Does ERP have benefits on the business intelligence ...

Int. J. Information Systems and Change Management, Vol. 8, No. 2, 2016

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Does ERP have benefits on the business intelligence readiness? An empirical study Saeed Rouhani* Department of IT Management, Faculty of Management, University of Tehran, P.O. Box: 14155-6311, Jalal Al-e-Ahmad Ave., Nasr Bridge, Tehran, Iran Email: [email protected] Email: [email protected] *Corresponding author

Mobin Mehri Department of IT Management, Faculty of Management and Accounting, Allameh Tabataba’i University, Tehran, Iran Email: [email protected] Abstract: Business intelligence is an essential part of business analytics and decision support in organisational environment and its readiness is the first and vital step. The goal of this research is the study the enterprise resource planning (ERP) implementation benefits on the business intelligence (BI) readiness. In this research a survey has been guided based on 28 hypothesises which were designed through seven ERP implementation benefits and four BI readiness criteria that were extracted from literature review. The Pearson correlation test was utilised to analysis the questionnaire data of 54 firms. The results of Pearson correlation test shows 17 positive relations between ERP implementation benefits and BI readiness criteria. Consequently ‘decisional empowerment’, ‘improved interaction with customers’, ‘improved decision-making process’, ‘increased flexibility in information generation’, ‘increased IT infrastructure capability’, ‘integrated information across the enterprise’ and ‘improved information flow among departments’ as ERP implementation benefits lead to BI readiness in organisation. This research would be useful for CIO of firms to prepare their organisations for BI utilisation by ERP implementation. Also insights about ERP effects and relations to readiness level of BI are the main outcomes of the current research. Keywords: enterprise resource planning; ERP; business intelligence; readiness. Reference to this paper should be made as follows: Rouhani, S. and Mehri, M. (2016) ‘Does ERP have benefits on the business intelligence readiness? An empirical study’, Int. J. Information Systems and Change Management, Vol. 8, No. 2, pp.81–105.

Copyright © 2016 Inderscience Enterprises Ltd.

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S. Rouhani and M. Mehri Biographical notes: Saeed Rouhani obtained his BS in Industrial Engineering from Iran University of Science and Technology, Tehran, Iran, in 2003, and his MA in Information Technology Management from Allameh Tabataba’i University, Tehran, Iran, in 2005. He received his PhD in Systems Engineering from Iran University of Science and Technology in 2011. Currently, he is an Assistant Professor in Faculty of Management at University of Tehran, Iran. His research interests include enterprise resource planning systems, business intelligence, information systems and decision making. He has published more than ten books and presented more than 40 papers at different conferences and in acclaimed journals. Mobin Mehri is a Technology Research and Planning Expert at Pardis Technology Park, Tehran, Iran. He received his BS in Industrial Engineering, in 2011, from Iran University of Science and Technology, Tehran, Iran, and MA in Information Technology Management, in 2013, from Allameh Tabataba’i University, Tehran, Iran. His research interests are enterprise resource planning, business intelligence, and business process reengineering. He has written two books and several papers published in different conferences and journals.

1

Introduction

Todays’ intricate and flexible surrounding makes organisations think of new ways to perform their functions real-time and to escort with their changes. This issue forces the organisations to using information systems (ISs) for business performance improvement and more competitiveness frequently (Ho et al., 2004). Enterprise resource planning (ERP) is one of the systems which creates integrated processes by using joint database and sharing information (Chung and Snyder, 2000; Dredden and Bergdolt, 2007). This system causes decreasing of processes’ time and sharing information in organisation and so, the organisation can response the customers’ changeable needs (Lee et al., 2010). In spite of many benefits, ERP cannot act as a system to analyse data and to support decision-making process. This system is appropriate to gather and to store data but it is so worthy reporting for its users (Chou et al., 2005). Also integrating organisation’ data and improving decision-making process are the benefits of this system which can be prominent to get the business intelligence (BI), so that some of researchers express BI is also one of the usual modules of this system like that financial, human resource, supply chain management (SCM) and customer relationship management (CRM) (Boykin, 2001; Chen, 2001; Marnewick and Labuschagne, 2005; Yen et al., 2002). All the users of ERP are able to access immense volume of data and analyse and percept processes by it which this ability can support business decisions (Marnewick and Labuschagne, 2005). ERP might be known as a basic tool for BI especially to gather and to integrate data into a central data base. So far, numerous researchers have settled to give a frame for ERP and BI in addition to pay opinions in this range. Chou et al. (2005) expressed that ERP systems integrate all the business areas and make access to all data easily. Datamonitor (2001) showed integrated frame for ERP and BI includes five main parts such as software, BI analytical

Does ERP have benefits on the business intelligence readiness?

