Learning from a failed ERP implementation: The case of a large South African organization Anjali Ramburn, Lisa Seymour, Avinaash Gopaul University of Cape Town, Cape Town, South Africa
[email protected]
Abstract Enterprise Resource Planning (ERP) systems allow enterprises to integrate various processes across different functional areas in an attempt to increase productivity, efficiency and to sustain their competitive edge. However, despite the various positive outcomes of adopting ERP systems, the implementation process poses a number of challenges for organizations. This research reports on the case of a failed ERP implementation in a large South African organization and looks into the details that led to the failure. Consequently, through the lessons learnt, this paper also reports on the different dimensions of Knowledge Management (KM) required during the ERP implementation using Chan’s (1999) framework. Through use of semi-structured interviews and qualitative data analysis, this study validated Chan’s (1999) model in a large emerging economy. Some of the challenges the organization faced include lack of technical, process and project knowledge. Other concerns include poor understanding of the need for change, lack of management support and poor change management and training initiatives. Managing ERP systems knowledge has been identified as a critical success factor. However, a review of the existing literature reveals a lack of comprehensive research on the role of KM during ERP implementation. While ERP implementation within large organizations has been well researched, there have been relatively fewer studies focusing on the role of KM in emerging economies. The study seeks to close some of the identified gaps in this area, hence contributing to the existing body of knowledge. Through a practical lens, this research should be of immediate benefit to large organizations in the South African economy. Keywords: Failed ERP Implementation, User Experiences, Knowledge Management Challenges and Dimensions, Large Organization, Emerging Economy
1.0
Introduction
Organizations are continuously facing challenges, causing them to rethink and adapt their strategies, structures, goals, processes and technologies in order to remain competitive (Bhatti, 2005; Holland & Light, 1999). Many large organizations are now dependent on ERP systems for their daily operations. Enterprise Resource Planning systems (ERP) allow enterprises to integrate various processes across different functional areas in an attempt to increase productivity, efficiency and to sustain their competitive edge. ERP is not a new technology, as such; its market penetration within large organizations is considerable. ERP systems have been widely deployed in developed countries all over the world to automate and streamline business processes to achieve global competitive advantage. Over the years, ERP vendors have tried to overcome “the economic, cultural and basic infrastructural barrier” related to emerging economies (Upadhyay, Basu, Adhikary, Dan, 2010). An increasing number of organizations are investing in ERP systems in South Africa. There have been many implementations in the South African public sector such as the SAP implementations at the City of Cape Town and Tshwane Metropolitan Council. Consequently, this research will focus on the implementation of an ERP in a large organization in South Africa. The implementation process is described as costly, complex and risky whereby firms are not able to derive benefits of the systems despite huge investments. Half of all ERP implementations fail to meet the adopting organizations’ expectations (Jasperson, Carter & Zmud, 2005). This has been attributed to the disruptive and threatening nature of ERP implementations (Zorn, 2002). With ERP adoption, comes the requirement of adapting work practices to the global processes inherent in the ERP system. This requires the organization to undergo a major transformation; users have to come to
terms with the organizational changes, new ways of work and unlearn previous practices (Robey, Ross & Boudreau, 2002). This process however can be less challenging and more effective through proper use of knowledge management (KM) throughout the ERP lifecycle phases. Managing ERP systems knowledge has been identified as a critical success factor and as a key driver of ERP success (Leknes & Munkvold, 2005). An ERP implementation is a dynamic continuous improvement process and “a key methodology supporting ERP continuous improvement would be knowledge management” (McGinnis & Huang, 2004). However, there has been very little work conducted to date that assesses the practices and techniques employed to effectively explain the impact of knowledge management during ERP systems implementation (Parry &Graves, 2008; Sedera, Gable & Chan, 2004).
