DEFINITION AND ANALYSIS OF CRITICAL SUCCESS FACTORS FOR ERP IMPLEMENTATION PROJECTS

Transcription

1 DEFINITION AND ANALYSIS OF CRITICAL SUCCESS FACTORS FOR ERP IMPLEMENTATION PROJECTS José Manuel Esteves de Sousa Universitat Politècnica de Catalunya Barcelona, Spain Advisors: Joan Antoni Pastor Josep Casanovas A thesis submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Llenguatges i Sistemes Informàtics of the Universitat Politècnica de Catalunya, Barcelona, Spain.

2 ACKNOWLEDGEMENTS Throughout this doctoral research project, there are many people that I would like to acknowledge for continuing support and kind help that they have been offered to me. Foremost, I would like to thank my advisor Joan Pastor for his guidance and support over the past six years. I can only feel flattered for the confidence he has shown in me. Fortunately, I have benefited from his extraordinary motivation, great intuition, and technical insight. I just hope my thinking and working attitudes have been shaped according to such outstanding qualities. I wish to thank my co-advisor, Josep Casanovas, for his guidance and support over the last two years. He has always show confidence in me. My thanks also extend to João Álvaro for he guided my first steps in the academic world and lately as a Ph.D. student and with whom I have had the pleasure of working in some studies. I want to thank him for the advices and support he has always given to me. Thanks for John Gunson for his cooperation and wise advices. I would also like to express thanks to my ERP research colleagues for the questions, comments and discussions we had during and after the conferences. Special thanks to my friends and family who have been a beacon of strength. Thank you for understanding when I needed a break and when I needed solitude. During my research I had the financial support of two institutions that made possible this long journey. First, the Agencia Española de Cooperación Internacional (AECI) who awarded me with a Mutis fellowship helping me in the early stages of my doctoral studies and then, the Fundação para a Ciencia e Tecnologia (FCT) who awarded me with a fellowship for the development of the doctoral research project. Last, but not least, I would like to thank my mother, Ana, to whom this thesis is dedicated and my whole family for their unconditionally love and support along this journey.

3 ABSTRACT ERP is one the latest technologies that many organizations have undertaken. Typically, Enterprise Resource Planning (ERP) systems are software packages composed of several modules, such as human resources, sales, finance and production, providing cross-organizational integration of transaction-based data management throughout imbedded business processes support. These software packages can be customized up to a certain limit to the specific needs of each organization. ERP was characterized as the most important development in the corporate use of technology in the 1990s. Unfortunately, many ERP projects have not been effective enough and hence have been unable to achieve all the results envisaged. As the cost of an ERP implementation project is very high, it is critical for an organization to make the project a success and start obtaining benefits out of it as fast as possible. But what is it that makes an ERP implementation project successful? To address this issue we propose the use of a Critical Success Factors (CSF) approach to manage ERP implementation projects. After an extensive literature review on ERP research and ERP implementation project studies, we have studied and have proposed results along the following issues: The identification and definition of a comprehensive list of CSF. The relevance of CSF along the typical ERP implementation phases. The definition of Key Performance Indicators (KPI) for CSF. The analysis of CSF management in some organizational contexts. A theoretical framework was developed in order to aid the process of answering the implied research questions. In order to accomplish the research aims of this research, we have proposed an interpretive research approach and a multimethod research framework that combines various research methods, both quantitative and qualitative, with predominance of qualitative ones. An annotated bibliography on ERP research. A CSF unified model for ERP implementation projects. A CSF relevance schema along the typical ERP implementation phases. A new criticality indicator for Process Quality management (PQM) method. A tentative set of KPI for some CSF and a systematic approach to develop the rest of KPI. An ERP implementation model. A CSF management analysis in two organizational contexts: a small and midsized enterprise and a public higher education institution.

4 With regard to the two cases studies conducted, the first was a pilot case study of an ERP implementation in a Portuguese small and midsized enterprise. The second one was an in-depth case study of an ERP implementation in a big Spanish public higher education institution. The different organizational contexts provided valuable insights in CSF management as well as implications from the emergence of patterns of communality between both case studies. The research results evidence that: Most of the problems that arise in ERP implementation projects are associated with the activities identified as CSF in this research, The main concerns are organizational rather than technological. The management of CSF is influenced by the context and, When managers have taken into account the CSF identified, some of project problems have been avoided or their impact significantly reduced in ERP implementation projects, and the organization is more likely to use more effectively the ERP system after its implementation. A CSF approach is also helpful to avoid problems on the long term since most of the CSF identified are strategic. It is hoped that future ERP research and ERP implementations can draw upon and learn from this thesis.

