1A study on ‘success’ on the basis of
Implementation Strategies
Joe van Hofwegen September 2006 Engineering and Policy Analysis Faculty of Technology, Policy and Management Delft University of Technology
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Planning:
A study on ‘success’ on the basis of Implementation Strategies
Author: Joe van Hofwegen MSc Student at Delft University of Technology Master Program: Engineering and Policy Analysis Student Number: 1248243 Email: J.O.E.vanhofwegen@student.tudelft.nl or JoeVH2@gmail.com October 2006. Delft, the Netherlands Masters Thesis on ERP Implementations Section: Information and Communication Technology Faculty of Technology, Policy and Management Technical University of Delft Graduation Committee: Prof. Dr. R.W. Wagenaar (Head of the ICT Section) Dr. J.L.M. Vrancken (Assistant Professor) Dr. I.S. Mayer (Associate Professor) ir. Michiel Malotaux (Gartner VP & Enterprise Architect)
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Abstract Substantial literature is available on the critical success factors (CSF) of an Enterprise Resource Planning (ERP) implementation, however there is little or no theoretical literature investigating the relationship between the implementation success of ERP systems and the specific implementation strategy used (Big-bang or Incremental). Current literature identifies CSF’s during ERP implementations but does not differentiate between implementation strategies. This report is based on a research project to investigate the relationship between the implementation success of ERP systems and the implementation strategy used (Big-bang or Incremental). The objective of this research was to identify factors that determine the success or failure of an implementation process under a specified implementation strategy. Upon the identification of success factors, the results of the two implementation strategy success factors were compared and analyzed along with their success rates to observe any differences. Scope: The study focused exclusively on two methods of ERP implementation: ‘Big- bang’ and ‘Incremental’. A successful implementation was defined according to three criteria: (1) Project cost relative to budget; (2) Project completion relative to schedule; (3) Level of Scope Creep encountered. The stage at which the ERP modules ‘go-live’ is where this study will consider the system implemented. Once it is in use by mainstream users and part of an organizations business practices, it can be considered ‘live’. Lastly, this study focused solely on one ERP package: SAP. There are many other vendors, but SAP is the biggest vendor and focusing on SAP will limit the technical implementation issues to one package and add consistency to the study. Method: A multimethods approach was used to enable triangulation of results. Methods used in this research consisted of literature review (literature studies and literature case studies) and personal interviews with six experts with ERP implementation experience. Triangulation was applied in hopes of exposing unique differences or meaningful information that may have remained undiscovered with the use of one approach or data collection techniques. Results/Conclusions Many companies have used big-bang implementations in the past, but the negative connotations associated to it discourage some organizations from following that strategy. This study has shown that there are, contrary to many literature studies, organizations that have used a big-bang approach and succeeded.
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Success is dependent on how well an organization follows through with the critical success factors. This study has shown that the level of criticality of each CSF varies only slightly between implementation strategies. However, based on the analysis it appears that some CSFs do differ slightly and some strong commonalities exist: • Project Management is more critical for big bang implementations than
under an incremental strategy. • Incremental implementations should take advantage of the fact that they
require smaller teams. Given there is less company wide involvement during the implementation process, the role of the project champion is made more critical under this strategy.
• Both big bang and incremental need top management support to succeed and is a strong determinant for success.
Outside the critical success factor list designed for the interview process, other success factors emerged. These factors may not necessarily be critical to all projects but should be kept in mind during an implementation. • The project team should be well balanced with technical and business
minded people. • The timing of a big bang go-live date should take into account an
adjustment period for the new users to adapt to the system. • A larger project using either big bang or incremental implementation
strategies will place greater emphasize on aligning their ERP system to top management’s business plan and vision.
Suggestions for Further Research The next step in this research project would be to broaden the sample of companies studied. This research has reveled there are indeed differences between success factors under different implementation strategies. A statistical analysis of a larger sample would strengthen the results of this study, and possibly reveal even greater differences in success factors. Also, further research could be conducted in the implementation practices under a merger or acquisition scenario. This study has revealed that merger/ acquisitions success factors are significantly different to traditional implementations. Companies aggressively expanding their businesses may not realize that the practices used on their own ERP system may not be suitable during an implementation/integration of a newly acquired business or merger. Keywords: ERP Implementation, Big-bang, Incremental, Success Factors
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2.1 Method ..........................................................................................................7 2.2 Research Framework ..................................................................................9
3.1 Complexities of an ERP Implementation................................................13 3.2 Why Implement an ERP System..............................................................14 3.3 ERP Vendors ...............................................................................................15 3.4 How ERP systems Differ ...........................................................................16
5 Critical Success Factors in ERP Implementations ..................... 24
5.1 Literature Review: Critical Success Factors ...........................................24 5.2 Critical Success Factors Selection and Framework...............................27 5.3 Conclusion...................................................................................................33
6 Measuring Implementation Success ......................................... 35
6.1 ERP Success literature ..............................................................................36 6.2 Implementation Success Framework......................................................37 6.3 Conclusion...................................................................................................37
7.1 Description of Case Studies .....................................................................39 7.2 Case Study Discussion and Analysis .......................................................42 7.3 Case Study Conclusions ............................................................................45
10 Conclusion and Reflection......................................................... 69
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Abbreviations and Acronyms Acronym Description BPR Business Process Reengineering CSF(s) Critical Success Factor(s) ERP Enterprise Resource Planning LC Life Cycle PM Project Management RWS Rijkswaterstaat TTS Thomassen Turbine Systems SAP Module Abbreviations
Abbr. Module Name AM Asset Management CO Controlling FI Financial Accounting HR Human Resources IS Industry Solutions MM Materials Management PM Plant Maintenance PP Production Planning PS Project System QM Quality Management SD Sales and Distribution TE Training and Events Management WF Workflow WM Warehouse Management
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1 Introduction Enterprise resource planning software, or ERP, can be defined as “configurable information systems packages that integrate information and information-based processes within and across functional areas in an organization” (Kumar & Van Hillegersberg, 2000). Organizations have implemented ERP systems in order to integrate all databases amongst departments in order to more easily share information and improve inter- departmental communication. And although ERP systems have been extensively implemented in various organizations and industries, the failure stories continue to mount. Even with implementation costs running as high as 3% of total revenue (Ehie & Madsen, 2005), organizations continue to underestimate the difficulties associated with a company wide ERP implementation. Underestimating the complexities of an implementation project can lead to disastrous consequences as seen by many large organizations which implemented ERP systems. To name a few: • Unisource Worldwide, Inc. wrote off US$ 168 million when the company
abandoned nationwide implementation of SAP software. • FoxMeyer Drug went bankrupt and filed a US$ 500 million lawsuit against
SAP, an ERP software provider, blaming SAP for its problems. • Dell abandoned its SAP implementation following months of delay and cost
overruns. • Dow Chemical wrote off close to half a billion dollars when it implemented
a new ERP system. Because of an ERP system’s integrative nature, the introduction of an ERP system into an organization may cause vast changes in the way an organization does business. For this reason, an ERP system is different from a traditional IT project as the focus of the project has expanded to include the business aspects the system will provide. Unlike traditional ICT projects, no longer are the technical challenges the sole priority, but include business process (re)design, business-focused software configuration and legacy data clean-up (Al-Mudimigh, Zairi, & Al-Mashari, 2001). However, regardless of how daunting an implementation project may seem, both small and large organizations realize that technical and strategic benefits can be substantial from investing in an ERP system. World wide, organizations continue to invest in an off-the-shelf ERP packages. With 70% of Fortune 1000 companies having or soon to install ERP systems, the ERP vendors expect the market to grow to US$ 15.8 Billion by 2008 in the United States alone (Ehie et al., 2005).
