Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years

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1 第 十 五 卷 第 二 期 2013 年 6 月 (pp.159~194) Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years Wen-Hsien Tsai a, * Der Chao Chen a Ya-Fen Lee a Sin-Jin Lin b Yao-Chung Chang a Hsiu-Li Lee a a Department of Business Administration, National Central University b Department of Accounting, Chinese Culture University Abstract This paper presents the results of four cross-sectional surveys of the top 5000 largest corporations in Taiwan, undertaken in 2003, 2006, 2009 and We focus on a longitudinal study of the used or intended implementation of Enterprise Resource Planning (ERP) systems of firms to examine the innovation diffusion phenomenon and examine key management issues during the ERP life cycle phases. Our initial empirical analysis provides us with a number of interesting results. We find that the implementation of an ERP project entails an innovation diffusion phenomenon. Our analysis further shows that some important management issues deserve more attention during the life cycle of ERP projects. Based on our findings, practitioners, academics and entrepreneurs will benefit from this knowledge to prepare an effective management plan to increase ERP implementation success. Keywords: Enterprise Resource Planning (ERP) implementation, longitudinal study, Innovation diffusion theory, ERP life cycle ERP ERP a a a b a a a b ERP ERP * Corresponding author whtsai@mgt.ncu.edu.tw DOI: /JEB (2).01 June

2 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years ERP ERP ERP ERP ERP ERP ERP ERP ERP 1. Introduction Since the 1990s a number of companies around the world have implemented enterprise resource planning (ERP) systems (Rajagopal, 2002; Tsai et al., 2007). In the face of globalization, more and more Taiwanese companies have also recently increased their investment in implementing ERP to increase competitiveness. ERP systems enhance the competitiveness of companies, promoting the ability of real-time responsiveness, enabling easier access to information and faster retrieval of information or reports, as well as improving information for strategic planning and operational control, in order to achieve benefits (Mirani and Lederer, 1998; Tsai et al., 2012a). The ERP system can be conceptualized as a complex software system that ties together and automates a wide range of processes within an organization (Minahan, 1998). ERP implementations can be viewed as innovation diffusion processes within organizations (Al-Mashari, 2001). Innovation diffusion theory can be divided into two parts; one is innovation which as an idea, practice or object that is perceived as new by an individual or other unit of adoption; the other is diffusion, which is the process in which an innovation is communicated through certain channels, over time, among the members of a social system (Rogers, 2003). ERP systems can be characterized as innovative, with the potential to trigger change at organizational and inter-organizational levels (Light and Papazafeiropoulou, 2004). ERP systems need to be implemented sequentially through diffusion. Rogers (2003) illustrates that the rate of adoption is the relative speed with which an innovation is adopted by members of a social system. It takes time for an innovation to be diffused and we view this as the right time to consider this process. As we view ERP systems as innovative, we apply diffusion of innovations theory to broaden our 160 June 2013

3 understanding of the phenomena behind their implementation. According to Chang and Gable (2002), an improved understanding of ERP lifecycle issues is required for both fruitful research and effective implementation of ERP. The stages of their model are: pre-implementation, implementation and post-implementation. The Markus and Tanis (2000) implementation model is based on four phases, namely: chartering, project, shakedown, and onwards and upwards. Accordingly, we analyzed an ERP system implementation process in order to gain an overall perspective. In this study, based on the research of Chang and Gable (2002), and Markus and Tanis (2000), we divided ERP into pre-implementation (the chartering phase), implementation (the project phase) and post-implementation (the shakedown and onward-upward phases) to examine key management issues involved in these phases. The purpose of this investigation was to propose a longitudinal study of the implementation of ERP in Taiwanese firms in order to examine the innovation diffusion phenomenon as well as to explore fundamental management issues during the ERP life cycle. 2. Methodology 2.1 Research Framework Questionnaire surveys regarding the implementation of ERP in Taiwan were first conducted in 2003; Umble et al. (2003) estimated that the payback period for an ERP system typically ranges from one to three years after implementation. Moreover, Jones et al. (2006) also discovered that the first implementation in each of the organizations occurred two to three years after the project began. As a result, the questionnaires were distributed again in 2006, 2009, and Thus, this study draws on the findings of four cross-sectional surveys of the top 5000 largest corporations in Taiwan to examine the status of ERP implementation. Markus et al. (2000) examined key management issues during the ERP life cycle. ERP implementation involves four distinct phases: (1) Chartering phase, comprising decisions leading up to the funding of an ERP system. The key activities during this phase include establishing a business case for ERP systems, selecting a software package, identifying a project manager, and approving a budget and schedule. The key players in chartering phase include June