5 LIST OF ABREVIATIONS ASAP BPR CSF ERP IS IT GQM GT HEI KPI MCP MRP MRPII PQM ROI SME UPC WS Accelerated SAP Methodology Business Process Reengineering Critical Success Factors Enterprise Resource Planning Information System Information Technology Goals/Questions/Metrics Grounded Theory Higher Education Institution Key Performance Indicators Most Critical Processes Material Requirements Planning Manufacturing Resource Planning Process Quality Management Return On Investment Small and Midsized Enterprise Universitat Politècnica de Catalunya Web Survey

6 INDEX Chapter 1 Introduction ERP Overview ERP Historical Account ERP Functional Modules ERP Product Lifecycle and Market ERP Importance Motivation and Benefits for adoption of ERP Objectives of the Research Thesis Contributions Organization of the Thesis References Chapter 2 Theoretical Background and Literature Review Information Systems Implementation Review IS Implementation Research Diversity ERP System as a Special Information System ERP Lifecycle Framework Phases of the ERP Lifecycle Dimensions of the ERP Lifecycle The ERP Implementation Phase ERP Implementation Approaches ERP Implementation Success An Annotated bibliography on ERP Research ERP Implementation Phase Bibliography Implementation Approaches Implementation Success Other Issues Case Studies Main Topics Researched Topics for Further Research Critical Success Factors Approach CSF Approach Usage A Conceptual CSF Identification Framework Techniques for CSF Identification... 52

7 2.5.4 Benefits of CSF for Managers Key Performance Indicators Conclusions References Chapter 3 Research Design Conceptual Framework IS Research Paradigms and Methods Quantitative, Qualitative, and Multimethod Research Research Strategy Research Questions Research Goals Motivation Research Paradigm Research Design Multimethod Design Followed Trustworthiness of the Research Credibility Transferability Dependability Confirmability References Chapter 4 Unified Model of Critical Success Factors Background on CSF for ERP Implementations Research Approach CSF Unified Model Proposal Organizational Perspective Technological Perspective Comparison of ERP projects with other Projects CSF as Perceived ERP Risk Factors Clarifying Project Champion Role CSF Project Champions Project Sponsors Project Managers Hypothesis Development Research Methodology Web Survey Analysis Proposed Definitions ERP Project Structure Typologies

8 4.4.9 Discussion Comparison with Further ERP CSF Models Our Extended CSF Unified Model Conclusions References Chapter 5 Critical Success Factors Relevance Software Project Overview Software Project Structure CSF Relevance Overview CSF Relevance in ERP context Process Quality Management Method Overview Building the PQM Matrix of CSF vs. Business Processes PQM Matrix Detail Section PQM Matrix Analysis Section Establishing the Most Critical Processes SAP Implementation Methodologies ASAP Implementation Methodology Other SAP Methodologies Research Methodology Validation Critical Success Factors Relevance Schema Organizational Perspective Technological Perspective Strategic and Tactical Factors along the ERP implementation Phases Organizational and Technological Factors along the ERP implementation Phases Identification of the Most Critical Work Packages Work Package Criticality Indicator An Example Critical Work Packages per Phase Overall SAP Work Packages Criticality Conclusions References Chapter 6 Pilot Case Study Introduction Research Methodology Data Collection Data Analysis

9 6.3 Case Study Context ERP Implementation Phases A Grounded Model of ERP Implementations Phenomenon Causal Conditions Environmental Context Organizational Context Information Technology Context Intervening Conditions Action/ Interaction Strategies Consequences References Chapter 7 Key Performance Indicators for CSF Introduction Research Methodology A GQM Preliminary Plan on ERP Implementations GQM Method Overview ERP Business Process Reengineering BPR and ERP Towards a BPR Strategic View for ERP Implementations Measurement Goal of the GQM Preliminary Plan Questions Description of Metrics Interpretation of BPR Metrics ERP Sustained Management Support Management Support Management Commitment Measurement Goals of the GQM Preliminary Plan Questions Description of Metrics Interpretation of Metrics ERP Adequate Training Program Training Methods Training Schedule Training Curriculum Training Evaluation An ERP Training Framework Proposal Training as a Continuous Process Goals of the GQM Preliminary Plan Questions

10 7.6.9 Description of Metrics ERP User Involvement and Participation User Involvement User Participation User Involvement/Participation in the ERP Implementation Context A Framework for Monitoring User Involvement and Participation Proposal Goals of the GQM Preliminary Plan Questions and Metrics Description of Metrics Interpretation of Metrics Towards a Framework to Develop KPI Considerations References Chapter 8 Confirmatory Case Study Introduction ERP in Higher Education Institutions: Literature review Case Study Context ERP Implementation Phases Research Methodology Data Collection Data Analysis A Grounded Theory Model for ERP Implementations Phenomenon Causal Conditions Environmental Context Organizational Context Information Technology Context Intervening Conditions Action/ Interaction Strategies Consequences Comparison with the Pilot Case Study Causal conditions Organizational Factors Technological Factors Consequences SHEI-CSF Relevance Key Performance Indicators Conclusions

11 8.10 References Chapter 9 Contributions and Further Research Research Questions Addressed Methodological Contributions Trustworthiness Limitations of this Research Implications Implications for Further Research Implications for Practitioners Summary of Contributions References Appendix A: SAP System Overview Appendix B: Summary of Research Topics along the ERP lifecycle. Appendix C: An Overview of the major IS Research paradigms. Appendix D: PQM matrix for each SAP Implementation Phase.

