AWERProcedia Information Technology & Computer ...

AWERProcedia Information Technology & Computer Science Vol 03 (2013) 1626-1635

3rd World Conference on Information Technology (WCIT-2012)

Factors Impacting Intention to use of Erp Systems In Indian Context: an Empirical Analysis Ankit Mahindroo *, L M Thapar School of Management, Thapar University, Patiala, India. Hergovind Singh, Maulana Azad National Institute of Technology, Bhopal, India. Harsh Vardhan Samalia, Rajiv Gandhi Indian Institute of Management, Shillong, India. Suggested Citation: Mahindroo, A., Singh, H. & Samalia, V., H. Factors Impacting Intention to use of Erp Systems In Indian Context: an Empirical Analysis, AWERProcedia Information Technology & Computer Science. [Online]. 2013, 3, pp rd 1626-1635. Available from: http://www.world-education-center.org/index.php/P-ITCS Proceedings of 3 World Conference on Information Technology (WCIT-2012), 14-16 November 2012, University of Barcelon, Barcelona, Spain. Received 16 April, 2013; revised 13 May, 2013; accepted 12 September, 2013. Selection and peer review under responsibility of Prof. Dr. Hafize Keser. ©2013 Academic World Education & Research Center. All rights reserved. Abstract The demand for Enterprise Resource Planning (ERP) applications in India has increased tremendously from US$1596 million in 2006 to US$2399 million in 2011. The presented study is a specific attempt to investigate factors impacting the intention to use of ERP systems in India using Technology Acceptance Model. Data was collected from 27 organizations from which 152 valid responses were analysed. Reliability Analysis was conducted on the sample followed by Exploratory Factor Analysis to validate the constructs. Linear Regression Analysis was done to validate the significance of the model. Perceived usefulness, perceived ease of use and system flexibility, showed significant relationships with the intention to use of ERP systems in Indian organizations and contributes to 42.3% of its variation. The study concluded that perceived usefulness of ERP systems along with its ease of use and flexibility for the end-user are important factors to predict the ERP adoption in Indian organizations. Keywords: Enterprise Resource Planning, perceived usefulness, perceived ease of use, system flexibility, indian context;

* ADDRESS FOR CORRESPONDENCE: Ankit Mahindroo, L M Thapar School of Management, Thapar University, Patiala, India, E-

mail address: [email protected] / Tel.: +91-988-869-8668

Mahindroo, A., Singh, H. & Samalia, V., H. Factors Impacting Intention to use of Erp Systems In Indian Context: an Empirical Analysis, AWERProcedia Information Technology & Computer Science. [Online]. 2013, 3, pp 1626-1635. Available from: http://www.world-educationcenter.org/index.php/P-ITCS