4 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years vendors, consultants, company executives, and IT specialists. (2) Project phase, during which ERP is configured and rolled out to the origination. The key activities include software configuration, system integration, testing, data conversion, training, and rollout. The key players include the project manager, project team members, internal IT specialists, vendors, and consultants. The success metrics for the project phase are: (a) project cost relative to budget; (b) project completion time relative to schedule; (c) completed and installed system functionality relative to original project scope. (3) Shakedown phase, during which the company makes the transition from go-live to normal operations. The key activities include bug fixing and rework, system performance tuning, retraining, and staffing up to handle temporary inefficiencies. In this phase, the errors of prior causes can be felt, typically in the form of reduced productivity or business disruption. However, various problems will be resolved finally. The success metrics for the shakedown phase are: (a) Short-term changes occurring after system go-live in key business performance indicators such as operating labor costs; (b) Length of time before key performance indicators achieve normal or expected levels; (c) Short-term impacts on the organization s adopters, suppliers and customers such as average time on hold when placing a telephone order. (4) Onward and upward phase, during which the company achieves most of its business benefits. The key activities include continuous business improvement, additional user skill building, upgrading to new software releases, and postimplementation benefit assessment. The key players include operational managers, end users, and IT support personnel. Vendor personnel and consultants may be involved when upgrades are concerned. These four phases also can be divided into ERP pre-implementation (the chartering phase), implementation (the project phase) and post-implementation (the shakedown and onward-upward phases) (Chang and Gable, 2002). Understanding ERP life cycle issues will also help in better directing the ERP agenda (Tsai et al., 2005). Thus, we examine key management issues during the ERP life cycle in the context of Taiwanese firms to explore whether there were any significant differences during 2003, 2006, 2009, and The questionnaires of this research focused on five areas: (1) the characteristics of ERP implementation (Section 3.1), (2) ERP implementation status (Section 3.2), (3) motivation and evaluation of the project chartering phase (Section 3.3), (4) implementation 162 June 2013

5 experience and ERP system configuration for the project phase (Section 3.4), (5) Postimplementation problems of an ERP system for the shakedown phase (Section 3.5), and (6) the benefits of the ERP system and future directions for the onward and upward phase. DeLone and McLean s information systems (IS) success model (DeLone and McLean, 1992) is used to measure ERP performance improvement levels (Section 3.6). There are six dimensions for this IS success model: System Quality, Information Quality, System Use, User Satisfaction, Individual Impact, and Organizational Impact. Besides, the Balanced Scorecard (BSC) method is used to access the organizational impact. The research framework is shown in Figure 1. Ideas Dollars Dollars Assets Assets Impacts Impacts Performance Phase I Phase II Phase III Phase IV Project Chartering The Project (Configure & Rollout) Shakedown Onward and Upward Pre-Implementation Implementation Post-Implementation Project Performance Budget Schedule Scope System Quality User Satisfaction System Use User Satisfaction Individual Impact Organizational Impact BSC Section 3.3 Motivation and evaluation of the project chartering phase Section 3.4 Implementation experience and ERP system configuration Section 3.5 Post-implementation problems of an ERP system Section 3.6 Benefit of ERP system and future directions Financial Customer Internal Business Process Learning & Growth Section 3.1 The characteristics of ERP implementation Section 3.2 ERP implementation status Figure 1 The research framework 2.2 Sample and Data Collection The questionnaire, developed to examine the ERP life cycle, served as a tool for determining management issues that influence top managers, project managers, key users and end users. This study employed a two-step approach in designing the questionnaires and collecting data. The steps are described as follows: June