1.1
Research Objective, Scope & Importance
This study seeks to explore the reasons that led to the failure of the ERP system in a large organization. One of the objectives is to investigate the challenges faced by organization during the implementation phase. Furthermore, the dimensions of KM practices required during the ERP implementation phase are investigated. In this context, the implementation phase takes into account an end user’s perspective and focuses on the experiences of the users’ during the training and development phase of the implementation. This research should be of immediate benefit to both academics and practitioners. From an academic viewpoint, this study looks at the ERP implementation phase from a KM perspective. There has not been any prior research in South Africa, hence this research provides a better inference of knowledge .This research also aims to provide a reference for any further future research which might be undertaken in the context of KM and ERP systems in South Africa. Through a practical lens, this research draws a number of lessons learnt from a failed ERP implementation which can be of immediate benefit to large organizations implementing ERPs in South Africa and international organizations with global user bases.
2.0
Literature Review
2.1 Enterprise Resource Planning Systems Enterprise Resource Planning (ERP) systems include a set of software products which are mostly targeted to support day to day operations, decision making and automation, streamlining and improvement of processes in organizations (Sedera et.al, 2004). ERP systems are characterized as large, complex, multifunctional, modular and generic. However, most enterprises need to customize their ERP packages to align their specific business needs to the capabilities of the systems, in an attempt to achieve optimum business value. This process however poses a number of challenges to organizations, leading to high implementation costs, big investments and risky projects. Despite the cost intensive, lengthy and risky process, the rate of implementation of ERP systems has increased over the years. Most of the large multinational organizations have already adopted ERPs as their de facto standard with the aim of increasing productivity, efficiency and organizational competitiveness (Pan, Newell, Huang, Cheung, 2004).
2.2
Knowledge Management
Knowledge management can be referred to as the diffusion of knowledge. Employees in organizations acquire different types of knowledge and the core purpose of knowledge management is the distribution of this knowledge to those who require it for their tasks within the organization (Parry & Graves, 2008). A number of studies have emphasized the importance and use of KM in the ERP implementation process. Use of KM activities during the ERP implementation phase ensures reduced implementation costs, improved user satisfaction as well as strategic and competitive business advantages through effective product and process innovation during use of ERP (Sedera et.al, 2004). Organizations
should therefore be aware of and identify the knowledge requirement for any implementation. This knowledge can be derived from the lessons learnt of people who have suffered from failed ERP implementations as well as those who have gained useful knowledge and experience from successful ERP implementations. Hence, based on past research, experiences and failed implementation cases, Chan (1999) puts forward a three dimensional framework of KM required for successful ERP implementation. These refer to project management, business and management and technical knowledge. 2.2.1 Project Management For the previous 12 years, project management has been amongst the key critical success factors required for successful ERP implementation (Huang, 2010; Umble, Haft & Umble, 2003). Project definition, project planning, people/resources, time and cost are key components of this dimension (Chan, 1999). In their research, Umble et.al (2003) categorized poor project management and a wrong selection of the implementation team as the major reasons accounting for ERP implementation failures. 2.2.2 Business and management knowledge The business and management knowledge dimension deals with the soft issues of ERP implementation and includes business process engineering, change management, management support, outsourcing, training and education and culture. Management Support Undoubtedly one of the most influential factors for successful ERP implementation, top management support has always been rated the number one critical success factor by most previous studies (Fang & Patrecia, 2005; Motwani, Subramaniam, Gopalakrishna, 2005; Umble et.al, 2003). Senior management commitment plays a fundamental role in the entire implementation process as it forms the basis for a successful implementation (Fang & Patrecia, 2005). Change Management Managing change is arguably one of the primary concerns of ERP implementation. Knowledge about managing change in an organization should be prioritized as implementing change without any prior planning or strategy in organizations will result in confusion and instability amongst employees (Chan, 1999; Motwani et.al, 2005). In effect, half of the ERP implementations have failed to achieve expected benefits as a result of misjudging the efforts involved in change management (Somers & Nelson, 2001). 2.2.3 Technical Knowledge The third dimension looks at the technical knowledge which organizations need to consider in order to successfully implement their ERP systems. Chan (1999) identifies the following attributes: process engineering, programming, system administration and hardware/network.