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1.1 Problem Description A study conducted by Donovan (2000) revealed that over 90 percent of companies that have implemented an ERP system were not successful the first time around. Many ERP implementations result in a more costly and more time consuming endeavor than had previously been anticipated in any planning phase preceding the ‘go ahead’ for the project (Botta-Genoulaz, Millet, & Grabot, 2005; Gargeya & Brady, 2005; Kumar et al., 2000). However, regardless of the risks associated with an implementation project, different organizations have not overlooked the benefits that can be achieved through the effective use of an ERP system, and have undertaken their own implementation endeavors. With more and more companies upgrading or implementing an ERP system, many researchers have not overlooked the growing need to understand what makes and ERP implementation successful. Having been widely researched, a number of factors have been identified that may result in the successful implementation of an ERP system. One factor in particular that has been identified is the selection of an appropriate implementation strategy. When an organization opts to implement an ERP system it usually follows one of two implementation strategies: Big-bang or Incremental. Implementing incrementally, the ERP systems modules are implemented one at a time or in a group of modules, often a single location at a time. On the other hand, a big-bang entails an entire suite of ERP applications being implemented at all locations at the same time. As one of the most important decisions an organization will make during their ERP implementation journey, the selection of an appropriate implementation strategy is crucial. This decision will have a wide array of consequences on such aspects as cost, implementation duration, necessary resources and the level of complexity. Both strategies have their advantages and disadvantages but which is ‘best’ is a constant debate among researchers and implementers alike. Many researchers point to a lower risk of failure through incremental implementations and suggest that implementers not follow a big bang strategy. But with organizations having different motives, resources and needs, a company may select either strategy on their own accord. Upon selection of a strategy, what is unknown by researchers are the factors needed for either strategy to succeed. Most literature has grouped all implementation projects into one sample and proceeded to identify success factors. This created a knowledge gap that was identified by the Gartner Group, a leading IT consulting firm. Even with ERP literature having been exponentially growing in the past years (Botta-Genoulaz et al., 2005) there is little or no theoretical literature investigating the relationship between the implementation success of ERP systems and the specific implementation strategy used (Big-bang or Incremental). Current literature identifies critical success factors (CSFs) during ERP implementations but does not differentiate between implementation strategies.
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1.2 Research Objective This report is based on a research project to investigate the relationship between the implementation success of ERP systems and the implementation strategy used (Big-bang or Incremental). The objective of this research is to identify factors that determine the success or failure of an implementation process under a specified implementation strategy. Furthermore, upon the identification of success factors, the results of the two implementation strategy success factors were compared and analyzed to observe any differences. An explorative research method was utilized as there is no theory or well- defined hypotheses formulated in advance. This explorative research is intended to answer ‘open’ difference or relational research questions amongst the two main variables: “success” and “implementation strategy”.
1.3 Research Questions The following research questions will be answered through the course of this thesis. Furthermore, sub-questions have also been derived. These sub- questions will form the basis for answering the main research questions and for the development of the research framework.
Main Research Questions
(A) What are the factors determining success or failure of a big-bang implementation strategy of a SAP ERP package?
(B) What are the factors determining success or failure of an incremental
implementation strategy of a SAP ERP package?
(C) How do the success rates and success factors of a big-bang implementation strategy compare to those of an incremental implementation strategy?
The following sub-questions will be answered by means of a literature study.
Sub Questions 1. What is a big-bang implementation strategy? What is an incremental
implementation strategy? What factors have been identified that influence the implementation strategy decision making process?
2. What are the critical success factors (CSF) of an ERP implementation? 3. Which CSFs are most suitable to compare the two implementation
strategies? 4. To allow different ERP system implementation projects to be studied,
what factors can be used to compare projects to one another?
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A research framework has been developed in order to answer the main research questions and sub-questions. This framework evolved during the course of this thesis and is further explained in section 2.2.
1.4 Scope An ERP implementation project is a large, complex and dynamic undertaking with many variables involved. In order to add useful knowledge to the field of ERP it is important to narrow the scope. This study will focus solely on one ERP package: SAP. SAP's products focus on ERP, which it helped pioneer. There are many other vendors, but SAP is the biggest vendor and focusing on SAP will limit the technical implementation issues to one package and add consistency to the study. The study will focus exclusively on two methods of ERP implementation: ‘Big- bang’ and ‘Incremental’. Though it has been argued that these two categories have become too limited and do not encompass many of today’s implementation practices, they are two clearly distinguishable categories and are commonly used to categorize implementation processes. As this research has not been done before, it is important to begin the exploratory research with low granularity, allowing for further research to be done in the future in more detail, using this study as a foundation. Furthermore, the exploratory aspect of this study will focus exclusively on the factors contributing to a successful implementation project under a specified implementation strategy. Some factors contributing to a successful implementation could also be seen as factors contributing to the decision to proceed with a particular implementation strategy. However, this study will examine, irrespective of the decision making process of which strategy to select, on the factors that led to a successful implementation. Thus, the research will not examine how the decision was made regarding which implementation strategy to follow. The study will assume each organization went through its own decision making process to reach a decision on how the implementation was going to proceed. Only decisions made after the implementation strategy was selected and prior to the “go live” phase of the project will be examined. Even though success factors have been studied in the past, they never differentiated between projects using different implementation strategies. In order to add useful knowledge, this study will focus primarily on a limited number of variables explaining a successful implementation. It would be impossible to examine all potential variables that determine a successful implementation. Furthermore, too many variables could result in a study with no real substance. The variables to be explored were selected from literature studies and knowledge gained during the interview process. The final comparison between the two strategies will be based on 10 critical success
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factors along with the results of the open interview part of the interviewing process. A successful implementation will be defined according to three criteria: (1) Project cost relative to budget; (2) Project completion relative to schedule; (3) Level of Scope Creep encountered. This will permit different implementation projects to be compared and evaluated. Lastly, it must be made clear where the implementation cycle has ended. It is important to note that an ERP system is technically always a work in progress and never has a clear ending point, following a cyclical process of improvement. The stage at which the ERP modules ‘go-live’ is where this study will consider the system ‘implemented’. Once it is in use by mainstream users and part of an organizations business practices, it can be considered ‘live’. Given the go-live cutoff point of the study, success will be measured by the opinion of people who implemented ERP systems rather than those that adopted them.
1.5 Thesis Structure This thesis can be broken down into four parts followed by an analysis of results and conclusions, illustrated in Figure 1. The analysis of results will take place in chapter 9. This analysis compares and contrasts the results and analysis of the interview process and the literature case studies. The conclusion will summarize the findings of this thesis and provide insight on the success factors of each implementation strategy along with a comment on the success rates of each strategy and suggested further research.
Figure 1 Thesis Structure
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Part 1 is the background on the research method and framework utilized for this study. The framework served as a guide for the research to be conducted in a structured and valid manner. The framework was refined after the completion of the literature studies outlined by Part 2 and Part 3. Part 2 provides a background on ERP systems for the reader unfamiliar with the complexities of implementing an ERP system. This part will not only provide background on ERP systems, but also demonstrate to the reader the complexities of an ERP implementation along with a brief overview on how ERP implementation projects differ from one another (answering sub question 4). Part 3 consists of three chapters. These chapters made up the main literature studies conducted during this research. The literature studies helped expand the initial research framework. The literature studies had three main goals: (1) to obtain background information of implementation strategies; (2) to identify relevant critical success factors to be explored during the interview process and literature case study analysis; (3) to define a successful ERP implementation. The aforementioned objectives answer sub questions 1, 2 and 3, respectively. Part 4 consists of two chapters and presents the results obtained during the course of this research. The research and results of this thesis were based on available literature case studies and interviews of six people with ERP implementation experience.
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2 Research Method and Framework This study will utilize the concept of triangulation. Triangulation is the combination of two or more data sources, investigators, methodological approaches, theoretical perspectives, or analytical methods within the same study. These combinations result in data triangulation, investigator triangulation, methodological triangulation, theoretical triangulation or analytical triangulation (Thurmond, 2001). A multimethods approach was used to enable triangulation of results. The multimethods in this research consisted of literature review and personal interviews as illustrated in Figure 2. Methodological triangulation will be applied in hopes of exposing unique differences or meaningful information that may have remained undiscovered with the use of one approach or data collection technique in the study.