6 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years Step1: Listing issues related to ERP life cycle as a result of a literature review, and then evaluating them with a small sample survey. To ensure data validity and reliability of the survey instrument, an iterative process of personal interview with eight knowledgeable individuals (i.e. two IS experts, two ERP suppliers, two ERP consultants and two managerial level users) were conducted to modify the questionnaire before sending it out. Their comments also helped us to improve its quality. Step2: Redesigning the survey questionnaire concerning ERP life cycle ; collecting the data of a large sample and analyzing the collected data. Questionnaires were distributed in 2003, 2006, 2009, and 2012 to the manufacturing and service companies that are listed among the Top 5000 Largest Corporations in Taiwan in 2001, 2004, 2008, and 2011 including manufacturing and service firms were targeted. Thus, the top 5,000 largest corporations in these sectors were included. All of the corporations registered at the Ministry of Economic Affairs have an annual revenue of over NT$ 300 million for manufacturing and NT$ 200 million for service industry. This study sent out 3,957, 4,300, 4336, and 4,276 questionnaires in 2003, 2006, 2009, and 2012, respectively, to the ERP project managers and senior project team members in the participating companies. ERP project managers and senior project team members were selected because they understand these issues. Therefore, after deleting missing responses and unusable ones, the final investigative samples included 657, 620, 603, and 605 completed questionnaires (an effective response rate of 16.60% in 2003, 14.41% in 2006, 13.91% in 2009, and 14.1% in 2012, respectively). It is worth mentioning that our data collection effort reflects the typically lower responses that are commonly seen for IS studies in the field, for example, 17% for Bernroider and Koch s (2001) research and 3.9% for Rao s (2000) research. Possibly, time constraints and the size of the instrument contributed to this low response rate. To support the use of the sample, tests of non-response bias were conducted. We conducted a chi-square test to determine the differences in the distribution of firm size (employee numbers) between responding and non-responding firms. We used recommendations suggested by Armstrong and Overton (1977) to assess the non-response bias in our survey by comparing early and late respondents on key organizational characteristic such as firm size (Ifinedo and Nahar, 2007). The assumption behind such an approach is that late respondents can to some degree characterize the views of non-respondents who just never got-around-to filling out the questionnaire (Bendoly and Jacobs, 2004). Two groups of the same size were formed based on the return date of the questionnaire (Wang et al., 2007). The results of the chi-square 164 June 2013

7 test showed there were no significant differences between the two sub-samples. The results promoted the adoption of the set of complete responses as a representative sample in our investigation. 3. Data Analysis 3.1 The Characteristics of ERP Implementation Table 1 lists the basic characteristics of the Taiwanese responding firms in 2003, 2006, 2009, and 2012, respectively. In 2003, the sample involved 502 (76.4% of 657) companies with fewer than 500 employees and 540 companies (82.3% of 657) with annual revenues below NT$5 billion. Among these organizations, approximately 406 companies (61.8% of 657) are manufacturers and 251 are members (38.2% of 657) in service industries. In 2006, the sample contained 478 (77.1% of 620) companies with fewer than 500 employees and 486 companies (78.5% of 620) with annual revenues below NT$5 billion. Among these organizations, approximately 348 companies (56.1% of 620) are manufacturers and 272 are members (43.9% of 620) in service industries. Finally, in 2009, the sample included 451 (74.8% of 603) companies with fewer than 500 employees and 465 companies (77.1% of 603) with annual revenues below NT$5 billion. Among these organizations, approximately 354 companies (58.7% of 603) are manufacturers and 249 are members (41.3% of 603) in service industries. In 2012, the sample involved 460 (76.0% of 605) companies with fewer than 500 employees and 486 companies (80.3% of 605) with annual revenues below NT$5 billion. Among these organizations, approximately 360 companies (59.5% of 605) are manufacturers and 245 are members (40.5% of 605) in service industries. Table 1 Characteristics of the respondents Employee numbers Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% < to > Missing data Company age < 10 years June