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applications, data integration, operational data and data storage. Ghazanfari et al. (2011) have settled expert tool to evaluate the BI competencies of enterprise systems, and they have recognised six factors for the evaluation model: ‘analytical and intelligent decision support’, ‘providing related experimentation and integration with environmental information’, ‘optimisation and recommended model’, ‘reasoning’, ‘enhanced decision-making tools’, and finally, ‘stakeholder satisfaction’. Holsapple and Sena (2005) studied relation between ERP systems and decision support and stated this subject that ERP can support decision making. Davenport (1998) expressed that one of the proofs of ERP necessity is needs to accurate and real-time decision making. Some of the inquirers believe that a successful ERP can act as an spinal column of BI at organisation because it is able to give managers integrated approach of inside processes of BI (Nash, 2000; Parr and Shanks, 2000). Hawking et al. (2007) mentioned that although ERP systems have traditionally been concerned with managing the processing of business transactions rather than BI, ERP system vendors are transforming their solutions into the BI arena. Consequently, the effect of ERP on the decision making has shown in these past researches, but in spite of recent circulating BI, the relation between these two systems and their influence is not studied. On the other hand, if BI implementation has been without necessary readiness, it will just gamble that cost a lot, because some IS projects such as BI cost lots of money and time, so it ought to act with accurate studying and planning. Researching performed investigations marks presenting research gap to show the effect of ERP on the BI readiness in organisations, because of this, current research aims to study this effect and answer the following research question: •

Is there a relation between ERP benefits and BI readiness? (Does ERP implementation help organisation to be ready to achieve BI?)

For responding this question, a survey has been designed that had statistical population of employees of 54 Middle East companies. In progress, based on literature review, ERP benefits and BI readiness factors are extracted. Then, the effect of ERP benefits on the BI readiness is studied by designing a questionnaire and statistical analysis of gathered data.

2

Literature review

2.1 Business intelligence Recently, settling the organisations in ambiguity and changeable room (Rouibah and Ould, 2002) causes its limitation by the vast information, so the organisations require the gathering and processing data for faster decision making. BI is a solution which can improve the process of gathering, processing and decision making (Sacu and Spruit, 2010). The BI word can be said to the different computerised ways to convert the data to information, next convert the information to knowledge (Lonnqvist and Pirttimaki, 2006) and consequently, improve organisational decision making (Williams and Williams, 2007). It is a discussion which proceeds as a technological solution in the theme of decision support and employs analytical tools and integrated data to give valuable information to several employees to decision making (Popovic et al., 2012). Hans Peter

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S. Rouhani and M. Mehri

Luhn who was the first person to use BI word in 1958, has explained it as an ability to understand corresponding relation among the available truth in order to direct it to the desirable goal (Dey et al., 2010). In the belief of Ghoshal and Kim (1986), BI is a tool and managerial philosophy to help the organisations to manage and process business information in order to get the effective decisions. BI has explained as an epidemic word that contains concepts and methods for making business decisions which is using fact-based decision support systems (Power, 2007). Wells (2008) knows this concept as the ability and the worth of organisation to define, predict, consider and percept, learn, and increase organisational knowledge, prepare information for decision-making process, improvement effective steps, and supporting of achieving the business goals. The ‘Knowledge Management Workshop’ has defined this concept as an active basic model and long-term solution for discovering hidden points and decision making in big size which uses business data with the purpose of better access to information in the decision-making process (Liebowitz, 2006). Wixom and Watson (2010) believe that it is as a set of technologies, applications, and processes for gathering, storing, accessing and analysing data with the purpose of helping users in better decision making. Azvine (2006) believes that BI is about the reaching to perception, analysing and processing one of the vital capitals of organisation which means information that acts converting raw data to information with the purpose of improving business. The main purpose of BI is to reach at discovering ability, integrating, gathering intelligently, and multi-dimensional analysing data which is made by different information sources (Olszak and Ziemba, 2007), consequently, the quantity of data converts to the quality of data (Gangadharan and Swami, 2004). The purpose of investing in BI is transferring from reactive surrounding to proactive surrounding. Integrating and making automatically all the organisation’ processes and functions and providing data for tool-based analysis are the other purposes of BI (Ranjan, 2008).

2.2 BI readiness Today, BI is considered as a necessity for organisations. Gartner Group has done a survey that shows BI was considered as the top priority for chief information officers (Anjariny et al., 2012). In other hand, some studies show that the return of investment of BI was questionable because of challenges in its implementation at organisations (Williams and Williams, 2007). The most challenge is organisation readiness toward BI system (Cooper et al., 2000; Hwang and Hongjiang, 2005; Howson, 2008; Yeoh and Koronios, 2010). The challenge here is how to drive BI systems to deliver a good quality business value to the user. It should develop business methods to ensure that BI investments payoffs (Williams and Williams, 2007). An assessment for organisations’ readiness toward BI will have major contribution in reducing the high failure rate of BI project. This topic is still a hot research area which needs to be reinvestigated (Anjariny et al., 2012). Although many organisations have implemented BI, not all BI projects have been successful. A large number of the BI projects do not succeed, with failure rates estimated at 50%–80% (Farrokhi and Pokoradi, 2012). Performing BI project is much more than installing software and hardware and its success depends on assessing the current condition, planning, analysing and improving processes, acting carefully and system science. It will not be successful without some-year strategy and roadmap for system development (Stratagem, 2012).


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BI readiness is a necessary prerequisite to reach successful and its assessment is done before and after its implementation, so the level of readiness will be known to achieve all of the values and benefits which are produced by BI (Williams and Williams, 2007). These values and benefits can include improving profitability, productivity and services (Williams and Williams, 2004). BI readiness covers a category of tasks that analyses several key areas of organisations, so that level of organisation readiness for BI implementation would be estimated in the short-term and BI maturity in the long-term (Gartner, 2011). deHenry (2007) emphasised that a BI program is the end of a long road that beings with an organisation assessing its readiness for BI. He mentioned that BI readiness assessment is necessary because of following reasons: •

to clarify the organisation goals for BI initiative

•

to develop a consistent methodology for the initial BI implementation effort

•

to identify current team skills and deficiencies and prepare a roadmap for filling gaps

•

to identify and develop needed processes necessary to sustain the organisation’s BI program

•

to research technical architecture and tools for current BI needs and develop a roadmap based upon the organisation’s changing BI requirements over the next two to three years

•

to identify potential data quality issues in existing OLTP systems.

