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
i
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:
[email protected] or
[email protected] 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).
2
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.
3
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
14
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
15
(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.
16
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.
17
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.
18
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
19
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.
20
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
21
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.
22
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.
23
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.
24
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,
25
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
26
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).
27
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.
28
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
29
• 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
30
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
31
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