8 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years 10 to 20 years to 30 years > 30 years Missing data Annual revenue (NT$bil.) < $ $0.5 to < $ $1.0 to < $ $5.0 to < $ $10.0 to < $ > $ Missing data Industry sector Manufacturing Service Total Respondents ERP Implementation Status The questionnaires asked respondents to provide basic information about their current status regarding ERP implementation Current Use of the ERP Package Table 2 indicates that the percentage of the responding firms with implemented ERP systems increased from 57.3% ( ) in 2003, 59.9% ( ) in 2006, and 70.7% ( ) in 2009, to 74.7% ( ) in 2012, which is an significant increase of 17.4%. Rogers (2003) defines the adoption of an innovation as following an S curve when plotted over a length of time. The categories of adopters are: innovators (the first individuals to adopt an innovation), early adopters (the second fastest category of individuals who adopt an innovation), early majority (adopt an innovation after a varying degree of time), late majority (adopt an innovation after the average member of the society), and laggards (the last to adopt an innovation). This implies that the marketing of an ERP system displays the innovation diffusion phenomenon (Table 166 June 2013

9 3). From Table 3, the results indicate that almost all of the responding firms are pursuing ERP implementation increasingly year by year. Thus, it is worth noting that the innovation diffusion phenomenon of the ERP system clearly exists within Taiwanese firms of various industries. Table 2 Current use of the ERP package ERP status All planned modules being successfully implemented Only parts of the planned modules being successfully implemented Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Still in the implementation stage Under evaluation Being evaluated, and determined not to implement temporarily Without any consideration so far Total Respondents Table 3 Descriptive statistics of implemented companies Industry N Implemented % N Implemented % N Implemented % N Implemented % Food Cotton & Rag trade Plastics & rubber Chemical manufacturing Electronics & Generators Information products Engineering/iron/ steel Conveyance June

10 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years Other manufacturing Trade Financial/insurance Building/real estate Other services Total Respondents Reasons for Adopting or not Adopting ERP Systems The motivation behind companies implementing ERP systems is to improve organizational efficiency, effectiveness and ultimately performance (Arnold, 2006). However, not every company chooses to adopt ERP, in spite of the significant benefit that ERP software packages provide (Rainer et al., 2005). Aloini et al. (2007) observe that ERP implementation involves a large number of hidden costs during the ERP life cycle and that these costs dramatically increase the total implementation costs; some companies reduce their initiatives and even relinquish ERP implementation for this reason. Panel A of Table 4 identifies two major reasons for not adopting an ERP system: Satisfaction with the current computer systems and High investment cost, low performance. On the other hand, the top five reasons for adopting ERP systems during the investigative years are the same (In Panel B of Table 4). Table 4 Reasons for adopting or not adopting ERP systems Panel A: Reasons for not adopting ERP systems Freq. % Freq % Freq. % Freq. % Satisfaction with the current computer system High investment cost, low performance Lack of human resources Too time-consuming for the ERP implementation Lack of understanding of the ERP system Total Respondents Panel B: Reasons for adopting ERP systems Improving information accuracy and timeliness June 2013

11 Reducing operational costs and increasing operational efficiency Integrating IT systems across business functions Real time control on business operational conditions Enhancing business quick response competence Implementation the Business Process Reengineering (BPR) system Reinforcing the organizational IT infrastructure Improving the quality of management decision-making Assisting the execution of overall corporate strategies Fitting with business growth and corporate makeover Total Respondents As can be seen, many companies always pay more attention to the main capability of ERP systems, which is to integrate information across the enterprise and provide real-time information for reporting and making decisions (Mirani and Lederer, 1998; Teltumbde, 2000). It is also interesting to find that the percentages of various reasons for adopting ERP systems are generally decreasing. It may means that an ERP system is a prerequisite for firms in Taiwan nowadays ERP System Sources and Integration with Other IT Systems Most firms consider implementation of ERP systems based on cost-effectiveness (Verville et al., 2007). Umble et al. (2003) indicate that ERP packages are primarily proprietary systems rather than open system architectures, and that this feature can limit the flexibility of the selected enterprise software. In Panel A of Table 5, this comparison revealed that our sample firms acquired the ERP system by using Evolution from legacy systems, In-house redevelopment, and Outsourcing approach, where the percentage decreased from 39.1% ( ) in 2003 to 26.3% ( ) in This phenomenon occurred because companies with the required expertise can design their own systems for integration with other complex systems. On the other hand, most firms are pursuing ERP packages (including Single ERP package and A mixture of an ERP packages with other systems ), where the percentage increases from 59.5% (40.4% %) in 2003 to 73.7% ( ) in The companies pursuing ERP packages are expected to provide complete functionality for all business needs. Furthermore, based June