In traditional methods of BI development without paying attention to business processes, starts to data warehouse implementation which costs a lot that it is not effective for business completely. But, the new methods are searching for new paradigms that discover optimised solutions for access enough information. Pathway method is one of these ways and a best practice which has been educated by The Data Warehousing Institute for many years. It obtains three main steps of ‘architecture’, ‘implementation and operation’ and ‘continuous improvement’. In the first step, it uses the BI readiness assessment to recognise some risks which needs particular management, so that the value and profit of investing in BI would reach (Williams and Williams, 2004). In conclusion, BI readiness assessment follows two main purposes. First, readiness assessment shows some gaps which cause organisation to not get ready for BI implementation and finally it avoids perishing resource and time. Second, studying these gaps will obtain the field of filling present gaps and it helps organisation to increase the probability of success by deleting these gaps (Farrokhi and Pokoradi, 2012).

2.3 Enterprise resource planning ERP is a total set of software and as a system of business management. If it is done successfully, it can be used to manage and integrate all the functions of an organisation (Shehab et al., 2004). In spite of giving lots of definitions for ERP, many people are following discovering philosophy of this system. Marnewick and Labuschagne (2005) know ERP as a software package for business which lets organisation to integrate and automate its business processes, share data and real-time access to information. Fontana and Neto (2009) know this system as a IS which integrates all the business information and provides abilities of process control and unique information flow. This computerised

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system is used for inside and outside resource management of an organisation such as tangible and intangible assets, financial resource, material and human resource (Jain, 2011). Jacobs and Bendoly (2003) defined ERP as a concept and as a system. As a concept, ERP involves the integration of business processes within an organisation, with improved order management and control, accurate information on inventory, improved workflow, and SCM, and better standardisation of business and best practices. As a system, ERP is about technological infrastructure designed to provide the required functional capability required to turn the ERP concept into a reality. From the viewpoint of Hawking et al. (2006) ERP used for integrate all core business functionality into a single system with standardised definitions, user interfaces and a single database. The ERP vendors also modelled business processes in their systems based on a number of leading companies that enabled the vendors to claim that their systems incorporated best practices. They believed that ERP system can be defined as ISs that are integrated and modular, have broad business functional scope and are responsible for transaction processing in a real time environment. Ming et al. (2003) mentioned that ERP adds value by improving the coherence and integrating the needed information in decision-making process. Although ERP can gather and integrate all the data which arises from different sources of organisation, the ability of reporting, the ability of budgeting, the ability of system integration and analysing practical problems are challenges which are against this system (Chou et al., 2005). In fact, these abilities are the differences among ERP and BI.

2.4 ERP benefits and BI readiness factors Although users enjoy cost saving in ERP, but it is difficult to quantise all the tangible or intangible benefits of this system implementation (Ho, 2007). Up to now, several researchers have settled to say a framework for the ERP benefits: Shang and Seddon (2002) define five categories of benefits arising from ERP: 1

operational (cost reduction, cycle time reduction, productivity improvement, quality improvement, customer service improvement)

2

managerial (better resource management, improved decision making and planning, performance improvement)

3

strategic (support for business growth, support for business alliance, building business innovations, building cost leadership, generating product differentiation, building external linkages)

4

IT infrastructure (building business flexibility for current and future change, IT cost reduction, increased IT infrastructure capability)

5

organisational (changing work patterns, facilitating organisational learning, empowerment, building common vision).

Chand et al. (2005) have suggested an ERP valuation framework which is called ERP scorecard. It integrates the four Kaplan and Norton’s balanced scorecard dimensions with Zuboff’s automate, informate and transformate goals of ISs to provide a practical approach for measuring the contributions and impacts of ERP systems on the strategic goals of the company.


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Singla (2008) defines three categories of benefits arising from ERP: 1

Tangible benefits after ERP implementation (inventory reduction, personal reduction, productivity improvement, order management improvement, technology cost reduction, procurement cost reduction, cash management improvement, revenue/profit improvement, transportation/logistics cost reduction, maintenance reduction, on time delivery improvement)

2

Intangible benefits after ERP implementation (new/improved business processes, customer responsiveness, cost reduction, integration, standardisation, flexibility, globalisation, business performance, supply/demand chain, information/visibility, economic performance of firm (internal coordination cost), monitoring cost, bonding cost, residual cost, information processing cost, communication cost, documentation cost, opportunity cost due to poor information)

3

Business performance factor (reduce organisations business risks, enhance organisations regulatory compliance, makes MIS more accurate and accessible, facilitate improved services to customer and suppliers, allows new services to customer and suppliers, enhance primary users knowledge and skills, increase institutional accountability, increase shareholders confidence in organisation, enhance support to organisational activities, enhance organisation business performance, decrease work load in various departments, decrease workload in central department, ERP is less costly to maintain and operate as compared to legacy systems, ERP is less costly to enhance/upgrade as compared to legacy system, ERP is less costly to integrate as compared to legacy system, ERP made it easier to take advantage of new technology, nature of work in various departments has changed).

