could be a
critical failure, and for large organisation organisations in future embarking on ERP
projects, sustaining top management commitment is vital.
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5.8.3 Project Management
Fox
Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé SA
HP
Competent project champion
X X X √
X √
X
Appropriate implementation strategy
X √
X √
√
X -
Formalized project plan/schedule
√
√
X √
√
√
√
Project delivered within the specified project plan
X X X X X X X
Adequate knowledge of legacy systems
X X X √
X √
X
Necessary skills in-house to facilitate the project implementation
X X X X X √
X
Appropriate quality assurance measure in place
X X X √
X X
X
Appropriate risk plan
X X X √
X X X
Figure 19: Project Management
NIBCO, and Nestle were the only company that had a competent project champion
and adequate knowledge of the system on the project team. This indicates that these
two factors could be inter-related.
Manco, NIBCO and Dell were the only companies that employed an appropriate
implementation strategy. All the companies except for Hershey had a formalized
project plan however all could not deliver the system on the expected go-life date.
This shows that failure to deliver on project date might not be a critical failure factor.
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Appropriate quality assurance measure and risk mitigating plan was effectively
adapted by only NIBCO the other companies did not adapt it. Nestle was the only
company that had necessary in-house skill to facilitate implementation.
The research point out that NIBCO was the only organisation that employed
effective project management. This gives a clearer indication as to why it delivered a
successful implementation. The only other company, Nestle that tried to implement
effective project management (although it was graded average), obtained a working
system at the end of the project (though the implementation was classified as a
failure). This indicates that lack of effective project management is detrimental to
project implementation of an ERP system.
5.8.4 Commitment of the Organisation to Change
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Business processes effectively redesign
X X X √
X X X
Users actively involved
X X X X X X X
ERP adoption promoted in organisation
X X X X X X X
Sensitivity to user resistance
X X X X X X X
Figure 20: Commitment of the Organisation to Change
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NIBCO was the only company that effectively redesigned its business processes.
As stressed by Falkowski et al., (1998) an enterprise wide culture and structure
change should be put in place which facilitates people, organization and culture
change. This could be a principal reason why NIBCO did not fail in the project
implementation. Though Rosario (2000) explained that users must be actively
involved and concerns must be addressed through regular communication, working
with change agents, leveraging corporate culture and identifying job aids for
different users, none of the companies, including NIBCO was sensitive to user
resistance; neither did they get users involved. Lastly none of them promoted ERP
adoption within the organisations.
From the study all the companies that were used for the research did not employ
effective change management (including NIBCO, which ended up with a successful
ERP implementation). While writers such as Sumner (1999) and Davenport (1998)
have explained that change management is a vital in an ERP implementation, the
author learnt that there might be other factors that could lead to an ERP failure.
5.8.5 Selection of Project Team
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Staff and consultants dedicated
X X √
√
X √
X
Appropriate usage of consultants
X X √
X X -
X
Sufficient technical expertise
X X X √
X √
X
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Adequate application of knowledge
X X X X X X X
Competent business analysts
X X X X X X X
Adequate project team composition
X X X X X X X
Trust between partners
X
X X - X X √
Figure 21: Selection of Project Team
All the companies failed to adequately apply knowledge, employ competent
business analysts and ultimately achieve an adequate project team composition.
None of the companies except HP established trust between partners. HP and SAP
got on well, because they had a long history of good working relationships, more
than half of SAP’s customers run on HP servers These three factors could be closely
linked and interdependent of each other, however because NIBCO was able to
deliver a successful implementation this suggest that though this might be a failure
factor, it may not be considered critical.
Only NIBCO and Nestle had sufficient technical expertise on the project, no wonder
they both delivered a working system. The staffs at Hershey, NIBCO and Nestle
were dedicated to the project; however analysis shows that only Hershey made
appropriate usage of consultants.
From the study all the companies that were used for the research did not select
appropriate project team (including NIBCO, which ended up with a successful ERP
implementation). Though researchers such as Sumner (1999) and Davenport (1998)
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have explained that team composition is a vital in an ERP implementation, the author
learnt that there might be other factors that could be more critical failure in an ERP
implementation.
5.8.6 Education and Training of Users
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Sufficient training of end-users
X X X X X X X
Effective communication with users
X X X X X X X
Commitment of users to project activities
X X √
√
X X X
Figure 22: Education and Training of Users
Though the works of Roberts and Barrar (1992) pointed out that education should be
a priority from the beginning of the project, and the financial resources and time
should be spent on various forms of education and training. It can be seen from
analysis that none of the companies provided sufficient training for end-users, neither
did they established effective communication with users. Only Hershey and NIBCO
had users’ commitment to project activities. Though Hershey failed, so did all the
others that did not employ this strategy. This goes to say that while there are other
factors causing failure, user commitment to project activities is important in order to
avoid failure.
