Enterprise Architecture - The design of IT processes in companies

Transcription

1 BSc(B), 6 th semester Author: Vlad-Mihai Drăgan (study number: ) Bachelor thesis supervisor: Mads C. Brink Hansen Bachelor thesis Enterprise Architecture - The design of IT processes in companies Characters without blanks: 105,123 Aarhus University Business & Social Sciences Department of Economics & Business Fall 2015

2 Contents Executive summary Introduction The ERP system Problem statement Delimitation Methodology Factors influencing the use and implementation of ERP systems Implementation plan and strategy Implementation challenges People and processes Resistance to change Hardware Management of the transition Critical failure factors Poor consultant effectiveness Poor quality of BPR Poor project management effectiveness ERP software misfit Poor quality of testing The influence of ERP on managerial performance ERP system and the satisfaction measurement The relationship between ERP s satisfaction and managerial performance The research method Checking the validity of the EUCS model Variables and measurement... 16

3 The results The implementation costs of the ERP software Main costs of an ERP software The research The implementation approaches Data collection and research method Results Conclusion ERP system influence on the financial performance The organizational change ERP system and change management ERP system and Strategic Objective ERP system and Marketing Performance ERP system and Financial Performance ERP system and Organizational Efficiency ERP system and Integrated Reporting System ERP system and Production Performance ERP systems and HR performance The relationship between the ERP system and Financial Performance Study case TEMAD Company Short presentation of Temad The development of Temad along the time Temad and the ERP system Factors influencing the use and implementation of ERP systems The influence of ERP on managerial performance The implementation costs of the ERP software ERP system influence on the financial performance Conclusion How can selected factors influence the implementation and use of ERP? How does the ERP system influence the managerial performance? How does the implementation approach affect the implementation costs of the ERP system?... 44

4 7.4. How does the ERP system influence the financial performance? General conclusion Bibliography Appendix... 49

5 Executive summary Information technology has become a crucial part of our lives. Most of the companies are implementing new systems in order to be more competitive. The companies that are having a good financial situation are opting for ERP systems, which are standardizing the information of the company and the business processes, so the managers can take faster and better decisions. The aim of this study is to analyze how an ERP system is influencing different aspects of the company. The analysis focuses on four elements: the influence of different factor on the implementation and use of ERP, the influence of ERP system on the managerial performance, the influence of the ERP implementation approach on the costs and the ERP influence on the financial performance. 1. Introduction 1 Information systems and information technology have become a crucial part of the business sector. Whether we are referring to the marketing, financial, accounting or human resources departments, the information systems and technologies are present to facilitate the work of the managers and employees. Information technology is starting to play an important part in businesses. The reason why most of the businesses are using IT is because IT helps them improve their efficiency and effectiveness, which undoubtedly leads to a superior position in the marketplace. An information system is an organized combination of people, hardware, software, communications networks, data resources, and policies and procedures that stores, retrieve, transforms, and disseminates information in an organization. 2 Basically, an information system represents how people make use of physical devices, programs, computer systems and data in order to process information. Regarding the components of an Information System, there are two main components: the resources and the activities of the system. 1. The resources of the Information Systems (referred from this point forward as IS): People resources: this type of resource is one of the crucial ones when it comes about the efficiency of the information system. This resource includes the end users and the IS specialists. The end users are the 1 This section of the paper is based on the following source: Bjarne Rerup Schlichter. It in Business. 2 Source: Bjarne Rerup Schlichter. IT in Business. In: Foundations of information systems in business, pp. 38. Page 1

6 people who make use of the information provided by an information system, while the IS specialists are the people who create and monitor the information system, based on the demands of the end users. Hardware resources: When it comes to hardware resources, most people think about computer systems (personal computers, laptops, tablets, printer, scanner, etc.) or computer peripherals (keyboard, mouse, etc.), but also the devices on which we store data (CDs, USB sticks) are part of the hardware resources. Software resources: The software resources encompass the programs, which are the operating instructions, but also the procedures, which are the information processing instructions. Data resources: The data resources represent the raw part of the information system. Due to IS, nowadays the data can be stored and also processed, so the managers can use it easier. Network resources: The internet, extranets and intranets are today part of our life and crucial for any business. Network resources include two parts: communications media and network infrastructure. 2. The system activities of the Information Systems: Input of Data Resources: This activity consists of recording or editing the data that was collected. The end users are collecting the data and afterwards they enter the data into a system. Processing of data and information: The main aim of the Information Systems is to convert the data into information, so the end-users can make use of it. Usually, the Information System is organizing and analyzing the data. Output of Information Products: As stated above, the role of the Information Systems is to provide information to the users. The output process does exactly this. It provides the information to the users via different kind of forms (audio, video, graphic). Storage of Data Resources: This activity refers to the activity in which the Information System retains the information in an ordered manner. Control System Performance: This process is dealing with controlling the system parameters, by checking the feedback from the rest of the processes presented above (input, processing, output, storage) As I stated above, IT and IS play a vital role in the development of any business, but they can be reduced to three fundamental ones, which give support to: strategies for competitive advantage, business decision making and business processes and Page 2