Eckartz et al. (2009) have developed three-dimensional conceptual benefit framework which build upon several benefit dimensions and the balanced scorecard approach. Dimension one is based upon three of Shang’s benefit categories (operational, managerial and strategic). Dimension two is formed by including the following categories of the BSC framework of Kaplan and Norton (process, customer, finance and innovation). They added a fifth category to it, focusing on the role of human resources in the ERP adopter. Dimension three deals with benefits falling into IT-infrastructure and organisational categories, identified by Shang et al. The Appendix is showing the ERP benefits which is based on literature review in the field of this system. Some of these benefits can be the effects and results of BI readiness, potentially. The success of BI depends on various factors, some of which are technological. As a sample, BI implementation relies on IT infrastructure. In addition, success dependent up organisational and process factors too, which are identified according to BI variations among different industries (Adamala and Cidrin, 2011). Academic literature on readiness methodologies in BI focus on implementation aspects of BI. For example, Arnott (2008) and Hawking and Sellitto (2010a) report on BI organisational critical success factors (CSF). There are several industry readiness models, such as The Data Warehousing Institute (TDWI) and a BI assessment framework by deHenry (2007). He provides qualitative guidelines to describe the readiness of an organisation for BI; these are identified as functioning IT/business partnerships, a current analytic culture, and most importantly, a

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capable and astute business management sponsor. Yeoh and Koronios (2010) introduced a framework for BI implementation readiness and in this framework the organisation, technology and process factors impact the implementation of BI successfully. Watson et al. (2006) identified the model of BI implementation and demonstrated that some factors such as management support, champion, resources, user participations, human resource skills, source systems and development technology effect BI. Up to now, some models have been given to BI readiness assessment. Although several authors have put a number ideas and frameworks with respect to successfully obtain BI readiness factors, the number of papers and books which have paid the topic of BI readiness assessment is very low really (Farrokhi and Pokoradi, 2012). Table 1 is showing some of BI readiness assessment models and these features and factors. Table 1

BI readiness assessment models

Reference

Features and factors

Williams and Williams (2007)

Strategic alignment, continuous process improvement culture, culture around use of information and analytics, BI portfolio management, decision process engineering culture, BI & DW technical readiness, business: IT partnership

Xtivia (2013)

Strategic alignment, information use and analysis, BI portfolio management, technical readiness, continuous process improvement

Stratagem (2012)

Required resources and costs, CSFs, potential risks, business requirements, critical hardware and software components

Friedman et al. (2003)

Two dimensions: IT BI activism and user BI activism

Somani and Karra (2005)

Four conditions: BI? What is that?, Wake the users up!, Where is IT? and you are in BI heaven! What information is required – alignment of data How will the information be retrieved – reporting processes and formats Who would have access to what information – information security profiling How should the users be prepared for usage of the new tool – user preparation

Williams and Williams (2007)

TDWI DW readiness assessment: people readiness and business imperative, IT readiness and business imperative, business readiness and business imperative, people readiness and executive sponsorship, IT readiness and executive sponsorship, business readiness and executive sponsorship, people readiness and DW development method, IT readiness and DW development method, business readiness and DW development method, people readiness and business process orientation, IT readiness and business process orientation, business readiness and business process orientation

2.5 ERP Benefits related to BI Successful ERP implementation forces the organisation to standardising, restructuring, and simplification of their functions (Akyuz and Rehan, 2009). Today, a lot of organisations use BI to improve technical and operational process, supply chain and customer services (Williams and Williams, 2003). In this research, four factors of


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‘infrastructure’, ‘human resource capability’, ‘integrated data’ and ‘transparent and automated processes’ are selected as the BI readiness factors based on this models. The BI systems are used for the purpose of changing and improving in organisational processes and they will not change or improve without transparent and automated processes. The current condition of organisational processes can show the level of organisation readiness for BI, because reforming processes and their reengineering needs much time and money and if apiece of processes be more suitable and transparent, the BI development will be easier. Each change of processes effects organisational data and information. One of the main features of ERP is integrating data, because of this each data just once enters to the system and it is usable for all the departments and employees. Accessing all the gathered data in one data warehouse is one of the essential elements of BI. Data integration depends on the information technology infrastructure and ERP emphasises on the provision of this infrastructure. This integrator infrastructure can guarantee all the technical and infrastructural requirements in BI. It is so important that ISs support the strategic goals of organisation and make certain that the purpose of ERP implementation is parallel with the organisation needs (Chyan and Fen, 2009). The effects of ERP on the enhancing human resource capabilities and decision making and analytical skills can promote BI readiness in the field of improving the culture of analytical decision making. Table 2 is showing the most important ERP benefits related with BI. Table 2

The most important ERP benefits related to BI

Benefits

3

Reference

Decisional empowerment

Chand et al. (2005) and Holsapple and Sena (2005)

Improved interaction with customers

Dey et al. (2010), Genoulaz and Alain (2005), Olhager and Selldin (2003) and Saatcıoglu (2009)

Improved decision-making process

Chand et al. (2005), Dey et al. (2010), Holsapple and Sena (2005), Spathis and Ananiadis (2005) and Spathis and Constantinides (2003)

Increased flexibility in information generation

Holsapple and Sena (2005), Singla (2008), Spathis and Ananiadis (2005) and Spathis and Constantinides (2003)

Increased IT infrastructure capability

Saatcıoglu (2009)

Integrated information across the enterprise

Chand et al. (2005), Ling and Minder (2004) and Spathis and Ananiadis (2005)

Improved information flow among departments

Davenport and Brooks (2004), Gattiker and Goodhue (2002) and Ling and Minder (2004)

