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Lessons from enterprise resource planning implementations in Ireland – towards smaller and shorter ERP projects
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Journal of Information Technology (2000) 15, 305–316
T E U L D
r & Fr a nci s G
FRÉDÉR IC ADAM Executive Systems Research Centre, O’Rahilly Building, University College Cork, Cork, Republic of Ireland
PETER O’DOHE RTY Seabrook Research Ltd., IDA Enterprise Centre, North Mall, Cork, Republic of Ireland.
The enterprise resource planning (ERP) software market has been growing at a very fast pace over the last few years and has been predicted to keep growing rapidly in the long term. This has led to an abundance of media reports on the subject of ERP and to managers wondering whether their companies should implement ERP systems. In order to separate the reality of the ERP phenomenon from the hype that surrounds it, we studied 14 ERP implementation projects in Irish organizations and focused on the key relationships between organizations which attempt to implement ERP systems and their implementing partners. We found that the ERP implementations that are going on in Ireland at the moment are different to the projects that have been reported elsewhere in two key respects. Firstly, the organizations interested in ERP software are, on average, far smaller than the case studies reported in the literature and the majority of the cases we reviewed were small and medium enterprises (SMEs). Secondly, the durations of implementation were far shorter than reported elsewhere. These results are not surprising if one considers the smaller average size of Irish organizations, but they indicate that the ERP movement is truly ready for an extension towards the SME market. They also indicate that the duration of the implementation of ERP software may be related to the size and complexity of the client organization and that SMEs can expect to have an easier time implementing ERPs than the current literature suggests. We also found that software implementers play a key role, not only in technical terms, but also in managerial and political terms, because they can help their clients in correcting their expectations and perceptions of ERP systems and ERP implementations.
Introduction The enterprise resource planning (ERP) software market has been growing at a very fast pace over the last few years and it has been predicted that the current growth rates of 35–40% will be here for the long term (Bingi et al., 1999). Initially destined for larger organizations, ERP software is now also thought to be of some bene t in equipping smaller rms who have smaller user populations and fewer nancial resources. Different models are being proposed in order to broaden the market, including the application supplier provider (ASP) model whereby organizations no longer purchase the software but access ERP functionalities across the Internet (Jeanne, 1999). In the general case, organizations acquire one of the ERP software packages available on the market (where SAP, Baan, Oracle, PeopleSoft, J.D. Edwards and MFG/PRO are established solution providers) and
seek the assistance of a local implementer (typically a consultancy rm or software distributor) in order to carry out the complex process of preparing the company for the migration of processes and systems to the ERP solution selected. Thus, it has been reported that, for every pound spent on ERP software licences, companies must spend a further £5–£7 on related services, mainly consultancy (Berger, 1998). This means that ERP projects are large, costly and dif cult and that they require large investment in capital and staff and management time (Rowe, 1999). However, the extent of the bene ts reported in the literature and claimed by vendors and consultants is proving a strong attraction for managers and there is great interest in methodologies that may be used in decreasing the risks inherent in ERP projects. In order to study the reality of ERP projects in Ireland, we carried out a eld study of 14 rms which have implemented ERP software in the last 3 years.
Journal of Information Technology ISSN 0268–3962 print/ISSN 1466–4437 online © 2000 The Association for Information Technology Trust http://www.tandf.co.uk/journals DOI: 10.1080/02683960010008953
306 After a review of current reports on the subject of ERP, this paper describes the methodology that was followed in this investigation and presents the ndings of the study. Finally, conclusions that pertain to the reality of today’s ERP projects and guidelines for the relationship between clients and their implementing partners are put forward.
ERP systems – from myth to reality As Rowe (1999) quite aptly described, ERP systems represent the implementation of the old managerial dream of unifying and centralizing all the information systems (IS) required by the rm in one single system (or at least under one name). ERP systems provide organizational actors with a common language and a common pool of data. At a practical level, ERP has very bene cial effects that remove the need for often disparate and unreliable end-user applications, standardize operating procedures and reporting; and optimize some of the key processes of the rm (e.g. order acquisition and processing or inventory control). At the same time, these systems offer high levels of portability and reasonable exibility in adapting to the requirements of speci c organizations (Forest, 1999; Rowe, 1999). These bene cial effects are matched by the high level of risk associated with ERP projects. ERP projects are complex and require reliance on many different types of expertise often sourced outside the organization. Consultants often advise managers to undertake some degree of re-engineering of key processes before acquiring ERP systems (Bancroft, 1996) and this adds to the complexity and political character of the projects. There is empirical evidence of the dangers inherent in such vast projects. The case of Foxmeyer, who went bankrupt in 1996 after 3 years of unsuccessful implementation of SAP, suing SAP’s US subsidiary and Arthur Anderson in the process, is illustrative of what can happen to the largest organizations when implementations go wrong (Kalakota and Robinson, 1999). These dif culties have led to some researchers taking a negative view of ERP systems, with Wood and Caldas (2000) using the Orwellian analogy to characterize the goals of ERP systems and questioning whether the current interest in ERP in the business community is justi ed more by political reasons than by sound managerial reasoning. Indeed, these authors found low levels of satisfaction in their survey of rms having implemented ERP systems with 45% of rms perceiving no improvements whatever from implementation and 43% claiming that no cycle reduction had been obtained.
