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 2012. 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 2003 2006 2009 2012 5000 ERP ERP * Corresponding author E-mail: whtsai@mgt.ncu.edu.tw DOI: 10.6188/JEB.2013.15(2).01 June 2013 159
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
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 2012. 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 2013 161
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 2012. 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
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 2013 163
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
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$5 billion. Among these organizations, approximately 360 companies (59.5% of 605) are manufacturers and 245 are members (40.5% of 605) in service industries. Table 1 Characteristics of the respondents 2003 2006 2009 2012 Employee numbers Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% < 100 147 22.4 158 25.5 174 28.9 149 24.6 100 to 500 355 54.0 320 51.6 277 45.9 311 51.4 > 500 155 23.6 142 22.9 152 25.2 145 24.0 Missing data Company age < 10 years 109 16.6 105 16.9 72 11.9 42 7.0 June 2013 165
Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years 10 to 20 years 215 32.7 197 31.8 150 24.9 146 24.1 21 to 30 years 147 22.4 124 20.0 141 23.4 159 26.3 > 30 years 151 23.0 181 29.2 234 38.8 258 42.6 Missing data 35 5.3 13 2.1 6 1.0 Annual revenue (NT$bil.) < $0.5 116 17.7 116 18.7 132 21.9 131 21.6 $0.5 to < $1.0 173 26.3 152 24.5 134 22.2 144 23.8 $1.0 to < $5.0 251 38.3 218 35.3 199 33.0 211 35.0 $5.0 to < $10.0 43 6.5 48 7.7 43 7.1 45 7.4 $10.0 to < $30.0 37 5.6 49 7.9 40 6.6 34 5.6 > $30.0 37 5.6 35 5.6 37 6.2 38 6.3 Missing data 2 0.3 18 3.0 2 0.3 Industry sector Manufacturing 406 61.8 348 56.1 354 58.7 360 59.5 Service 251 38.2 272 43.9 249 41.3 245 40.5 Total Respondents 657 620 603 605 3.2 ERP Implementation Status The questionnaires asked respondents to provide basic information about their current status regarding ERP implementation. 3.2.1 Current Use of the ERP Package Table 2 indicates that the percentage of the responding firms with implemented ERP systems increased from 57.3% (22.2+20.9+14.2) in 2003, 59.9% (31.9+16.5+11.5) in 2006, and 70.7% (48.6+17.6+4.5) in 2009, to 74.7% (53.4+19.0+2.3) 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
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 2003 2006 2009 2012 Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% 146 22.2 198 31.9 293 48.6 323 53.4 137 20.9 102 16.5 106 17.6 115 19.0 Still in the implementation stage 93 14.2 71 11.5 27 4.5 14 2.3 Under evaluation 136 20.7 96 15.5 41 6.8 31 5.1 Being evaluated, and determined not to implement temporarily 50 7.6 39 6.3 41 6.8 22 3.6 Without any consideration so far 95 14.4 114 18.3 95 15.7 100 16.6 Total Respondents 657 620 603 605 Table 3 Descriptive statistics of implemented companies Industry 2003 2006 2009 2012 N Implemented % N Implemented % N Implemented % N Implemented % Food 16 11 68.8 24 20 83.3 22 18 81.8 19 14 73.7 Cotton & Rag trade 27 14 51.9 18 14 77.8 13 10 76.9 10 7 70.0 Plastics & rubber 23 13 56.5 17 10 58.8 15 11 73.3 26 22 84.6 Chemical manufacturing Electronics & Generators Information products Engineering/iron/ steel 34 13 38.2 28 18 64.3 33 24 72.7 36 29 80.6 86 65 75.6 69 60 87.0 54 47 87.0 61 56 91.8 38 35 92.1 28 25 89.3 36 35 97.2 22 20 90.9 71 43 60.6 67 48 71.6 78 63 80.8 83 72 86.7 Conveyance 31 24 77.4 21 15 71.4 18 15 83.3 23 21 91.3 June 2013 167
Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years Other manufacturing 80 48 60.0 76 57 75.0 85 74 87.1 80 77 96.3 Trade 38 13 34.2 32 18 56.3 29 15 51.7 19 15 78.9 Financial/insurance 54 12 22.2 81 14 17.3 48 8 16.7 57 12 21.1 Building/real estate 30 11 36.7 26 12 46.2 29 17 58.6 26 16 61.5 Other services 129 74 57.4 133 60 45.1 143 89 62.2 143 91 63.6 Total Respondents 657 376 57.2 620 371 59.8 603 426 70.6 605 452 74.7 3.2.2 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 2003 2006 2009 2012 Panel A: Reasons for not adopting ERP systems Freq. % Freq % Freq. % Freq. % Satisfaction with the current computer system 27 54.0 27 69.2 22 53.7 18 40.9 High investment cost, low performance 32 64.0 22 56.4 21 51.2 11 25.0 Lack of human resources 7 14.0 7 17.9 8 19.5 5 11.4 Too time-consuming for the ERP implementation 5 10.0 6 15.4 5 12.2 4 9.1 Lack of understanding of the ERP system 5 10.0 3 7.7 3 7.3 2 4.5 Total Respondents 50 39 41 22 Panel B: Reasons for adopting ERP systems Improving information accuracy and timeliness 311 82.7 301 81.1 349 81.9 349 77.2 168 June 2013
Reducing operational costs and increasing operational efficiency 292 77.7 257 69.3 271 63.6 269 59.5 Integrating IT systems across business functions 220 58.5 207 55.8 233 54.7 250 55.3 Real time control on business operational conditions 214 56.9 205 55.3 202 47.4 210 46.5 Enhancing business quick response competence 228 60.6 223 60.1 213 50.0 209 46.2 Implementation the Business Process Reengineering (BPR) system 213 56.6 182 49.1 201 47.2 203 44.9 Reinforcing the organizational IT infrastructure 197 52.4 174 46.9 191 44.8 194 42.9 Improving the quality of management decision-making 191 50.8 160 43.1 129 30.3 164 36.3 Assisting the execution of overall corporate strategies 163 43.4 141 38.0 138 32.4 158 35.0 Fitting with business growth and corporate makeover 158 42.0 154 41.5 148 34.7 150 33.2 Total Respondents 376 371 426 452 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. 3.2.3 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% (14.1 + 8.5 + 16.5) in 2003 to 26.3% (9.7 + 7.1 + 9.5) in 2012. 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% + 19.1%) in 2003 to 73.7% (46.0 + 27.7) in 2012. The companies pursuing ERP packages are expected to provide complete functionality for all business needs. Furthermore, based June 2013 169
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 2012. 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 2003 2006 2009 2012 Panel A: ERP system sources Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Evolution from legacy systems 53 14.1 48 12.9 43 10.1 44 9.7 In-house redevelopment 32 8.5 34 9.2 46 10.8 32 7.1 Outsourcing 62 16.5 40 10.8 41 9.6 43 9.5 Single ERP package 152 40.4 183 49.3 208 48.8 208 46.0 A mixture of an ERP packages with other systems 72 19.1 66 17.8 88 20.7 125 27.7 Missing data 5 1.3 Total Respondents 376 371 426 452 Panel B: Integration of ERP with other IT systems No integration 173 46.0 178 48.0 93 21.8 149 33.0 170 June 2013
SCM 94 25.0 74 19.9 129 30.3 138 30.5 CRM 89 23.7 84 22.6 119 27.9 113 25.0 APS 66 17.6 63 17.0 90 21.1 89 19.7 Knowledge management (KM) 49 13.0 43 11.6 67 15.7 58 12.8 Others 32 8.5 36 9.7 37 8.7 35 7.7 Total Respondents 376 371 426 452 3.2.4 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 2003 2006 2009 2012 Panel A: Implementation ERP software packages Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Data Systems (Taiwan) 68 30.4 109 43.8 115 38.9 119 35.7 SAP 18 8.0 19 7.6 46 15.5 54 16.2 Oracle 36 16.1 30 12.0 30 10.1 29 8.7 June 2013 171
Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years J.D. Edwards 6 2.7 7 2.8 10 3.4 13 3.9 IE (Taiwan) 17 7.6 8 3.2 8 2.7 9 2.7 Fast Tech. (Taiwan) 10 4.5 7 2.8 8 2.7 - - Other ERP packages 62 27.7 63 25.3 65 22.0 78 23.4 Multiple ERP packages 5 2.2 5 2.0 9 3.0 9 2.7 Missing data 2 0.9 1 0.4 5 1.7 - - Total Respondents 224 249 296 333 Panel B: Implementation ERP modules Financial Accounting 207 92.4 229 92.0 281 94.9 318 95.5 Purchasing Management 199 88.8 213 85.5 254 85.8 291 87.4 Sales Distribution 176 78.6 184 73.9 227 76.7 256 76.9 Material Management 179 79.9 184 73.9 225 76.0 240 72.1 Fixed Asset Management 147 65.6 162 65.1 221 74.7 237 71.2 Production Planning 147 65.6 160 64.3 200 67.6 214 64.3 Human Resource 87 38.8 96 38.6 149 50.3 135 40.5 Management Accounting 74 33.0 100 40.2 145 49.0 131 39.3 Quality Management 66 29.5 70 28.1 90 30.4 98 29.4 R&D 42 18.8 40 16.1 47 15.9 46 13.8 Financial Management 26 11.6 24 9.6 35 11.8 41 12.3 Investment Management 12 5.4 11 4.4 14 4.7 20 6.0 Others 12 5.4 16 6.4 8 2.7 12 3.6 Total Respondents 224 249 296 333 3.2.5 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 2012. The ERP system costs range from NT$5 million to NT$50 million extending from a low of 42.2% (23.6 + 18.6) in 2003 and 31.3% (15.1 + 16.2) in 2006 to a high of 47.2% (26.0 + 21.2) in 2009 and 39.9% (22.1 + 17.8) in 2012. 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
expenses are less than NT$5 million, with the percentage increasing from 64.4% in 2003 to 80.8% in 2012. This result indicates that the consulting firms are cutting prices to fight for their share of the ERP market. Thus, the ERP-implemented companies have shown a decrease in consulting expenses in recent years. Table 7 Investment costs 2003 2006 2009 2012 Panel A: ERP system cost (NT$ million) Freq. % Adjust % Freq. % Adjust % Freq. % Adjust % Freq. % Adjust % < NT$5 million 80 35.7 49.7 114 45.8 61.6 132 44.5 45.2 174 52.2 52.6 NT$5 million to NT$10 million 38 17.0 23.6 28 11.2 15.1 76 25.7 26.0 73 21.9 22.1 NT$11 million to NT$50 million 30 13.4 18.6 30 12.0 16.2 62 20.9 21.2 59 17.7 17.8 > NT$51 million 13 5.8 8.0 13 5.2 7.0 22 7.4 7.5 25 7.5 7.6 Missing data 63 28.1 64 25.7 4 1.4 2 0.6 Total Respondents 224 249 296 333 Panel B: Consulting expense (NT$ million) < NT$5 million 103 46.0 64.4 139 55.8 76.8 224 75.7 78.3 264 79.2 80.8 NT$5 million to NT$10 million 26 11.6 16.3 10 4.0 5.5 29 9.8 10.1 24 7.2 7.3 > NT$10 million 31 13.8 19.5 32 12.9 17.7 33 11.1 11.5 39 11.7 11.9 Missing data 64 28.6 68 27.3 10 3.4 6 1.8 Total Respondents 224 249 296 333 3.3 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. 3.3.1 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 2013 173
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 2003 2006 2009 2012 Panel A: Main internal drivers Freq. Valid% Freq. Valid% Freq. Valid% Freq. Valid% Board chairpersons 38 17.0 63 25.3 57 19.3 65 19.5 Top managers 101 45.1 140 56.2 169 57.1 180 54.1 CIO 50 22.3 36 14.5 54 18.2 62 18.6 Departments/Users 3 1.2 9 3.0 5 1.5 Others 16 7.1 6 2.4 5 1.7 20 6.0 Missing data 19 8.5 1 0.4 2 0.7 1 0.3 Total Respondents 224 249 296 333 Panel B: Implementation partners Consultants from ERP vendors 182 81.3 190 76.3 241 81.4 260 78.1 Consultants from consulting firms 28 12.5 26 10.4 27 9.1 35 10.5 Individual consultants 7 3.1 11 4.4 6 2.0 8 2.4 Consultants from CPA firms 7 2.8 4 1.4 11 3.3 Others 6 2.7 11 4.4 15 5.1 17 5.1 Missing data 1 0.4 4 1.6 3 1.0 2 0.6 Total Respondents 224 249 296 333 3.3.2 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