Hypothesis and research model

From the viewpoints of several researchers, there is a consistent indication of the complementary existence between the ERP and BI on the enterprise architecture level in the sense that ERP provides a database which BI can retrieve data from it (Rom and Rohde, 2006; Adam and Pomerol, 2008; Vakalfotis et al., 2011; Sanchez-Rodriguez and Spraakman, 2012). Sanchez-Rodriguez and Spraakman (2012) emphasised that BI cannot

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operate in vacuum without additional data support from other IS technologies especially the ERP system. Umble et al. (2003) mentioned that ERP with the collaboration of BI is expected to be more competitive and flexible in order to share information and data for decision making and control. Chou et al. (2005) mentioned that ERP systems integrate all facets of the business and make data available in real time and BI tools are capable of accessing integrated data directly from ERP modules. They mentioned too, ERP systems are transacted-based, that is, ERP applications are designed to process large volumes of business transactions within sub-second response times. Due to ERP ability to generate friendly reporting, BI allows dynamic enterprise data search, retrieval, analysis, and explanation of the needs of decisions (Nofal and Yusof, 2013). Davenport et al. (2004) supported this evolution of ERP systems towards BI through their three drivers for ERP usage: •

integrate: organisation has ability to integrate their data and processes internally and externally with customers and suppliers

•

optimise: organisation standardises strategic processes based on best business practice as offered by the ERP system

•

informate: organisation is able to provide context rich information to support effective decision making.

They identified a list of benefits companies were expecting from their ERP. The top benefits are related to effective decision making and BI. Hall (2004) believed that within the context of ERP, BI is the process of leveraging detailed customer behaviour information to best manage relationships for maximum customer satisfaction, loyalty, retention and profitability. Holsapple and Sena (2005) in their study show that ERP system enables organisations to achieve decision support benefits. In their study, enhances decision makers’ ability to process knowledge had the maximum mean and improves satisfaction with decision outcomes had the minimum mean among the decision support benefits of ERP. Also, in their research, access to real-time BI was an important benefit of ERP. Ling and Minder (2004) emphasised this benefit too. Chou et al. (2005) believed that BI tools can be used to generate various aspects of business views through manipulating existing data captured by company’s ISs. BI can be used for any organisation to structure its ERP information and other data repositories, for fast and effective decision making. Williams and Williams (2007) mentioned that ERP and BI integration reduces IT infrastructure costs by integrating information and eliminating redundant data extraction processes and duplicate data housed in the enterprise independent data marts across. Hawking et al. (2005) provided an understanding of the evolution of BI solutions within Australian companies. Both the survey and the case study in their research demonstrate that there is an evolutionary approach to the adoption of BI solutions. The continuous use of BI solutions results in companies striving for more strategic solutions. This BI maturity process is similar to how companies evolve with their ERP usage. They mentioned that there is a very strong interdependent relationship between ERP systems and BI solutions. The reliance of BI on data that transaction processing systems generate and the long-term dominance ERP vendors have in transaction processing gives these


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vendors a chance to dominate this market. ERP systems are no longer solely responsible for transaction processing; they have evolved a range of value adding applications of which BI is the latest iteration. Hou and Papamichail (2010) believed that organisations using ERPBI systems achieve higher levels of decision-making performance compared to organisations which only use ERP system. Hawking and Sellitto (2010b) mentioned that BI is highly reliant on ERP functionality and the vast amount of data that ERP systems generate. Caserio (2011) conducted two approaches to show the implementation and upgrading ERP and BI. He emphasised that an effective approach to BI, must pay attention to the structure of the data, because they are the basis of all the decision support systems. This structure can be supported by ERP. Helmy et al. (2012) believed that ERP can provide integrated data for BI and BI can use data with its tolls. They mentioned that using a web portal based on BI tools gives an integrated and web-based solution that enables legacy ERP’s partners to create and share relevant information, based on data marts which are derived from a ‘one-version data store’. They emphasised that integrated data from ERP is an essential element for BI. Kadoli et al. (2014) believed that ERP provides a rich source of highly granular information about all aspects of business. This is a natural by product of ERP’s reach deep into business and collecting and systematising day to day functioning and BI takes that data one step further to allow organisation to make strategic and technical decisions about how to run its business. Bansal and Narula (2004) analysed ERP impact on the various aspects of human resource and showed that how these functions can be made perform better with the ERP. They mentioned that ERP increase human resource accessibility to decision making’ data, facilitates faster reporting, master data analytics and making decisions faster. Figure 1

Research model

Maxcer (2015) at an e-book that sponsored by IBM emphasised the unique challenges of IT and BI professionals in ERP-centric environments. He offered best practices, strategic advice and long-term planning assistance for organisations seeking to create or optimise

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BI programs that effectively leverage existing ERP investments. He mentioned that ERP can provide integrated data for BI with creating a suitable infrastructure. In current research based on synthesis of literature, seven ERP benefits were selected as major benefits and also four BI readiness categories were picked. Therefore 28 hypothesises were designed as below: •

There is a significant relation between ‘decisional empowerment’ and: 1 infrastructure 2 human resource capability 3 integrated data 4 transparent and automated processes.

•

There is a significant relation between ‘improved interaction with customers’ and: 5 6 7 8

infrastructure human resource capability integrated data transparent and automated processes.

•

There is a significant relation between ‘improved decision-making process’ and: 9 infrastructure 10 human resource capability 11 integrated data 12 transparent and automated processes.