7 operations. In order to have a flexible and fluent flow of data, organizations are thriving to integrate the three dimensions. In the history of IS, there are six distinct periods. Between 1950s and 1960s, information systems were dealing mostly with the processing of data (record-keeping, transaction processing, accounting applications). MIS (management information systems) was also developed during this period. MIS had the role of offering managers and employees different reports based on the information gathered, so they could take decisions based on these reports. Between 1960s and 1970s, the information systems were further advanced to provide a better decision platform for the managers, so DSS (decision support systems) was developed. This new type of system was meant to provide instant information for the managers, when they had to take decisions, but in the same time the system could be adapted to face the specific problems of the managers. In the 1980s, information systems had known a pronounced diversification period. In the beginning, the development of different hardware components of the computers gave birth to end-user computing (EUC). EUC is basically a system that allows people with no programing skills to create different applications. This development came to help saving time, as end users were now able to do their job without having to wait for support from the IT department of the companies. Also, in this period, based on the fact that most of the top managers were not making use of the reports provided from the information systems, EIS (executive information systems) have been developed. Furthermore, companies started to make use of AI (artificial intelligence). The AI is used nowadays to undertake a part of the tasks of the users, providing managers more time for taking decisions. Other two important types of information systems that appeared in this period are the ES (expert systems) and SIS (strategic information systems). From these two, SIS played a more important role, as it integrated IT in the business processes. In the 1990s, due to the expansion of the Internet, businesses started to take in consideration doing e-business and e-commerce. Also, in the late 1990s, ERP (enterprise resource planning) systems made their first time appearance. The ERP have become a crucial information system for the companies, as it can integrate virtually all the processes of a company (sales, marketing, inventory control, customer relationship, financial management, etc.) virtually. The ERP system offers a common interface for the users of different sectors and ensures a more fluent data flow. BI (business intelligence) was also developed now. Page 3

8 The information systems kept their main roles along time, but due to different technological development, the systems have become more integrated and managers are now able to receive faster the reports that they need The ERP system In the followings, the focus of this paper shifts towards the ERP systems. The ERP is an information system, which is the technological backbone of e-business, an enterprise wide transaction framework with links into sales order processing, inventory management and control, production and distribution planning, and finance 3. Basically, the ERP system is integrating in real-time the processes of a company and keeps the information in a common database, which can be accessed by the end-users of the different departments. The ERP systems are bringing many benefits to companies. First of all, it provides a higher quality and efficiency for the distribution, production and customer service. Second of all, it helps with decreasing the costs, mostly in the IT department. Since ERP is an integrated system, the costs with hardware, software and IT specialists are decreasing. Also, ERP are providing managers with vital information, information which is used as a support for their decisions. And finally, it breaks down the barriers between different departments, making the company more agile and connected. When it comes to the costs of implementing an ERP system in a company, reengineering represents the most expensive part (43% of the costs). Next, there are the software, training and change of management and data conversions (15%) and lastly the hardware costs (12%). Of course, besides the costs of implementation, companies are also facing additional costs. For example, if the ERP system stops working properly, the company can lose data about their products, lose shipments, etc. All of these costs can have a substantial impact on the revenues. Even though an ERP system is mainly seen as an upgrade in quality and efficiency, there are cases when companies don t succeed to implement the system. The main reason behind this is that the implementation process is usually underestimated by the IT specialists and the companies. Also, there are companies who are implementing the ERP system too fast, which leads to an inefficient use of it and some of the companies are reeling excessively on the consulting firms Problem statement This paper aims to focus on: How an ERP system is affecting a company. The paper will focus on four aspects: How can selected factors influence the implementation and use of ERP? 3 Source: Bjarne Rerup Schlichter. IT in Business. In: Enterprise business systems, pp Page 4