Literature Review Interviews
Literature: Case Studies
Figure 2 Triangulation by Method
2.1 Method The three methods selected for this research were literature reviews, case studies in literature and one-on-one interviews with experienced ERP implementers.
2.1.1 Literature Study A literature study was conducted in order to answer the sub-questions of this study and form a foundation for the literature case study analysis and interview process. Potential Sources to be used in the literature aspect of the study include: journals, books and internet sources (i.e. databases, online journals etc.). A clear understanding of the variable definitions is vital to ensure that future interviews result in the desired insight into ERP implementations. Literature studies will reveal possible variables that influence an organizations implementation strategy. Beyond the implementation strategy, critical success factors will be identified in order to limit the scope of the interview process. The critical success factors identified in literature will be categorized and used during the interview process.
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Furthermore, in order to successfully gage whether an implementation project was successful or not, a literature review was conducted on defining a successful implementation. This literature review provided the means of quantifying the definition of success during the interview process.
2.1.2 Case Studies in Literature There are few published research studies available pinpointing the selected implementation strategy together with specific information relating to the success of the implementation. However, five case studies have been found to provide the implementation strategy along with information on how the implementation progressed. The case studies available are listed in Table 1. Table 1 Case Studies in Literature
Company Implementation Strategy Type of Organization Hershey Food Corp. Big-Bang Private W.W. Grainger Inc. Big-Bang Private Prat and Whitney Big-bang Private FoxMayer Corp. Incremental Private Siemens Incremental Private
The level of detail within each case study varies significantly. However, the case studies will provide insight into other failed and successful implementations.
2.1.3 Interviews The study involved interviewing six persons with experience in implementing an ERP system, specifically SAP. The interviews lasted approximately one hour each. The interview method is described below followed by a summary of the people/organizations which participated in this study. • Interview Method An interview scheme has been developed in hopes of achieving a degree of consistency amongst the interviews. This interview scheme consists of both structured and unstructured questions. The interview process will comprise three elements (listed in Table 2). Table 2 Interview Process Elements and Structures
Interview Element Structured or Unstructured
1. Determine which implementation strategy used. Structured 2. Determine the success of the ERP
implementation. Structured
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The structured part of the interview will establish some background on the project, determine the implementation strategy utilized (big-bang or incremental), and the success of the project. Not all projects can easily be compared to one another and the implementation processes can differ significantly. However, from the descriptions given by the interviewees and the literature, it will be established in which category the implementation best fits: big-bang or incremental. The unstructured, open question part of the interview will enable the research to draw conclusions on what makes an implementation a success or failure. The open questions will explore how the project progressed, what went wrong, what went well and overall what the implementer felt attributed to success/failure implementing an ERP system. The unstructured part of the interview will specifically address the main research questions. Beyond the open questions segment of the interview, the interviewees were also asked to score a list of CSFs according to criticality. The interview scheme utilized for this study can be found in Appendix A. • Interviewee Selection A total of six organizations were interviewed on their experiences implementing their ERP systems. The interviews were conducted with experts within the private sector, public sector and consultants. All organizations were interviewed in the Netherlands regardless of their headquarter locations, and all those interviewed had been members of their respective implementation project team. The companies interviewed were the following: Table 3 List of Organizations Interviewed Company Implementation Strategy Type of Organization RWS Incremental Public (National) ISBW Big-bang Private (National) Thomassen TS (TTS) Big-bang Private (International) Gasunie Big-bang Private/Public (National) IBM Incremental Consulting (International) Albemarle Big-bang Private (International)
2.2 Research Framework Based on the research questions identified in section 1.3, a research framework has been developed. A research framework is a schematic representation of the research objective and includes the approximate steps that need to be taken in order to realize the objective (Verschuren & Doorenwaard, 2005). This scheme also indicates the necessary theoretical background required for the research project. Figure 3 illustrates the preliminary research framework developed for this research project.
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Figure 3 Preliminary Research Framework
Following the initial research framework, it was further refined following the literature studies on: (1) Big-bang Implementations; (2) Incremental Implementations; (3) Critical Success Factors (CSFs) of ERP implementations; (4) Measuring Implementation Success. Derived from the literature studies, the final research framework is illustrated in Figure 4. A list of 10 CSFs were identified and used to analyze the implementation projects in a systematic manner. The reason this specific list of CSFs is used is explained in Chapter 5, but broadly speaking it permitted the study to focus on a limited number of variables as outlined by the research scope. Additionally, with a clear success definition it is now possible to compare ERP project to one another and compare their success rates. Both the addition of the CSF list and the success measurement allow for some consistency during comparison of the interviews and case studies.
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Figure 4 Final Research Framework Lastly, the framework also identifies how and at what point during the research project, the main research questions will be answered. The letters A, B and C refer to their respective research question.
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3 ERP Background and Concepts In the introduction of this report, Enterprise resource planning software, or ERP, was defined as a “configurable information systems packages that integrate information and information-based processes within and across- functional areas in an organization” (Kumar et al., 2000). Alternatively, Marnewick (2005) suggested an alternative definition which goes beyond the definition of an ERP as being just a software product:
“A packaged business software system that lets an organization automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real time environment. The ultimate goal of an ERP system is that information must only be entered once.”
Even though the definition of an ERP system has been defined by several different authors, they differ from one another only slightly. At the core of almost all definitions is an emphasis on an ERP’s integrative nature and the operational, managerial, strategic, and/or organizational benefits they can deliver. Implementing an ERP system will typically have the following characteristics (Hossain, Patrick, & Rashid, 2002): • Modular design comprising many distinct business modules such as
financial, manufacturing, accounting, distribution, etc. • A centralized common database management system (DBMS) • The modules are integrated and provide seamless data flow among the
modules, increasing operational transparency through standard interfaces • They are generally complex systems involving high cost • They are flexible and offer best business practices • They require time-consuming tailoring and configuration setups for
integrating with the company’s business functions • The modules work in real time with online and batch processing
capabilities • They are or soon they will be Internet-enabled Different ERP vendors provide ERP systems with some degree of specialty but the core modules are almost the same for all of them. Some of the core ERP modules found in the successful ERP systems are the following (Hossain et al., 2002): • Accounting management • Sales & distribution management • Financial management • Human resources management • Manufacturing management • Supply chain management • Production management • Customer relationship management • Transportation management • E-Business
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Using some the aforementioned modules, Figure 5 illustrates how these modules are interconnected through an ERP system.
Figure 5 ERP Systems Concept But what exactly sets an ERP apart from traditional ICT projects? The previous overview of ERP systems focused mainly on the software component of an ERP. But to begin to fully understand what makes an ERP implementation so complex and why organizations will go through the challenging task of implementing one, you have to look beyond the software component of an ERP system
3.1 Complexities of an ERP Implementation Marnewick (2005), introduced an ERP model which encompasses the complexities arising from implementing an ERP system in an organization. Figure 6 illustrates his conceptual model for understanding what an ERP is and the impact it has on an organization. The model consists of four components that are implemented through a methodology (a systematic approach to implementing an ERP system).
Figure 6 Conceptual Components of ERP
The software component consists of generic modules making up an ERP system, such as Finance, HR, supply chain management (SCM) and customer
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relationship management (CRM). The remaining components of the model are what set an ERP system apart from traditional ICT projects. Process flow deals with the way in which information flows among the different modules within the ERP system (Marnewick & Labuschagne, 2005). In order to implement this aspect of an ERP system an organization’s business process must be modeled. The software components of an ERP system are all integrated and as such information flows from one software component to another. The software component is just one part of the implementation process. One can design and implement a functioning ERP system with the desired system quality and information quality, but if the user rejects the product it will undoubtedly not be a success. ERP systems bring with it a change in the way people do business, and in many cases there is great resistance to this change. For any ERP system to succeed, the users must buy into the new ERP system. A paradigm shift must be achieved within the organization (Marnewick et al., 2005). The fourth component in the ERP model is change management. Change management occurs at several levels in the implementation process. According to Marnewick, in order to successfully implement an ERP system the following four levels of change management must be addressed: 1. User attitude: Communicate to employees the business case for the
change and manage users’ expectations of the new system. Keep in mind that if users do not accept the new system the project is likely not to succeed.