3.0
Research Method
This research is qualitative and descriptive in nature. Semi-structured interviews have been used to allow unrestricted responses from the sample, providing richer insight into the users’ opinions and perceptions of ERP implementation, hence allowing the researcher to understand the subject from different perspectives. An inductive research approach has been used to ensure the derived findings have resulted from the raw data. Thematic analysis has been used to analyze the data (Thomas, 2003; Attride-Stirling, 2001). Iterative analysis of the collected data has enabled the researcher to understand and investigate the main research problems posed. All the interviews have been recorded and transcribed. The transcripts of the interviews have been read a number of times to identify, conceptualise, and categorise emerging themes. Approval for this research has been obtained from the University of Cape Town’s ethical committee. Participants have been asked to sign a voluntary participant consent form and their anonymity has been assured.
3.1
Case Description
The case organization has a number of branches throughout South Africa, employing over 39 000 people and is currently launching the SAP Project Portfolio Management module throughout its different branches across the country. Currently in the implementation stage, an organization wide training, involving the employees, has already been conducted. A number of individual interviews have been carried out in one of organization’s division in Cape Town and purposive sampling has been used to select the interviewees. All the interviewed participants had been through the training and were impacted by the SAP implementation process. The sample includes 8 employees, 6 of them are users of the system while the remaining 2 are support staffs. All of the participants are currently working within the engineering department of the organization. The sample consists of 63% males and 37% female. With respect to the age distribution, the sample reflects a relatively young user group: 75% of the respondents fall in the 25-35 year age group with the remaining 25 % being older than 50 years.
4.0
Analysis
The users experienced a number of challenges throughout the implementation process, leading to non-use of the system. Most of the issues were experienced by the users during the training period and consequently the ERP system initial ‘Go-Live’ date has been put on hold. Users were told that the identified issues were being addressed. The section below provides a comprehensive account of the aforementioned challenges and experiences of the users that led to non-use of the ERP system.
4.1
Training
The training itself was a two day process and it was conducted by two trainers during which all the users of the new system were trained. Users included people from various departments such as finance, project management and planning. The users perceived the training of the new system inadequate in various ways. They felt they were wasting their time as they saw no value in the attending the sessions. The training consisted of simulation exercises related to user activities, tasks and processes. The simulation exercises did not give them an adequate insight and exposure of the new system. There was no format or structure to follow and they felt that they were only filling random blocks on the system. The training was seen as a click and paste exercise with a number of repetitive data that needed to be entered in the system. “So the training showed us how to click on SAP. This is what we did; ‘Click, Click, Click, Copy Paste, Copy Paste’…It was ridiculous, it was insane to have more than 300 steps of clicking” I1. Moreover, it was reported that there were numerous errors and technical faults in the software that were uncovered during this period. The software did not function as intended and users saw the system as sub-standard. At the end of the 2 day training, the users were given an assessment to test their acquired competencies. Users perceived the assessments as a mere formality; they did not see the usefulness of the assessments to reinforce or test their skills, instead they claimed anyone could have completed the tests using the information provided in training material without really having a core understanding of the process.
4.2
Customization of Training Materials
Another concern raised was with reference to the lack of customization of the training materials and exercises used resulting in a poor focus on local context. Interviewees could not relate to the given training examples as they were based on the process flow from a different province. Interviewees stated that each province has its own way of operating and has unique terms and terminologies. The fact that the standard examples used came from only one province made it harder for the users to understand the overall process. “The examples used were from Joburg, I could not relate to the examples. It would have been nice to have our terminologies” I7.
4.3
Information Overload
The training included people from different departments who are associated with a range of diverse processes. As a result, the trainers covered various tasks related to various processes in one training session as opposed to focusing on the specific processes that a specific group of users could understand. There was a lot of information which was not specific to anyone’s job role and this made it difficult to focus. The users got confused with regards to their role definition and the ownership of the different tasks. The trainers were unable to clear this confusion. This caused a certain level of panic amongst the employees; subsequently they lost interest in the training and attributed it as an unproductive process. Employees believed the training would have been easier and beneficial if the training was limited to their specific and individual department and processes. “If you are planners, this is all you need to do. I do not feel we had to do all these steps and a lot of the information needs to be entered before we would see it as planners, someone else would have already entered that data but when we doing the training everyone was confused with what and why we need to do certain tasks” I1. “If the trainers said, this is only 2 pages of information you need to do, we would be calmer. So there was too much of information given which was not specific to anyone and you did not know what to focus on and where this data is supposed to come from” I8.