•

There is a significant relation between ‘increased flexibility in information generation’ and: 13 infrastructure 14 human resource capability 15 integrated data 16 transparent and automated processes.

•

There is a significant relation between ‘increased IT infrastructure capability’ and: 17 18 19 20

•

infrastructure human resource capability integrated data transparent and automated processes.

There is a significant relation between ‘integrated information across the enterprise’ and: 21 infrastructure 22 human resource capability 23 integrated data 24 transparent and automated processes.

Does ERP have benefits on the business intelligence readiness? •

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There is a significant relation between ‘improved information flow among departments’ and: 25 infrastructure 26 human resource capability 27 integrated data 28 transparent and automated processes.

Figure 1 is showing the research model.

4

Research methodology

The current research uses quantitative research method. A survey was designed and the questionnaire was generated based on the research`s hypothesises. As analysing method, Pearsonian correlation test has been used for hypothesis testing and SPSS software for statistical analysis. Survey was conducted among employees of 54 Middle East companies. A questionnaire has been developed for gathering data. This questionnaire contained 38 questions and three sections; first section contained demographic questions. Second section was for assessing ERP benefits -Decisional empowerment, improving interaction with customers, improving decision-making process, increasing flexibility in information generation, increasing IT infrastructure capability, integrating information across the enterprise and improving information flow among departments-. Third section was for assessing current condition of BI readiness factors -Infrastructure, Human Resource Capability, Integrated Data, and Transparent and Automated Processes-. Cronbach’s Alpha has been used for the assessing reliability of questionnaire. It has been 0.834 which shows that the questionnaire was reliable. Validity of questionnaire has been supported by professors.

5

Research findings

5.1 Statistical analysis of data Table 3 is showing the demographic profiles of responders to questionnaire and the profile of studied organisations. Pearsonian correlation test has been used for studying the relation between dependent and independent variables. As an example, the hypothesis stating in this form: H0

There is a significant relation between decisional empowerment and infrastructure.

H1

There is not a significant relation between decisional empowerment and infrastructure.

Table 4 is showing the results of testing hypothesis.

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Table 3

Demographic profiles of responders to questionnaire and the profile of studied organisations

Gender ERP lifetime

ERP implementation strategy

No.

Number

Percent (approximate)

Cumulative (percentage)

Male

35

64.8

64.8

Female

19

35.2

100.0

Less than 5 years

15

27.7

27.7

5 to less than 10 years

29

53.7

81.4

More than 10 years

10

18.6

100.0

Single package

46

85.2

85.2

Single package with other systems

6

11.1

96.3

Multi package

2

3.7

100.0

Manufacturing

18

33.3

33.3

Information technology

5

9.2

42.5

Utility and oil/gas

7

12.9

55.4

Pharmaceutical

4

7.5

62.9

Automobile

6

11.1

74.0

Industry type

Table 4

Description

Food

3

5.6

79.6

Telecommunications

4

7.5

87.1

Services

7

12.9

100.0

The results of Pearsonian correlation test Independent variable

Dependent variable

R

Infrastructure

0.157

Human resource capability

0.451**

3

Integrated data

0.104

0.245 Not supported

4

Transparent and automated processes

0.157

0.092 Not supported

Infrastructure

–0.061

0.343 Not supported

1 2

5 6

Decisional empowerment

Improved interaction with customers

Sig

Result

0.147 Not supported 0.001

Supported


0.274*

0.033

Supported

7

Integrated data

0.369*

0.018

Supported

8


0.205

0.086 Not supported

Infrastructure

0.226

0.066 Not supported


0.523*

0.000

Supported

11

Integrated data

0.356**

0.008

Supported

12


0.331*

0.034

Supported

9 10

Improved decision-making process

Notes: *Correlation is significant at the 0.05 level (1-tailed). **Correlation is significant at the 0.01 level (1-tailed).

Does ERP have benefits on the business intelligence readiness? Table 4 No. 13 14 15

The results of Pearsonian correlation test (continued) Independent variable Increased flexibility in information generation

16 17 18 19

Increased IT infrastructure capability

20 21 22 23

Integrated information across the enterprise

24 25 26 27

95

Improved information flow among departments

28

Dependent variable

R

Sig

Result

Infrastructure

0.464*

0.024

Supported


0.146

0.167 Not supported

Integrated data

0.425*

0.048

Supported


0.276*

0.032

Supported Supported

Infrastructure

0.308*

0.019


–0.057

0.353 Not supported

Integrated data

0.405*

0.031

Supported

Transparent and automated processes 0.308**

0.004

Supported

Infrastructure

–0.042

0.391 Not supported


–0.079

0.302 Not supported

Integrated data

0.361*

0.020

Supported


0.370*

0.019

Supported

0.115 Not supported

Infrastructure

0.180


–0.264*

0.038

Supported

Integrated data

0.346*

0.014

Supported


0.276*

0.032

Supported

Notes: *Correlation is significant at the 0.05 level (1-tailed). **Correlation is significant at the 0.01 level (1-tailed).

