Edward W. N. Bernroider, Michel J. Leseure. Arbeitspapiere zum Tätigkeitsfeld Informationsverarbeitung und Informationswirtschaft. Nr./No.

Transcription

1 - Enterprise resource planning (ERP) diffusion and characteristics according to the system s lifecycle: A comparative view of small-to-medium sized and large enterprises Edward W. N. Bernroider, Michel J. Leseure Arbeitspapiere zum Tätigkeitsfeld Informationsverarbeitung und Informationswirtschaft Working Papers on Information Processing and Information Management Nr./No. 01/2005 Herausgeber / Editor: Institut für Informationsverabeitung und Informationswirtschaft Wirtschaftsuniversität Wien Augasse Wien Institute of Information Processing and Information Management Vienna University of Economics and Business Administration Augasse Vienna

2 Enterprise resource planning (ERP) diffusion and characteristics according to the system s lifecycle: A comparative view of small-to-medium sized and large enterprises Edward W.N. Bernroider Department of Information Business Vienna University of Economics and Business Administration, Augasse 2-6, A-1090 Vienna, Austria Tel: Ext. 5231, Fax: , Edward.Bernroider@wu-wien.ac.at Michel J. Leseure Aston Business School Birmingham, B4 7ET,United Kingdom Tel: (44) , m.leseure@aston.ac.uk Abstract This report represents the next step of Enterprise Resource Planning (ERP) related research at the Department of Information Business at the Vienna University of Economics and Business Adminstration following previous work on the selection process. Based on 209 datasets originating from a primary, national and industry independent survey, it provides a descriptive oriented overview of main characteristics of ERP in all stages of the system s lifecycle, emphasising differences between small-to-medium sized and large enterprises (SMEs and LEs). The given research topics in particular comprise software diffusion, resources allocated, strategic project guidance, investment drivers, considered and chosen solutions, team structures, selection criteria, information gathering, methodical support, implementation approaches, acompanying business strategies, implementation problems, perceived utilisation of ERP benefits, firm level ERP impact, and the role of ERP systems as technology enabler. Future work based on the gathered data will document analytical projects undertaken in particular focusing on ERP success, enterprise integration, organisational fit of ERP, and BPR/BPI related questions. Keywords: ERP, IS evaluation, IS implementation, Empirical Survey, SME

3 Contents Introduction 3 Literature Review 3 Relevance of the Undertaken Research 6 Research Objectives 7 Methodology 9 Empirical results 11 Sample demographics 11 General information 12 Adoption Decision 15 Acquisition 16 Implementation 19 Use and Maintenance 22 Evolution 26 Summary and ongoing research 27 References 28 2

4 INTRODUCTION An Enterprise Resource Planning (ERP) system is a software infrastructure embedded with "best practices", respectively best ways to do business based on common business practices or academic theory. The aim is to improve the co-operation and interaction between all the organisations' departments such as the products planning, manufacturing, purchasing, marketing and customers service department. ERP is a fine expression of the inseparability of IT and business. As an enabling key technology as well as an effective managerial tool, ERP systems allow companies to integrate at all levels and utilise important ERP applications such as supply-chain management, financials and accounting applications, human resource management and customer relationship management [11]. They represent large, complex, computerised and integrated systems, which can strongly influence long-term business success. This study represents the next step of ERP related research at the Department of Information Business at the Vienna University of Economics and Business Adminstration following previous work on the ERP decision making process [6, 7]. It provides empirical information on various stages of the ERP systems lifecycle and provides more accurate details in particular on the different situations in in small to medium sized enterprises (SMEs) compared to large enterprises (LEs). LITERATURE REVIEW The literature overview pertains to the stages in the ERP system lifecycle. According to [26], the lifecycle covers six different stages that an ERP system passes during its life within an organisation (see Fig. 1). Fig. 1. An ERP Lifecycle model [26] Concerning the stage of adoption decision a need for further research into the planning phase of the adoption process is expressed by [53]. They also outline some of the principles that should form the basis of empirical research in this area and provided a qualitative analysis of ERP adoption within universities. Other researches describe the 3