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 2003 2006 2009 2012 Panel A: ERP package selection criteria Better fit with corporate business processes Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking 117 52.2 1 127 51.0 3 155 52.4 1 156 46.8 1 A robust ERP framework 116 51.8 2 126 50.6 4 150 50.7 2 154 46.2 2 Ease of use and maintenance 90 40.2 7 142 57.0 1 127 42.9 5 153 45.9 3 Flexible systems for corporate requirements 101 45.1 5 109 43.8 6 129 43.6 4 145 43.5 4 June 2013 175
Evolution of ERP Systems Implementation in Taiwan Four Surveys in Ten Years The provision of various realtime online researching and report statements functions 108 48.2 4 139 55.8 2 118 39.9 6 143 42.9 5 Total cost of Ownership 112 50.0 3 122 49.0 5 130 43.9 3 134 40.2 6 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 84 37.5 9 96 38.6 8 94 31.8 11 127 38.1 7 91 40.6 6 100 40.2 7 98 33.1 9 112 33.6 8 87 38.8 8 94 37.8 10 96 32.4 10 105 31.5 9 78 34.8 13 95 38.2 9 106 35.8 7 103 30.9 10 84 37.5 9 94 37.8 10 91 30.7 12 100 30.0 11 84 37.5 9 88 35.3 12 104 35.1 8 98 29.4 12 83 37.1 12 78 31.3 14 80 27.0 13 76 22.8 13 77 34.4 14 86 34.5 13 76 25.7 14 69 20.7 14 54 24.1 15 60 24.1 15 55 18.6 15 58 17.4 15 The provision of Best Practice 43 19.2 17 53 21.3 16 50 16.9 16 54 16.2 16 Ease of integration with other systems (ex: CRM, SCM) 49 21.9 16 50 20.1 17 45 15.2 17 44 13.2 17 Consultant s suggestions 36 16.1 18 45 18.1 18 34 11.5 18 43 12.9 18 ERP systems which are used by customers and suppliers 19 8.5 20 28 11.2 20 18 6.1 20 37 11.1 19 Return On Investment 28 12.5 19 33 13.3 19 29 9.8 19 28 8.4 20 Total Respondents 224 249 296 333 Panel B: ERP vendor selection criteria Capabilities and experiences 130 58.0 1 142 57.0 1 153 51.7 1 175 52.6 1 Support of maintenance and upgrading in the postimplementation stage 128 57.1 2 139 55.8 2 141 47.6 2 163 48.9 2 176 June 2013
Brand goodwill 88 39.3 3 100 40.2 4 121 40.9 3 128 38.4 3 Market position 77 34.4 5 104 41.8 3 119 40.2 4 127 38.1 4 The offering of education and training courses 81 36.2 4 98 39.4 5 102 34.5 5 116 34.8 5 Reputation in the industries 67 29.9 6 92 36.9 6 91 30.7 6 103 30.9 6 International big brand 54 24.1 7 53 21.3 7 66 22.3 7 68 20.4 7 Financial position 29 12.9 8 47 18.9 8 32 10.8 8 27 8.1 8 Relationship 17 7.6 9 15 6.0 9 21 7.1 9 19 5.7 9 Total Respondents 224 249 296 333 Panel C: Consultant selection criteria ERP experiences 171 76.3 1 195 78.3 1 209 70.6 1 244 73.3 1 Domain knowledge 145 64.7 2 150 60.2 3 173 58.4 2 188 56.5 2 Industry experiences 135 60.3 3 162 65.1 2 159 53.7 3 181 54.4 3 Project management capabilities 102 45.5 4 132 53.0 4 141 47.6 4 162 48.6 4 Post-implementation support provision 78 34.8 6 92 36.9 6 84 28.4 6 128 38.4 5 Costs 81 36.2 5 94 37.8 5 105 35.5 5 124 37.2 6 Methodologies/approaches 65 29.0 7 75 30.1 7 71 24.0 7 81 24.3 7 Total Respondents 224 249 296 333 3.4 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. 3.4.1 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 2013 177
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 2003 2006 2009 2012 Panel A: Implementation responsibility Freq % Freq % Freq % Freq % Project teams 113 50.4 122 49.0 153 51.7 175 52.6 Information departments 100 44.6 117 47.0 131 44.3 137 41.1 Others 4 1.8 8 3.2 11 3.7 21 6.3 Missing data 7 3.1 2 0.8 1 0.3 Total Respondents 224 249 296 333 Panel B: Implementation Strategies Integral planning and Big-bang implementation approach 87 38.8 92 36.9 121 40.9 144 43.2 Integral planning and phased implementation approach 99 44.2 125 50.2 135 45.6 144 43.2 Stepwise planning and phased implementation approach 35 15.6 29 11.6 39 13.2 45 13.6 Missing data 3 1.3 3 1.2 1 0.3 Total Respondents 224 249 296 333 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% (44.2 + 15.6) in 2003, 178 June 2013