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From the study all the companies that were used for the research did not employ
adequate education and training of users (including NIBCO, which ended up with a
successful ERP implementation). Though researchers such as Wee (2000) and
Davenport (2000) have explained that user training is a vital in an ERP
implementation, the author learnt that there might be other factors that could be more
critical failure in an ERP implementation.
5.8.7 Performance Measures
Fox
Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Performance measures that assesses the impacts of the new system
X X X X X X X
Accurate measurement of quality assurance of the new system
X
X X X X X X
Followed an enterprise-wide design which supports data integration
X X X √
X X X
Effective change agents and managers
X X X X X X X
Effectively seek the expertise of external consultants
X X X X X - X
Figure 23: Performance Measures
None of the companies adapted performance measures that assess the impact of the
new system. In the case of all the companies, accurate measurement of quality
assurance of the new system was not adhered to; effective change agents were not
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introduced to the project; and companies did not effectively seek the expertise of
external consultants. Only NIBCO followed an enterprise-wide design which
supports data integration.
The study shows that, none of the companies used for the research employed
effective performance measures (including NIBCO, which ended up with a
successful ERP implementation). The works of researchers Falkowski et al., (1998)
concluded that performance measures is a vital in an ERP implementation, however
the author learnt that there might be other factors that could be more critical failure in
an ERP implementation.
5.8.8 Multi-site issues
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Multi-sites issues well resolved
X √
- √
X X X
Figure 24: Multi-site issues
NIBCO and Manco were the only companies that resolved their multi-sites issues
effectively. In accordance to Davenport (2000), multi-site implementations present
special concerns and the manner in which these issues are addressed may play a large
role in the ultimate success of the ERP implementation.
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5.8.9 Technical difficulties
Fox Meyer
Manco
Hershey Foods
NIBCO
Dell Computers
Nestlé
HP
Adequate software configuration
X X X √
X X X
Integrated technological strategy
X X X √
X X X
Resolved software difficulties
X X X √
√
X X
Figure 25: Technical difficulties
NIBCO was the only organisation that employed adequate software configuration
and an integrated technological strategy. The analysis went further to point to the fact
that Nestle and NIBCO were the only companies that did resolved technological
difficulties. This shows that it is imperative to face technical difficulties during a
project implementation, however if this issues are not well managed it could be
critical to the failure of the project.
5.9 Risks Associated with ERP implementation
Below are the risks that were deduced from the study.
1. The company may not benefit from the opportunities provided by the new
ERP system (e.g. Nestle)
2. Poorly implemented business re-engineering processes (e.g. HP)
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3. The financial aid to implement the system may not be allocated to the project
(e.g. Dell)
4. ERP implementation is a long process, generally running into several months,
therefore keeping an activity alive for such long duration would be nearly
impossible without top management commitment (e.g. Manco).
5. Employees may not understand how the system will change business
processes (HP).
6. Lack of support for staff as well as managers during implementation
7. Users’ needs will no be met after installation.
8. Impact of the new system on the organisation may not be appropriately
monitored for decision making processes.
9. Necessary feedback to facilitate change may not be received
10. Quality assurance measures may not be ensured
11. Inability to deliver orders or lost sales because of incorrect stock records.
12. Developing system that does not meet up with user requirements
13. A delay or scrapping of a new system implementation (e.g. FoxMeyer and
Dell).
14. Extra cost to prepare reconciliation.
15. Failed implementation
The list stated above is similar to the risks factors that was discussed in the works of
Sumner (1999) in section 3.2.1, Table 8.
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5.10 ERP Failure Factors
As evident from the study, there are some failure factors that are more detrimental to
the project, they are known as critical failure factor (CFF). The author found out that
most of these factors lie around the area of top management’s commitment to the
project; project management’s effectiveness, management of multi-site and technical
issues. They include:
Inadequate software configuration
Ineffective Business processes redesign
Ineffective management of Multi-sites issues
Lack of buy-in from all stakeholders
Lack of integrated technological strategy
Lack of adequate knowledge of legacy systems
Lack of an enterprise-wide design which supports data integration
Lack of appropriate quality assurance measure in place
Lack of appropriate risk mitigating plan
Lack of commitment of users to project activities
Lack of competent project champion
Lack of dedicated staffs and consultants
Lack of proper management and control structure.
Lack of strategy that executes direct efficient and effective management of IS
resources
Lack of sufficient technical expertise
Management not realizing the benefits sought from the ERP implementation
and the timescale required in achieving these benefits.