5 significance of ERP systems with case-based approaches [33]. The question whether data quality is a reason to acquire an ERP system and other aspects relating to data quality are investigated in [76]. Based on structured interviews with 10 Canadian government organisations [44] analyse the ERP adoption as an organisational innovation process and apply an "ERP System Experience" model, which was originally proposed by [67] and then adapted by [45] and reflects an organisation's experience with ERP systems from adoption to success. Therefore [44] also give interesting insights into other stages of the lifecycle model. But due to the limited number of analysed units, the results are not generisable. Previously published material in the acquisition area focused on an ERP methodological acquisition approach [65, 66], frameworks for the selection process [9, 68], purchasing criteria [12], game-playing behaviour [51] and case studies [71, 72]. A review of the work published in the main information systems journals and conferences showed that research conducted in the area of ERP systems has concentrated on issues related to the implementation phase of the ERP lifecycle [25]. Issues attributed to the implementation stage can be classified in implementation approaches [32, 61], implementation success [10, 23, 34], case studies [29, 47, 70], empirical surveys [15] and other issues such as the role of consultants [75], information technology architecture options [17] and change management strategies during implementation [1, 2]. The attention of scholars in the IS area is much higher in the post implementation stages compared to the stages prior to implementation. Contributing to the use and maintenance stage benefits, risks, limitations and factors that affect ERP usage and organisational performance have been analysed [5, 55, 56, 64]. Scientists have analysed technological aspects such as architectural issues, maintenance tasks, databases performance, security and fraud prevention [36, 50]. During the evolution phase ERP applications can act as a technology enabler for ERP extensions or applications and systems such as SCM [11, 41]. Not all publications on ERP can be directly related to a specific ERP lifecycle phase. They can consider aspects attributable to the lifecycle as a whole. For example, the application of decision models during the life of ERP projects was analysed by [63]. [52] focused on knowledge management across the whole lifecycle of an ERP solution. Several researchers point to the linkages between ERP and BPR, where the former is 4

6 considered a driving technology of BPR [3, 35, 42]. An important research issue which can be related to any stage of the lifecycle model are proposals on how to analyse the value of ERP applications [46]. Although a considerable amount of articles contribute towards analysing the value of information systems, packaged software solutions or commercial off the shelf (COTS) products [48, 73] in general, only a few have focused on the special case of ERP systems. Some studies investigated certain factors in the ERP context special to smaller organisations mainly for the area of implementation [28]. Contributing to the acquisition stage, work was published concerning a methodological approach to the acquisition of ERP solutions by SMEs [66] and certain specificities in the acquisition process of Austrian SMEs [7]. In response to the widespread application of ERP systems, academic institutions introduce ERP system gradually in their IS curriculum [3]. This also originates from the market demand for highly qualified ERP specialists. ERP vendors provided a special arrangement that encourages universities to incorporate their ERP systems helps to integrate the teaching of these emerging technologies into their current education processes [74]. As a consequence, researchers also focused on the processes and mechanisms that some universities implemented to introduce ERP into education [4, 31]. Although all major IS conferences dedicate at least a track or mini-track to ERP systems, the number of publications within the information systems community on ERP systems appears small compared to the size of the business they generated [25]. As the widespread application of ERP systems continues, research in the ERP area is still lacking and the gap in the ERP literature is huge [3]. Considerable research effort has been directed towards the implementation and to large parts of the post-implementation phases. The lack of attention especially applies to the stages of system adoption and acquisition as well as on how to analyse the value of ERP systems and to the special situation faced by SMEs. 5

7 RELEVANCE OF THE UNDERTAKEN RESEARCH Enterprise resource planning software solutions have become the central nervous system for almost any major large company. The effectiveness of these software applications directly translates to the effectiveness and competitiveness of the firm and its long term viability. ERP systems promise the development and sustainment of competitive advantage in the global marketplace through enhanced decision support; reduced asset bases and costs; more accurate and timely information; higher flexibility or increased customer satisfaction [20, 21, 55, 59]. A empirical survey reported that two-thirds of the interviewed IT managers responsible for their organisation s ERP projects viewed the ERP systems as their organisation s most strategic computing platform [69]. The acquisition and implementation of ERP systems are very effort-intensive processes. An empirical analysis of the implementation process in European companies revealed mean implementation costs of EUR 5 Mio. and a mean implementation time of 13.5 months [15]. In addition, also high risks are involved in every ERP project. The farreaching structural changes following an ERP software implementation can be disastrous as examples [10, 13, 62] show. A market research company reported that 70% of ERP implementations fail to achieve their corporate goals [13]. It can be expected that major mistakes were already made in the early stages of the ERP lifecycle prior to the implementation process. Despite the importance of ERP systems, the high effort expended by companies to implement these systems and the high risks involved, to many questions regarding different aspects especially in the early stages of the lifecycle of ERP systems remain unanswered. For example, the relationship between decision approach and implementation as well as usage success or the area of analysing the value of ERP systems [46]. The situation faced by small and medium-sized enterprises (SMEs) in their IS/IT decision processes is different to LEs. They face much greater constraints in terms of resources that can be commited to the all stages of the system s lifecycle. In general, decision making in SMEs features much greater constraints on the ability to gather information in order to reduce uncertainty about their investment [19]. Nevertheless, the complexity and amount of IS/IT requirements are often similar to the cases found among LEs. SMEs more and more experience the need for integration, especially for inter- 6