Adam and O’Doherty Trading off bene ts and risks with ERP The high level of risk inherent in ERP implementations is illustrated by claims that organizations implementing ERP systems should typically only hold on to 20% of their previous applications (Rowe, 1999). However, this extensive replacement of previous systems may be a requirement if the major bene ts of ERP implementations – greater integration of functional areas and, in the case of multinational rms, greater coordination between entities and between sites – are to be obtained. The case of Vandelay Industries Corporation (Harvard Business School, 1997) shows that one of the key reasons why managers want to proceed with dif cult ERP projects is to end the fragmentation of current systems in order to allow a process of standardization, give more visibility on data across the entire corporation and, in some cases, obtain competitive advantage. Another consequence of this ‘clean slate’ approach is that organizations nd it virtually impossible to revert to their pre-ERP situation and, in some cases, their investment either cannot be recouped or generates very low returns. Unisource Worldwide Ltd and Dell Computer Corporation have both written off very signi cant amounts invested in aborted SAP implementations and associated consultant fees (Bingi et al., 1999). The role played by consultants in ERP implementation has also been questioned and may constitute another source of risk. Only 47% of the respondents to Wood and Caldas’ (2000) survey felt consultants had been in uential in their implementation and only 23% felt that their consultants had the necessary knowledge and experience with ERP (91% of the respondents in this study had sought assistance from consultants in their ERP projects). However, the case for ERP systems seems com pelling at this point in time and the development of more powerful and user-friendly platforms now makes it possible to integrate many large systems in a way that was not possible a few years ago (Wood and Caldas, 2000). Thus, Microsoft spent 10 months and $25 million replacing 33 existing systems in 26 sites with SAP. Managers in this company claim to save $18 million annually as a result and Gates, Microsoft Corporation’s Chairman, reportedly expressed great satisfaction with the SAP software (White et al., 1997). According to Kalakota and Robinson (1999), Microsoft had grown so fast that it could not keep up with itself and the number of applications that had been developed to support the company’s operation and their lack of integration meant that IS staff had lost control over the complexity of the systems they administered. Thus, as many as 90% of the 20 000 batch programs retrieving data and passing it between systems may have been redundant. The move to a single
Lessons from ERP implementation in Ireland architecture enabled better linkages between business areas as well as with suppliers and customers. However, there is anecdotal evidence that many companies had been pushed into ERP projects by much-publicized fears of what might happen to legacy systems during the year 2000 change. The increasing proximity of this key deadline may also have helped the emergence of the ASP model because it was reported to allow a much shorter implementation. This is a less positive rationale for implementing ERP systems, but certainly aided the cause of the vendors of ERP software. Broadening the scope of ERP: the relationship with current managerial thinking The Microsoft example illustrates that ERP systems can help managers leverage two other key aspects of the management of organizations: supply chain management (SCM) and customer relationship management (CRM). Terrand (1998) described how SCM applications can be bolted on top of ERP systems in order to obtain additional bene ts, which KPMG (quoted in Terrand, 1998) found to reach the following scale. (1) (2) (3) (4) (5) (6)
Reduction of planning cycle (95%). Reduction of delivery times (10–40%). Reduction of production times (10–50%). Lower stock levels (10–25%). Reduction of late deliveries (25–50%). Increase in productivity (2–5%)
However, the area of CRM, which concentrates on better management of customers and on providing a uni ed vision of customers’ needs and status to all organizational actors, has also become a major focus for the key players on the ERP market and SAP, J.D. Edwards, QAD, Oracle and Baan are all proposing CRM modules as part of their offering (Gros, 1999). Thus, the CRM market which, up to now, was dominated by specialized software houses (95% of the software purchased) is being taken over by ERP vendors (Terrand, 1999). These two developments are very signi cant because they give ERP systems an outward looking orientation that earlier offerings did not provide. ERP products are now also EDI (electronic data interchange) compliant in an effort to boost further the possibility of integrating them with state-of-art software solutions. ‘MIS’ – conceptions about ERP A major concern of managers with ERP remains the perception that ERP implementations take a lot of time
307 and are best suited to large organizations which can afford to spend time redesigning their most important processes. Besson (1999) reported on how quick managers have been to point the nger at ERP software packages and their excessive complexity as a reason why projects fail. However, he questioned whether the required paradigms and managerial skills exist for such projects and whether the failures he investigated were not due to a failure to plan and organize the implementation of the new system. He also made the case that the perception that ‘political’ con icts between ERP implementers and users is the major cause of failure of ERP implementations may be misleading. While it is evident that ERP projects often generate con icts in organizations, it is questionable whether the debates are solely about a group of organizational actors refusing the bene ts of modernity and progress (Besson, 1999). In some cases, managers’ underestimation and mismanagement of the scale of change required in implementing ERP systems coupled with their low level of awareness is a source of great dif culty (Harvard Business School, 1997). Such misconceptions may be the result of the strength of the promotional push behind ERP (Lampel, 1995) and the abundance of media reports about ERP (Caldas and Wood, 2000).