1. Introduction Enterprise Resource Planning (ERP) is a software application program that attempts to integrate enterprise-wide business operations. ERP technologies have been designed to address the fragmentation of information across an enterprise’s business, to integrate with intra- and interenterprise information (Sharif, Irani, & Love, 2005). It is an information system that manages, through integration, businesses including production, marketing & sales, plant maintenance, asset management, distribution, accounting, and customer service (Scalle & Cotteleer, 1999). The importance and usage of ERP systems has increased appreciably for organizations in the last decade specifically in India, where it has increasing from US $1596 million in 2006 to a whooping US $2399 million in 2011 i.e. an increase of almost over 50% (Parker, 2010). ERP systems have evolved over a period of time due to the increasing need of different businesses to integrate its functional areas. As per a study conducted (Mabert et al., 2000), most of the US based organizations have either installed ERP or were planning to implement ERP applications in the coming years to integrate with its various business partners, namely vendors, customers and distributors. This integration will help organizations to reap benefits in terms of efficiency and effectiveness of their business processes by forming a partner like relationship with them. Implementation of an ERP system across the organization takes time and effort to complete and involves systematic planning from the whole organization in order to actually experience all the benefits associated with its implementation. As a result, organizations have been trying hard to find out and come up with factors that can help them to succeed in their implementation of ERP systems. There have been numerous studies to list down the success factors for an ERP implementation. In a more recent work, organization maturity level and implementation approach have been identified as factors impacting successful ERP implementation (Dantes & Hasibuan, 2012) while in another study, external consultant support, knowledge transfer and top management commitment were considered as important parameters for the same (Maditinos, Chatzoudes, & Charala, 2012). Cost of ERP Implementation, Implementation duration and return on investment (ROI), employee training, and effective use of ERP applications can also be acknowledged as strategic factors that can affect the implementation success rate (Dowlatshahi, 2005). Similarly, a study was done in Iran that came out with a list of 23 Critical Success Factors (CSF) which can have a major impact on ERP implementation in the Iranian companies (Ahmadi, Mahmoudi, & Jandaghi, 2011). A study of higher education system in Saudi Arabia (ALdayel, Aldayel, & Al-Mudimigh, 2011) revealed two perspectives of critical success factors for ERP implementation: i) technical perspective and ii) user perspective. From the user perspective, there were three factors which were used in the study and were considered as a measure of success of the implementation that is system usefulness, training and user participation. As mentioned in the above study, both technical factors as well as user-related factors play a vital role in the success of an ERP implementation. There have been quite a few studies which have looked into the user-perspective related factors as well. In one of the research conducted in Pakistan, perceived usefulness, perceived ease of use, internal support, results demonstrability and compatibility have been used as factors by adopting the Technology Acceptance Model (TAM), which impacts user satisfaction, and hence the measure of a successful ERP implementation (Anjum, 2011). TAM is a user-acceptance model “with aim to describe the determinants of computer accession accompanied to user action across genuine amplitude of end-user computing technologies and user incumbents” (Anjum, 2011; Davis, 1986). There have been studies which have probed the relationship between the various TAM constructs (Davis, 1986; Garaca, 2011; Venkatesh & Davis, 2000; Venkatesh, Morris, Davis, & Davis, 2003). A research work carried out in Croatia used Expectation Confirmation Theory (ECT) and TAM to study the intended use of ERP system by students of business studies. The study took data from 180 1627


third year students to investigate the relationship between perceived usefulness of ERP system, perceived ease of use and user computer anxiety to their satisfaction attained with the used ERP system which in turn finally leads to intention to use the ERP system (Garaca, 2011). ECT is a theory that explains the customer satisfaction and dissatisfaction determinants and concludes that “the initial tendency to purchase a commodity will affect the consumer’s behavior to buy it the next time” (Garaca, 2011; Oliver, 1980). If the satisfaction level for a particular commodity is high, it will increase the purchaser’s willingness to purchase it again (Anjum, 2011). A study similar to Garaca, 2011 was conducted in Turkey to study ERP acceptance by using the TAM and twelve specific factors and came to the conclusion that organizations which have not implemented ERP but knew about it, intends to implement the same and hence the usage of ERP will increase in future (Pasaoglu, 2011). In another research, system capability, compatibility, perceived ease of use, flexibility, user guidance, learnability, minimal memory load and perceived usefulness were used as parameters to study its impact on end-user satisfaction and stated that the model variables were able to explain 48% of the variation on end-user satisfaction with ERP system (Calisir & Calisir, 2004).The post implementation risks of ERP application such as operational risks, analytical risks, organization wide risks and the technical risks were considered to be important decision criteria that contribute towards the adoption of ERP in a large scale organization (Pan, Nunes, & Peng, 2011) and this has been well supported for SMEs as well (Poba-Nzaou, Raymond, & Fabi, 2008). Other than the perceived usefulness and benefits of the ERP systems, possession of deep IS knowhow by the top management in the organization, cost of the system and technological impact of the ERP system were found to have an impact on the ERP adoption in the organization (Shiau, Hsu, & Wang, 2009) while another study revealed that System Quality, Documentation, Ease of use, Reliability, Authorization, and Utilization were also used as critical factors in case of ERP adoption (Kositanurit, Ngwenyama, & Osei-Bryson, 2006). Organization size acts as a major constraint towards the ERP system adoption in an organization (Laukkanen, Sarpola, & Hallikainen, 2007; Uzoka, Abiola, & Nyangeresi, 2008) but at the same time budget was not considered as the primary reason for its nonadoption in SME sector (Buonnano et al., 2005). The impact of institutional factors such as mimicry of peers, compliance with industry norms and coercion from powerful entities over adoption of ERP systems has provided another dimension to the discussion of ERP adoption (Ugrin, 2009). Environmental factors such as pressures from firm’s business partners and technological factors like computer integrated manufacturing technologies has also added depth to ERP adoption studies (Raymond & Uwizeyemungu, 2007). ERP user’s motivational dynamics perspective has also been considered in a case study based research to study ERP system adoption (Lim, Pan, & Tan, 2005). There have been studies conducted in India for technology adoption of information technologies. A study conducted for the Advanced Manufacturing Technology (AMT) adoption in India revealed that computer aided design, computer aided manufacturing, MRP / ERP, plant certification and local area networks (LAN) are the technologies in which Indian organizations are going to heavily invest in the coming future (Thakur & Jain, 2006). In another Indian study on acceptance of internet chatting, a structural model linking internet chatting to perceived usefulness, perceived ease of use, perceived enjoyment and perceived risk was proposed and validated using TAM with attitude acting as a mediating variable (Thomas, 2011). Research conducted on acceptance of internet banking extended TAM by incorporating a new factor “consumer trust on internet banking” that represents the user security and privacy issues, and used it to measure individual’s intention to adopt internet banking (Karthikeyan & Clement, 2010). A similar study on acceptance of Internet Banking was done where customer attitude was used as a parameter to analyze how it impacts adoption of internet banking specifically in India (Dash et al., 2011). Study to measure intentions towards usage of Mobile Banking in India using TAM was also conducted (Dasgupta, Paul, & Fuloria, 2011).