8 organisational integration, and expecting ERP software to fulfil these needs. The availability of relatively inexpensive hardware is fostering this situation [28]. ERP vendors are in search for new challenges to generate higher revenues and have turned to the small and medium-sized market segments. A saturation of the market as most large organisations have already implemented an ERP solution decreased the annual ERP market growth [54]. By 1998 approximately 40% of companies with annual revenues over 1 billion USD had implemented ERP systems [16]. The small and mediumsized market segment is far from being saturated [54]. The total European midsize market for IT products and services surpasses 50 billion dollar per year [27] Due to the pervasive nature of ERP systems, our results should be of interest for a wide range of professional and scholarly communities (from software engineering to accounting), apart from the IS field. The results presented should especially help practitioners (in SMEs) facing the important task to introduce an ERP system to their company. Another aspect is that results would also contribute to the development of any e- initiative (CRM, SCM, etc.) on the basis of ERP systems and to handling decision problems regarding any other type of enterprise wide standard software package. RESEARCH OBJECTIVES This research proposal seeks to close some of the mentioned gaps in ERP research by providing a holistic overview of the whole ERP lifecycle. To advance the state of the art, this research report was primarily guided by the following topics. The first category contains general topics not pertaining to a single stage of the ERP system lifecycle. (1) General information (Topic.i) (Topic.ii) (Topic.iii) (Topic.iv) ERP diffusion among SMEs and LEs Diffusion of other software applications Resource allocation Strategic project guidance/characteristics 7

9 (2) Adoption Decision (Topic.v) Drivers for the decision to implement ERP (2) Acquisition (Topic.vi) (Topic.vii) (Topic.viii) (Topic.ix) (Topic.x) Considered and chosen ERP packages Composition of project team Importance of decision making criteria (including intangible costs and benefits) Applied information gathering methods Methodical support in particular the use of formal evaluation techniques (3) Implementation (Topic.xi) The implementation approach chosen. (Topic.xii) Accompanying business strategies such as process improvement (BPI) or reengineering (BPR) efforts (Topic.xiii) Accounted implementation problems (4) Use and Maintenance (Topic.xiv) (Topic.xv) The perceived utilisation of ERP benefits Firm level ERP impact (5) Evolution (Topic.xvi) ERP as technology enabler To provide information on these topics, an empirical survey covering a reasonable share of SMEs and LEs in the Austrian marketplace was undertaken. The methodical design of this study is given in the next section. 8

10 METHODOLOGY The methodology employed is an industry independent empirical survey undertaken in the years 2003 to The target group was defined as containing Austrian SMEs as well as LEs. To avoid under representing the large enterprises in the sample, a stratified and disproportional sample with subgroups according to company size was defined. One thousand Austrian SMEs and LEs were randomly selected from firms listed in a comprehensive, pan-european database containing financial information on 7 million public and private companies in 38 European countries [14]. The questionnaire developed for this study was based on a previously undertaken ERP related study [6], on a review of the literature and on recommendations of a panel of ERP experts from two universities in Austria and the UK. Following an empirical design method, the panel was asked to critique the questionnaire for content validity [22]. According to their suggestions, the questionnaire was revised and used in Pre-Tests applied in the UK and Austria. Responses were examined to optimise the formulation of each question and ensure consistency in the way they were answered. The questionnaire contained a general section assessing the background information on the company especially IT/IS related and performance related questions. The assessed topics were structured in four sections following the ERP system lifecycle: adoption decision, acquisition, implementation, use and maintenance. Companies were contacted through a multi-staged procedure. A cover letter, the hardcopy questionnaire, and a self-addressed stamped return envelope were sent to business management of the 1000 companies. The package explained the purpose of the study, promoted participation in the survey, assured confidentiality, and offered an ERP-related collection of material on CD as well as a summary of the results together with an opportunity to engage in further research activities with our research department. The questionnaire was also provided in an electronic version to further strengthen the participation. Two weeks after the initial mailing, follow up calls were made to all companies that could not be identified as respondents, asking them for their interest in participating and if cooperative for an address. Short after these calls, reminder/thank you s were sent out. The next round of contact consisted in reminding 400 randomly selected companies via telephone calls that they had not yet responded, and again giving them the address and logins for the online questionnaire. Finally, 209 valid returns were registered, resulting in an above average response rate of 22%. Some companies could not be contacted, because they had ceased to exist, the 9

11 address was wrong or could not be found, etc. These neutral dropouts (49 companies) were considered in the calculation of the response rate and therefore did not decrease the return quota. To test for non-response bias, known distributions of variables available through the used corporate database were assessed. The analysis revealed no significant different characteristics between non-respondents and respondents. The data was analysed using a statistical package offering the ability to work on complex samples. It should be noted that in practice, most scientific papers utilize the default significance tests generated by software packages based on the assumption of simple random sampling even if multi-stage, cluster, or other complex sampling designs were employed [18, 40, 43]. To avoid biased estimates, this work uses a SPSS module called Complex Samples where adjusted tests including chi-square (χ 2 ) are provided. However, since the range of procedures is limited, analysis was also conducted with the use of sampling weights [58]. 10