Goals of the study In this study, we investigated the reality of ERP system implementations in Irish organizations. As part of the study, we focused speci cally on the pro les and sizes of the organizations implementing ERP and on the key parameters in their relationship with their suppliers of ERP software. The customers of Ireland’s sole distributor for one of the ERP software packages were investigated in order to analyse their experience with acquiring the software and implementing it. We also asked them about their perceptions of the role played by the distributor and what they would change in the type of relationship that was established between the two rms. The organizations studied covered a broad range of activities (from telecom system suppliers to distributors of medical supplies for animals) and degrees of expertise with the deployment of information technology (IT) (from ‘green eld sites’ to organizations that had a complete IS department). They also covered a broad range of sizes (from ten to 500 employees), but 64% of them were SMEs according to European standards (SMEs are de ned as having less than 250 employees and a turnover below 40 million ECUs, sixth periodic report on the social and economic situation and development of SMEs,
308 http://www.inforegio.cec.eu.int/wbdoc/docoffic/ of cial/radi/page31 en.htm (viewed June, 2000)). Thus, they constituted a good sample of the variety of organizations implementing ERP solutions in Ireland at this point in time. This selection mechanism, whereby the clients of this ERP supplier were studied, was opportunistic and enabled us to access a signi cant number of organizations without having to deal with the common problems of breaking barriers and identifying knowledgeable respondents, which academic researchers often face when seeking access to new case studies. In addition, the fact that all the organizations had been dealing with the same supplier of software and the same software guaranteed the comparability of their experience with ERP implementations and helped us concentrate on the key factors that remain true across organizational settings and those that only appear in speci c circumstances. The other side of the coin is that this study did not enable us to investigate the different outcomes resulting from the differences between the ERP software packages available on the market, a price we were willing to pay given the goals of the study. Data were collected through semi-structured interviews with key actors who had been involved with the selection and implementation of the software in the client organizations. A questionnaire was used in order to ensure that all relevant issues were dealt with, but interviewees were left to volunteer whatever information they felt was important given the goals of the study. The empirical data collected about each site and about each implementation were then reviewed in collaboration with the staff members in the software house who had delivered the software to this site, thereby providing the opportunity for corroboration/ clari cation of the problems encountered and the time spent on the different phases of implementation. Analysis of the ndings and conclusions about the research were undertaken in a collaboration between the academic researcher and the most senior project leader in the software distributor (the co-authors of this paper) in order to give equal importance to the opinions of all parties involved and remove the possibility of bias.