4.4
System Complexity
The users described the ERP system as incoherent, the user interface and navigation increasingly complex as opposed to their existing system. They persistently compared the ease of use of their existing system to SAP’s complex design and structure. They have been working with the current system for a number of years and believed it operated in the most logical way, the same way as to how their minds would function. However, they did not understand how the new system functioned, the system made no sense to them. Activities which could be completed without any difficulty on the existing system seemed increasingly complex when using SAP. Furthermore, the number of steps taken to complete a task seemed to have increased drastically; hence they felt their productivity would also decrease. “I have not used the system before, so I do not understand it. We struggled with the complexity of the system. The number of steps we had to complete for one task made it worse. No one understood what and why we were doing most of the steps. This will surely affect my productivity” I3.
4.5
Trainers’ Process and System Competencies
The trainers’ knowledge and skills were also questioned. The trainers lacked key ERP skills and did not understand the process from the users’ perspective. Since none of the trainers had any understanding of the system as end users, there were some inconsistencies in what was communicated. Ownership of roles and tasks were not clearly defined and there was no clarification on the information and process flow between the different departments and the individuals as per their role definition. “However what makes it difficult is that the trainers do not work with the project. They do not understand the process entirely and are not aware of what is happening in the background, they only collect data.” I5 Employees also indicated that the trainers’ lack of technical knowledge contributed to their negative experiences. The trainers were the administrator support technicians who are experts in the existing system used by the organization but they did not have enough expertise to tackle the different technical issues that surfaced during the training. “There were a lot of unanswered questions. Data needed to be put in the system, we did not know where…We asked the trainers but they did not know themselves, I felt they were not very qualified either” I3
4.6
Project Management
Interviewees were unaware of the clear project objectives, milestones and deployment activities. The employees did not have any information regarding the status of the project activities. They were only aware of the fact that they had to be trained in SAP as management had a set deadline set up by which all employees had to complete the training. The training was conducted a year prior to the
conduction of the interviews and users claimed that they did not hear anything regarding the status of the system. They believed that there will be another training session in the future as none of them remembered how to use the system. Users were also uninformed of the date they were required to start using the system. They were past the initial system ‘Go-Live’ date and there was no information given on the new roll out dates. Some of them believed they were not near the implementation stage, and the training was only a pilot activity to assess the ERP system’s suitability to their environment. Others hoped that the implementation had been cancelled due to the number of issues and faults experienced in the training sessions. “All they said was that now you have had the training for SAP and this is the system we will phase into. No one knows when it will happen for sure. I am hoping it won’t be anytime soon….We do not get frequent emails or updates to inform us of the status of the project.” I8 “We got trained in October now we are in August, I hope they will train us again as I have forgotten so much of what was covered. I did not gain anything from the training.”I5
4.7
Management Support
Management has neither supported nor encouraged the employees to use the system. Top and middle management were not part of any training activities that took place. Users felt management had not supported the initiative. Consequently, they assumed they did not have to use or understand the system until they got the ‘go ahead’ from top and middle management. They had not received any information or communication on the purpose and benefits of the new system from management. This lack of motivation and support from management resulted in users disinterest and lack of commitment towards the system. “We will only start using it when we get the word from top management; well basically when they tell us, as from now you are expected to use this program. Then I will make an effort to learn the program” I3.