12 EMPIRICAL RESULTS After giving sample demographics, this section presents preliminary results contributing to each of the stated research topics stated in the previous section. Sample demographics Following a commission recommendation of the European Communities concerning the definition of micro, small and medium-sized enterprises [24], this research classified as SME an enterprises which employs fewer than 250 persons and which has an annual turnover not exceeding EUR 50 million. Table 1 denotes the firm size and branch distribution of the data sample. The branch classification was based on the core codes given in brackets of the North American Industry Classification System (NAICS) which has replaced the U.S. Standard Industrial Classification (SIC) system in 1997 [49]. Table 1. Firm size and branch distribution Size No. of companies (rel. in %) No. of companies (abs. unweighted N) SMEs LEs Total Branch Trade (42,44-45) Manufacturing (31-33) Construction (23) Services (54) Transportation and Warehousing (48-49) Information (51) Health Care and Social Assistance (62) Management of Companies and Enterprises (55) Other Total The observed distribution of management structure is given in Table 2. The traditional functional management structure was observed in 64.7% of the cases followed by the project/team structures in 16.1% of the enterprises. 11

13 Table 2. Management structures Management structure Rel. in % Functional 64.7 Divisional 5.1 Geographic 1.0 Project/Team oriented 16.1 Matrix 7.6 Network (core and periphery) 0.8 Virtual 0.0 Other 4.7 General information ERP diffusion among SMEs and LEs ERP diffusion along the system s lifecycle stages is denoted in Table % of all SMEs have already selected an ERP system, i.e. have reached at least the stage of implementing the system, comparing to 67.6 % of all LEs. As expected, the observed differences between SMEs and LEs are highly significant (χ 2, p=.00). The company s positions in the lifecycle correlate positively with organisational size (corr=.16, p=.03). Table 3. ERP diffusion among SMEs and LEs Stage All companies SMEs % cum. % % cum. % % cum. % Consideration Evaluation Implementation Stabilisation Usage and maintenance Extension No ERP LEs Diffusion of other software applications Table 4 considers the usage of three specific types of software applications apart from the ERP context. In terms of CRM and SCM, more SMEs than LEs compared in relative terms have these specialised software applications in place (not significant, p>.05, χ2). 12

14 This hints at the wider adoption of specialized applications in smaller firms where requirements in CRM and SCM need to be met. Table 4. Diffusion of specific other software applications Software applications in use All (%) SMEs (%) LEs (%) p (χ2) CRM (Customer Relationship Management) SCM (Supply Chain Management) KM (Knowledge Management) Resource allocation The expended efforts in terms of all assessed variables were lower in SMEs than in LEs as can be seen in Table 5. In this study, the durations, expended man months, and costs of both the software acquisition and implementation stages were assessed directly. In terms of actual costs most organizations were not able or not willing to answer. Only 10 organizations were able to give acquisition costs and 20 their implementation costs. In terms of durations the number of observations was 68 for system acquisition, respectively 75 for implementation. Based on the experience from the previous ERP study, the new survey also accounted for an indirect assessment of exploited personnel costs. Expended personnel efforts were assessed in terms of man months together with information on the structure of the project team, i.e. the proportion of external and internal assistance Table 6. Based on salary related publications [15, 30], the costs associated with an external man month were 23,100 EUR, related to an internal man month 6,000 EUR. By using this information together with the inquired data the following rough estimation of personal costs was achieved: Among SMEs, personnel costs for the whole ERP implementation including decision making in the mean amounted to 153 tsd., in the case of LEs to 643 tsd.. 13

15 Table 5. Resource allocation Variable All SMEs LEs Spearman Corr Duration of ERP system acquisition (months) Duration of ERP system implementation (months) Duration of overall project (months) Man months expended for ERP system acquisition Man months expended for ERP system * implementation Man months expended for overall project * Given acquisition costs (tsd ) ** Given implementation costs w/o licence costs , (tsd ) 5 Given project costs (tsd ) ** Estimated personnel costs for acquisition (tsd ) Estimated personal costs for implementation (tsd ) ** Estimated personnel costs of overall project (tsd ) ** * p<.05, ** p<.01; N (SMEs) = max 39, N (LEs) = max 59 Table 6 outlines to what extent external man power was needed for ERP evaluation and system implementation. Table 6. Assignment of external man-power All (%) SMEs (%) LEs (%) Spearman Corr External support from consultants Prop. of external man power needed for acquisition * Prop. of external man power needed for implementation * p<.05, ** p<.01; N (SMEs) = max 39, N (LEs) = max 59 Strategic guidance Business management has in only 25.8% of all cases explicitly defined their IT/IS strategy regardless of their ERP utilization. Among LEs only, the rate is 48.2%, still a remarkable low number. The mean rate of alignment of corporate resp. business strategies and structures with IT/IS strategies and infra-structures on a scale between 1 (very bad) to 5 (very good) is 3.13 revealing a slightly positive assessment. Selection criteria were derived from the strategic goals of the company in 65.3% of all cases. Again, the number increases among LEs, which in general are known to possess a better developed managerial competence. 14