12 LIST OF TABLES Table 1. IS research representation by organizational topic (source Vessey et al. 2002) Table 2. IS events and journals surveyed Table 3. ERP publications at selected international IS conferences Table 4. Most common used research methods Table 5. Characteristics of multimethod designs (source: Morse 2003) Table 6. Three worlds relevant to research methods (source: Mingers 2001) Table 7. Multimethod research framework proposal Table 8. CSF studies found in the literature review Table 9. The coding table for adequate training program CSF Table 10. The list of CSF and the respective citations Table 11. The CSF categorization using the CSF framework Table 12. Unified critical success factors model Table 13. CSF literature relevance by perspective Table 14. Pinto and Slevin CSF model and Standish Group model Table 15. Comparison between risk factors and CSF in ERP projects Table 16. Some champion definitions found in literature (source Roure 1999) Table 17. Words count for project champion definitions Table 18. Categories of answers (%) for project champion role choice Table 19. Identification of project champion by respondent type Table 20. Identification of the most critical figure in an ERP implementation by respondent type Table 21. Comparison with further CSF models Table 22. The extended unified critical success factors ERP model Table 23. Example of the matrix CSF versus ASAP work packages for project preparation phase Table 24. Comparing conventional and SAP methodologies (source: Khan 2002) Table 25. CSF relevance along the SAP implementation phases Table 26. Strategic and tactical perspectives along ERP implementation phases Table 27. Organizational and technological perspectives along ERP implementation phases Table 28. Formal definition of criticality indicator Table 29. Work packages criticality by ASAP phase Table 30. Information technology evolution in Photopics Table 31. ERP implementation phases in Photopics Table 32. Cultural dimensions suggested by Hofstede (1991) with score and mean for Portugal Table 33. Main issues in a BPR approach during an ERP implementation project Table 34. Goal for comprehensive business process reengineering CSF Table 35. The definition of questions related with business process reengineering CSF Table 36. The definition of metrics for BPR and their relationship with questions Table 37. Goals for top management support CSF Table 38. The definition of questions for top management CSF

13 Table 39. The definition of metrics for top management and their relationship with questions Table 40. ASAP Training activities of ASAP implementation methodology Table 41. Goal for adequate training program CSF Table 42. The definition of questions for adequate training program CSF Table 43. The definition of metrics for training and their relationship with questions Table 44. Roles used along a SAP implementation project Table 45. Goals for user involvement and participation CSF Table 46. The definition of questions for user involvement measurement goal Table 47. The definition of questions for user participation measurement goal Table 48. The set of metrics for user participation goal Table 49. The relationship between questions and metrics for user involvement Table 50. Information technology evolution in SHEI Table 51. ERP implementation phases in SHEI Table 52. SHEI-CSF relevance along the ERP implementation phases Table 53. Pilot case study trustworthiness Table 54. Confirmatory case study trustworthiness

14 LIST OF FIGURES Figure 1. ERP characteristics (source: Uwizeyemungu and Raymond 2004) Figure 2. Thesis roadmap followed Figure 3. Factor research view (source: Sarker 2000) Figure 4. Process research view (source: Sarker 2000) Figure 5. Socio-technical research view Figure 6. An ERP lifecycle framework proposal Figure 7. Number of ERP Publications by category Figure 8. Number of ERP publications related with each topic of implementation phase Figure 9. The ERP decision-making implementation framework Figure 10. A CSF conceptual framework Figure 11. Conceptual research framework Figure 12. Multimethod research framework Proposal Figure 13. Types of respondents in our web survey Figure 14. Identification of project champion figure Figure 15. Identification of the most critical figure in an ERP implementation Figure 16. A typical implementation project structure Figure 17. CSF relevance research framework followed Figure 18. Most relevant CSF model proposal for a typical SAP implementation project Figure 19. Strategic and tactical perspectives along ERP implementation phases Figure 20. Organizational and technological perspectives along ERP implementation phases Figure 21. Most critical work packages in project preparation phase Figure 22. Analysis of organizational versus technological SAP work packages Figure 23. Criticality analysis along SAP implementation phases Figure 24. An exploratory model for ERP implementation projects Figure 25. The ERP implementation project structure Figure 26. BPR concerns in the ERP context Figure 27. Graphical representation of the GQM plan for BPR Figure 28. Top Management concerns in the ERP context Figure 29. Graphical representation of the GQM plan for sustained management support Figure 30. A proposed ERP training framework Figure 31. Graphical representation of the GQM plan for training Figure 32. Constructs proposed by different authors for user involvement and participation Figure 33. A framework for monitoring user involvement and participation in ERP projects Figure 34. A framework to develop KPI for ERP implementations Figure 35. ERP project duration in SHEI Figure 36. A model for ERP implementation projects