2. Project change: Manage scope changes during the implementation process. Ensure that the proposed changes are necessary and appropriate and that the integrity of the ERP system is maintained.
3. Business process changes: Introducing an ERP system results in constant changes in business processes. A more accurate and timely information flow will be made possible by an ERP system, business process changes must occur to make the most of the new system.
4. System changes: Organizations need to manage the testing and release of future software versions. Also security issues typical to software development and maintenance projects must be addressed.
Marnewick’s model makes clear that implementing an ERP system is much more than the introduction of a new software package, and that it has a great impact on an organization.
3.2 Why Implement an ERP System Organizations have different motives for implementing an ERP system and researchers have attempted to classify the most common of them. Reoccurring citations in literature reference either Ross (2000) or Parr
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(2000b) as having the most comprehensive list of motivational factors for implementing an ERP system. It is important to look into the motivation for implementing an ERP system as this could affect the proposed scope, design and approach to the ERP implementation (Parr & Shanks, 2000b). The six most common motivations cited by Ross (2000) for ERP implementations were: • Need for a common platform • Process improvement • Data visibility • Operating cost reductions • Increased Responsiveness • Improved strategic decision making
On the other hand, Parr (2000b) subdivided the implementation motivations into three distinct categories: Strategic, Operational and Technical. Parr then subdivided Ross’s six motivations into their respective categories and added four additional motivations. Table 4 summarizes Parr’s motivations for an organization to implement an ERP system. Table 4 Motivation for ERP Implementation Strategic Operational Technical Multi-site standardization Process
improvement Common platform/obsolescence of legacy systems
Customer responsiveness Data visibility Decision-making improvement
Operating cost reductions
Need for efficiencies and integration
Business restructuring Of the aforementioned motivations, one was left out: Y2K compliance. Meeting Y2K compliance is no longer relevant to studies conducted today. The Y2K bug was a computer programming design that caused some date- related processing to operate incorrectly once the year 2000 started. Parr published the motivations list during the midst of a world wide rush to upgrade IT systems to meet Y2K standards; this is no longer relevant today. It is important to note that the aforementioned motivations for implementing an ERP system are not exhaustive, but rather are two of the more commonly cited motivations for implementing an ERP system. However, it is important to look into why an organization has implemented an ERP system as this could influence an organization’s implementation strategy.
3.3 ERP Vendors There are several competing ERP software developers in the commercial ERP systems market. Some of the better known and widely used ERP software package vendors include: SAP, Oracle, Peoplesoft (2004 merged with Oracle) and Microsoft Dynamics Group. This study will be limited to organizations that implemented SAP’s software packages.
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SAP AG (“Systeme, Anwendungen, und Produkte in Datenverarbeitung”) or Systems, Applications and Products in Data Processing, is the third largest software company in the world and largest European software enterprise (SAP, 2006). Founded in 1972 by five former IBM engineers in Germany, their first ERP product was launched in 1979. As the pioneer in this market, SAP went on to become the largest vendor of ERP products. SAP’s main ERP software package is R/3 – a client/server based ERP system. SAP R/3 software modules are designed according to “best business/industry practices” and can be configured so that they map an organization's activities encompassing everything from corporate structure down to the specifics of pricing discounts (Hirt & Swanson, 1999). A list of common SAP modules, abbreviations and descriptions can be found in Appendix C. SAP R/3 claims to provide an organization’s workforce with access to information on a real-time basis across the entire organization, and cost reductions through increased productivity, reengineered business processes, and improved information flows for decision making (Hirt et al., 1999). However, one draw back of SAP R/3 is the fact that most organizations are forced to adapt to SAP’s software package rather than adapting the software package to the organizations needs. Furthermore, the inherent complexity arising from integration issues, results in an organization requiring a great deal of outside help from the vendor and specialized consulting firms, adding to the costs of implementation.
3.4 How ERP systems Differ In order to study ERP systems, it is important to know what set them apart from one another. Parr and Shank’s (2000) provided several characteristics by which ERP implementations can differ. These characteristics will enable this research study to differentiate different implementation projects based on a predefined set of categories. The characteristics of an ERP implementation project that will be examined, along with other factors, are as follows: • Physical Scope: An ERP implementation may involve a single site,
multiple sites within the same geographic region, or multiple sites scattered across national boundaries. Further, the number of users of the ERP system may vary widely. Because of these physical factors, the complexity, cost and duration of a project may vary significantly.
• Business Process Re-engineering: Analysis and design of workflows and processes within and between organizations.
• Technical Scope: Decide if and how much the ERP software is to be modified. Apart from customization, a company may require an industry specific module to be developed.
• Module Implementation Strategy: Selection of modules to be implemented and the implementation strategy.
• Resource Scope: Time and Budget.
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4 Implementation Strategies The benefits of implementing an ERP system are significant, and so too are the complexities in implementing one. Once an organization feels they can benefit from an ERP system in their organization, the decision needs to be made how it will be implemented. The implementation of an ERP system typically follows two strategies: big bang or incremental. Both strategies differ significantly from one another and have their benefits and shortcomings. The selection of a particular strategy should not be taken lightly, and many factors need to be taken into account when selecting either one.
4.1 Defining Big-bang and Incremental Implementations According to O’Leary (2000), in a full big-bang implementation, an entire suite of ERP applications is implemented at all locations at the same time. Using big-bang, the system goes from being a test version to being the actual system used to capture transactions in only a matter of days. Big-bang requires simultaneous implementation of multiple modules and usually employs a three-step approach. Firstly, all relevant processes and artifacts are chosen (or developed) and implemented in the software. Secondly, all modules are tested individually followed by the creation of interfaces to link to all modules. Lastly, the old system is turned off and the new system is turned on. An incremental approach is one where modules are implemented one at a time or in a group of modules, often a single location at a time. Incremental implementations are sequential implementations that consist of designing, developing, testing and installing different modules. Unlike big-bang, incremental implementations require that substantial attention and maintenance be given to legacy systems in order – at each phase – to facilitate integration with the new ERP systems (O'Leary, 2000). Summarized in Table 5 (O'Leary, 2000) are the advantages/disadvantages of both implementation strategies. Important to note is that one strategy’s advantage may be the other’s disadvantage.
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interfaces • Limited need to maintain and
revise legacy software • Functionality linkage • Shorter implementation time • Cost
• Peak Resources Requirements are less than Big-bang
• More resources can be devoted to a particular module
• Legacy System Fallback • Personnel gain knowledge in each
phase • Time between development and
use is reduced Disadvantages • Risk of total system failure may
be higher • Cannot readily go back to
legacy system • Project managers can’t show
system works until the system is entirely installed
• Time between development and implementation may be longer.
• Heavy use of temporary interfaces • Higher risk of uninvolved and
uncoordinated personnel • Higher risk of losing personnel to
turnover • Operative legacy system
constitutes fallback position that may derail new implementation
A big-bang approach has been deemed less risky from a commitment standpoint while an incremental approach is less risky from a technical perspective. An incremental approach is not an “all or nothing” approach like the big-bang; a total system failure is less likely compared to a big-bang in which one malfunctioning module may result in implementation failure. On the other hand, a big-bang approach requires total commitment from the organization and project teams thus possibly leading to better coordination efforts and member involvement. Additionally, according to O’Leary, the risk of losing employees before completing engagements is lower with the big- bang approach. However, according to O’Leary and other literature studies (Duplaga & Astani, 2003; Mabert, Soni, & Venkataramanan, 2003a; O'Leary, 2000) an incremental approach has generally been viewed as the less risky of the two alternatives. Other key differences between the two strategies identified in literature have been in cost and time requirements for implementation. A big-bang strategy has generally been considered less time consuming and also having lower costs than an incremental approach (Duplaga et al., 2003; Huang, Chang, Li, & Lin, 2004; Koch, 2006; Mabert et al., 2003a; O'Leary, 2000).