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As discussed above, there have been various studies with respect to technology adoption of Information Technology (IT), including ERP, in different countries. But in Indian context, most of the studies refer to adoption of internet chatting, internet banking or mobile banking. The presented paper is an attempt to study the ERP adoption in India from the user perspective by taking TAM into cognizance for the formation of research model. Further, the research model serves as the foundational element for the hypotheses development as elaborated. Variables identified from literature above have been used to formulate the hypotheses that have been further empirically validated as a part of this study. A brief description of the variables used to develop the research model is given below: 1.1. Intention to Use (IU) Intention to Use refers to “The degree to which a person has formulated conscious plans to perform or not perform some specified future behaviour” (Venkatesh & Davis, 2000). In business context, it measures the intention of the end-user to use a technology once it has been implemented in an organization. It also reflects the attitude of the end user towards a particular technology and can be considered to be an indicator of the adoption of the technology in the organization. 1.2. Perceived Usefulness (PU) Perceived Usefulness is defined as “the degree to which a person believes that using a particular system will enhance his / her job performance” (Davis F. D., 1989; Thomas, 2011). In the current context, it refers to the degree to which the use of ERP system by the individual will increase the performance of the individual and hence result in a successful ERP implementation. Some researchers have investigated that Perceived Usefulness (PU) has a positive impact on the Intention to Use (IU) of the technology, both in the context of ERP Systems (Anjum, 2011; Calisir & Calisir, 2004; Chung, Skibniewski, & Kwak, 2009; Garaca, 2011; Vathanophas & Stuart, 2009; Zviran, Pliskin, & Levin, 2005) as well as other information technologies (Amin, 2009; Davis, 1989; Qi et al., 2009; Tan et al., 2012). H01: Perceived Usefulness (PU) has a positive impact on the Intention to Use of an ERP System. 1.3. Perceived Ease of Use (PEOU) Perceived Ease of Use refers to “the degree to which a person believes that using a particular technology will be effortless” (Davis, 1989; Thomas, 2011). In the boundaries of the study, it refers to how easy is it to use the ERP system with minimum of effort, hence leading to a greater intent to use and successful adoption of ERP in the organization (Anjum, 2011; Bodenberg, Garrett, & Lee, 2011; Calisir & Calisir, 2004; Chung, Skibniewski, & Kwak, 2009; Garaca, 2011). Hence, following hypothesis has been formulated with respect to perceived ease of use of ERP systems: H02: Perceived Ease of Use (PE) has a positive impact on the Intention to Use of an ERP System. 1.4. System Flexibility (SF) System Flexibility (SF) of an ERP system refers to the flexibility the system provides to the end user in using the system and hence tends to increase the usage of the system by the end user (Calisir & Calisir, 2004). It refers to possibilities to do a task in his job profile, and select the best possible way to carry out the activity. This is possible by training (Gyampah & Salam, 2004; Kwak, Park, Chung, & Ghosh, 2012), which demonstrates the level of flexibility given to the users by ERP application and in 1629