61.8% (50.2 + 11.6) in 2006, 58.8% (45.6 + 13.2) in 2009, and 56.8% (43.2 + 13.6) in 2012. 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% (38.8 + 44.2) in 2003, 87.1% (36.9 + 50.2) in 2006, 86.5% (30.9 + 45.6) in 2009, and 86.4% (43.2 + 43.2) in 2012. 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 2012. It may because the consultants and companies in Taiwan got much experience in ERP implementation during the last ten years. 3.4.2 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 2013 179
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 2003 2006 2009 2012 Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking 107 47.8 1 120 48.2 1 111 37.5 2 136 40.8 1 82 36.6 2 74 29.7 9 117 39.5 1 130 39.0 2 76 30.5 6 88 29.7 4 96 28.8 3 Users resistant to change 65 29.0 8 74 29.7 9 74 25.0 7 92 27.6 4 Users are not ready to use an ERP system to assist their work 66 29.5 7 75 30.1 7 77 26.0 5 90 27.0 5 Users lack of experience 85 34.1 3 93 31.4 3 88 26.4 6 Lack of ERP system fit for organizational process Users don t understand the ERP functions 76 33.9 4 78 31.3 5 76 25.7 6 88 26.4 6 67 29.9 5 98 39.4 2 73 24.7 8 84 25.2 8 Inadequate IT members 67 29.9 5 67 26.9 12 71 24.0 10 74 22.2 9 Consultants lack of understanding of corporate operational processes 59 26.3 12 73 29.3 11 69 23.3 11 72 21.6 10 Exceeds time allotted 78 34.8 3 81 32.5 4 57 19.3 14 70 21.0 11 Insufficient IT knowledge of users 63 28.1 10 66 26.5 13 72 24.3 9 67 20.1 12 Lack of top management involvement Lack of adequate corporate policies and processes 61 27.2 11 75 30.1 7 66 22.3 12 66 19.8 13 59 26.3 12 54 21.7 15 55 18.6 15 63 18.9 14 Lack of organizational change 53 23.7 14 47 18.9 17 59 19.9 13 52 15.6 15 Users don t want to use ERP system 46 18.5 19 46 15.5 17 52 15.6 15 Lack of user participation 65 29.0 8 56 22.5 14 44 14.9 18 52 15.6 15 Lack of cross-functional team members 39 17.4 15 48 19.3 16 47 15.9 16 49 14.7 18 180 June 2013
Difficult to integrate the ERP with other IT systems IT members lack of specialized knowledge required by the ERP project 24 10.7 18 26 10.4 21 30 10.1 22 34 10.2 19 17 7.6 22 28 11.2 20 35 11.8 20 33 9.9 20 Exceeds budget 20 8.9 19 18 7.2 26 32 10.8 21 32 9.6 21 Inexperienced consultants 39 17.4 15 47 18.9 17 44 14.9 18 29 8.7 22 Scale-down modules or functions 19 8.5 20 22 8.8 24 29 9.8 23 24 7.2 23 Ineffective communication 26 10.4 21 22 7.4 25 24 7.2 23 Unclear goals 18 8.0 21 24 9.6 23 15 5.1 26 22 6.6 25 Vendors lack of specialized skills 34 15.2 17 22 8.8 24 25 8.4 24 12 3.6 26 Total Respondents 224 249 296 333 3.5 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. 3.5.1 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% (43.3 + 24.9) in 2003, 66.9% (38.9 + 28.0) in 2006, 73.6% (41.4 + 32.2) in 2009, and 72.8% (41.5 + 31.3) 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 2012. 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 2013 181
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 2012. 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 2003 2006 2009 2012 Freq. % Ranking Freq. % Ranking Freq. % Ranking Freq. % Ranking <6 months 42 14.8 24.3 66 22.0 22.5 61 15.3 15.5 66 15.5 15.5 6 to 12 months 75 26.5 43.4 114 38.0 38.9 163 40.9 41.4 177 41.5 41.5 13 to 24 months 43 15.2 24.9 82 27.3 28.0 127 31.9 32.2 133 31.3 31.3 >24 months 13 4.6 7.5 31 10.3 10.6 43 10.8 10.9 50 11.7 11.7 Missing data 110 38.9-7 2.3-5 1.3 - - - - Total Respondents 283 300 399 426 3.5.2 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