4.2 Factors Influencing the Implementation Strategy Decision
Several authors have examined the circumstances under which an organization selects an implementation strategy. The following sections outline some of the main factors influencing the implementation strategy selection process. The following three sections cover factors within the
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following areas: (1) Organization Factors; (2) Module Implementation Factors; (3) Time and Risk Factors. • Implementation and the Organizational Characteristics One of the more frequently examined variables in literature relating to ERP implementation strategies is organization size. Several researchers found that large companies tend to utilize an incremental approach whilst smaller organizations tend to utilize a big-bang approach (Duplaga et al., 2003; Mabert et al., 2003a; O'Leary, 2000). Coupled with organizational size, a relationship was found by O’Leary (2000) between the size of an organization and the organization complexity influencing the selection of either a big-bang or incremental implementation strategy. Organizational size is usually defined by either the organization’s revenue or total assets. However, O’Leary (2000) also defined organization size according to the geographic regions the organization spans and/or the number of products and customers an organization has. The level of organization complexity is derived by several means. For one, the more products and customers the more complex an organization is, and vice-versa. Also, the characteristics of the customers and products are also a factor influencing organization complexity. For example, a powerful customer may have great influence in the system design or a broad range of products would increase the organization complexity. Figure 7 illustrates O’Leary’s findings that smaller and less complex organizations tend to utilize a big-bang approach and that larger and more complex organizations tend to use an incremental approach.
O’Leary (2000) also provided a relationship between organization hierarchy and controls. The conclusion is that as organizations become more hierarchical with tighter controls, it becomes more able to sustain an incremental implementation, illustrated in Figure 8.
Figure 7 Linkage between Organization Size and Complexity and Implementation Strategy
Figure 8 Linkage between Organization Hierarchy and Control and Implementation
If a company has a flat organization that is not tightly controlled, it’s very difficult to sustain commitment throughout an incremental implementation.
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And if the organization structure has extensive hierarchy (is “tall”) and there is tight control, then there is substantial organizational machinery to facilitate an incremental implementation. In addition, because of the organization structure and controls in place, it may be that – in the absence of substantial reengineering – an incremental approach is the only one politically feasible (O’Leary, 2000). Another study, conducted by Mabert et al. (2003), examined the impact of organization size on ERP implementations in the manufacturing sector. This study categorized the organization size according to annual revenue (small < $200, $200 < Medium < $ 1B, Large >$1B). This study did not only examine which implementation strategy was used according to organization size, but also other key differences in implementation practices across companies of different sizes. Firstly, Mabert (2003) confirmed O’Leary’s findings that larger organizations tend to utilize an incremental approach while smaller organizations opt for a big-bang approach. This conclusion was also confirmed by Duplaga’s (2003) research on manufacturing companies implementing ERP systems. Mabert also made other key findings on ERP implementations and organizational size:
1. Adoption of ERP systems by large companies is motivated more by strategic needs whereas tactical considerations are more important for smaller companies.
2. Larger companies employ more ERP functionality than small companies.
3. Large companies customize ERP software more while small companies tend to adopt business processes within ERP systems more.
4. Large companies report greater benefits in the financial areas, while small companies report more benefits from their ERP implementations in manufacturing and logistics.
5. Larger companies spend a higher percentage of their budgets on ERP implementation teams. Smaller companies spend a higher proportion of their budgets on the cost of software.
However, keep in mind that Mabert’s research may not necessarily be universally applicable to different industries (specifically Mabert’s finding #4). • Implementation and the Module Characteristics The implementation strategy selected by an organization can also be influenced by the number of modules and the degree to which the organization changes those modules, as illustrated in Figure 9. As the number of modules increases, the technical and organizational complexities during he implementation process can increase substantially. Thus, in order to better manage the complexities stemming from an ever increasing project scope, the more modules are implemented the stronger the tendency for organizations to opt for an incremental approach increases. Additionally, the
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amount of resources required increases with each module chosen for implementation (O'Leary, 2000).
Figure 9 Linkages between Implementation Strategy and ERP Modules
If management decides to implement a standardized ERP package without major modifications, this will minimize the need to customize the basic ERP code. This, in turn, will reduce project complexity and help keep the implementation on schedule (Umble, Umble, & Haft, 2003). As the extent of change to modules increases, preferences will shift from a big-bang approach to an incremental approach. If the modules used are virtually as the vendor intended and developed them, interaction problems between modules will be minimal. A big-bang approach is preferred in a project requiring minimal change to the modules and fewer modules. This combination results in the least complex implementation scenario, as the likelihood of errors and additional testing will be minimal compared to an implementation requiring extensive modifications to the modules and many modules implemented. • Implementation Strategy: Time and Risk One of the advantages of the big-bang approach is that theoretically it takes less time than an incremental approach. This fact could be one of the motives for an organization to opt for a big-bang approach. Much of the research done on ERP implementations prior to the year 2000 listed the Y2K bug as one of the primary motivations for ERP systems to be installed. The Y2K bug gave organizations the excuse to implement a new system, as ICT investment and resources were going to be required anyway. The urgency to complete system implementation prior to the year 2000 was found to be one of the main reasons for organizations to proceed with a big-bang approach (Parr et al., 2000b). Thus, an organization will most likely opt for a big-bang approach if time is critical and they are willing to manage the risks associated with a big-bang approach.
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As mentioned earlier, a big-bang approach is considered to be the riskier of the two strategies. It is considered riskier given the greater degree of complexity in managing the project and also the necessity for greater resources at one time (peak resources). Selecting an implementation strategy must address these risks and consider the trade-offs between each implementation strategy. As the project size increases, the risks increase as well in almost all of the risk categories: Organizational, project management and control, system design and technological planning; all of which may make a big-bang approach less desirable. Managing these risks is vital in both a big-bang and incremental approaches, and must be considered prior to selecting a strategy and during the implementation process. However, from an implementer’s standpoint, the objective of both strategies will usually remain the same: manage the risks and get the system up and running on time and on budget.
4.3 Conclusion Assuming an implementation goes to plan, a big-bang approach generally requires more peak resources during implementation, but it is considered less time consuming and having lower costs than an incremental approach. However, the lower costs and speedier implementation are accompanied by and an increase in the level of risk. Each organization should examine their needs, motives and resources before selecting a strategy. Studies have revealed several characteristics associated with organizations that have opted for a particular strategy in the past (Table 6). Table 6 Factors Influencing Implementation Strategy Decision
Big-bang Incremental Smaller Companies Larger Companies Larger % of total costs towards software Larger % of total costs towards Teams
Simple Organization Complex Organization
Loose Controls Tight Controls
Minimal Customization to ERP package Extensive Customization to ERP package
This chapter has addressed sub question 1 and revealed some success factors under either strategy. For one, if an organization is to implement under a big bang approach, it should have the necessary resources at it disposal. An organization could be faced by resource clashes should they not take into account the necessary peak resources a big bang implementation demands. Secondly the organization should be aware of the added risks that need to be addressed given the increase in complexity associated to implementing the entire system in one go.
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There are no set criteria on selecting an implementation strategy. Weighing the advantages and disadvantages of both strategies, together with the organizations’ needs and available resources will determine their final implementation strategy. Overlooking any of these factors could possibly lead to a decision that may manifest itself into problems later on during the project.
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5 Critical Success Factors in ERP Implementations With so many companies implementing ERP systems in their organizations, it has become a priority for many researchers to find a way to help these organizations succeed. Identify the factors that helped other organizations succeed in implementing their ERP systems was one way of helping. These factors have since been used as a guideline for many implementers to follow, but they are assumed to be universally applicable regardless of the implementation strategy followed. In order to make a comparison between success factors under different implementation strategies, it is important select a CSF list that is in line with the objectives of this research study.