9 How does the ERP system influence the managerial performance? How does the implementation approach effects the implementation costs of the ERP system? How does the ERP system influence the financial performance? The problem statement and the four research questions will be answered based on the practical case of Temad Company. The theoretical part will only be used as a tool of analyzing the research questions, not for answering these questions Delimitation When it comes to how an ERP can affect a company, a lot of factors must be taken in consideration. For starters, an analysis of all the departments of the company that have a connection with the ERP system is in order. This paper aims to deliver a focused analysis, so it will take in consideration only a handful of factors, considered to be the most important. Also, when it comes to the managerial performance, only some of the departments of a company will be analyzed, as this paper will have also a practical part, in which the theoretical part will be used to draw conclusions. Regarding the validity of data, all the sources used are from the academic area; therefore they are expected to be valid. For the practical part of the paper, the data was collected by sending questionnaires to the company and the respondents were assured that there will be confidentiality and the results will be used only for this research. One important thing to mention is that some of the data that was collected on Temad Company comes from internal sources, which are not for the public. Even though, mostly their website was used to gather general information, there are parts in the paper which cannot be referenced. The information that cannot be referenced is going to be used only to give a general presentation of the company, not for drawing any conclusions relevant for this paper Methodology The paper consists of three main parts, based on an inductive analysis. In the first part, we undertake a theoretical analysis based on empirical articles. We analyze the four main research questions (factors influencing the implementation of ERP, ERP influence on managerial performance, the costs of ERP system and ERP influence on financial performance) from a theoretical perspective. In the second, the focus will be on a case based on the company Temad. In this section, the theoretical analysis will be applied on the company, based on a series of interviews with the employees. The third part will be the conclusion. In this section, based on the four research questions, the main findings regarding the problem statement will be presented. Page 5

10 2. Factors influencing the use and implementation of ERP systems 4 Information technologies and systems are playing an important role in the lives of the companies, both manufacturing and service providers. Due to the implementation of ERP systems in companies, new possibilities have arisen. Nowadays, the customers are looking for fast responses from the companies, so the ERP systems managed to integrate the processes of the companies making them more dynamic. Integration makes the firms avoid redundant operations like introducing the same set of data multiple times in different databases. All of this result in a faster response for the customers demands Implementation plan and strategy In order for a company to successfully implement an ERP system, it needs a series of advantages, like a good management system and an implementation plan. The implementation plan is very important and should be made in a way that would suit the abilities of the company to make internal changes. Besides the implementation plan, the company should also develop an implementation strategy. There are two main strategies that a company can pursue: a step by step strategy in which the changes are acquired by the departments one by one, or the Big Bang strategy, which is faster. In support to the above affirmation, a study conducted by Cooke and Peterson (1998), showed that 90% of the companies that did not had a plan or a strategy have faced problems. In order for the ERP system to be implemented successfully, the company should be able to meet three basic requirements: to have a very clear business objective, to understand the changes that are going to happen inside the company once the system is implemented and to understand the risks of the implementation. One way to develop the ERP system is called the iterative evolutionary method, which was defined by Bailey (1998). This method consists of improving the communication between the system developers and the customers, which will result in an evolvement of the ERP system. The iterative evolutionary method is important for the implementation phase because: It helps the IT developers to see how the system will work, this being impossible to assess from the design stage. 4 This section of the paper is based on the following sources: Appuswamy. Implementation issues in ERP. Department of Engineering and Technology, Deakin Univeristy, Australia Mandal, Gunasekaran. Issues in implementing ERP: A case study. European Journal of Operational Research 146 (2003) Wong, Chau, Scarbrough, Davison. Critical failure factors in ERP implementation Page 6

11 With the new system, some changes might arise in the way that people used to do things. There are high chances for the implementation project to fail due to lack of communication. In the research carried by Bailey, there is made a connection between the planning stage and the changes that are going to occur. In his study, he discussed about three ways of planning: linear, exploratory and personal. Linear planning consists of identifying the necessary assignments, while exploratory planning consists of a repetitive action to make the product better. The last type of planning, the personal one, consists in specifying a series of tasks and time frames for the management. Another method for developing the ERP system is called concurrent engineering, and was developed by Cleland (1991), Skelton & Thamhain (1993). This method necessitates the simultaneous work of different departments, so the ERP system can be faster delivered. Other two researchers, Parsaei & Sullivan (1993), got to the conclusion that there can be two ways of implementing the concurrent engineering method. The first way is called the team-based approach. This approach is enhancing the development of the ERP, but also helps the necessary technological transfer. The other way is called computer-based approach, and comes as a justification of the chosen design. Based on Al-Mashari & Zairi (2000), in order for the company to successfully implement the ERP system, it needs to have a holistic approach. The managers need to be careful and deal with strategic and operational issues that might arise during the implementation. Besides this, the company needs to excel in four categories: Change strategy development and deployment Enterprise-wide project management BPR integration with IT Technical aspects of ERP installation 2.2. Implementation challenges Even though the implementation of an ERP system is advantageously, there are also some challenges. One of the most important challenges is the human factor. When a company decides to implement an ERP system, it needs to reengineer and change some of the processes that they have. Usually, humans are reluctant to change, so this represents an obstacle that the companies must overcome. Some of the characteristics of the implementation are the long implementation time, the high costs and changing the usual job of the employees. The standard software is usually complying on the needs of the business, but in the case of the ERP system, the Page 7