Findings Analysing the pro les of the organizations studied The rst step in this research project was to analyse the pro les of the organizations studied. In total, there were 14 companies at various stages of maturity with the ERP software, though all sites had at least started to implement some of the modules of the software. As
Adam and O’Doherty in Wood and Caldas’s (2000) survey, some of the companies were subsidiaries of foreign multinational rms and could therefore bene t from speci c implementation guidelines and from the past experience of staff at their headquarters. This enabled them to implement the software more quickly than other companies. Table 1 presents the key characteristics of all the companies studied. The gures in Table 1 indicate that the average size of the companies we studied is 150 employees with a turnover of £115 million, which is far smaller than most of the instances reported in the current literature (nine out of 14 could be categorized as SMEs). For instance, the respondents in Wood and Caldas (2000) were described as large or medium size organizations and case studies commonly cited in textbooks involve implementation projects that have a speci c budget greater than the turnover of the organizations we studied. These gures re ect the small average size of organizations in Ireland (approximately two-thirds of Irish organizations have less than 250 employees), but they come as a surprise because the current wisdom in relation to ERP systems, as abundantly reported in the media (e.g. Jeanne, 1999) is that ERP systems are only for large organizations because of the costs and implementation times involved. One of the questions that is being asked at this point in time is whether the ERP market can now be redirected towards SMEs and whether new methodologies for quicker implementation can be found. Our data indicate that SMEs are already involved in the ERP phenomenon to a large extent, as most of the organizations we studied undertook their implementation projects in 1998 or 1999. The new ASP model for distribution of ERP functionality (which has been said to be targeted at sub £120 million rms) may therefore not be the only route to ERP for smaller companies. Typical implementation project – impact on the organization As a complement to the analysis of the pro les of the companies involved in the ERP movement presented in the previous section, it was important to study the projects in which these rms had been involved. Table 2 presents the key parameters measuring the size, duration and impact on the IT capability of the organizations of the ERP projects we studied. The impact of ERP implementation on a company is a key aspect of ERP projects as reported in previous research (Besson, 1999; Kalakota and Robinson, 1999; Rowe, 1999) and we wanted to establish to what extent the implementation of ERP software had been a source of signi cant change for the structure and staf ng of the organizations we studied.
Lessons from ERP implementation in Ireland Table 1
309
Pro les of the organizations studied
Company
Industry
Size (No. of employees)
Turnover (£ million)
Status of project Post-implementation Post-implementation Post-implementation Post-implementation Ongoing (phase 1 completed) Ongoing (phase 1 completed) Ongoing (phase 1 completed and phase 2 started) Close to completion Post-implementation Close to completion On-going (phase 1 completed and phase 2 started) Post-implementation Post-implementation Post-implementation
Company Company Company Company Company Company Company
A B C D E F G
Medical packaging supplier Animal medical products Telecom network products Mining and industrial products Sheet plastic producer Procurement specialist Plant protection
50 100 200 600 30 100 40
2.4 25 30 250 2 20 15
Company Company Company Company
H I J K
Fitters for oil/gas installations Medical supplies Tobacco products Food products
50 10 N/A 50
4 N/A 160 N/A
Lens colouring Electric connectors Entertainment products
500 180 25
N/A 500 250
Company L Company M Company N
‘Phase 1 completed’ means that the organization is already using the software but is expected to develop its usage of ERP functionality further (e.g. by acquiring more modules).
Table 2
Key characteristics of the ERP projects studied
Company
Start date
End date
Number of users (start/end)
Company A Company B Company C Company D Company E Company F Phase 1 Phase 2 Company G Phase 1 Phase 2 Company H Company I Company J Company K Phase 1 Phase 2 Company L Company M Company N
November 1997 November 1997 December 1998 March 1999 November 1998
August 1998 July 1998 March 1999 November 1999 July 1999
March 2000 April 2000
April 2000 August 2000
November 1997 April 2000 Early 1998 March 1998 March 2000
January 1998 May 2000 End 1999 April 1998 May 2000
Early 1997 April 2000 January 1998 May 1997 Early 1997
Mid 1997 June 2000 November 1998 October 1997 Mid 1998a
5/10 16/32 32/32 100/150 5/5 50/50 8/8
In-house IS capability (start/end) None/limited None/two staff Two staff/three staff Eight staff/eight staff None/none None/contractors One staff/two staff
10/10 5/5 10/10 8/8
None/none None/none None in Ireland None/none
32/32 16/30 5/5
Two/two None/one staff None/none
a
The exceptional duration of the project in company N was due to slow decision making at the choice stage and does not mean that the software implementation took longer than other cases in the sample.