12 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years on Rogers (2003) research, they also experience the innovation diffusion phenomenon of the ERP package like Taiwanese firms do. The integrated system was found to improve operations, foster a paperless environment and provide efficient inventory tracking and picking. It also had several tangible benefits, including reduced lead time and improved inventory accuracy (Bose et al., 2008). In order to maximize a firm s competitive advantage, most firms contemplating an ERP system focus on the integration of internal resources and consider the competitive environment of global logistics. In Panel B of Table 5, we find that firms have not integrated ERP systems with other systems; the percentage declines from 46.0% in 2003 and 48.0% in 2006 to 21.8% in 2009, and 33.0% in A higher percentage of firms has implemented or is in the process of implementing the Supply Chain Management (SCM) system and the Customer Relationship Management (CRM) system. Much research has indicated that ERP systems should be extended to include SCM and CRM, and that systems should manage the integration of material planning and control that flows both ways from suppliers and consumers (Akkermans et al., 2003; Chang et al., 2008). The results indicate that many companies have extended their ERP system with other IT systems (especially SCM and CRM) to maximize their firm s competitive advantage. Thus, it is worth noting that the innovation diffusion phenomenon of the ERP system integration with other IT systems clearly exists within Taiwanese firms. This means that firms in a highly competitive market are able to pursue and integrate different IT systems. Table 5 ERP system sources and integration with other IT systems Panel A: ERP system sources Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Evolution from legacy systems In-house redevelopment Outsourcing Single ERP package A mixture of an ERP packages with other systems Missing data Total Respondents Panel B: Integration of ERP with other IT systems No integration June 2013

13 SCM CRM APS Knowledge management (KM) Others Total Respondents Implementation ERP Software Packages and ERP Modules In Panel A of Table 6, the top three ERP software packages for implementation among the investigative years are the same. The Data System (Taiwan) ERP software ranks first, with the greatest market share (approximate 30.4% in 2003, 43.8% in 2006, 38.9% in 2009, 35.7% in 2012). The Oracle and SAP rank a distant second and third. The result indicates that the ERP package market in Taiwan seems to be dominated by local suppliers. However, the market share of Data System (Taiwan) and Oracle is decreasing and SAP s market share is increasing. Packaged ERP systems are designed by using numerous modules to provide a comprehensive range of functional support. However, instead of accepting an entire package, firms may choose to select certain needed modules for implementation. Results of the survey indicated that over 60% of the responding firms have installed the following six major modules among the investigative years: Financial Accounting, Purchasing Management, Sales Distribution, Material Management, Fixed Asset Management, and Production Planning (in Panel B of Table 6). On the other hand, Human Resources and Management Accounting modules have only been widely implemented more recently. This implies that human resources management and cost management are the most important internal management issues which companies have recently prioritized. Table 6 Implementation ERP software packages and ERP modules Panel A: Implementation ERP software packages Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Data Systems (Taiwan) SAP Oracle June

14 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years J.D. Edwards IE (Taiwan) Fast Tech. (Taiwan) Other ERP packages Multiple ERP packages Missing data Total Respondents Panel B: Implementation ERP modules Financial Accounting Purchasing Management Sales Distribution Material Management Fixed Asset Management Production Planning Human Resource Management Accounting Quality Management R&D Financial Management Investment Management Others Total Respondents Investment Costs Table 7 summarizes the answers of respondents to questions related to ERP system costs and consulting expenses. The results identify that installing a full ERP system costs less than NT$5 million, the percentage being 49.7% in 2003 and 61.6% in 2006, but decreasing to 45.2% in 2009 and 52.6% in The ERP system costs range from NT$5 million to NT$50 million extending from a low of 42.2% ( ) in 2003 and 31.3% ( ) in 2006 to a high of 47.2% ( ) in 2009 and 39.9% ( ) in This result means that the ERP-implemented companies have, in recent years, increased their investment costs in the ERP system. On the other hand, the consulting 172 June 2013