12 business needs to be changed so it becomes more efficient, based on the standards of the ERP system. Other important problems that need to be taken in consideration are the hardware, networking and data migration. In order to retain the data, the ERP systems need a series of servers, which can cause several problems. Also, when the ERP system is implemented, there need to be a data transfer from the old servers to the new servers, which can lead to high costs. One way to avoid this is by planning thoroughly this process beforehand and also training the end users to cope with the new format. Based on different researches that have been done on various companies, the most frequent ERP issues are: People, Business Process Reengineering, Data migration, Hardware and Network typology and configuration issues, Enormity of the effect of golive on production, integration of the already existing legacy systems to ERP and extra costs when it comes about implementation. Some of these problems caused the firms to discard the idea of implementing an ERP system. The factors considered the most important will be now presented in a detailed manner People and processes A successful implementation of the ERP system will most likely result in cost savings, which can be used to raise the wage of the employees. As mentioned before, an ERP system will cut the duplicated processes and improve the accuracy of data transfer. Even though there are some good parts for the employees, these might still be frightened that they are going to lose their job. Having their job position threaten, people might lose their morale and not be that efficient. One way to overcome this is by assuring the employees that there are not going to be massive layoffs. Also, some companies are involving the people in the process of implementation by informing them about each step of the implementation. When it comes about the process of reengineering, usually people are also involved in the process. Top management is involving them by letting them to make the necessary changes. Some of the companies are also dividing the implementation process in four parts: preparation, demonstration, verification and acceptance. Kuruppuarachchi et al. (2002) wrote about the factors, but also the implementation methods that have an effect on the change of management in a company. These factors can be depicted in Fig. 1. Fig. 1 also provides an important aspect of the factors. The factors are influencing the change process in all three stages (pre-implementation, implementation and post-implementation strategy phases). Furthermore, the factors that were pointed out during this paper (training, supporting team, project organization structure, organizational requirements and project information system) are taken in consideration by Kuruppuarachchi. Page 8

13 Fig. 1 Change management strategic considerations (Source: Kuruppuarachchi et al., 2002) Other authors (Meyers et al, 1991) researched the factors that can make the change to a new technology more facile. The factors are as follow: Human resource: if the company has skilled workforce, than is going to be easier for it to control the change. Structure: this factor deals with the structure of the company. If the company has a flexible structure and the departments are well interrelated, than the transition to a new technology is easier. Decision processes: it is important for the company to involve the workforce in the change process from an early stage and also the management to be committed to this process. Technology fit: this factor coincides with the first one (human resource). It analyzes the extent to which the people from the company are used with the use of technology Resistance to change The middle managers are the most reluctant to the implementation process. The main reason why middle managers are the most affected by the implementation is because the top managers are not involving them in the process. While the top managers are involved in the implementation process, the middle managers need to get extra training for using the system and they might lose focus of their main tasks. Also, the implementation of the ERP system can affect the middle management from an authoritative perspective, as they used the legacy system. Moreover, people might be concerned about how successful the implementation will be. A method for overcoming this obstacle is to involve the middle management in the process, by giving them notes on how their jobs will change after the implementation process. Page 9