15 Chapter 1 Introduction 15 Chapter 1 Introduction Chapter Summary: This chapter introduces the doctoral research project that has been undertaken, giving an outline of why such research has been done, placing the research in context and demonstrating its importance. This chapter first describes an overview of ERP systems, analyzing the different meanings for them, their historical account, typical functional modules, product lifecycle, motivations for their adoption and benefits achieved. Then, the research questions are outlined and an overview of the chapters within this thesis is presented. The focus of this dissertation is on the definition and analysis of Critical Success Factors (CSF) in Enterprise Resource Planning (ERP) systems projects. The interest of studying CSF for ERP implementation projects is because the Information Systems (IS) implementation literature, while acknowledging adaptation as one phase in the process, offers little theory to address the problems faced during implementation of packaged application software (Holland and Light 1999, Volkoff 1999, Esteves and Pastor 2001). Furthermore, there is the personal motivation and curiosity to know why it is difficult to adopt an IS even if it follows (from a technology and conceptual perspective) the needs of an organization. Many organizations have tried ERP implementations and it is obvious these implementations are difficult and that success is not guaranteed. 1.1 ERP Overview ERP stands for Enterprise Resource Planning. Other common names used are: Enterprise Information Systems (EIS), Enterprise Wide Systems (EWS) or Enterprise Systems (ES). Enterprise systems are commercial software packages that enable the integration of transactionoriented data and business process throughout an organization (Markus and Tanis, 2000, p. 176). Typically, ERP systems are software packages composed of several modules, such as human resources, sales, finance and production, providing cross-organization integration of transactionbased data throughout embedded business processes. These software packages can be customized to the specific needs of each organization up to certain limits (Esteves and Pastor 1999, Pastor and Esteves 1999). As Klaus et al. (2000) state, in the IS literature we observe some dissent among academics on the nature and definition of ERP. Some authors (Davenport 2000, Laudon and Laudon 2000) advise against the use of the term ERP and suggest alternatives; others (e.g. Pawlowski et al. 1999) state that ERP is not a term referring to a distinct object but rather a category ( umbrella term ), signifying a range of similar products. Yet others explain the ERP

16 Chapter 1 Introduction 16 concept in terms of its historical evolution, relating it with manufacturing and supply chain management. It is unlikely that a broadly agreed upon definition can be achieved. In the literature there is a consensus that ERP are indeed expected to support the enterprise's operations and provide its various levels of management with information in a highly integrated manner. When integrated beyond the confines of the individual enterprise with the systems of its business partners, such extended ERP systems engender a vision of a network of value-creating processes cutting across organizational boundaries. ERP can form a fundamental platform for the informational infrastructure of an enterprise. Based in literature review, Uwizeyemungu and Raymond (2004) have attempted to identify the characteristics generally attributed to ERP systems (see figure 1). Adaptability Technical Openness Integration Completeness ERP Organizational Homogenization Transversality Best practices Informational Real time Simulation Figure 1. ERP characteristics (source: Uwizeyemungu and Raymond 2004). Nowadays, new terms have been proposed, such as ERP II, and Enterprise Resource Management (ERM). The term ERP II was created by Gartner Group and it is defined as a business strategy and a set of industry-domain-specific applications that build customer and shareholder value by enabling and optimizing enterprise and inter-enterprise, collaborative operational and financial processes (Bond et al. 2000). There are over 1000 ERP vendors and solutions to from which to choose (Anderegg 2000). However, most of them are very small and escape the detection of companies looking for new ERP systems (Anderegg 2000, p. 9). As Oliver and Oliver (2002, p. 508) mention the extent to which ERP systems are shaping the IT industry are captured in the following comparison: Twelve years ago, IT people identified their organizations as IBM or Digital shops, says Bruce

17 Chapter 1 Introduction 17 Richardson, VP of research at AMR research inc. They are now more likely to be SAP or Peoplesoft (Sweat 1998) ERP Historical Account The roots of ERP systems can be traced back to the Material Requirements Planning systems (MRP) in the 70 s. These systems evolved to the Manufacturing Resource Planning systems (MRPII). (Shankarnarayanan 1999) identifies four phases in the ERP systems history: The 1960 s - Most of the software packages (then usually bespoke developed) were designed to handle inventory based on traditional inventory concepts. The 1970 s - The focus shifted to MRP systems which translated the master schedule built for the end items into time-phased net requirements for the sub-assemblies, components and raw materials planning and procurement. The 1980 s - The concept of MRP-II systems evolved, as an extension of MRP to shop floor and distribution management activities. The early 1990 s - MRP-II was further extended to cover areas like engineering, finance, human resources, project management, i.e. the almost complete gamut of activities within any business enterprise. Hence, the term ERP (enterprise resource planning) was coined. Hoy (1996) mentions that ERP systems follow the trend of its predecessors: MRP-II systems that consisted in a change from a materials emphasis to a holistic view of the manufacturing environment. Additionally, ERP systems add technology aspects to the overall system requirements. These include features such as a client/server-distributed architecture, and Object- Oriented Programming (OOP) development practices. Both of these factors help with the scalability task. This scalability and their evolution towards including supply chain and customer relationship management operations provide the extension into customer and supplier environments ERP Functional Modules The ERP functional capabilities are generally grouped into functional modules. This perspective gives the organization implementing an ERP system the possibility to choose only the modules that serve the interest of its business. The functionality may be expanded in the future by implementing additional modules. In chapter 5, the pilot case study chapter, we explain in detail the SAP system functional modules. We would like to mention that each vendor has its own way of thinking the composition of the ERP functional modules. In other cases, these functional capabilities are spread across different modules. According to Anderegg (2000, p. 43), in many cases ERP vendors use terminology specific to their own product in describing a particular ERP functional module be careful in comparing ERP systems based on terminology, for it is better to compare them based on functional capabilities.