Table 2 indicates that the projects undertaken by the organizations in the sample were of short duration in comparison with the durations cited in current literature. The 14 projects we looked at ranged from 1 month to 24 months and averaged 8.5 months in duration with just over one-third of the companies taking 9 or 10 months. Even though these projects appear to
be shorter than those reported in the media or in other similar studies, these gures con rm that ERP implementation projects are large IS projects. A comparison with Fitzgerald’s (1998) survey of IS development is appropriate because it was also carried out in Ireland. This survey found that the average duration of in-house development, outsourced and
310 purchased software projects was only 5.7 months, which means that 65% of the projects we studied are above the average reported by Fitzgerald (1998) and 14% are four times as long. The projects studied in the ve larger companies of the sample (those that could not be classi ed as SMEs) had an average duration of 9.4 months, which is somewhat above the overall average, but in fact only three of these ve companies were above the 8.5 overall average (and only company N was substantially above with an 18 month project), which does not suggest that the larger companies take longer to implement ERP software. However, these results must be viewed in the light of the small size of the sample and the absence of a truly large organization in the sample. It was also of interest to analyse the number of users of the software in each of the sites. The cases studied had on average between 21 and 22 users initially and between 27 and 28 at the time this study took place (i.e. post-implementation). Signi cantly, only four companies had increased their number of users after the software went live (less than 30%) even though many sites implemented their software as far back as 1998 or 1999. We also tried to evaluate the organizational impact of ERP projects in other ways. In particular, we focused on the effects of these projects on the in-house IS staff organizations possessed. As can be seen in Table 2, ten companies (70% of the cases studied) had no resident IS expertise prior to their implementing ERP and ve (35%) maintained this situation at the end of the project. In total, only ve companies hired IS staff as a result of the ERP implementation, three of these being ‘green eld sites’ where there had been no IS department before the implementation (four if the hiring of contract IS staff is equated with hiring full time staff). When IS staff were hired, the increase was limited as no company hired more than two staff as a result of the project. These gures are signi cant in that they indicate that ERP software may not have a great impact on the IT staff requirements of organizations. Table 2 also indicates that many companies are still able to rely totally on IS service providers for all their IS needs even after implementing ERP software. These gures are somewhat surprising in that they suggest that a large proportion of Irish SMEs do not have fulltime, resident IS expertise. Unfortunately, it is not possible to compare this result to Fitzgerald’s (1998) study (although those results included the average size of IS departments) because the sample used in this study was biased towards rms that had an identi able IS manager. More research would be required to ascertain whether the sample used in this study was biased towards companies that are weak in their
Adam and O’Doherty deployment of IT. However, it must be noted that the presence of four subsidiaries of international groups (with IT support from headquarters) in uenced this result. Alternatively, it could be suggested that companies that have not developed any IT capability see ERP projects as providing the opportunity to catch up in a rapid and robust manner by acquiring a total system that can easily be installed and maintained by an experimented, outside implementing partner. Managers may think that such acquisitions can bring them back in contact with the best practices in their industry without having to experience the usual growing pains of incremental IS development. Goals of the projects and project leadership One of the key issues with ERP is whether the bene ts commonly associated with ERP implementations actually materialize or whether they are exaggerated by media hype (Caldas and Wood, 2000). In order to ascertain how successful the organizations we studied had been with their projects, it was therefore necessary, as a rst step, to establish the goals pursued by managers when they purchased ERP software. The data pertaining to these issues is presented in Table 3. The rst observation that must be made about these data is that most organizations in the sample were pursuing speci c goals in their ERP projects, as opposed to merely implementing ERP software for the sake of it. The most common goals pursued were the implementation of a robust transaction processing system (nine companies) – a ‘world class system’ for two companies. The traditional bene ts of ERP systems, in particular cost reduction bene ts, were also sought for nine companies while for 28% of our respondents year 2000 had been a major incentive to buy an ERP system, although in no case had it been the only rationale. Three companies were also seeking improvements in the visibility of their transactions while four companies bought ERP software under instruction from their foreign headquarters and put forward no speci c goals for the implementation. Finally, electronic business was a long-term objective for six companies. It was a key nding that, in three cases, actually implementing the ERP software developed the perception of the managers and led to additional goals being pursued. In two of these cases, the availability of a solid platform for order acquisition and processing gave managers con dence that their company should experiment with electronic business. In the third case, the ERP system had been intended to boost the value of the company prior to its sale but, again, the availability of the ERP software led to managers attempting to capitalize on the good work done and reap additional bene ts.