14 Hardware The ERP systems come with hardware components. For example, the company will need a GUI (Graphic User Interface). Also, the end users will need to be able to access data from all the platforms. In order to enable the end users to access the data, there will be need of interoperability features, which will free implementers and users from managing the complexity of connections, handling communications, reporting error, translating data and disconnecting from remote databases 5. Most of the times, the companies make use of ODBC (Open Database Connectivity) to achieve interoperability. Besides this, the companies need to change a series of machines, because the ERP systems need a different operating system than the normal legacy systems. For example, the company will need to buy special servers, which need to be custom made, as each company has its own needs. Also, the companies will need special communication protocols (TCP/IP). Even though most of the companies have their own IT department, they still use external consultancy companies to take care of the hardware components they need for implementing the ERP system. The main reason why the companies are doing this is because the ERP system needs special hardware components. Usually, most of the companies decide to employ an external consultancy company to take care of the hardware components, as this task cannot be carried by their own IT department Management of the transition Once the system is implemented, a transition of the management from the old system to the new system must occur. This transition is considered one of the hardest obstacles of the company, because the ERP system is meant to integrate all the processes of the company, so at some point the company will have to stop their routine procedures. This stop need to be carefully planned, so all the procedures (testing, acceptance, production support readiness, data migration, security of users) to take place during one stop, not on a multitude of stops. During the testing and acceptance procedure, the IT department of the company or the consultancy company is testing if the ERP system is behaving as it should and as it was designed too. Of course, the coding and interface parts of the ERP system will be tested in the pre-implementation phase, so the final testing is done only to make the transition from the development server to the production system. In the next step, there are three 5 Source: Appuswamy. Implementation issues in ERP. Department of Engineering and Technology, Deakin Univeristy, Australia Page 10

15 main processes: extracting data from the old system, cleaning the data and implementing the data in the ERP system Critical failure factors The factors that are going to be discussed, have been gathered after a research that have been done on four companies (a multi-national electronic component manufacturing company, a furniture manufacturing company, an electronic component manufacturing company and a multimedia speaker manufacturing company). The four companies are very diverse. The first company has an annual turnover of 400 million dollars, while the last one has only 10 million dollars. The implementation budget varies (from 1.3 million to 0.2 million) and the time allocated to implement (12 to 4 months). These aspects were outlined only for the reader to know that the four companies are different and the results are more reliable, but there will be no connection made between the size, budget for implementation or time for implementation and the failure rate Poor consultant effectiveness One of the companies had to implement their ERP system using consultants were from India, while the company is established in Europe. The company has encountered various problems with the consultants. The management has complained that the consultants that were send, were lacking experience. First of all, there was a communication barrier between the consultants and the management. Second of all, the consultants were unable to adapt the ERP system to the business processes, so they just implemented the system and thought that is going to work, even though the companies were having different processes. Third of all, the consultants didn t make any plans for implementing the system. These issues lead to a delay of 6 months for the implementation, double than the planned period. The consultants that took care of the furniture company were also poor prepared. They did not succeed to do a proper training with the employees of the company and also they failed to do a qualitative BPR (Business Process Reengineering). Also, this happened to the third company. There, the consultants only provided services for two days, and didn t deliver any BPR advices or planning advices. The last company encountered all the problems that were mentioned above, but in this case the consultants were lacking experience and implemented the system based on a standard methodology Poor quality of BPR In the case of the first two companies, the employees stated that they did not know exactly how to run the BPR procedures and also the consultants were unable to give support in this matter. The main negative outcome of the poor quality of BPR is that the Page 11

16 ERP system has been configured incorrectly. This means that the system was not adapted on the business processes that the companies were having. Also, another problem was that the consultants that were employed to deal with BPR, did not make a map of the software (the architecture part), so there were some differences between the software and the business processes. All in all, the ERP software was unable to give a plus for the companies, because both the users and business processes were not ready to support the ERP software. For the third company, as they had only two days of consultancy, the whole implementation process took them 18 months. This shows how important the planning and the BPR are for a company. The last company had a planning, but it was not done properly. For example, the employees did not know how to adapt the business processes to the ERP software, as the process diagram flow was not done Poor project management effectiveness All four companies have dealt with a common problem. Their project managers were unable to do a proper planning for the ERP implementation, as they were inexperienced in this domain. The project managers stated that the main drawbacks were the lack of a plan and management of the implementation process. Also, there were some communication barriers between the top management and the rest of the departments, and most of the project managers said that this project was very demanding, as they had to take care of three aspects (the system itself, the people and the reengineering of the processes). For the last three companies, there was also a problem with the bad time schedule and the insufficient human resources, which made the employees unable to get along with the new system. Furthermore, the project managers were unable to do their work properly, to keep track of the consultants work and to give feedback to the top management about the issues that they encountered during the implementation ERP software misfit Besides the issues that occur during implementation, there is one problem that needs to be overcome before this process. That is choosing the right ERP software for your company. In case the system is not right for the company processes, than the ERP will not be used at its full potential. Also, the company will need to spend extra money for improving the ERP software and adapting it on their business processes. Page 12