18 Chapter 1 Introduction ERP Product Lifecycle and Market One of the main issues within ERP area is to know how long an ERP product may remain in the market, i.e. the ERP product lifecycle. Usually, to study this issue the Boston Matrix technique is used. The theory underlying the Boston Matrix is the Product lifecycle concept, which states that business opportunities move through 'lifecycle' phases of introduction, growth, maturity and decline. The Boston Matrix focus is based in the market growth versus market share. These are the two axes that define four quadrants which define the product categories: cash cows, stars, dogs, and babies. Janstal (2002) evaluated different ERP packages and he mapped them in a Boston Matrix which is available in Janstal (2002) alerts that ideal is to find mature STARS in the evaluation and selection of packages. STARS are often subject to development, the vendor makes lots of profit, the remaining life time for the package is satisfactory long and most of the bugs are gone. But very few systems are for the moment found in this section of the Boston Matrix. According to his account, an ill performed business application or ERP package can be sold and maintained at most in years. In late stage the package has old architecture and contains of spaghetti code. It is hard (sometimes impossibly) to make changed in the program code without hazardous damage the systems stability (Janstal 2002). According to Janstal (2002), SAP AG is still the market leader for ERP systems. The company is the largest vendor of ERP systems. Their global market share is 12%. SAP has done a powerful redesign in order to integrate SAP R/3 with CRM, e-business, SCM, APS and other new extended ERP applications. An overview of SAP system is provided in appendix A. Regarding the ERP market, mostly of the studies are published by consulting companies. For instance, a survey from AMR research confirmed that ERP will remain the biggest segment of large and mid-size company IT applications budgets through 2004 (Seewald 2002). The only academic study we found about ERP market is the one conducted by Everdingen et al. (2000). They studied the ERP adoption by European midsize companies using a European multicountry/multi- industry survey conducted in mid Although the study is not recent, it shows that the penetration of ERP vendors was growing considerably during the period According to their findings and from the viewpoint of clients, the fit with business processes was the most important selection criterion for a new ERP system. At the same time companies within the mid-market rate a low price and short implementation times as highly important (Everdingen et al. 2000, p. 31). At that time, some of the ERP vendors Ire attempting to satisfy these requirements by offering accelerated implementation methods. Roughly 11% of companies had an ERP implemented ERP Market in Spain According to a study conducted by Grupo Penteo an IESE business school (Grupo Penteo 2002), 70% of the Spanish companies implemented an ERP system. However, the study also shows that only 13% of these companies fully use the functionality of their ERP systems. SAP system is the most implemented ERP system (62 %), followed by JD Edwards (8%), Movex (7%), and BAAN (5%). According to the study the main reasons for SAP system choice are: the high

19 Chapter 1 Introduction 19 functionality offered, and its innovative vision of corporate applications. Next, we briefly describe the SAP system ERP Importance The importance of ERP was already evidenced by several studies such as: Approximately $300 billion has been invested in ERP worldwide in the last decade (Carlino et al. 2000). More than 60% of Fortune 1,000 companies had implemented core ERP applications manufacturing, financials, and human resources (Stein 1999). ITtoolbox ( conducted its 2004 ITtoolbox ERP Implementation Survey from March 17 to March 19, Over 375 IT and business professionals from around the world participated in this online survey. Participants were recruited directly from the ITtoolbox network. The 2004 ITtoolbox ERP Implementation worldwide survey reveals that the IT professionals surveyed: 52% anticipate budget increases for new ERP implementations/new modules deployments in SAP and PeopleSoft/J.D. Edwards were cited as the most popular ERP packages for new implementations and replacements. 65% are considering adding new modules to their existing ERP packages. 46% indicated that the main challenge to successful ERP implementations was inadequate definition of requirements and resistance to change. Davenport (1998, p. 122) characterized ERP as the most important development in the corporate use of technology in the 1990s. By utilizing packaged ERP software like those offered by companies such as SAP, BAAN, PeopleSoft and Oracle, companies seek to integrate the flow of information between different segments of their business while improving efficiency and reducing costs. Theoretically, these integrated systems provide broad functionality while reducing problems associated with data flow when interfacing between different software systems. According to (O'Leary 2000, p. 3) ERP are a corporate marvel, with a huge impact on both the business and information technology worlds, including each of the following dimensions: ERP affects most major corporations in the world. ERP affects many Small and Medium Enterprises. ERP affects competitor's behavior. ERP affects business partner requirements. ERP has changed the nature of consulting firms. ERP provides one of the primary tools for reengineering. ERP has diffused many best practices. ERP gave client server computing its first enterprise product. ERP has changed the nature of the information system functions. ERP has changed the nature of jobs in all functional areas. ERP costs are high. ERP has experienced huge market growth.