16 Table 7. IT/IS strategic guidance All SMEs LEs p (χ2) Explicitly defined IT/IS strategy 25.8% 23.8% 48.2%.00 Strategic Alignment Strategic concept driving the choice of selection criteria 65.3% 63.7% 76.9% - 1 Rated on a scale between 1 (very bad) and 5 (very good), * p<.05, ** p<.01; N (SMEs) = max 39, N (LEs) = max 59 Adoption Decision Drivers for the decision to implement ERP The enterprises in the sample were asked about the reasons for initiating their ERP projects. Their answers were clustered in six categories (see Table 8). Business management was allowed to mention multiple reasons. The reasons for adopting ERP do not significantly differ between SMEs and LEs. Three variables showed distributions dependent on the size of the company each with marginal significance. While operational problems due to multiple systems, interfaces, and databases were given as most important driver for ERP in LEs (59.5 % of the cases), among SMEs ERP was regularly initiated to lower costs of operations (55.5 % of the cases). Table 8. ERP adoption driver Category Adoption reason All (%) SME s (%) Operational problems due to multiple Int1 systems, interfaces, and databases Internal Multiple vendors of legacy systems resulting integration in too high software licensing and Int2 maintenance costs External Integration Ext Pressure from the value chain (from business customers or partners) Tec1 Low reliability of legacy system Technical Tec2 Technical limitation of legacy system Lowering costs of operations (higher Bus1 efficiencies) Business Strategic reasons (enhanced decision Bus2 making, support of management style, etc.) Bus3 Missing functionality Enforced Enf Guidelines from a controlling company Other Oth Other LEs (%) p (χ2) 15

17 Acquisition Considered and chosen ERP packages The software suppliers considered for the decision process showed clearly the dominant position of SAP in the marketplace. The global contenders Oracle and BaaN show weak representations in Austria. J.D. Edwards and Peoplesoft are seldom considered, hardly ever chosen. Notable is the strong presence of other, smaller suppliers hinting at the acceptance of more specialized and less complex systems. The situation regarding the solutions chosen is similar, although the advantage of SAP is more pronounced. BaaN and Oracle are the other contenders of larger size while again smaller providers have captured a large market share. The given list of other vendors was comprehensive; no single provider gained a notable market share. Table 9. Alternatives (ERP systems) considered and chosen System All companies (rel. in %) SMEs (rel. in %) LEs (rel. in %) Chosen Considered Chosen Considered Chosen Considered SAP BaaN Peoplesoft J.D.Edwards Oracle Others Total Both the leading position of SAP and the relatively large cumulative market share for smaller suppliers are in accordance with the findings of a previous study [8], and an European survey of midsize companies (Everdingen et al., 2000). The analysis confirmed the significant influence of organizational size on the selected software package as given in Table 9. Composition of project team The area covers the size, structure of the project team, and management commitment to whole project. For the choice of team structures the study included three different team formations identified from the mentioned previously undertaken ERP study: (i) project run under the head office (top management) with the inclusion of external consultants, (ii) project run under the organisational department with only small participation of other 16

18 internal departments, (iii) participative decision making including members of all or almost all parties including those later on affected by the implementation of the system chosen. The results are denoted in Table 10. Table 10. Defined project team and management role Variable All SMEs LEs p (χ2) Size of project team (count of persons) Dominated by business management 36.9% 41.0% 25.2% - Dominated by IT department 38.6% 44.1% 22.9%.03 Dominated by organisational department 7.1% 6.7% 8.2% - Participative decision making 15.2% 8.1% 35.6%.00 Management commitment to whole project Rated on a scale between 1 (not important) and 5 (very important), N = max 79 Importance of decision making criteria Table 11 denotes decision making attributes inquired in the ERP study with their mean importance ratings and standard deviations as given by the respondents of the survey differentiated between SMEs and LEs. For both enterprise size classes, the reliability and functionality of the system were the most important attributes in the evaluation process, followed by the support offered by the vendor. Only after these system related perceptions, a number of business related criteria follow, which are concerned with processes and information integration. The attributes concerned with the enablement of specific technologies are rated as least important. Since these requirements would not apply to every company, the resulting position is not surprising. 17