5.1 Literature Review: Critical Success Factors Much literature has been devoted to identifying the critical success factors (CSFs) during an ERP implementation. Identifying these critical success factors affecting the implementation process is necessary to ensure that potential failures can be avoided. Table 7 summarizes some of the most commonly cited research papers and their respective CSFs. Table 7 CSFs in Literature Somers and Nelson. (2001)
Holland and Light. (1999)
Al-Masharis et al. (2003)
Parr and Shanks. (2000)
Umble et al. (2003)
competence • Interdepartmental
selection • Data analysis and
• Project Schedule/plans
• Client Consultations
• Empowered decision makers
• Best people • Champion • Vanilla ERP • Smaller Scope • Definition of Scope and goal
• Strategic goals with the system
• Commitment of management
training • Focused
performance measures
• Selection of system
All of the aforementioned CSFs are necessary to understand what is involved in an ERP implementation project. As is made evident by literature, for a successful implementation to occur much emphasize should be placed beyond the technical realm. Personnel involved in the project (top management,
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project teams, users etc.) and business aspects of the implementation project are equally as important as the ERP package itself. It is important to note however, that some critical success factors can be have causal relationships; changes in one of them influences other CSFs, directly or indirectly (Akkermans & Van Helden, 2002). • Critical Success Factors and Life-Cycle Models This literature study not only examined the CSFs, but also paid close attention to which life-cycle model was used to establish a list of CSFs. Many of the researchers who derived their own ERP or ERP implementation CSFs based their research on a predefined life-cycle model. There are many widely used life-cycle models that can be found in literature, but there is no clear consensus amongst researchers as to which life-cycle model is the best or most appropriate for studying ERP systems. Table 8 provides a brief overview of commonly used life-cycle models found during the literature study for this research. These life-cycle models specifically address the ERP life-cycle and not necessarily other large scale ICT projects. However, in some cases, these models may have been derived from general ICT life-cycle models. Table 8 Life Cycle Models in Literature according to authors O’Leary (2000) Rajagopal
(2002) Ross and Vitale (2000)
Markus and Tanis (2000b)
2nd Stage
Onward and Upward
6th Stage
Infusion
Many researchers based their research methodologies on one of the aforementioned life-cycle models (overviews of these life-cycle models can be found in Appendix B). A closer examination of the life-cycle models revealed some of the derived CSF lists were based on life-cycle models that included stages outside the scope of this research. Or worse yet, it was found that many CSF lists did not clearly identify which stages of an ERP life-cycle was being studied. Ignoring the ERP life cycle meant that a reader could not
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clearly identify when the CSFs were relevant. For example, Rajagopal’s six stage life-cycle model has been widely used during CSF research studies (Botta-Genoulaz & Millet, 2005; Edwards & Humphries, 2005; Ehie et al., 2005; Li, Liao, & Lei, 2006; Luo & Strong, 2004; Rom & Rohde, 2006; Somers & Nelson, 2003; Somers & Nelson, 2004; Vinter, 2005; Zhang, Lee, Zhang, & Banerjee, 2005a). However, the six stage life-cycle model overlooks the design, installation and configuration of the ERP system. The model begins by selecting a software package followed by the decision to implement or not, and then jumps to an installed system used on a daily basis by the end users. For this reason, the decision was made not to utilize CSF studies based on Rajagopal’s life-cycle model. The CSF studies that were based on life-cycle models not within the scope of this research were not selected as candidates for a CSFs study of ERP implementation strategies because CSFs may refer to life-cycle stage outside the scope of this research. In order to ensure that the relevant CSFs are examined during the course of this study, this research limited the CSF literature to those research studies that used Markus and Tanis’ (2000) life cycle model. The main advantage of this life-cycle model is the fact that it draws a clear line between the decision making process (chartering) and the actual implementation of the system (project), unlike other models which may leave out certain aspects of the implementation process and/or fall short/out of the scope of this research project. • Background on Life-Cycle Model Selected This study will base its CSFs on the life-cycle model developed by Markus and Tanis. This model identifies four distinct phases during the adoption organizations undergo with an ERP system. They are:
1) Chartering: Decisions defining the business case and solution constraints.
2) Project Phase: ERP software is configured and rolled out to the organization.
3) Shakedown Phase: The company makes the transition from “go live” to “normal operations”
4) Onward and Upward Phase: Company captures the majority of business benefits (if any) from ERP system and plans the next steps for technology implementation and business improvements.
The life-cycle model is illustrated in Figure 10 and provides a visual representation of the implementation stages. The chartering phase consists of all the decisions leading up to project approval and funding. This phase includes the following activities: building a business case for enterprise systems, selecting a software package, identifying a project manager, and approving a budget and schedule (Markus & Tanis, 2000b). The end result of this phase is the approval or denial of the project, and the project parameters being set (schedule, scope, and budget).
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Next in the life-cycle is the project phase. This phase consists of activities intended to get the system up and running in one or more organizational units (Markus et al., 2000b). Typical activities according to Markus (2000) in this phase are as follows: Development of detailed project plan, ongoing project management, selection and assignment of project team members, training of projects team members, software configuration and customization, documentation, testing, and rollout and startup.
Figure 10 Five Stage Enterprise System Life Cycle Lastly, the two remaining stages occur once the system has gone live. The shakedown phase involves the transition from ‘going live’ to ‘normal operation’ or until routine use has been achieved. Within this stage, activities usually include activities such as bug fixing, problem resolution and process and procedural changes. The last phase in the implementation cycle involves the future of the ERP system. In this phase system upgrades may occur and the organization realizes business benefits from the system (if any).
5.2 Critical Success Factors Selection and Framework This study will focus on the aforementioned life-cycle developed by Markus and Tanis (2000). Several researchers have used this Markus and Tanis’ research to examine issues relating to ERP implementations. One study in particular subdivided main CSFs into Markus and Tanis’ life-cycle model (Fui- Hoon Nah, Lee-Shang Lau, & Kuang, 2001). This study used a process theory approach to classify the CSFs, or in other words, on the sequence of events leading up to implementation completion. The result of this study revealed eleven CSFs across the ERP implementation life-cycle and is illustrated in Figure 11 within their respective life-cycle phase.
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Figure 11 Classification of CSFs into life-cycle model From the aforementioned CSFs a final list of 10 CSFs were studied through the course of this research, Figure 12. One of the CSFs was purposely left out of the study, ‘Monitoring & Evaluation’. It was excluded because the CSF fell outside the scope of this research. This research is primarily interested in the CSFs within the Chartering and Project phases of the life-cycle model.
Figure 12 CSFs Research Framework It was noted by Parr et. al (2000a) that CSFs have different levels of criticality. Factors can be linked to success by a known causal mechanism, factors necessary and sufficient for success, factors necessary for success and lastly, factors associated with success (Parr & Shanks, 2000a). As part of the interview process, the experts were asked to score the aforementioned CSFs according to criticality. The expert will give the following scores to each critical success factor (the lower the score the more critical):
Score 1 = Strongly Determines Success Score 2 = Determines Success Score 3 = Necessary for Success
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• Critical Success Factor Definitions The following 10 definitions are of the aforementioned CSFs that will be used throughout the analysis of interviews and case study reviews.
1. ERP Teamwork & Composition The project team is responsible for implementing the system at the operational level and usually disbanded upon installation of the system. The ERP implementation team has been identified as a critical success factor by several researchers (Somers et al., 2004; Kim, Lee, & Gosain, 2005; Akkermans et al., 2002; Gargeya et al., 2005; Somers & Nelson, 2001). These researchers identified the importance an implementation team has on the success of the project. Teamwork should be encouraged and sharing information within the company. Also, partnerships should be managed with regular scheduled meetings and incentives, and risk-sharing agreements will aid in teams working together to achieve similar goals (Fui-Hoon Nah et al., 2001). The team’s business and technological competence are critical factors in determining implementation success (Somers et al., 2004). Common tasks performed by the project team may include, but not limited to:
• Establishing the ERP project schedule. • Reporting actual performance against the schedule. • Identifying problems and obstacles. • Making decisions, as appropriate, regarding priorities, resource
reallocation, and so forth. • Making recommendations, when necessary to top management.