20 Chapter 1 Introduction Motivation and Benefits for adoption of ERP According to Ross and Vitale (1998) the six common motivations to ERP implementations are: The need for a common platform, process improvement, data visibility, operating cost reductions, increased customer responsiveness, and improved strategic decision making. Another study by Deloitte Consulting (1998) of selected individuals from 62 organizations found that motivations for an ERP implementation fell into two broad categories: a solution of technological problems and a vehicle for solving operational problems such as uncompetitive business performance and ineffective business processes. Markus and Tanis (2000) presented reasons why organizations implement ERP systems and discuss issues related to ERP systems success (see chapter 3 for an analysis about this topic). A number of points raised in their discussion can usefully be applied to analyze the question of how to assess the benefits of ERP implementation. Prior research has reported mixed results with regard to the effect of ERP systems adoption on a firm s long-term financial performance (Nicolaou 2004). The media are plenty of articles about ERP benefits and costs rates. For instance, in 1997 Appleton (1997) estimated that half of the ERP implementations failed to meet expectations. Other recent studies show that more than 70% of ERP implementations fail to achieve their estimated benefits (Al-Mashari 2000). Other survey from (Themistocleous et al. 2001) shows that organizations acquire benefits such as an increase in suppliers and customers satisfaction and an increase in productivity but the level of the Return On Investment (ROI) is rather low. Lately, different ERP benefits and costs models have been published such as: Shang and Seddon (2000), Gattiker and Goodhue (2000), Esteves et al. (2001), Stefanou (2001), Murphy and Simon (2002). The most cited study is the one of Shang and Seddon (2000). They present a list of business benefits categorized in five dimensions. However, lately this study has been criticized. The two main reasons for the criticisms are the lack of relationship between benefits and ERP goals and the timeframe to realize these benefits. Markus and Tanis (2000, p. 186) note that the benefits of ERP systems implementation should be assessed in relation to the organization s unique goals for the system. They also state that the measures of ERP success (the benefits attained) are relative to the period of time during which they are assessed. Davenport (2000) states that there are different types of benefits and that some types are likely to arise before others e.g. benefits from improved transactional processes and common data appear to precede benefits associated with improvements in management and decision-making. Therefore, according to O Grady (2002), a framework for assessing the benefits of ERP systems should therefore reflect both the objectives for implementing the system and the timing differences for the realization of each type of benefit. For an extended reading on the potential benefits of ERP systems see O Grady (2002).

21 Chapter 1 Introduction Objectives of the Research Since there were only a few research studies about CSF in ERP implementation projects reported in the literature when this research was initiated, the need and opportunity to conduct a doctoral research study in this area became rather obvious. A doctoral research study that would explain CSF in ERP implementations would benefit both academics and practitioners. This thesis is centered on a specific phase of the ERP lifecycle, the ERP implementation phase. After an extensive literature review on the ERP research, we detected a lack of this thesis focuses on the identification and management of critical success factors for ERP implementation projects. The general research questions of the doctoral research study are the following: What are the CSF for an ERP implementation project? CSF should be analyzed with respect to organizational and technological perspectives, at least. What is the relevance of each CSF along the typical implementation project phases? How these CSF are managed and influence ERP implementation projects? What are the key performance indicators related to the above CSF? These key performance indicators help in the control and monitoring of CSF. The main research goal of this study is to gain an understanding of project management practices in the realm of ERP implementation by focusing on the analysis of CSF and the generation of KPI. Therefore, the project aims to contribute to the monitoring of the implementation phase, to help managers in the task of project management. We attempt to achieve the following goals: Definition of CSF needed for a successful ERP implementation. All the studies related with CSF and ERP implementations are based on case studies so, first, we attempted to unify these CSF in a unique model. Understand how these CSF are managed in ERP implementations. Generation of a set of KPI to help with the monitoring of CSF. Usually, once CSF are established, each process and department is encouraged to identify indicators that can be used to measure its contribution. KPI can be used to monitor the ERP implementations and, help in CSF analysis, thus helping managers in the decision making process related to the ERP implementation phase. According to Kulik (1997) the importance of understanding why projects succeed is because repeating what worked on successful projects is a powerful strategy to ensure the success of future projects.