15 expenses are less than NT$5 million, with the percentage increasing from 64.4% in 2003 to 80.8% in This result indicates that the consulting firms are cutting prices to fight for their share of the ERP market. Thus, the ERP-implemented companies have shown a decrease in consulting expenses in recent years. Table 7 Investment costs Panel A: ERP system cost (NT$ million) Freq. % Adjust % Freq. % Adjust % Freq. % Adjust % Freq. % Adjust % < NT$5 million NT$5 million to NT$10 million NT$11 million to NT$50 million > NT$51 million Missing data Total Respondents Panel B: Consulting expense (NT$ million) < NT$5 million NT$5 million to NT$10 million > NT$10 million Missing data Total Respondents Chartering Phase: Motivation and Evaluation of the Project Chartering Phase Motivation and evaluation of the pre-implementation process comprises the first phase of ERP life cycle. The following details the answers of respondents to questions related to the decision-making based on the pre-implementation of packaged ERP systems Main Internal Drivers and Implementation Partners From Table 8, we find that there is no significant change in the four periods regarding internal drivers and implementation partners. The results identify Top managers (45.1% in 2003, 56.2% in 2006, 57.1% in 2009, and 54.1% in 2012) as the main internal driver June

16 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years and Consultants from ERP vendors (81.3% in 2003, 76.3% in 2006, 81.4% in 2009, and 78.1% in 2012) as the most important implementation partner. Most of the organizations partnered with Consultants from ERP vendors or Consultants from consulting firms during their ERP implementation process. A few organizations also partnered with Individual consulting or Consultants from CPA firms. These results show that Top managers and ERP vendors play key implementation roles because of their active and significant contributions in advising and facilitating system adoption, implementation and stabilization for the organizations. Table 8 Main internal drivers and implementation partners Panel A: Main internal drivers Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Board chairpersons Top managers CIO Departments/Users Others Missing data Total Respondents Panel B: Implementation partners Consultants from ERP vendors Consultants from consulting firms Individual consultants Consultants from CPA firms Others Missing data Total Respondents The Selection Criteria of ERP Package / Vendors / Consultants The survey evidence for the percentages and the rankings of selection criteria for the ERP package, vendors, and consultants in 2003, 2006, 2009, and 2012 is listed in Table 9. In Panel A of Table 9, as can be seen. Better fit with corporate business processes, A robust ERP framework, Total cost of Ownership, Flexible systems for corporate 174 June 2013

17 requirements, Ease of use and maintenance, and The provision of various real-time online researching and report statements functions emerged as statements reflecting the six key benchmarks for ERP package selection. These results imply that, instead of modifying organizations existing software or reengineering their processes or management needs, most organizations prefer to adopt systems that closely fit their processes. Thus, selecting ERP package software that best suits an organization s information needs and processes is crucial for ensuring minimal customization as well as successful implementation and use (Janson and Subramanian, 1996). We also found that there was no significant change during the four periods regarding the selection criteria of ERP vendors and consultants. ERP vendors capabilities and experiences and Support of maintenance and upgrading in the post-implementation stage ranked as the top two important selection criteria of ERP vendor (In Panel B of Table 9). The results are consistent with Bernroider and Koch s (2001) research which pointed out that good support is the most important criterion for large firms. Furthermore, according to the research of Rao (2000) and Tsai et al. (2009, 2011, 2012b), it is important that the software vendor knows the industry and is willing to implement the software for the industry. This explains the reason why the two selection criteria remained the top two selection criteria among the investigative years. On the other hand, several respondents considered Consultants experiences of ERP implementation, Domain knowledge, and Industry experiences as the top three important criteria for selecting consultants (In Panel C of Table 9). These results match the findings of Piturro (1999) and Welti (1999), who pointed out that consultants experiences, knowledge of the modules and experiences with similar software applications play a major role in ERP implementation. Table 9 The selection criteria of ERP package / vendors / consultants Panel A: ERP package selection criteria Better fit with corporate business processes Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking A robust ERP framework Ease of use and maintenance Flexible systems for corporate requirements June

18 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years The provision of various realtime online researching and report statements functions Total cost of Ownership The provision of a robust auditing system The provision of a well-designed security protection mechanism system The provision of appreciable implementation methods and assistant tools A consistent (satisfied) output interface and function for local business Adequate system testing and high level of system stability Supporting capabilities for the inclusion of multi-languages, multi-currencies, and multicorporations The period of time for the system implementation The provision of several successful example The capability of integrating different platforms and data The provision of Best Practice Ease of integration with other systems (ex: CRM, SCM) Consultant s suggestions ERP systems which are used by customers and suppliers Return On Investment Total Respondents Panel B: ERP vendor selection criteria Capabilities and experiences Support of maintenance and upgrading in the postimplementation stage June 2013