Lessons from ERP implementation in Ireland Table 3
311
Goals pursued and project leadership
Company
Goals pursued
Project champion
ERP manager
Company A
Initially A system To be able to show the ‘big boys’ Now Electronic business Stock reduction Initially Replace old systems (year 2000) Common ERP bene ts Now Electronic business Euro transactions Electronic business Replace old systems (year 2000) Data access/visibility Reduce costs Cope with volume of data Year 2000 Integration of systems Visibility Supply chain improvements Centre of excellence Electronic business Initially Boost company value Stock right sizing Now Visibility Accountability Process improvements Phase 1 Replace old systems (year 2000) Phase 2 Electronic business CRM Expansion Executive information system MRP and inventory control Phase 1 World class system Phase 2 Electronic business Euro transactions Manufacturing processes Group decision ‘Flair’ Bought by large group (worldwide user of ERP) Instruction from group Phase 1 World class system ERP functionality Phase 2 Manufacturing MRP Costs tracking
Finance director
Finance director
Operations manager
Operation manager
Accountant
Accountant (gained much status after project)
Finance controller
Financial controller
Production manager
Accountant
Company B
Company C
Company D
Company E
Company F
Company G
Company H Company I Company J Company K
Operations director (hands-off) Operations director plus contract IT Lack of true champion and project leader for the implementer feels that he must act as project champion IT manager
IT manager
Finance manager Operations manager
Finance manager Operations manager
IS manager for Europe Accountant
IS manager for Europe Accountant
Adam and O’Doherty
312 Table 3
continued
Company
Goals pursued
Project champion
ERP manager
Company L Company M
Worldwide implementation A system required Common ERP functionalities Replace existing systems MRP Cope with growth in volumes
Financial controller Financial controller
Financial controller Financial controller
Financial controller
Financial controller
Company N
There were also encouraging signs in three of the four subsidiaries that local managers had taken ownership of the ERP project and were eager to see it succeed. This meant that, even in the absence of clear ‘local’ managerial rationale initially, the ERP implementation was being taken seriously and the potential of the system that was being implemented was understood by organizational actors. These ndings are divergent from those of Caldas and Wood (2000) who found that ‘following the trend’ was the motivation of 77% of their respondents. They also found that 41% of companies had implemented ERP systems under pressure from their IT departments and this contrasts strikingly with our nding that the IT department had been the champion or even the manager of the project in only two companies (14%). Indeed, only 35% of the companies we investigated had an IS department prior to the implementation of the ERP software, which indicates that the motivation behind the ERP movement often comes from other areas. Thus, the accounting/ nance area had championed the ERP project in 57% of the companies, while 21% of projects had been led by operations managers on the client’s side. It is dif cult to assess why these results diverge so markedly from these reported in Caldas and Wood’s (2000) study, but the fact that 85% of their companies were subsidiaries of multinational groups (and, therefore, were asked to implement ERP systems by their headquarters) may have had a negative in uence on the perceptions of managers regarding their ERP projects. In addition, the fact that most companies in our study were SMEs means that coordination and consensus about such projects were easier to achieve for these organizations. Outcomes of the ERP projects In order to assess whether the ERP projects studied had been generally successful, we then looked at whether the ERP system had been widely adopted by staff in the organization and whether staff were convinced of the bene ts brought by the software. The degree to which managers had taken ownership of the ERP system was another key aspect of the study.
Project leaders in the client organizations were asked whether they were satis ed with the implementation of the software and also to what extent the goals pursued (as outlined in Table 3) had been achieved. All sites were satis ed with their ERP software and its implementation apart from a certain amount of anxiety which staff experienced as they began to realize the extent of change that the ERP system was going to require. This included concerns about trying to replicate existing functionality rather than meeting business requirements with the new system, migrating data and designing workarounds. Although migrating data has been greatly simpli ed by emerging common standards, the lack of data integrity from legacy systems can still prove a big problem. In addition, in some cases no workaround is available for a speci c requirement, which gives rise to tough negotiations between the implementer seeking zero modi cation and the client seeking ‘100% functionality’. By and large, all these problems had solutions and the implementer and the client collaborated in designing them. The investigation into whether the implementation projects had achieved their goals was less straightforward. Some companies were more able than others to tell us about this because not all had attempted to measure the outcome of the project in managerial terms speci cally (as is also considered in the next section). Company C was an interesting site because its managers had carried out a speci c analysis of the consequences of the ERP implementation. They reported a broad range of improvements in business ef ciency, including the ability to handle an increased volume of transactions with the same staff, easier linkages with customers and suppliers, less errors and reruns, better access to information and easier after-sales support. They also reported additional bene ts such as improved quality of business reporting and easier access to key performance indicator analyses for top management. The managers were particularly impressed with the improvements relating to the speed and accuracy of enquiry response in general, which they perceived as a key factor in their business. The manager interviewed concluded that the ERP system had enabled top management to implement major growth plans for the company.