terms of the functionality provided by the ERP vendors (Kwak et al., 2012), which improves usage of the system and leading to the acceptance of the technology. H03: System Flexibility of the ERP System (SF) has a positive impact on the Intention to Use of the ERP System. The above mentioned hypotheses have been described as a proposed model in Figure. 1.

Perceived Usefulness (PU) H01

Perceived Ease of Use (PEOU)

H02

Intent to Use (IU)

H03 System Flexibility (SF)

Figure 1. The proposed technology acceptance research model for ERP systems

2. Methods The data was collected through questionnaire survey, divided into two sections. The first section was used to capture the demographic information about the respondent organization as well as the individual respondent and their respective experiences in using the ERP systems. The second section was specific and was used to capture the respondent’s perception of each factor as described in the technology acceptance ERP model mentioned in the study. The target population for the study includes respondents from 27 different organizations which mostly belonged to the service sector. A total of 350 questionnaires were sent to these 27 organizations, from which a total of 198 responses came back out of which 46 responses were rejected due to incomplete and missing data, leading to 152 valid responses. The items used in this survey questionnaire were taken after an extensive literature review (Calisir & Calisir, 2004; Davis, 1989) and changes were made from the ERP systems usage context. A five-point Likert scale was used for the 18 items of the questionnaire (related to the 4 factors mentioned in the recommended model) where 1 indicated the least favorable response (strongly disagree) and 5 the most favorable response (strongly agree).

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2.1. Reliability Analysis The reliability of each item in the questionnaire was measured using Cronbach’s Alpha Reliability analysis on a factor by factor basis as well as of the entire instrument as mentioned in Table 1 below. All the reliability values were found to be above the acceptance level of 0.70 (Hair et al., 2006). Table 1. Reliability analysis Factor

Number of Items

Cronbach’s Alpha

Perceived Usefulness (PU)

6

0.832

Perceived Ease of Use (PEOU)

6

0.792

System Flexibility (SF)

4

0.749

Intention to Use (IU)

2

0.708

All items

18

0.898

2.2. Exploratory Factor Analysis After the reliability analysis, exploratory factor analysis (EFA) was conducted to evaluate the construct validity with principal component analysis (PCA) used as the method of extraction and Varimax used as the method of rotation. The items in the questionnaire loaded well on the respective factors as per the theoretical background, except for PU5 and SF1, which were rejected from further analysis due to their factor loadings coming below the desirable limit of 0.50 (See Table 2).

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Table 2. Exploratory factor analysis Items PU1 PU2 PU3 PU4 PU6 PEOU1 PEOU2 PEOU3 PEOU4 PEOU5 PEOU6 SF2 SF3 SF4

Perceived Usefulness 0.680 0.594 0.837 0.732 0.549

Perceived Ease of Use

System Flexibility

0.682 0.527 0.650 0.606 0.752 0.581 0.669 0.768 0.832

2.3. Multiple Regression Analysis To establish a relationship between the variables in the technology acceptance model of ERP in Indian context and in order to validate the model, regression analysis was conducted using Intention to Use as the dependant variable and Perceived Usefulness, Perceived Ease to Use and System Flexibility as the independent variables (See Table 3). Table 3. Regression analysis Hypothesis H01 H02 H03

Factor PU PEOU SF

Coefficient 0.407 0.458 0.244

t-value 6.003 6.756 3.605

Significant .000 .000 .000

Supported Yes Yes Yes

Model Summary: R – 0.659; R square – 0.435; adjusted R square – 0.421; Standard error of estimate – 0.53967