17 Poor quality of testing Regarding the testing of the ERP system, the four companies have done this step in a rush and also they didn t have the necessary experience to conduct a proper testing. The main motive why the project managers have done the testing is to see if the ERP system was ready to go live. The testing consisted of assessing the IT infrastructure, the configuration of the ERP system and also the users. The main result of the testing was that the system was having more problems than anticipated and they had to do extra work for solving the problems. 3. The influence of ERP on managerial performance 6 As mentioned before, the main aim of the ERP system is to integrate the business processes of a company through a common database. This can improve the business processes and help the managers to take better decisions and analyze the performance of the company. In this part of the paper, it will be analyzed how the ERP system can influence the managerial performance. Based on the fact that all the information is standardized and integrated, it is also expected that the information level of quality is higher. Two aspects will be analyzed in detail: the level of satisfaction of the manager towards the ERP system and how the ERP system can influence the managerial performance. In order to do this, the EUCS model (end user s computing satisfaction) will be used. The EUCS model has been used before by the researchers in order to find out measurement models, but it has not been used to see how the users influence the company. In this section, the model will be used for the followings: There will be analyzed five factors that have an influence on the satisfaction level (content, accuracy, format, ease of use and timelines) The influence of the manager s satisfaction towards the managerial performance in taking decision The two steps that will be used in this section can be depicted in fig This section of the paper is based on the following source: Weli (2014). Manager satisfaction in using the enterprise resource planning (ERP) system and the managerial performance. Australasian Journal of Information Systems. Page 13

18 Fig.2 Research Model (Source: Weli Manager Satisfaction in using the Enterprise Resource Planning (ERP) system and the managerial performance. Australasian Journal of Information systems) 3.1. ERP system and the satisfaction measurement Due to a need to measure the end user s satisfaction level regarding the information systems, the researchers developed a model that can show this. The EUCS model is one of the most used models and was developed in 1988, by two researchers (Doll and Torkzadeh). In order for them to develop this model, they analyzed which factors are the most suitable to describe the satisfaction of the end users, and they reached to the conclusion that content, accuracy, format, ease of use and timelines are the best factors to describe the user satisfaction. Of course, besides this model there are also other models which are used. One of them is called successful information system. This model is making the connection between the satisfaction level of the end users and how successful the implemented information system will be. For example, if the company can enhance the level of satisfaction of their employees regarding the new system, than the system will be more and more used at its full potential, which of course will have a positive impact on the performance of the company. Before continuing to discuss about the satisfaction measurement, it is important to define the user s satisfaction. User satisfaction is the level of user confidence over an information system use that is available to meet their needs for information 7. The users perceive the information system based on their own experience and compare it with their expectations. Even though the EUCS model, was offering very good results, the researchers continued to investigate this issue. 7 Source: Weli (2014). Manager satisfaction in using the enterprise resource planning (ERP) system and the managerial performance. Australasian Journal of Information Systems. Page 14

19 Other researchers have made further investigations regarding the EUCS model. Deng et al (2008), wanted to see if the EUCS model can be applied at a global level. Five regions were chosen (USA, Western Europe, Saudi Arabia, Taiwan and India) and checked to see how the people from these countries react to an ERP system. The results were identical in all five regions, so the researchers got to the conclusion that the EUCS model can be used globally. Furthermore, Mitakos et al (2010) studied the relation between the successful of ERP implementation and different demographics of the users (department, age, gender, experience with computer, education level, position in the company). The researchers did not reach any relevant conclusion, so there is no connection between these demographic factors and the system. Regarding all the research that has been done about the EUCS model, it can be said that it is a valid and reliable model that can be used to analyze the influence of the ERP system on the managerial satisfaction. Furthermore, it is known that the main purpose of the ERP system is to gather all the information in a common database, so it makes the information better. So, it is easier to use the EUCS model in this case, because the factors (content, accuracy, format, ease of use, timelines) can be used to describe the quality of the information and see if the information is better The relationship between ERP s satisfaction and managerial performance The users satisfaction can be measured by taking in consideration the output of the ERP software (the integrated information), and analyzing the content, accuracy, format, ease of use and timelines of it. Also, it is important to take in consideration that the satisfaction of the user is also given by how well the system is accomplishing his needs (increasing the productivity and performance of his work and help him take better decisions). Kim (1988) is stating that in order for a system to be efficient, the user needs to be pleased with the information that the system is giving, and the information needs to give the user the possibility to take a reliable and quick decision. Furthermore, Sajady et al (2008) stated that a system is effective if the information he provides is useful for making reports, budgets and controlling the organization. The research carried by Sajady also showed that after an ERP system is implemented, the managers can take better decisions and there is a better internal and financial control. In the followings, not only that there will be analyzed the relationship between the output delivered by the ERP system and the manager s satisfaction, but also the relationship between the output and the manager s performance. This relationship will also be measured with the EUCS model. This is achievable, because the ERP system not only does it provide integrated information, but also it provides better information. Therefore, Page 15