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Unresolved software difficulties
Other factor areas in ERP system that needs to be managed effectively in order to
avoid failure: training of users; performance measures, strategic goals, selection of
project team, and the organisation’s commitment to change.
How to Avoid ERP failure
From the study the researcher learnt that in order to avoid ERP failure:
1. Laying down clearly defined strategic goals.
2. Top managements commitment must be sustained for the project
3. Project management must be effectively coordinated by a competent project
champion.
4. Organisation as a whole must be fully committed to change
5. Effective project team must be selected
6. Users must be effectively trained and educated
7. Performance measures must be adequately adapted
8. Multi-sites issues must be resolved
9. Technical difficulties must be effectively managed
This was the same findings that were noted in the work of Umble et al., (2003), when
they put forward ERP critical success factors.
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5.11 Summary The seven cases are especially characteristic for the current ERP project failure
study. They all failed in different ways, some are failed because of undelivered, and
some are delivered but still failed after a period of implementation. No matter why
these projects are failed, there are key issues to take into consideration: project
management, top management support, technical difficulties and multi-site issues.
These key factors were found to be critical. So far, the final result for the research
question of “ERP failure factors” can be answered in a consistent way. The factors
are deduced from the study along with support from previous chapters’ studies. To
sum up, to manage such an enormous ERP project in the large organisations is a
incredibly complicated task. It requires entire responsibilities and reliabilities of not
only the project leader, staffs, users and but also that of management. It is essential
for a successful project that all the involvers can collaborate and communicate in a
proper way.
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CHAPTER SIX
CONCLUSION
6.0 Introduction
In this chapter, the research conclusion will be presented in the context of research
objectives which was given in chapter 1, section 1.4. The chapter concludes with the
discussion on recommendations for further research.
6.1 Conclusion
In this dissertation, a number literatures and reports are fully reviewed and compared
in Chapters two and three. The main aim of these chapters was to describe ERP
system and to discuss these systems in light of large organisations respectively. The
author learnt that ERP system may promise a lot of benefits to the implementing
organisations, there have been high reports of ERP project failures. There had been a
lot of study on the critical success factors (CSF) in ERP system. The author discusses
the issues that were pointed out. The author also tried to discuss failure and potential
failure of ERP system, as noted by other researchers.
For this purpose this study has developed a checklist for carrying out subsequent
evaluation of the sample case studies to identify and gain an insight into the
endeavours of the organisations in facilitating failure factors in project
implementation. The findings and analysis of this evaluation revealed that there are
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four areas where most critical failure factors lie. The factors in this area would
lead to failure of projects if they are not effectively managed. They are: top
management’s commitment to the project; project management’s effectiveness,
management of multi-site and technical issues. There are other factor areas in ERP
system that needs to be managed effectively in order to avoid failure. These areas
includes: training of users; performance measures, strategic goals, selection of
project team, and the organisation’s commitment to change.
As a result of this study, the author recommends to implementing organisations that
information-based enterprises must be planned in an integrated way whereby all
stages of the project implementation are engaged to bring about agility, quality, and
productivity. In review of all that has being discussed so far, the author believes that
the most important thing that would help organisations to deal with all the future
uncertainties and changes its environment holds (with regards to project
implementation), would to develop strategies and cultures that would elevate it to a
learning organisation, where people at all levels, individuals and collectively, are
continually increasing their capacity to produce results. As rightly explained by
Peltum (1989) steering a successful course into such an unknown territory depends in
having a clear sense of direction and ability to respond effectively to unforeseen
pitfalls and opportunities therefore it is vital for a corporate strategy of information
management to have top management involvement and backing for information
management policies crucial.
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6.2 Future Research
After three months investigation on project failure of ERP systems study, the main
issue that comes to the mind of the researcher is that not many literatures addresses
how to solve all the problems because “after decades of experience and countless
publications, most enterprise projects still fail to reach a satisfactory conclusion
(Davenport, 1998). Therefore there is a need to address this issue.
The author encourages that the further research should be conducted with regards to
ERP failure assessments. In accordance to Ward and Chapman (2002) systems are
failure in different ways. “Some systems never work… some work, but come in either
cripplingly over budget, very lat or both. Others are pared down in terms of
facilities… some perform to specification but turn out to be so inflexible that
maintenance and enhancement assume nightmarish proportions… others are thought
to work, but turn out not to do.” This was also revealed by the study, although Nestle
implemented a working system on the go-live date, it was still considered a failed
implementation. Therefore, the research on ERP system evaluation can reveal the
question what projects failures factors are even further.
Lastly the author proposes that, further research should evaluate and test if the only
critical failure factors to ERP system implementation are the ones mentioned in the
findings. The checklist could also be modified to incorporate other failure factors.
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