3. Results and Discussion The analysis of the data collected on ERP usage in the 27 Indian organizations lead to certain results. The regression analysis (as mentioned in table IV above) concluded that the H01 hypothesis is supported, which reveals that the perceived usefulness of ERP system has a significant impact on the intention to use of the ERP system which has also been proved by various other studies conducted on ERP systems (Calisir & Calisir, 2004; Chung et al., 2009; Garaca, 2011; Gyampah & Salam, 2004; Pasaoglu, 2011). This indicates that if the ERP systems in the Indian organizations enhances the employees’ job performance and makes them more efficient, they will have an intention to use those ERP systems, leading to effectiveness of the organizational processes. The organizations must ensure that the ERP system that they implement must increase the efficiency of the employees’ jobs, thus giving them the motivation to use the ERP systems for fulfilling their personal as well as organizational goals. This can be done by conducting attractive employees training programs from time to time, to help employees to understand the importance of ERP systems. These training programs should be 1632


carried out from the employees’ perspective, and should concentrate more on how these systems enhance the employee productivity on the job rather than providing them with just basic typing skills. H02 is also supported by the findings from the regression analysis which supported that perceived ease of using the ERP systems has a significant effect on the intention of using the ERP system by the employees of the organization. As described earlier, perceived ease of use, in general, refers to the “the degree to which the prospective user expects the target system to be free of effort” (Chung et al., 2009; Davis, 1989). The prospective user in this case refer to the employees of the organization who are actually going to use the ERP systems. So, in case the ERP systems in the organization are such that their usage is easy and provides graphical user interfaces (GUI) or screens which the end user can use easily, to perform day-to-day activities, then the employee will always tend to use the system, thus leading to a greater intention to use and hence, acceptance of ERP technology in the organization. Organizations should also ensure that the ERP systems that they have implemented or are planning to implement, should have GUIs which are interactive and easy to use, with appropiate training provided for each module in the system. Similarly, H03 is also supported by the analysis which indicates that flexibility in ERP system enhances intention to use ERP. Flexibility in usage of ERP provides different ways of doing the same task to suit need of a task. The help documentation of the ERP application and trainings provided will help the user to use the system flexibly, and thus, should be prime focus of the organizations. Overall, the regression analysis revealed that in case of Indian organizations, 42.3% of the variance in the intention to use of the ERP systems is explained by three factors i.e. perceived usefulness of the system, perceived ease of using the system and the degree of flexibility that the ERP system provides to its users in terms of its usability. Although, these three factors are major factors which impact the intention to use, other factors can also be looked into to explain the rest of the variance. 4. Conclusions and Recommendations ERP systems have transformed the functioning of firms with regard to higher efficiency and accuracy in their operations. The coin of ERP success also has other facet to it as well, i.e. higher failure rate, which is dependent on various aspects of system implementation issues both from organizational perspective and end user perspective. The end user perspective, which broadly falls under the behavioural sciences domain, have been investigated by using Technology Acceptance Model (TAM) as a principle guiding force in the presented study. The study reveals that perceived usefulness, perceived ease of use and system flexibility are major factors in explaining the variations in intention to use of ERP applications by the end user in the Indian context. The presented work, which validates the technological acceptance of ERP in Indian organizations by studying the impact of perceived usefulness, perceived ease of use and system flexibility on the intention to use of the ERP systems, has few limitations as well that can serve to provide necessary direction for future research in this domain. Firstly, the study only considers the impact of 3 factors on the intention to use of the system, i.e. perceived usefulness, perceived ease of use and system flexibility, which explains only 42.3% of the variation in the intention to use of the ERP system. There might be other factors such as system capability, compatibility and user guidance (Calisir & Calisir, 2004), end user satisfaction and computer anxiety (Garaca, 2011), internal and consultant support (Kwak et al., 2012) that could be important as well to explain the intent to use of the ERP systems in organizations and can be taken up for further research. Secondly, cross-sectoral and cross-country studies can be carried out to make a comparison between the ERP practices and acceptance levels in different sectors in India like manufacturing, retail, telecom, and banking (Bodenberg et al., 2011). These studies can help to compare the good 1633