20 you can say that there is a direct link between the manager s satisfaction and manager s performance The research method The data for making this research was gathered from different companies from Indonesia (Jakarta) that have ERP systems. The data was collected during four months in 2011, so the data is more or less recent. In order for the researchers to gather the data, they have send questionnaires to the companies, or they conducted themselves interviews Checking the validity of the EUCS model As stated before, the EUCS model was checked to see if it is valid in many other studies, even at a global level. Even though this was the case, the researchers wanted to check it again and see if the model is valid in Indonesia. For checking it validity, the authors of the article have asked different experts for their opinion. The whole idea of this test was to see if the people from those Indonesian companies can understand what is asked from them in the questionnaires, so there will be no misunderstandings. Basically, the researchers have sent the types of questionnaires to three experts that checked them and send them feedback. Based on the feedback received, there needed to be done a few minor changes to the EUCS model. In the next section, it will be presented the actual research that has been carried out using the SPSS program. In order for this paper to keep its focus on the IT in Business aspects, there will not be given too many details about the statistics calculus that have been carried out, only some of the aspects that will give the paper meaning Variables and measurement As mentioned before, as variables for this study, the researchers have used the variables of the EUCS model (content, accuracy, format, ease of use, timelines). For each of these variables, there have been checked different factors, factors that appear in the EUCS model realized by Doll & Torkzadeh (1988). These factors can be seen in table 1. For measuring these variables and factors, the authors have used a seven Likert scale (scale from not very agreed to very agreed). Code Content C1 C2 C3 C4 Accuracy Explanation This variables checks how can the output of the ERP system meet their needs. This variable consists of four factors: The ERP system provides the right information as needed The ERP system content fulfills the needs The ERP system presents the reports exactly as requested The ERP system provides the needed information This variable shows how accurate the information provided by ERP is and consists of two factors: Page 16

21 A1 A2 Format F1 F2 Ease of use E1 E2 Timelines T1 T2 The ERP system used is accurate The accuracy of the ERP output system as presented is satisfactory This variable assesses the format of the output, and consists of two factors: The ERP output system is shown in an useful format The presented information by the ERP system is very clear This variable is measuring how easy if for the end users to use the ERP system and consists also of two factors: The ERP system is user friendly The ERP system is very easy to use This variable is measuring the time that the ERP system needs to offer the information. It uses two factors: The ERP system provides the best information The needed information can be timely used Table 1: EUCS model. Source: Doll & Torkzadeh (1988) The results The people that were send questionnaires to, were mostly from the IT and accounting department and were working in this position for about three years. The ERP system that they were using was SAP. The whole study that was carried out had two main aims. First aim was to see if the EUCS model can be used to measure the manager s satisfaction, hence to see if the five factors (content, accuracy, format, ease of use, timelines) can describe the manager s satisfaction level. The second aim was to see if the manager s satisfaction level can influence the manager s performance level when he needs to take decisions. For the study there were interviewed 71 people and based on the results, the researchers concluded that the five factors are very relevant for End User Computing Satisfaction (EUCS). Basically, the researchers showed that the model proposed by Doll and Torkzadeh can be used to analyze the manager s satisfaction. The next step was to demonstrate that the manager s satisfaction has an impact also on their performance in taking decisions. For analyzing this, the researchers have used a series of questions that they addressed to the person that got interviewed (quality and frequency of the reports, how effective are the monitoring activities, how effective is the coordination, decision making process, how easy is to get information from the system, how easy is to manage the information, increase in information flow, the relationship between the departments). The authors of the article managed to conclude that the manager s satisfaction has an impact on the manager s performance and can be stated that the five factors that form the EUCS model have an impact on the manager s performance. Page 17