ERP teamwork and composition were identified as being important throughout the implementation life cycle, and several team aspects were identified. First, the ERP team should consist of the most knowledgeable people in the organization and have them dedicated solely to the project at hand (Gargeya et al., 2005). Secondly, a cross-functional team composition is equally critical. A team should not only have the necessary technical know-how but equally important is having the business knowledge accompanying the technical expertise (Somers et al., 2004; Akkermans et al., 2002; Somers et al., 2001). The team should be familiar with the business functions and products so they know what needs to be done to support major business processes (Fui-Hoon Nah et al., 2001). Thus, a cross functional team consisting of experienced consultants, technical and non-technical personnel along with the organizations internal staff will ensure little is overlooked. 2. Top Management Support A successful implementation is only achievable when high-level executives have a strong commitment to the project (Gargeya et al., 2005) and lack of top management involvement can attribute to system implementation failures (Zhang, Huang, Lee, Zhang, & Huang, 2005b; Akkermans et al., 2002). Top
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management commitment to the project is important for several reasons and vital throughout the implementation life-cycle. No single factor has as predictive of ERP project success as top management support (Somers et al., 2004). One benefit stemming from top management making the project a priority includes an increased commitment by others in the organization and the management’s ability to give the appropriate amount of time to get the job done right. Senior management must be committed with its own involvement and willingness to allocate valuable resources to the implementation effort. A shared vision of the organization and the role of the new system and structures should be communicated to employees. New organizational structures, roles and responsibilities should be established and approved. Policies should be set by top management to establish new systems in the company. In times of conflict, managers should mediate between parties. Lastly, top management support does not only serve as a motivating factor but also their involvement will align the ERP project with the overall business strategy (Akkermans et al., 2002; Al-Mudimigh et al., 2001; Fui-Hoon Nah et al., 2001). 3. Business Plan and Vision A clear business plan and vision to steer the direction of the project is needed throughout the ERP life cycle. A business plan that outlines proposed strategic and tangible benefits, resources, costs, risks and timeline is critical and will help keep focus on business benefits (Zhang et al., 2005b; Somers et al., 2004; Akkermans et al., 2002; Fui-Hoon Nah et al., 2001). There should be a clear business model of how the organization should operate behind the implementation effort (Holland & Light, 1999). There should be a justification for the investment based on a problem and the change tied directly to the direction of the company along with a clearly stated project mission that is related to business needs (Fui-Hoon Nah et al., 2001). Goals and benefits should be identified and tracked along with a good business plan which will make the implementation run smoother. The organization should have a previously defined and well communicated project methodology that envelops both documentation procedures and clear performance measurements to monitor progress (Fui-Hoon Nah et al., 2001). 4. Effective Communication “Communication is the oil that keeps everything working properly” (Schwalbe, 2000) and communication across functional boundaries (compared to other IT projects) is important given the goal of an ERP system is to integrate business functions. According to Al-Mudimigh et al., (2002) communication is defined as the provision of an appropriate network and necessary data to all key factors in the project implementation. The communication has to cover the scope, objectives and tasks of an ERP implementation project. Expectations at every level need to be communicated at every level of the organization. This makes the management of communication, education and
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expectations critical throughout the implementation process (Fui-Hoon Nah et al., 2001). Communication has been viewed as having a high impact from initiation to system acceptance, as it helps minimize possible user resistance (Somers et al., 2004). Furthermore user input should be managed in acquiring their requirements, comments, reactions and approval. Lastly, employees should be told in advance the scope, objectives, activities and updates, and admit change will occur (Fui-Hoon Nah et al., 2001). 5. Project Management Good project management can result in meeting budget constraints and staying within the implementation schedule. Assigning a group of people responsible to drive project management success has been shown to increase implementation success (Al-Mudimigh et al., 2001; Weston, 2001; Atkinson, 1999). Project management as a CSF requires the project management to be carried out properly. The scope of the project needs to be clearly outlined and controlled, avoiding scope creep. Clear milestones need to be defined, critical paths of the project and planning of well-defined tasks all need to be carried out. Lastly, a focus on results and constant tracking of schedules and budgets against targets are also important (Fui-Hoon Nah et al., 2001). Implementing an ERP system is a complex undertaking requiring substantial strategic thinking, meticulous planning, and negotiations with departments and divisions; all of which require the careful selection of the appropriate PM structure and methods. Without good project management several pitfalls during the implementation project may occur. To name a few, poor project management may lead to a lack of appropriate project schedules, plans, and clear strategy for implementation. Additionally, with poor PM it may occur that a lack of adequate resources are available, result in frequent changes in requirements (Kim et al., 2005). The ability to manage large information system projects that affect virtually every area of the firm, such as an ERP system, is often underestimated, poorly supported, resource shy and under the control of the wrong people (Weston, 2001). 6. Project Champion The success of technological innovations has often been linked to the presence of a champion who performs the crucial functions of transformational leadership, facilitation, and marketing the project to the user (Somers et al., 2001). The project champion is someone within the organization who is delegated the responsibility of ensuring acceptance of the system by end users and keeps a close eye on the technological integration with business aspects of the ERP system. The Project champion commitment is critical to drive consensus and to oversee the entire life cycle of implementation (Fui-Hoon Nah et al., 2001). The project champion should be within the ranks of top management and have the necessary influence and power to set goals and legitimize change.
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7. Appropriate Business & Legacy Systems An organization should have a clear understanding of the existing legacy environment and the technological aspects involved in the implementation of the ERP (Parr et al., 2000a; Holland et al., 1999; Umble et al., 2003; Mabert, Soni, & Venkataramanan, 2003b; Al-Mashari, Al-Mudimigh, & Zairi, 2003; Somers et al., 2001). During the initial phases of the implementation process, a stable and successful business setting is essential. Furthermore, existing business processes, organization structure, culture, and information technology will determine the level of change required along with the likeliness of achieving success (Holland et al., 1999; Fui-Hoon Nah et al., 2001). For example, if your legacy systems are extremely complex, with multiple technology platforms and a variety of procedures to manage common business processes, then the amount of technical and organizational change required is high (Holland et al., 1999). 8. Change Management Program & Culture This CSF is vital throughout the entire implementation process. A comprehensive approach toward the large scale process and system changes associated with ERP is critical in ensuring success. Without appropriate change management processes, organizations may not be able to adapt to the new system to make performance gains (Kim et al., 2005). Users must be trained, and concerns must be addressed through regular communication, working with change agents, leveraging corporate culture and identifying job aids for different users (Rosario, 2000). As part of the change management efforts, users should be involved in design and implementation of business processes and the ERP system, and formal education and training should be provided to help them do so. Education should be a priority from the beginning of the project, and money and time should be spent on various forms of education and training (Fui-Hoon Nah et al., 2001). Furthermore, beyond a change management program, the organizational culture is equally important to achieve a successful implementation. A culture with shared values and common aims is conducive to success. Organizations should have a strong corporate identity that is open to change and a culture that emphasis quality, a strong computing ability, and a strong willingness to accept new technology (Fui-Hoon Nah et al., 2001). 9. BPR & Min. Customization According to Holland et al. (1999), aligning the business process to the software implementation is critical. One of the problems associated with implementing packaged software is the incompatibility of features with the organization’s information needs and business processes (Somers et al., 2001). In order to overcome this problem some organizations reengineer their existing business processes to the best business standards suggested by the vendor. This is referred to as Business Process Reengineering (BPR), and is defined as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary
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measures of performance, such as cost, quality, service and speed” (Zhang et al., 2005a). The factor leading to a successful implementation is within an organizations willingness to change their existing business processes to fit the software thus minimizing customization and adhering to a best business process standard (Zhang et al., 2005a). Minimizing customization by using the vendor’s code as much as possible has been linked to the success of an implementation (Somers et al., 2001). Minimizing customization will avoid errors and takes advantage of vendors’ new version and releases. Furthermore, customization may result in higher costs and longer implementation times (Grover & Malhotra, 1997; Gunasekaran & Nath, 1997; O'Neill & Sohal, 1999). 10. Software Development Testing & Troubleshooting Software development, testing and troubleshooting is essential, beginning in the project phase. The overall ERP architecture should be established before deployment, taking into account the most important requirements of the implementation. There is a choice to be made on the level of functionality and approach to link the system to legacy systems (under an incremental implementation). In addition, to best meet business needs, companies may integrate other specialized software products with the ERP suite. Interfaces for commercial software applications or legacy systems may need to be developed in-house if they are not available in the market. Lastly, troubleshooting errors is critical (Holland et al., 1999). The organization implementing ERP should work well with vendors and consultants to resolve software problems. Quick response, patience, perseverance, problem solving and firefighting capabilities are important (Rosario, 2000). Also, vigorous and sophisticated software testing eases implementation. Lastly, there should be a plan for migrating and cleaning up data. Proper tools and techniques and skill to use those tools will aid in ERP success (Rosario, 2000).