19 Brand goodwill Market position The offering of education and training courses Reputation in the industries International big brand Financial position Relationship Total Respondents Panel C: Consultant selection criteria ERP experiences Domain knowledge Industry experiences Project management capabilities Post-implementation support provision Costs Methodologies/approaches Total Respondents Project Phase: Implementation Experience and ERP System Configuration The activities during the second phase of the ERP life cycle include configuration of the ERP, system customization and modification of plans Implementation Responsibility and Strategies Umble et al. (2003) indicate that while ERP system implementation can be complex and difficult, a structured and disciplined approach can significantly facilitate implementation. Furthermore, Huang et al. (2004) suggest that the composition of project team members with experienced business and technology managers is invaluable in providing needed business and technical expertise. This is why project teams (50.4% in 2003, 49.0% in 2006, 51.7% in 2009, and 52.6% in 2012) were responsible for ERP implementation among the investigative years (See Panel A of Table 10). This indicates that implementation project teams should take a disciplined approach to project management, giving a clear definition of objectives, providing monitoring and feedback, and offering June

20 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years risk management (Tsai et al., 2011). It is interesting to find that the percentages of project teams taking the implementation responsibility are increasing while the ones of information departments are decreasing. It may mean that the implementation of the ERP involves the whole company, not the IT department only. As soon as the project is approved, and even before, a team involving all areas of the company should be formed. ERP systems can be implemented in many ways. Some companies adopt Phased implementation while others use Big Bang implementation (Bancroft, 1996; Bancroft et al., 1998; Mabert et al., 2003). Numerous companies select an integrated planning approach, while others adopt a stepwise planning method allowing for the evaluation of the benefits accrued by implementing an ERP information system. Table 10 The implementation responsibility and strategies of an ERP system Panel A: Implementation responsibility Freq % Freq % Freq % Freq % Project teams Information departments Others Missing data Total Respondents Panel B: Implementation Strategies Integral planning and Big-bang implementation approach Integral planning and phased implementation approach Stepwise planning and phased implementation approach Missing data Total Respondents In Panel B of Table 10, you can see that Integral planning and Big-bang implementation approach and Integral planning and phased implementation approach are two main implementation strategies. Besides, you also can find that the percentages of Integral planning and Big-bang implementation approach are increasing while the ones of Integral planning and phased implementation approach are decreasing. Regarding the Phased and Big Bang implementation approach, most organizations adopted the phased implementation approach, the percentage being 59.8% ( ) in 2003, 178 June 2013

21 61.8% ( ) in 2006, 58.8% ( ) in 2009, and 56.8% ( ) in Regarding the investment effort for ERP systems in the US 5000, more than 68 percent of companies applied the Big Bang methodology to change their system and business processes, as indicated by the survey results of Keil and Montealegre (2000). On the other hand, regarding Integrated planning and Stepwise planning method, most organizations adopted the Integral planning approach, the percentage being 83.0% ( ) in 2003, 87.1% ( ) in 2006, 86.5% ( ) in 2009, and 86.4% ( ) in The results suggest that the integral planning approach may be consistent with the integrated information system concept of an ERP system. Furthermore, the ERP package should be implemented in phases to enable organization members to have more time to learn and assimilate both the new software as well as the new business environment. However, Big Bang implementation approach was gradually adopted by firms in Taiwan, from 38.8% in 2003 to 43.2% in It may because the consultants and companies in Taiwan got much experience in ERP implementation during the last ten years ERP Implementation Problems ERP system implementation has often been found to be complex and risky to be implemented in business enterprises (Aloini et al., 2007; Tsai et al., 2013), and projects hampered with problems during the development process are unlikely to deliver successful software products (Wallace et al., 2004). Thus, we need to understand ERP project implementation problems so that we can increase the likelihood of its successful adoption. According to Table 11, Unclear or inadequate ERP system requirements made by departments is the number one problem that Taiwanese firms confront. Interestingly, as can be seen in Table 11 the top ten implementation problems are mostly in the Requirement and User areas. Thus, we observe that these two problem types are the primary risk areas contributing to problems frequently occurring during ERP project implementation among Taiwanese firms. This result is comparable to the findings reported by Huang et al. (2004). They state that the top ten factors of ERP risk include four user problems and one requirement problem. Thus, companies must address these two risk areas during ERP project implementation. This result also shows that Taiwanese firms are paying more attention to requirement identification, user education, training and experience of similar systems than before. Besides, from our results, Lack of ERP system fit to organizational process is also among the top ten implementation problems of the June