22 Chapter 1 Introduction Thesis Contributions The thesis contributes with: An annotated bibliography which is a reference for researchers interested in the implementation of ERP systems. A new CSF unified model for ERP implementation projects which combines previous research CSF studies. It extends previous research by providing a definition for each CSF and categorizing them in four perspectives: organizational, technological, strategic and tactical. A CSF relevance schema along the ERP implementation phases. A new criticality indicator for defining the most critical processes using PQM method. The definition of the most critical processes on SAP implementations based on ASAP implementation methodology. A set of KPI for some CSF and a systematic approach to develop the rest of KPI. A CSF management analysis in two organizational contexts: a small and midsized enterprise and a public higher education institution. A novel grounded theory model for ERP implementation projects.

23 Chapter 1 Introduction Organization of the Thesis This thesis is structured to guide the reader through the different phases of the doctoral project. Figure 2 presents the thesis roadmap, which includes the multimethod research approach followed. 1 Thesis Introduction 2 ERP Literature Review 3 Research Design 4 5 ERP Context CSFs Identification ( 1- coding procedure) 6 CSFs Relevance ( 2- Process Quality Management 3- Survey) CSFs Management (4 Pilot Case Study) 5 - Goals/Questions/Metrics 7 Key Performance Indicators 6 - Case Study 7 - Grounded Theory 8 - Stakeholder Analysis 8 Confirmatory Case Study 9 Thesis Contributions Figure 2. Thesis roadmap followed.

24 Chapter 1 Introduction 24 Once the above overview on ERP systems has been provided, we present below a brief outline of the topics addressed in this thesis. This doctoral thesis is organized in nine chapters plus appendices. The initial three chapters deal with general concepts thesis introduction, literature review, and research methodology. Then, the next chapters deal with the initial phase of the multimethod research approach that we have followed. Finally, the contributions chapter is presented. In Chapter 2 the literature review on ERP research and CSF is presented. This literature review shows that ERP researchers have mainly concentrated on issues related to the implementation phase of the ERP lifecycle. Until now, the other phases have been 'almost forgotten'. One of the main reasons is that the majority of organizations are in the implementation phase. Also, in some phases, namely acquisition and implementation phases, there is a strong intervention of consultants, which makes very difficult the access to information. ERP systems offer many potential areas for research, several of which were discussed in this literature review. Due to their pervasive nature, ERP systems are of interest for a wide range of professional and scholarly communities (from software engineering to accounting), apart from the IS field. This suggests that ERP-related research could or should be interdisciplinary. The literature review on CSF approach reveals that this approach has been widely used in different disciplines, especially in IS. Based on the literature review, a CSF identification framework is proposed. In Chapter 3 the research methodology undertaken in this doctoral research is described. Therefore, the purpose of this chapter is to present the thesis conceptual framework, the research paradigm, expound the research strategy, including the research methods and techniques adopted. The chapter reports on the multimethod research focus that this doctoral research project has taken. The doctoral research framework presents the different phases of the research study, with the different research methods mapped and linked in each phase. Considering the research questions and the research context, we rationally selected those research methods that could be useful to address our research questions as well as their combination. Finally, we propose the principles for evaluation of interpretive research in IS research. In Chapter 4 a unified CSF model for ERP implementations is defined. This model was developed through the application of open coding procedure from grounded theory method and based in a set of previous CSF lists. We also compare the CSF for ERP implementations with CSF for other IS implementation projects. We present an analysis of ERP CSF as perceived risk factors for ERP implementations and we compare the CSF unified model with the list of risk factors for ERP implementations. This comparison shows that most of the CSF may be perceived as risk factors. Finally, we present a study that we carried out to clarify project champion CSF since during the literature review we found some misunderstandings regarding this figure. The findings show that the project champion is associated to the project sponsor role and that project sponsor and project manager are both identified as CSF for ERP implementation projects. Therefore, the CSF unified model was extended to incorporate these CSF. In Chapter 5 the analysis of the CSF relevance along the typical ERP implementation phases using the Process Quality Management (PQM) method is presented. By applying PQM method and using the ASAP implementation methodology as a reference for the SAP implementation processes, we defined the CSF relevance for each CSF along the SAP implementation phases. Then we extrapolated our findings to other ERP studies by comparing our relevance schema with others proposed by other colleagues. One of the limitations of PQM is that the process structure of