5.3 Conclusion Even though many researchers have identified critical success factors of an ERP, the literature study revealed that many of them neglected to identify what stage of the ERP life cycle was being studied and lacked a concise definition of success. Leaving out these two critical pieces of information left a significant doubt on the validity of their findings and some ambiguity on the critical success factors listed. Were the success factors aimed at implementing an ERP successfully, successfully transitioning a legacy system to a new system, or aimed at long run success of the ERP system? Leaving out the life cycle model and success definition sometimes made the purpose of the CSFs unclear.
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For these reasons, this chapter has been devoted to CSFs to ensure that the list of CSFs to be used coincided with a life cycle stage within the scope of this research. Furthermore, the next chapter will delve into the success definitions found in literature, followed by a clear success definition that will be used during the interview process and case study analysis. The CSFs and the success definition strengthen the preliminary research framework and focus the research within the desired scope. This chapter has been devoted to answering research sub questions two and three as outlined in section 1.3. First a preliminary overview of CSFs was provided in order to have a general overview of commonly cited success factors. Upon closer examination, and comparing them to life cycle models in literature, it became evident that many of the commonly used CSF lists are not appropriate for this specific research study. A final list of CSFs will be used based on a specific ERP implementation life cycle model which does fit the scope of this research. The 10 critical success factors that will be used during the interview process and case study analysis are as follows: (1) ERP Teamwork & Composition; (2) Top Management Support; (3) Business Plan and Vision; (4) Effective Communication; (5) Project Management; (6) Project Champion; (7) Appropriate Business and Legacy System; (8) Change Management and Culture; (9) BPR and Minimal Customization; (10) Software Development, Testing & Troubleshooting.
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6 Measuring Implementation Success Many researchers were faced with the thorny question, what is ERP success? Over the last 20 years there has been much literature written on defining success within the fields of Information Systems (IS), Management Information Systems (MIS) and ERP. In the 1980’s successful ERP implementation was most commonly defined along two dimensions: Improved performance & user satisfaction (White, Anderson, Schroeder, & Tupy, 1982). Since the 1980’s the definition of success has evolved substantially and been a tricky subject, given that success can mean different things to different organizations and/or stakeholders. From previous ERP implementation literature, many reoccurring themes were found when relating to the definition of a successful implementation. To list a few: (1) user satisfaction; (2) intended business performance improvements; (3) on time; (4) on budget; (5) system acceptance and usage; (6) predetermined corporate goals. The most commonly cited framework in IS literature for assessing IS success has been DeLone and McLean’s (1992) research on IS success variables. The study by Delone et al. became a foundation for much research done in the field of ERP. DeLone et al. identified six main dimensions of IS’s success from which they were able to further develop an IS success model. The dimensions and respective definitions are as follows: • System quality: The desired characteristics of an IS itself. • Information quality: The desired characteristics of the product of an IS. • Use: The receipt consumption of the product of an IS. • User satisfaction: The receipt response to the use of the product of an
IS. • Individual impact: The effect of information on the behavior of a
receipt. • Organizational impact: The effect of information on organizational
performance. The resulting IS success model showing the relationship amongst the aforementioned dimensions (see Figure 13, (DeLone & McLean, 2003).
Figure 13 Model of IS Success
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Based on this initial model IS, some ERP researchers based their definitions of success on this framework (Nandhakumar, Rossi, & Talvinen, 2005; Xue, Liang, Boulton, & Snyder, 2005; Zhang et al., 2005a). However, this framework has been criticized for possibly being too broad. But even so, it can be applied to various situations and industries given that ‘success’ can be defined differently by different firms/stakeholders during various phases of the ERP life-cycle. Nonetheless, it is important to introduce DeLone and McLean’s model as it has been a starting point from which many IS projects have been judged as successes or failures; and ERP systems have been no exception. In order to define ERP implementation success, Delone and McLeans’s IS model may be more suitable when studying whether or not an ERP system was a success or not in the long run. In spite of this, prior to implementing an ERP system, a project scope was most likely outlined based on some or all of the IS success criteria. As such, a successful ERP implementation would require meeting a predefined scope outlining the desired system quality and information quality.
6.1 ERP Success literature It is important to note that ERP implementation success is not the same as ERP success. This distinction is important to keep in mind, as literature has revealed that many researchers definition of ‘success’ is a loosely used and a precise definition is sometimes left to the reader. A literature study revealed some more commonly used dimensions when attempting to categorize an implementation a success or failure. Some of these dimensions of success are as follows:
1. User satisfaction: (Al-Mashari et al., 2003); (Mandal & Gunasekaran, 2002); (White et al., 1982).
2. Intended business performance improvements: (Al-Mashari et al., 2003); (Hong & Kim, 2002); (Mandal et al., 2002); (Markus, Axline, Petrie, & Tanis, 2000a); (White et al., 1982) ; (Yusuf, Gunasekaran, & Abthorpe, 2004)
3. Oliver White’s ABCD Classification Scheme: (Yusuf et al., 2004) 4. On time: (Al-Mashari et al., 2003); (Hong et al., 2002); (Mabert et al.,
2003b);(Markus et al., 2000b) 5. Within budget: (Al-Mashari et al., 2003); (Hong et al., 2002); (Mabert
et al., 2003b); (Markus et al., 2000b) 6. System acceptance and usage: (Yusuf et al., 2004) 7. Predetermined corporate goals: (Al-Mashari et al., 2003); (Umble et
al., 2003); (Yusuf et al., 2004)
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6.2 Implementation Success Framework In order to analyze both the interview results and the case studies in literature, it must first be made clear what this study utilizes as a basis for defining a successful ERP implementation. An ERP system implemented on- time and on on-budget, similar to other ICT projects, have been deemed a success. From an implementation standpoint, these two dimensions are key indicators as to how the project progressed. Adding to these two criteria the original scope must also have been met to complete our definition of success. Keeping in mind this study only focuses on implementation, the following three criteria serve as a measure of ERP implementation success: (1) Project cost relative to budget; (2) Project completion relative to schedule; (3) Level of Scope Creep encountered. Hence the success framework used to measure success throughout this study is shown below (see Figure 14):
Figure 14 ERP Implementation Success Model
The degree of ‘scope creep’ encountered during the implementation process will serve as a measure for the completed and installed system functionality relative to original scope. A clear definition of project objectives and a clear plan will help the organization avoid the all-too-common ‘‘scope creep’’ which can strain the ERP budget, jeopardize project progress, and complicate the implementation. The project scope must be clearly defined at the outset of the project and should identify the modules selected for implementation as well as the affected business processes (Umble et al., 2003).
6.3 Conclusion This section was devoted entirely to defining a successful implementation because it is a crucial element whenever a study is being conducted on ERP’s. Without a clear definition of success the scope of the research project could be too wide or too narrow. Also, when relying on past literature studies one needs to be certain the study is applicable to your own research, as was done during the selection of CSFs for this particular research. If the literature source does not specify a clear definition of success it puts into question the applicability to ones own research. This literature study revealed many means of measuring