19 Table 11. Inquired decision making attributes with mean importance ratings and standard deviations All comp SMEs LEs Attributes 1 ME SD ME SD ME SD Systems reliability Functionality of the system Vendor support Business process improvement Enabler for desired business processes Integrated and better quality of information Reduced cycle times System usability System flexibility System interoperability Improved service levels Enhanced decision making Short implementation time Increased organisational flexibility Software costs Organizational fit Increased customer satisfaction Vendor's financial situation Y2K readiness Connectivity Availability of a industry focused solution Internationality of Software EURO currency conversion Market position of vendor Vendor reputation Improved Innovation Capabilities Operating system independency Incorporation of business best practices E-business enablement Enabling technology for CRM, SCM, etc Rated on a scale between 1 (not important) and 5 (very important), N = max 79 Applied information gathering methods In the mean, 3.5 different methods were employed for gathering information for evaluating the system alternatives. Eight explicitely named possible approaches were included in the questionnaire (see Table 12). There is also a trend to employ less expensive methods to be seen within the group of SMEs: The analysis of a prototype and an examination by consultants which can be considered as resource intensive were used 18

20 more extensively by LEs, while other approaches such as presentations by the bidders or internet search were used more often among SMEs. Table 12. Information sources used for decision making Source exploitation given in % All SMEs LEs p (χ2) Analysis of publications, references, studies, etc Meetings with vendors Analysis of competitors' ERP choices Trainings of key members of project team Internet search System demonstrations by vendors Analysis of a system prototype Engagement of external consultants Other sources Methodical support Although ERP decisions are structured along dimensions respectively attributes, a minority of decision makers in practice apply some kind of multiple attribute decision making method (41.3% of the cases). This compares to 70.9% of the enterprises that captured financial aspects by standard financial investment methods. The questions of the study to assess evaluation models comprised salary savings or profiles (used by 14.6% of the enterprises), some kind of work study assessments (14.1%), and any other method applied for evaluation (6.1%). The numbers show that the application of valuation methodologies in practice remains limited. Implementation Implementation approach Table 13 denotes the assessed characteristics of the implementation process, in particular implementation approaches. The most cautious approach considering a low phased-in implementation approach supported by organisational learning is carried out by 28% of the organisations. A pilot project implementing first one module, than all other modules in a single step, is applied by 16.6% of the organisations. The most aggressive 19

21 implementation approach is a Big Bang implementation of all ERP software modules at once, which was followed by the majority of the organisations (55.2%). SMEs more often rely on slow phased in implementation and pay less attention to pilot projects than LEs. The latter group achieves to implement a greater proportion of the desired ERP functionality than SMEs. Table 13. Implementation characteristics Item All SMEs LEs p (χ2) Slow phased in implementation 28.2% 32.9% 11.8%.01 - Pilot project then remaining modules in one step 16.6% 12.9% 29.4%.04 - Big Bang implementation 55.2% 54.2% 58.8% - - Modification efforts Programming proportion of overall effort 26.7% 27.4% 21.9% - - Customizing proportion of overall effort 32.6% 31.5% 39.9% - - Employed risk mitigation strategies 65.1% 68.1% 53.4% - - Employment of ERP-controlling 3.4% 2.6% 6.3% - - Implemented % of desired functionality * 1 Rated on a scale between 1 (very low) and 5 (very high) Corr Accompanying business strategies A new supporting or enabling software technology is often introduced in connection with a new business strategy. Table 14 denotes the inquired business strategies that were implemented together with the ERP system. It can be seen that business process reengineering or improvement efforts together with customer relationship management are among the most often considered strategies, the latter being implemented concurrently mainly within SMEs. 20

22 Table 14. Business strategies employed together with ERP Item All (%) SMEs (%) LEs (%) p (χ2) Business Process Reengineering (BPR) Business Process Improvement (BPI) Take Over Merger Total Quality Management (TQM) Supply Chain Management (SCM) Customer Relationship Management (CRM) Just in Time (JIT) Agile or lean manufacturing (LM) CRM or SCM concurrently implemented Concurrently with ERP 34.6% of all companies implement either CRM or SCM. This rate can be attributed mainly to SMEs. Only every 10 th LE introduces ERP together with CRM or SCM. The chronological order of the ERP implementation and Business Process Reengineering (BPR) phase can be seen in Table 15. No significant differences were observed concerning SMEs and LEs. Table 15. Sequence of BPR Item SMEs LEs All (%) (%) (%) no BPR BPR prior to ERP BPR after ERP BPR and ERP concurrently, yet independently BPR and ERP concurrently as same project Implementation problems The problems that occured while implementing the system are summarised in Table

23 Table 16. Implementation problems Item All (rel. in %) SMEs (rel. in %) LE (rel. in %) p (χ2) Cost escalation Time escalation User resistance System did not work as expected Availability and retention of skilled people Challenges of integration with other legacy.05 systems Not completing implementation by Y2K High degree of organisational change just to meet the needs of the software Capability of organisational infrastructure to contend with new technology Lack of management support Other Reported implementation problems were dependent on the size of the organisation in a number of cases: Time escalations and problems with achieving the intended system behaviour occurred more regularily in SMEs, while LEs more often reported the lack of skilled personell, integration problems, and difficulties of the organisational infrastructure to contend with the new ERP technology. Use and Maintenance The perceived utilisation of ERP benefits Table 17 denotes the perceived utilisation of ERP decision making criteria according to expectations/targets set prior to system implementation. The expectations of business management were most likely met in terms of the system related features Y2K readiness, Systems reliability, and EURO currency conversion. The first and the third criteria were among the most important drivers for ERP software growth in the last decade. The expectations of ERP as technology and connectivity enabler were considered as the least successful aspects. No substantive differences were detected in the perceptions given by managers of SMEs and LEs. 22