25 Chapter 1 Introduction 25 the PQM method is too simple since it only provides one level of process analysis. Since most cases imply project process structures that are more complex, such as ERP implementation processes structure, here we propose the improvement of the PQM analysis section to provide more depth to complex project structures. We propose an extension to the standard PQM method, where we provide a new criticality indicator for complex implementation project process structures. This criticality indicator was used to define and analyze the most critical SAP implementation processes. In Chapter 6 a pilot case study of an ERP implementation in a Portuguese SME is described. We focused on the identification of organizational factors that affected the ERP implementation project. The pilot case study helped to test the research framework and the preparation of the indepth case study, especially the interview questions. As outcomes, there was a preliminary list of findings regarding CSF management, and a grounded theory ERP implementation model. We also analyze the ERP implementation project from a national cultural perspective using Geert Hofstede s dimensions. These dimensions are used to explain some of the attitudes and behaviors during the ERP implementation project. Our findings enforce that some of the problems in ERP implementation projects are not of technological nature but may be attributed to organizational factors while some issues are related to national culture. Finally, we also discuss the issue of defining ERP implementation success as solely on time, on budget and providing the required functionality. The findings show that even when the project is not on time and within budgets, managers still thinking that it was a success since most of the times the initial project duration and budget predictions may be unrealistic or not update along the ERP implementation phases. In Chapter 7 a set of Key Performance Indicators (KPI) for some CSF were developed using the Goals/Questions/Metrics (GQM) method. The GQM method is a mechanism for defining and interpreting operational, measurable goals. Because of its intuitive nature the approach has gained widespread appeal. As a result, we propose a GQM preliminary plan with different metrics to monitor and control CSF while implementing an ERP system. Due to the extensive number of CSF we will focused on the most frequently cited CSF and the ones we had some working experience in the past. Thus, we propose set of metrics using GQM for: sustained management support, business process reengineering, adequate training program, and user involvement and participation. The idea of this work is not to present an exhaustive list of KPI. Instead, we attempt to present a form to develop these metrics in future ERP implementation projects and provided the first set of metrics that should be extended and adapted according to the specific needs of ERP implementation projects. Therefore, we present a general framework to develop KPI for the rest of CSF. In Chapter 8 an in-depth case study of an ERP selection and implementation in a public HEI is described. This case study helped to validate the theory developed and the research propositions defined in previous chapters. Special attention has been paid to contextual influence and to organizational factors. Furthermore, this case study helped to validate the theory developed and the research propositions defined in previous chapters. We also compare the findings of this case study with the pilot case study. Finally, we present an analysis of the CSF relevance along the ERP implementation phases of this case study. In Chapter 9 the thesis contributions and how we believe that this research contributes to the current body of knowledge on ERP are presented. Each research question is revisited and discussed. The additional contributions and key findings of the study, along with limitations of the

26 Chapter 1 Introduction 26 study are also presented. Then, we describe the implications for practitioners and for ERP/IS research. Finally, we evaluate the trustworthiness of this doctoral research. We added some appendices to provide greater depth of understanding of some aspects discussed in the thesis. The appendices are: A: SAP system overview. B: Summary of Research Topics along the ERP lifecycle. C: An Overview of the major IS Research paradigms. D: PQM matrix for each SAP implementation phase. 1.5 References Al-Mashari M Constructs of process change management in ERP context: a focus on SAP R/3, Sixth Americas Conference on Information Systems, pp Anderegg T ERP: A-Z Implementer s Guide for Success, Resource Publishing, USA. Appleton E How to survive ERP, Datamation 43, pp Bond B., Genovese Y., Miklovic D., Wood N., Zrimsek B., Rayner N ERP is Dead Long Live ERPII, Research Note SPA , Gartner Inc., October Carlino J., Nelson S., Smith N AMR research predicts enterprise applications market will reach $78 billion by 2004, AMR research, Boston Davenport T Putting the Enterprise into the Enterprise System, Harvard Business Review, July-August, 1998, pp Davenport T Mission Critical: Realizing the Promise of Enterprise Systems, Boston, Harvard Business School Press. Deloitte Consulting ERP s Second Wave, Maximizing the Value of ERP-enabled Processes, Deloitte Touche Tohmatsu, Esteves J., Pastor J An ERP Lifecycle-based Research Agenda, Proceedings of 1st International Workshop on Enterprise Management and Resource Planning: Methods, Tools and Architectures - EMRPS'99, pp Esteves J., Pastor J Enterprise Resource Planning Systems Research: An Annotated Bibliography, Communications of the Association for Information Systems (CAIS), 7(8). Esteves J., Carvalho J., Santos A Towards an ERP Lifecycle Costs Model, Information Resources Management Association (IRMA) International Conference, Toronto (Canada), pp Everdingen Y., Hillegersberg J., Waarts E ERP Adoption by European Midsize Companies, Communications of the ACM, 43(4), pp Gattiker T., Goodhue D Understanding the Plant Level Costs and Benefits of ERP: Will the Ugly Duckling Always Turn into a Swan?, Hawaii International Conference on System Sciences, vol. 7. Grupo Penteo Aplicaciones Corporativas: situación en España y tendencies futures, Grupo Penteo report, Holland C., Light B A Critical Success Factors Model for ERP Implementations, Focus, IEEE Software May/June 1999, pp Hoy P The Changing Role of MRP II, APICS Magazine, 6(6), June 1996.