22 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years investigative years. This is a risk factor unique to an ERP project (Wright and Wright, 2001; Sumner, 2000; Huang et al., 2004). The results indicate that an organization more frequently adopts only certain parts of the ERP system or modifies the system to customize feature-function. Table 11 ERP implementation problems Implementation problem Unclear or inadequate ERP system requirements made by departments Incorrect system requirements need to add on programs Users don t understand the benefits of an ERP system Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking Users resistant to change Users are not ready to use an ERP system to assist their work Users lack of experience Lack of ERP system fit for organizational process Users don t understand the ERP functions Inadequate IT members Consultants lack of understanding of corporate operational processes Exceeds time allotted Insufficient IT knowledge of users Lack of top management involvement Lack of adequate corporate policies and processes Lack of organizational change Users don t want to use ERP system Lack of user participation Lack of cross-functional team members June 2013

23 Difficult to integrate the ERP with other IT systems IT members lack of specialized knowledge required by the ERP project Exceeds budget Inexperienced consultants Scale-down modules or functions Ineffective communication Unclear goals Vendors lack of specialized skills Total Respondents Shakedown Phase: Post-implementation Problems of An ERP System The third phase of the ERP life cycle is the point in time during the ERP implementation, when the system is first used for actual production. In this phase, ERP goes live and progress is monitored Implementation Duration Aloini et al. (2007) indicate the degree to which the implementation project was completed on time, within the budget as initially planned, within the desired functionality and high quality. Implementation of ERP systems, however, can be both expensive and time-consuming (Abdinnour-Helm et al., 2003; Kumar et al., 2003). From Table 12, it can be seen that a higher percentage of firms had an implementation time for an ERP project of between 6 months and 2 years (68.3% ( ) in 2003, 66.9% ( ) in 2006, 73.6% ( ) in 2009, and 72.8% ( ) in 2012). The results also indicate that ERP implementation lasts less than 6 months, the percentage of 24.3% in 2003 decreased to 15.5% in 2009 and This shows that implementation with most firms requires more than six month. Our survey is consistent with PMP research (2001), which carried out an ERP related survey on the impact of manufacturing systems, and the results revealed that 70 percent of sample companies believed that the average implementation time of an ERP system is from six months to two years. On the other hand, in our research, the implementation period lasting from 6 months to two years increased from 68.3% in June

24 Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years 2003 and 66.9% in 2006 to 73.6% in 2009 and 72.8% in The phenomenon further suggests a close correlation between the implementation time and implementation strategy. According to Mabert et al. (2000), phased implementation tends to increase the time required to go live. While most Taiwanese firms adopt the phased implementation approach (in Panel B of Table 10), phased implementation is associated with a longer period of implementation. Table 12 Implementation duration Implementation duration Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking <6 months to 12 months to 24 months >24 months Missing data Total Respondents ERP Post-implementation Problems In order to avoid ERP post-implementation hazards, business managers should take care on management issues in ERP post-implementation so as to increase the likelihood of post-implementation success. Our survey finds that Insufficient education and training courses for employees remains a major problem during the post-implementation phase among the investigative years, the percentage being 50.9% in 2003, 53.7% in 2006, 50.1% in 2009, and 53.1% in 2012 (Table 13). According to Basoglu et al. (2007) lack of care about users of an ERP system will lead to disaster, and Huang et al. (2004) point out that user training is a key requirement for ERP implementation. From Table 11, we deduce that companies must adopt appropriate and on-going training, education and communication for users to decrease user problems early in the implementation process. Thus, we propose that employees should receive sufficient training, education, knowledge management and knowledge sharing, even during the post-implementation stage, to help them operate the new system effectively. 182 June 2013

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