Lessons from ERP implementation in Ireland Other companies reported problems that occurred after the implementation was completed and the ERP team was disbanded. One of the main concerns of managers was that, in the short term, their organization was more vulnerable to any staff member involved in the ERP project leaving the company too soon. If transfers of key knowledge about an ERP system have not had time to occur, then a company stands to waste much time in achieving the objectives pursued. However, some interviewees put forward the introduction of proper incentive schemes as a solution to this problem. Indeed, the shortage of experienced staff in the area of ERP in Ireland at this point in time is such that staff who have taken part in a successful ERP implementation come under pressure to capitalize on their newly gained experience and seek higher salaries. Management must acknowledge this fact and update the status and reward level of staff involved in order to re ect the additional skills gained in the ERP project and the resulting modi cations in their job content. Managers also referred to the sigh effect which affected staff immediately after the implementation of the software had been completed. In this crucial phase, staff must return to their normal duties and, therefore, have less time to tackle operational problems linked to the ERP systems. This results in a drop in motivation and this was experienced by most of the staff we interviewed. This effect is explored in detail in the next section. Key aspects of the relationship with the implementer The key points about the relationship between an implementer and its clients was formalized by staff in the software rm and helped the researchers make sense of some of the opinions expressed by the interviewees. It emerged from our investigations that, as time goes by, organizations’ perceptions and expectations about the software they have acquired uctuate. Typically, the mood of the staff in the client organization follows the curve that is represented in Figure 1 (which is somewhat reminiscent of the model of the rise and fall in visibility of major technological advances put forward by the Gartner Group). In the initial section of the curve, expectations rise steadily and the perception of the software product that is being purchased comes into sharper focus as a state-of-the-art solution to old problems is now in sight. Managers are excited about obtaining new tools for achieving their goals and their belief in the ERP system rises. Thus, organizational actors become increasingly committed to the project. Then, as the two organizations (client and implementer) begin to negotiate the ne detail of the implementation plan,
313 staff realize the extent of work and change to current practices involved in the project and their fears grow steadily. They culminate when the workload allocation is completed and they must face new responsibilities while strangers invade the organization asking loads of speci c questions about the way staff handle their duties. However, as the implementation gets under way, early bene ts are being delivered and, when obstacles are encountered, staff in both organizations (who know each other much better by then) are active in trying to solve them. In this phase, staff in the client organization reported that they got a real feeling of being at the leading edge of IT and collaboration developed between the two sides. Spirits were high and the commitment of staff to the project reached its highest point. Unfortunately, this dynamic period does not last as, in the post-implementation phase, the ERP team is soon disbanded and staff must return to their usual tasks of dealing with customer queries or processing sales orders. The turning point in the relationship between the two rms is the management of this post-implementation phase when the relation moves from an active hands-on role to a support role through the intermediary of a service desk or call centre. At that stage, the implementer loses track of the general perception of the product they have installed because the communication that develops as part of the support relation is too rigidly structured around the capture and processing of the problems with the software and cannot capture the business dimensions of the project, i.e. whether the organization is achieving its targets or whether the site is ready to move to the next stage of development of its IT capability. Clients all noted how signi cantly the mood of users and project leaders alike dipped in the post-
Figure 1 Evolution of staff and management motivation for the ERP project.
Adam and O’Doherty
314 implementation period. As the burden of their everyday tasks took over and customer inquiries became a priority again, their perceptions of the system tended to crystallize around the problems that emerged and the attention of all actors involved became focused on the problems resulting from the software, which they themselves acknowledged as being a very negative orientation. The challenge for the implementer, as perceived by the implementing staff, is in maintaining the active relationship as long as possible in order to redress the post-implementation dip as quickly as possible by maintaining a type of communication that is based on a discussion of what the software has achieved and how to take it further (as is suggested with the dashed curve in Figure 1) rather than move to a restricted and typically tension-laden software support situation. The project leader for the implementer rm was of the opinion that the fact that so many of the client organizations had no resident IT was another incentive to try to stay in touch with the evolution of the site. In organizations that have full-time IS staff there is an obvious channel of communication, but in organizations where the ERP leader is essentially a user of the system as opposed to an administrator the communication can quickly be restricted to matters of proper operation of the system, which may be crucial in terms of the operations of the rm, but are not conducive to an analysis of how the usage of the ERP functionalities can evolve or what kind of business development it could allow. Thus, a rich, continued and business-oriented communication between the implementer and the managers in charge was seen as very suitable by both sides for a better and more effective deployment of IT in the client organization. This may be the only way that the disillusionment mood of the post-implementation phase can be shortened and reversed quickly so the company can take full advantage of its newly acquired ERP functionality and develop more effective business processes. Such communication is also necessary for a proper review of the projects to take place. The review phase of decision-making processes has long been highlighted as critical to proper evaluation of the effectiveness of organizational decision making and to learning about key managerial issues, most notably by Simon (1977) and Mintzberg et al. (1976). There is empirical evidence that not enough organizations undertake a review of their IS investments (Ward and Grif ths, 1996). Indeed, IS investments are largely regarded as badly analysed and justi ed from the outset (Farbey et al., 1992). These ndings were con rmed in our study where some managers could not indicate to what extent the bene ts sought had been achieved. It seems that implementers can play a crucial role in this stage of the project because they can help managers identify the bene ts that may materialize and those that
are unlikely. The implementers could obviously not be relied upon exclusively in justifying the investment because of the con ict of interest inherent in the investment decision. However, it is clear that project leaders in the implementer organizations must, as part of their task, differentiate between sites where implementing ERP is likely to succeed and sites where it should not be undertaken. It is ultimately in no-one’s interest to get involved in a project that will never succeed and will generate a lot of problems. Later in the project, they can also help managers identify the next steps in deploying IT capabilities and exploiting the ERP systems acquired to the fullest.