and bad practices of ERP applications in different organizations as well as help us to clearly distinguish and list down the factors which are important for the technology acceptance of ERP across different sectors and different countries. Also, current study was conducted specifically on organizations in northern India and hence a country wide study with the considered factors can be carried out further. In a developing country like India where computer penetration is slow and the level of IT maturity is quite low and at the same time employee resistance is high for any new technology, ERP systems are quite handful in enhancing job performance and also provides the ease and flexibility in carrying out day-to-day business functions . This study is an attempt in determining the factors that impacts intention to use the ERP systems from the end user perspective thereby increasing the success probability of the ERP adoption in Indian scenario. References [1] Ahmadi, F., Mahmoudi, J., & Jandaghi, G. (2011). Determining Enterprise Resource Planning (ERP) success factors in Iranian companies. European Journal of Economics, Finance and Administrative Sciences, 34, 123-133. [2] ALdayel, A. I., Aldayel, M. S., & Al-Mudimigh, S. A. (2011). The critical success factors of ERP implementation in higher education in Saudi Arabia: A case study. Journal of Information Technology and Economic Development, 2(2), 1-16. [3] Amin, H. (2009). An analysis of online banking usage intentions: An extension of the technology acceptance model. International Journal Business and Society, 10(1), 27- 40. [4] Anjum, M. J. (2011). User’s satisfaction and ERP implementation success. Information Management and Business Review, 3(5), 262-269. [5] Bodenberg, S., Garrett, T. C., & Lee, J.-H. (2011). Online auction acceptance, are there national difference? A test of the technology acceptance model in Korea, New Zealand and Germany. Society for Marketing Advances, 397-401. [6] Buonnano, G., Faverio, P., Pigni, F., Ravarini, A., Sciuto, D., & Tagliavani, M. (2005). Factors affecting ERP system adoption: A comparitive analysis between SMEs and large companies. Journal of Enterprise Information Management, 18(4), 384426. [7] Calisir, F., & Calisir, F. (2004). The relation of interface usability characteristics, perceived usefulness, and perceived ease of use. Computers in Human Behavior, 20, 505-515. [8] Chung, B., Skibniewski, M. J., & Kwak, Y. H. (2009). Developing ERP systems success model for the construction industry. Journal of Construction Engineering and Management, 207-216. [9] Dantes, G. R., & Hasibuan, Z. A. (2012). Measurements of key success factors on Enterprise Resource Planning (ERP) implementation. IBIMA Business Review, 2010(2010), 1-11. [10] Dasgupta, S., Paul, R., & Fuloria, S. (2011). Factors affecting behavioral intentions towards mobile banking usage: Empirical evidence from India. Romanian Journal of Marketing, 6(1), 6-28. [11] Dash, M., Mohanty, A. K., Pattnaik, S., Mohapatra, R. C., & Sahoo, D. S. (2011). Using the TAM model to explain how attitudes determine adoption of internet banking. European Journal of Economics, Finance and Administrative Sciences, 36, 50-59. [12] Davis, F. D. (1986). A technology acceptance model for empirically testing new end-user information systems: Theory and results. Unpublished PhD dissertation. [13] Davis, F. D. (1989). Perceived usefulness, perceived ease of use and user acceptance of information technology. MIS Quarterly, 13(3), 319-339. [14] Dowlatshahi, S. (2005). Strategic success factors in enterprise resource-planning design and implementation: a casestudy approach. International Journal of Production Research, 43(18), 3745–3771. [15] Garaca, Z. (2011). Factors related to the intended use of the ERP system. Management, 16(2), 23-42. [16] Gyampah, K. A., & Salam, A. F. (2004). An extension of the technology acceptance model in an ERP implementation environment. Information & Management, 41, 731-745. [17] Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2006). Multivariate Data Analysis. Upper Saddle River, NJ: Pearson Prentice Hall. [18] Karthikeyan, S., & Clement, S. J. (2010). Diffusion of internet banking in India: An empirical study. Advances in Management, 3(11), 15-20. [19] Kositanurit, B., Ngwenyama, O., & Osei-Bryson, K.-M. (2006). An exploration of factors that impact individual performance in an ERP environment: an analysis using multiple analytical techniques. European Journal of Information Systems, 556-568.

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