5.2 Discussion a

Decisional empowerment is an ERP benefit which has relation with human resource capability as one of BI readiness factor. This result is aligned with Bansal and Narula (2004) opinion. BI relates with analytical decision making, undoubtedly, if the employees ability in the decision making gets more, their skill in the data analysis and making more efficient decisions will increase. Finally, because of this BI readiness will enhance too. As current issue in Middle East firms, they encounter non-integrated data. ERP provide integrated data which will be utilised in BI projects in Middle East firms.

b

Improved interaction with customers is another benefit of ERP which has relations with human resource capability and integrated data. This result is aligned with Hall (2004) opinion. Due to CRM as a module of ERP, the organisations can provide integrated customer data with the best quality by using this module. This object can help organisations for making better decisions and enhancing capability of analytical decision making in the employees, because access to integrated data is one of the most important prerequisites of efficient decision making. Improving human resource capability and ensuring integrated data enhancing BI readiness. Especially in Middle East countries, firms need to improve their HR capabilities. ERP implementation causes staffs will learn to work in systematic procedures and this help for future BI plans.

96


c

Improved decision-making process is another benefit of ERP which has relation with human resource capability, integrated data and transparent and automated processes. This result is aligned with Holsapple and Sena (2005) and Nofal and Yusof (2013) opinions. The more transparent the decision-making processes and procedures are, analytical capability of employees will enhance, organisational data will be more integrated and processes will be more transparent. Making processes transparent and converting processes from implicit condition to explicit condition is one of the ERP benefits which can enhance BI readiness.

d

Increased flexibility in information generation is another benefit of ERP which has relation with infrastructure, integrated data and transparent and automated processes. This result is aligned with Chou et al. (2005), Rom and Rohde (2006), Adam and Pomerol (2008), Hawking and Sellitto (2010a), Vakalfotis et al. (2011), Caserio (2011) and Sanchez-Rodriguez and Spraakman (2012) opinions. The base of BI is organisation information and creating and gathering this information needs a perfect IT infrastructure. ERP with creating flexibility in information generation can improve this infrastructure. By increasing flexibility in information generating, data would gather and integrate in the suitable form and real-time and also information-based processes will be more transparent.

e

Increased IT infrastructure capability is an ERP benefit which has relation with infrastructure, integrated data and transparent and automated processes. This result is aligned with Williams and Williams (2007) and Maxcer (2015) opinions. ERP is a prepared software package which covers all the organisation processes. The existence of IT infrastructure and tools in ERP can provide necessary infrastructure for BI. This feature causes the creating; sharing and gathering data in organisation performance with more integration, because one of the most important features of ERP is the existence one data base in it. This data base needs an IT platform which ERP can assure integration of organisation data with providing this platform. On the other hand, today all the organisation processes depend on IT and use its tools and infrastructures approximately, so increasing IT infrastructure capability arising from ERP can make organisation processes more integrated and transparent. Because of limitations and political matters in Middle East firms, their infrastructure is feeble, ERP projects renew and reinforce IT infrastructures.

f

Integrated information across the enterprise is another benefit of ERP which has relation with integrated data and transparent and automated processes. This result is aligned with Helmy et al. (2012) opinion. If we assume information as BI system inputs, information integration arising from ERP is really integration of BI inputs. Increasing this integration causes enhancing BI readiness, certainly. All the organisation processes depend on IT, so information integration causes improving and integrating organisational processes. When all the information that use by different organisation processes are being integrated, the processes will be integrated, too.

g

Improved information flow among departments is another benefit of ERP which has relation with human resource capability, integrated data and transparent and automated processes. When the process of data creation, integration and sharing improves in organisation, certainly BI readiness will be improved too. One of the most important features of BI is decision making based on real-time data, so when


97

the information flow is improved in organisation, employees and processes access will become better, human resource capability will enhance and processes will integrate. Because of old bureaucracy in Middle East organisations, they should practice transparency and information flows among departments. This is a good benefit of ERP which results better BI readiness. Notwithstanding in the literature review, there is a relation between ERP benefits and BI readiness factors, but the findings of this research show that some of ERP benefits have not relation with BI readiness factors. Probably this cause is the effect of other factors in the statistical population. Usually many factors affect the mean of a factor which the research limitations do not let to study all of them.

6

Conclusions and suggestions

Current research is aimed to investigate the relation between ERP benefits and BI readiness. For this purpose, based on synthesis of literature, seven ERP benefits were selected as major benefits and also four BI readiness categories were picked. Therefore, 28 hypothesises were designed. The research funding shows that seventeen hypothesises were supported and eleven hypothesises not supported. Decisional empowerment, improved interaction with customers, improved decision-making process, increased flexibility in information generation, increased IT infrastructure capability, integrated information across the enterprise and improved information flow among departments are the factors that affect the organisation BI readiness. The better organisation can achieve these ERP benefits, the more it will be ready for BI implementation. Human resource capability, transparent and automated processes, integrated data and infrastructure are the factors that are prerequisites of BI system. The findings of this research show that these prerequisites are provided by ERP. Organisations that have ERP can provide the rudiment of BI implementation. Organisations that want to implement BI must assess BI readiness before buying and installing this system and then they can buy and install BI after improving readiness. Because of this, the probability of success will increase and prevent from resource destruction. Based on the findings, the following suggestions are proposed for increasing BI readiness in the organisations that ERP have been implemented: •

Improve their employees’ capabilities in the terms of decision making and analysis with improvement their ability of interaction with customers and using CRM module of ERP more and better.

•

Involve their employees in decision making, train IT skills to employees and encourage them to information-based decision making for enhancing human resource capabilities.

•

Making more flexibility in information generating and improving IT infrastructure cause improving infrastructural capabilities for BI implementation. Hence, it is suggested that organisations implement perfect infrastructure and use stored information by ERP for analysing.