Conclusions This study of Irish experiences with ERP implementation shows that SMEs are just as likely to be interested in ERP than the larger organizations that have been studied by previous researchers. The only reason why SMEs have not been the primary target of software vendors so far seems to have been that vendors and consultants perceived that the arguments for ERP would be stronger when trying to convince managers in companies such as Microsoft, Dell or McKesson. However, in Ireland, where SMEs are a primary target on the software market (because organizations are, on average, much smaller), SMEs have already gone down the ERP route in signi cant numbers and have successfully implemented ERP systems. Our study indicates that the duration and complexity of large ERP projects as portrayed in the literature may be due as much to the complexity of the organizations where they are implemented as to the complexity inherent in ERP systems. This is good news for managers in SMEs who are interested in ERP because it means that the route to ERP may well be shorter and cheaper for them. However, ERP implementations remain large IS projects (above the average for typical IS projects), but they can be quicker if the organization is pursuing clear managerial objectives and if they work in collaboration with an experienced implementer. Thus, the ASP model, which has been recently introduced to the ERP market is not the only route for SMEs. This is also good news for ERP solution providers because it means that their market can be extended to a large group of organizations with far less developed IT infrastructures in place and where the potential for selling total software solutions is quite high. This development of the ERP market may actually be quite timely for the suppliers of ERP solutions if the predictions reported in the media that large multimillion IT projects will soon become a thing of the past turn out to be accurate (Robineau, 1998).
Lessons from ERP implementation in Ireland It is important to note that a large proportion of the companies in this sample were pursuing a strong managerial rationale in implementing ERP rather than just following a trend as found in previous studies (Caldas and Wood, 2000). If the four subsidiaries of international groups are excluded, all companies were either following de nite managerial goals or had reframed their projects to include new, speci c, managerial targets. Even in the companies where ERP implementations were imposed by headquarters, there was a chance that managers would truly adopt the systems and try to exploit their potential. The evolution of the managerial targets in the sites we investigated con rms the trends analysed in the media towards CRM and electronic business and ERP systems are seen as suitable total systems for supporting these new managerial strategies. This highlights the major conclusion of this study, i.e. that managers implementing ERP systems should pursue speci c managerial targets through the acquisition of such systems and that deciding to acquire ERP software may not be suf cient in itself. At the least, once the software has been implemented, managers should undertake an accurate review of what has been achieved and think creatively about the ways in which the robust platform implemented could be used to develop current business or pave the way towards new interests. Finally, this study indicates the importance of having experienced implementing partners in ERP projects. The implementation of the software can be sped up and, more importantly, the post-implementation disillusionment experienced by many companies can be shortened and diminished. An experienced implementation partner can also play a critical part in ensuring that organizations exploit their ERP platforms to the fullest and develop their IT capability beyond the mere use of ERP functionality.
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Biographical notes Frédéric Adam is a lecturer in the Department of Accounting, Finance and Information Systems at University College Cork in Ireland. He is also a senior researcher with the Executive Systems Research Centre (ESRC). He holds a Ph.D. from the National University of Ireland and Université Paris VI jointly. His research has been published in a number of international journals including the Journal of Strategic Information Systems, Decision Support Systems and Systèmes d’Information et Management. He is the co-author of the Manager’s Guide to Current Issues in Information Systems and Postgraduate Research (both published by Blackhall Publishing, Dublin, Ireland).
316 Peter O’Doherty is a Business Analyst and Project Leader with Seabrook Research Limited, an Irish software company based in Dublin and Cork, Ireland. He has 12 years of industrial experience in the deployment of IS resources and has been helping companies to implement ERP systems for several years. He also carried out research in the area of ERP and has special interest in developing methodologies for the management of this type of projects and fostering good relationships between client organizations and providers of software solutions.
Adam and O’Doherty Address for correspondence: Dr. Frederic Adam, Dept. of Accounting, Finance and Information Systems, O’Rahilly Building, University College of Cork, Western Road, Cork, Ireland, tel: 353-21-490 33 43 fax: 353-21427 15 66, e-mail: fadam@a s.ucc.ie