24 Table 17. Inquired decision making attributes with mean utilisation ratings according to expectations All comp SMEs LEs Attributes 1 ME SD ME SD ME SD Y2K readiness Systems reliability EURO currency conversion Vendor support Advanced technology Availability of a industry focused solution System functionality System flexibility Enabler for desired business processes Business Process Improvement Improved service levels Integrated and better quality of information System interoperability System usability Organizational fit Increased Organisational Flexibility Enhanced Decision Making Incorporation of business best practices Reduced Cycle Times Increased Customer Satisfaction Short implementation time Internationality of Software Software costs (licenses, maintenance, etc.) Operating system independency Improved Innovation Capabilities Connectivity (Intra/Extranet, Mobile Comp.,...) E-business enablement Enabling technology for CRM, SCM, etc Rated on a scale between 1 (not important) and 5 (very important) Firm level ERP impact An often mentioned short term effect of large scale software introductions is a decline in process efficiencies, resp. organisational performance. This was confirmed by data analysis (see Table 18) and a significant difference was observed between SMEs and LEs (χ2, p=.00). While the majority of SMEs are faced with short term declines, only a minor number experience long term problems, and no SMEs has stated that the performance level prior to ERP were not recovered. The situation is different among LEs where a 23

25 considerable proportion faced long term performance problems, while a minor, but nevertheless existing, proportion does not recover to past performance levels. Table 18. Decline in organisational performance after switching to ERP Decline in organisational performance All (%) SMEs (%) LEs (%) not noticed experienced over a short period of time experienced over a long period of time experienced and not recovered The question whether ERP is aiding to the organisation to gain a competitive edge was answered with yes by 83.1% of all enterprises. The view is clearly more optimistic in SMEs, i.e. the distribution is significantly depentend on the size of the organisation (χ2, p=.01). The rate increases to 88.1% for SMEs and decreases to 65% for LEs. The general success of IT/IS and the general performance of the organisation were assessed by the figures given in Table 19. In terms of IT/IS success the situation was regarded as positive on approximately the same level of magnitude among SMEs and LEs. Overall firm performance was judged slightly better among SMEs. An interesting question was to analyse possible dependencies between these general measures and the company s position in the ERP lifecycle model. With regard to IT success criteria, a number of correlations as calculated by Spearman Rank correlation were identified: The position of the organisations ERP system correlates positively with the efficiency of IT/IS supported processes (corr=.26, p=.03), IS/IT reliability (corr=.37, p=.00), and with IT/IS impacts on goal achievement (corr=.31, p=.00). 24

26 Table 19. General IS/IT and firm success metrics All comp SMEs LEs IT Success Criteria 1 ME SD ME SD ME SD Efficiency of IT/IS supported processes 3, IS/IT reliablity 4, General value of IT/IS for the organisation 3, IT/IS impacts on goal achievement 3, IT/IS contribution to organisational financial performance 3, Firm performance criteria 1 Development of Market Share Development of Customer Satisfaction Development of New Product Success Development of Competitive Position Development of ROI Development of general coporate success Rated on a scale between 1 (very poor) and 5 (very good) In evaluating the performance in the usage stage tradionally two different perspectives, the financial and the technical view, can be defined. The balanced score card is a well known approach used for controlling based on multiple attributes aligned along four different perspectives. It was first proposed in 1992 [37] and soon after applied [39]. The BSC is a well established measurement method which links strategic objectives and performance measures. Its application promises strategy mapping between each of the perspectives. The idea of a BSC is to find a set of measures that maintain a balance between short- and long-term objectives, between lagging and leading indicators, between financial and non-financial criterions, and between internal and external performance perspectives [38, 57]. To assess the performance in system usage, this study has drawn on suggestions provided in academic literature, mainly on [60] where the BSC was developed for ERP controlling. Table 20 denotes the four considered ERP controlling perspectives with attributed measures. Based on the gathered data, the overall conclusion is that ERP impact in terms of all measured dimensions provided positive effects in SMEs as well as LEs. 25