98


•

Data integration is the basic goal of ERP using and the organisations must control this integration continuously. The more closer the organisations are to this goal, the easier the BI implementation will be.

•

Use analytical tools such as data mining and spreadsheets for improving capability of information analysis. It enhances employees’ capability of decision making and analytical skill.

•

Business process reengineering (BPR) and reforming in ERP must be clear until organisational processes become clear. For this purpose, it is recommended that organisations document these processes. Process documentation is the prerequisite of reforming and provides process transparency for BI.

Narrow scope of variables, lack of considering environmental variables, survey method based on questionnaire instead of real examinations and particular respondents are the main limitations of current research. Based on literature review, there are several ERP benefits and BI readiness factors and it is not impossible to study all of them in one research. So this research considers some of them. Following topics can be considered in future research: •

Studying the effect of ERP benefits on the BI maturity.

•

Comparative studying of methods for enhancing BI readiness. It can show that which method is the best.

•

Providing a multi-level model for predicting BI readiness based on ERP system maturity. It can make our model practical.

This empirical study makes several contributions. The implications of this research would be useful for CIO of firms to prepare their organisations for BI utilisation by ERP Implementation. Also insights about ERP effects and relations to readiness level of BI are the main outcomes of the current research. The results of this research show that ERP can be seen as a basic tool for BI readiness enhancement in organisations. In fact, in this research, reaching ERP benefits has been identified as a method for BI readiness enhancement. This research demonstrates it is important that organisation try to achieving more benefits from ERP for enhancing its readiness for BI. ERP benefits and BI readiness factors that have been expressed in this research can be used for consulting organisations in the projects of BI implementation. Organisations can assess themselves BI readiness by the research model. Also, organisations can decide in a better way for designing, selecting, evaluating and buying ERP systems with modules that help them to enhance their BI readiness. The past researches about the ERP and BI usually are for on a single industry, but in this research, several industries are investigated. The other advantage of this study is that it reflects the status of several industries at the developing countries of Middle East.

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Appendix

Enable implementation of all variations of best business practices with a view towards enhancing productivity

X X

Personal reduction

X

Dey et al. (2010)

Spathis and Ananiadis (2005) Genoulaz and Alain (2005)

Saatcıoglu (2009)

Olhager and Selldin (2003)

Holsapple and Sena (2005) Gattiker and Goodhue (2002)

Davenport and Brooks (2004)

Spathis and Constantinides (2003)

Singla (2008)

Ling and Minder (2004)

Benefits

Chand et al. (2005)

ERP benefits based on past researches

X

X

Support production capacity planning

X

Reliable information access

X

Provide market demand forecast

X

X

Breakthrough reductions in working capital

X

Facilitate mass customisation and improve manufacturing flexibility

X X

Increase inventory turnover rate

X X

Improve exploitation of financial resources

X

Support business growth

X

Increase effectiveness of internal control

X

X

Improve in business processes

X X

Skill development and restructuration

X

Decrease inventory level and cost Control and improve product quality

X X X

Speed up new product development cycle and time to market Reduce cycle time of order fulfilment

X X X X

Increase communication among department

X X

Access to real-time business intelligence

X

X

X X

X

Allocate enterprise resource better

Increase availability of critical operational and decision support information to provide visibility of enterprise planning activities

X

X X

Achieve operational excellence

Integrate information across the enterprise

X

X

X

X X X

X

X X

X X

X

X

X

X

104


Improve response time to customer order

Dey et al. (2010)


X

Saatcıoglu (2009)

X



X



Singla (2008)

Improve information flow among departments


Benefits

Chand et al. (2005)

ERP benefits based on past researches (continued)

X X X

Lower selling, general, purchasing and administrative costs

X

Rapid generation of financial information

X

Improve service quality

X

X

Promotion of e-commerce and e-business

X

Improve customer satisfaction and loyalty

X

Abundant information about customer wants and needs

X

X

X X

Growing purchase from customers

X

Increase IT infrastructure capability

X

Technology and procurement cost reduction

X

Increase flexibility in information generation

X

Improve quality of reports

X

X

X

X

Increase integration of application

X

X

X

Less time for annual closing of accounts

X

X

Improve communication between employees and management

X

On time delivery improvement

X

Improve document circulation

X

Easy maintenance of databases

X

Increase user friendless of information systems

X

Automate and integrate business processes across organisational functions and locations

X

Assistance in development of new organisational strategies

X

Reduction of time for traction processing

X

X

Improve decision-making process

X

X

Financial flows control

X

X X X


105

Reduction in errors and cost in logistic Reduction of total operating and administration costs Better knowledge processing Better cope with large and complex problems

Dey et al. (2010)


Saatcıoglu (2009)

X

X

X X





Singla (2008) X

X


Benefits

Chand et al. (2005)

ERP benefits based on past researches (continued)

X

X

X X

Increase clarity of financial management

X

lower maintenance costs of information systems and greater ability to deploy new IS functionality Increase revenues and improve market value

X

X

X X

X

Less time for document entry

X

Fewer errors on data entry

X

Better coordination Decisional empowerment

X

X

Improve relationship with suppliers Faster response to business change

X

X

X X X

X

Increase competitive advantages

X

Centralisation of administrative activities

X

Control of flow of goods Reduce organisations business risks

X

X

X X

Decentralisation

X

Improve interaction with customers

X X X

Decrease work load in various departments and central department

X

Improve cash management

X

X X

X

X