4.8
Change Management
The results show the lack of importance attributed to this area. Lack of proper communication channels and planning coupled with the absence of change management initiatives resulted in employees’ confusion, instability and resistance. Users said they were unaware of the organization’s goals and objectives. The initial implementation training took place in October and one year later, there was still no clarity on the status on the system, future roll out plans and strategies. 4.8.1 Lack of Need of System Consequently, the employees did not understand the need of a new system from a strategic perspective or the perceived benefits of the new system. They constantly questioned the implementation of the new system; most of them had their own understanding as to why the system was being implemented. They did not see any value in the new system and felt their previous system could do everything they needed it to. They had never felt the need for a new system. They felt the new system had been forced onto them; the system was seen as a misfit as it did not cater to their needs. The users seemed disinterested in any related activities. They mentioned that occasionally there would be emails sent. However, none of them had opened any of the emails related to the new system. They felt that they have been treated unfairly and some of them had even considered leaving their jobs once the system phased in. “The system was forced onto us. I think they said they wanted a better way of keeping previous information…but I am not too sure” I1
5.0
Findings
The emergent themes of this research have been categorized according the three main knowledge dimensions put forward by (Chan, 1999). These knowledge dimensions provide an indication of the key knowledge required for implementation of an ERP system in large organizations. Figure 1, adapted from Chan (1999), illustrates the different dimensions of KM applicable to a large emerging economy.
Figure 1: Dimensions of Knowledge management during the ERP implementation phase
5.1
Technical Knowledge
The findings of this research reveal 3 different aspects which impacted the ERP implementation. Participants struggled to use SAP due to the system’s complexity, their lack of technical knowledge of the system and the trainers’ lack of technical expertise. System complexity has been attributed to the lack of system configuration knowledge which could have been essential in substantially decreasing the number of steps required to perform a particular task. Therefore, trainer’s expertise, participant’s technical know-how and configuration knowledge are key components on this dimension.
5.2
Project Management Knowledge
The findings of this study show that project knowledge such as project objectives, milestones, deployment activities, people and time are the key project dimensions required for successful implementation of an ERP system. Lack of key project knowledge accounted for employees’ resistance, uncertainty and negative attitude towards the overall implementation process. With statistics showing more than half of ERP projects going over time, knowledge about the time required to install ERP systems is crucial to the organization and is a crucial aspect of project management that needs to be carefully assessed. This particular organization was no exception. The implementation process was put on hold for more than a year due to the number of issues uncovered during the training period and the system ‘Go-Live’ date was suspended. Identification of the right mix of people and resources required to implement the ERP system is another crucial activity. The findings revealed that the organization incorrectly selected its core training team, hence the incompetence of the chosen training team and their failure to transfer key project knowledge to the employees.
5.3
Business & Management Knowledge
Process knowledge, customization & contextualization knowledge, management support, change management and training have been identified as key components of this dimension. Since the research was carried out in a large organization with multiple branches throughout South Africa, process knowledge and knowledge on contextualization and customization of the training content from the users’ perspective is essential. In this particular case, the process flow was not clear to the users and the training material was not satisfactorily contextualized and customized to suit users’ needs, resulting in information overload. The findings reveal that employees expected management to enforce the implementation of the system and were waiting for management’s go-ahead and communication to accept and use the system. Employees also unanimously agreed that they would have shown more interest in the new system and they would have been keener to learn and use the system had they been informed of the strategic need for change. Training initiatives and education are usually an integral component of change management. The results indicate that although the organization has invested in the training and education of their employees to enhance their ERP skills and to ensure they are capable of understanding their business processes and functions, the training was not seen as valuable and adequate to create and transfer key knowledge.
6.0
Conclusions
This paper reports on the various reasons that led to an ERP system implementation failure in a large engineering company in South Africa and provides a comprehensive insight on users’ initial experience. This research unveils a number of intra-organizational barriers to efficient knowledge creation, transfer and use. Inadequate training, lack of technical and process knowledge, lack of knowledge on management and project initiatives and lack of change management have been cited as major challenges. Seemingly, in a large organization with multiple branches throughout South Africa, contextualization and customization of the processes from the users’ perspective and system configuration are key aspects to consider for the ERP implementation process. Based on the above identified challenges, a three dimensional knowledge management framework derived from Chan’s (1999) model has been projected. The resultant framework looks at the key knowledge dimensions required during the ERP implementation phase from an end user perspective. The findings of this study thus validate Chan’s (1999) three dimensional knowledge management model. While the three major knowledge dimensions namely project management, business management and technical knowledge are prominent in this study; some of the derived components of each dimension are unique to this study. Notably, as opposed to Chan’s (1999) original model, outsourcing and cost did not emerge from the findings of this study.
7.0
References
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