27 Table 20. Performance metrics accross balanced score card perspectives All comp SMEs LEs Financial perspective 1 ME SD ME SD ME SD Procurement costs Inventory holding costs Transportation/logistics costs Hardware/Technology costs IT/IS maintenance costs Overall IT/IS costs IT/IS consulting costs Customer (supplier) perspective Coverage of business processes Transactions (deliveries,...) finished on schedule Problems with order processing or management Communication with supplier Internal process perspective 2 Availability of ERP services Average time to upgrade the system Release levels lagging behind actual level Effectiveness/Productivity Efficiency/Profitability Financial close cycle Problems with reports on demand Problems with warehouse processes Problems with standard reports Exploited ERP functionality Innovation and Learning perspective 5 Training hours per developer Training hours per user Rated on a scale between 1 (poor rating/higher costs) and 5 (good rating/lower costs) in comparison to the situation prior to ERP adoption 2 Rated on a scale between 1 (poor rating/decreased) and 5 (good rating/increased) according to planned level of support 3 Rated on a scale between 0 (no lag) and 3 (3 levels behind) 4 % of the implemented ERP system functionality 5 Rated on a scale between 1 (increased) and 5 (decreased) in comparison to the situation prior to ERP adoption In terms of ERP controlling, only 3.4% of the enterprise have implemented an instrument to control ERP system operation. Evolution ERP as technology enabler The data revealed a differential picture. The previous section Perceived utilisation of ERP benefits showed that the expectations towards ERP as technology enabler were met 26

28 on the lowest level compared to all other decision making criteria. However, in general, ERP is being viewed as the backbone for important extensions such as CRM or SCM. This statement is supported by 95% of the companies across all types of ERP projects. Companies already acknowledge the enabling function of ERP during ERP implementation. As mentioned earlier, concurrently with ERP 34.6% of all companies implement either CRM or SCM. SUMMARY AND ONGOING RESEARCH This research report provides a descriptive oriented overview of main characteristics of ERP in all stages of the system s lifecycle, in particular emphasising differences between SMEs and LEs. The given research topics comprise general information such as the diffusion of ERP and other computer software applications among SMEs and LEs, resources allocated, or strategic project guidance as well as drivers for the decision to implement ERP, considered and chosen ERP packages, project team structures, decision making criteria, applied information gathering methods, methodical support, implementation approaches chosen, acompanying business strategies, implementation problems, perceived utilisation of ERP benefits, firm level ERP impact, and the role of ERP systems as technology enabler. This report constitutes an intermediate research report giving preliminary results of the undertaken study. Future work based on the gathered data will document the analytical projects undertaken in particular focusing on SME specifities, ERP success, enterprise integration, organisational fit of ERP, and BPR/BPI related questions. 27

29 REFERENCES 1. Aladwani, A.M. Change management strategies for successful ERP implementation. Business Process Management Journal, 7 (3) Al-Mashari, M., Constructs of Process Change Management in ERP Context: A Focus on SAP R/3. in Americas Conference on Information Systems, (Long Beach, USA, 2000), Al-Mashari, M. Enterprise resource planning (ERP) systems: a research agenda. Industrial Management & Data Systems, 102 (3) Becerra-Fernandez, I., Murphy, K.E. and Simon, S.J. Integrating ERP in the Business School Curriculum. Communications of ACM, 43 (4) Beretta, S. Unleashing the integration potential of ERP systems: The role of process-based performance measurement systems. Business Process Management Journal, 8 (3) Bernroider, E.W.N. and Koch, S. The decision making process concerning investments in ERP software - results of an empirical study in Austrian organizations. Wirtschaftsinformatik, 42 (4) Bernroider, E.W.N. and Koch, S., Differences in Characteristics of the ERP System Selection Process between Small or Medium and Large Organizations. in Sixth Americas Conference on Information Systems, (Long Beach, California, 2000), Bernroider, E.W.N. and Koch, S. ERP selection process in midsize and large organizations. Business Process Management Journal, 7 (3) Bernroider, E.W.N. and Koch, S. A Framework for the Selection of ERP Packages for Small to Medium and Large Organizations. in Hossain, L., Patrick, J.D. and Rashid, M.A. eds. Enterprise Resource Planning: Global Opportunities and Challenges, Idea Group Publishing, Hershey, PA, 2002, Bingi, P., Sharma, M. and Godla, J. Critical Issues Affecting an ERP Implementation. Information Systems Management Decision, 16 (3) Boubekri, N. Technology enablers for supply chain management. Integrated Manufacturing Systems, 12 (6) Brown, C., Vessey, I. and Powell, A., The ERP Purchase Decision: Influential Business and IT Factors. in Americas Conference on Information Systems, (Long Beach, USA, 2000), Buckhout, S., Frey, E. and Nemec Jr., J. Making ERP Succeed. Turning Fear into Promise. IEEE Transactions of Engineering Management, 27 (3) Bureau-van-Dijk, E.P. Amadeus, Bureau-van-Dijk, Buxmann, P. and König, W. Empirische Ergebnisse zum Einsatz der betrieblichen Standardsoftware SAP R/3. WIRTSCHAFTSINFORMATIK, 39 (4) Caldwell, B. and Stein, T. New IT Agenda Information Week, 1998,