22 Of course, it is very important to take in consideration that for this study there were only 71 respondents. Besides that, the researchers could not use random sampling, because there was not enough data to show which companies are using ERP. The main reason why they could not interview more employees is because most of the companies are reluctant in offering information to the public. 4. The implementation costs of the ERP software Main costs of an ERP software There are several reasons why a company can choose to implement an ERP software. For example, the old system might not work anymore with the new applications, or the competition might implement a new ERP software that gives them an advantage. No matter what the reason might be, the question that each company will ask is about the price of the ERP system. One thing that is hard about the costs of the ERP system is that you don t pay only for the software or the implementation. Some extra costs might appear during the implementation phase, costs that are hard to predict. Therefore, most of the companies are requesting the services of a consultant or a consultancy firm, which can predict the total costs. Of course, even for the consultants is hard to predict a correct cost, as there are many unpredictable variables that influence the cost. When taking in consideration the idea of implementing an ERP software, most of the companies are taking in consideration only the cost of the license, but there are four main costs that need to be taken in consideration: Software license costs Maintenance costs Hardware costs Implementation costs The first three costs are very easy to predict and there are low chances for some extra costs to appear. But, the implementation costs are very hard to predict. The reason why this cost is hard to predict, is because it has many components, like: 8 This section of the paper is based on the following sources: ERP software blog. ERP Panel papers: Beyond software: How to budget the cost of ERP implementation services Bjorn, Frantisek. How factors affecting selection of implementation approach influence ERP system implementation costs. Copenhagen Business School. Page 18

23 Requirement analysis: this analysis is done for analyzing the actual needs of the company Installation: in this process, the software is installed on the company s servers Configuration: in this process, the software is configured for your own business and users Integration: integrating the software with the others applications Data migration: the transferring process of data from the old system to the new system Customization: changing the software to fit the business goals Reporting: developing report forms that the company needs Testing: in this step, the system is tested to see if it can be used Training: making sure that end users know how to use the system Documentation: showing how the system is configured Project management: Making sure that the project is running smoothly These are the main components of the implementation cost, and it can be seen why is hard to predict the actual cost. In order for a company to predict a budget for implementing an ERP system, they need to take in consideration the price of the software and afterwards double it (e.g. if the system costs 1000$, than the budget should be 2000$). There is a 1:1 ratio between the software price and the implementation cost, but of course this ratio can vary based on many things, like the number of users, number of modules implemented, etc The research In this section, I will make use of an article to present which are the factors of the implementation process, that are affecting the implementation costs of an ERP software in the European context. In a research carried out by Standish Group in 1998, there were studied 7500 IT projects and they found out that 45% of these projects had exceeded their budget or their time schedule (Cunningham, 1999). What is more important, are the figures that show the budget and time exceed. The small companies have exceeded their budget on average with 214%, while the big companies with 178%. This means that the companies have exceeded on average their budget with almost 200%. Regarding the time, the small companies needed 2.39 more time and the big companies 2.30 more time. The reason why it is important for a company to know the cost of the implementation, is because this cost is part of the TCO (total cost of ownership), so the company needs to know with how much they are going to exceed their planned costs (budget). Page 19

24 In the followings, will be presented three parts: the implementation approaches, the data collection, the analysis of it and the results of the research The implementation approaches Implementation is the process of integrating an ERP system into a company. This complex process can be done following different approaches. The implementation approach is defined as a systematically structured approach to effectively integrate a software based service or component into the workflow of an organizational structure or an individual end-user. 9 One of the criteria that can be used to differentiate between different implementation approaches is by noticing the changes that take place in the company and when they take place. Based on this criteria, Robey et al. (2002), distinguishes between piecemeal and concerted implementation. The main difference between these two approaches is that during a piecemeal implementation, the system is implemented and afterwards the changes are made, while during a concerted implementation, the implementation of the system and the changes take place in the same time. There are different factors that are influencing the decision of the companies between these two methods. The company might choose one of these two based on their IT strategy, or based on their BPR (business process re-engineering). In one of the researches carried out by McGillicuddy (2007), it is stated that the time of the implementation depends on the size of the company. A small company can implement faster an ERP system, than a big company. This is easy to understand, because a big company has maybe more processes and definitely it has more data flow. Besides the logic behind the statement, also there is a research that has been done by the Aberdeen Group. In the report it is showed that 86% of the small companies managed to implement the ERP system in the first year, 64% of the midsized companies managed to do the same thing and only 47% of the big companies managed to implement the ERP in the first year. It can also be argued that the small and big companies have a different approach. Small companies are willingly to follow a quick phase implementation, while the big companies prefer a long phase implementation approach. The implementation can be divided in three groups, based on time: slow phase, pilot project and big bang. The slow phase and the big bang implementation methods also appear in different researches (Maber et al, 2003 and Markus et al, 2000). The names of the two implementation approaches are very eloquent: the big bang approach refers to the approach in which the company starts using the ERP software simultaneous, while the phase implementation approach takes a few stages (phases) to implement the 9 Source: Page 20