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A approach for A planned-oriented planned-oriented approach for ERP strategy EPR implementation implementation strategy selection selection Guido Capaldo and Pierluigi Rippa University Federico II of Naples, Naples, Italy
Received February 2008 Revised September 2008 Accepted March 2009
Abstract Purpose – The purpose of this paper is to propose a methodological approach aimed at identifying technical and organizational capabilities firms should have before the ERP implementation process starts, in order to select the more appropriate implementation strategy and the change management interventions to support the selected strategy. Design/methodology/approach – Capabilities to implement ERP system are selected on the basis of a literature review and through focus group session in collaboration with the company partner of the project. Then, a methodological approach is proposed on the basis of such capabilities. Scales of the capabilities are built, and an algorithm to analyze and evaluate firms’ capabilities is proposed. Findings – The methodological approach has been tested through a validation experiment with the company partner of the research project. Results reveal the usefulness of the methodology in estimating the capabilities that firms should have in order to select the more appropriate implementation strategy. Research limitations/implications – Further research is under development in order to validate the methodological approach through a case study. Practical implications – Starting from the methodological approach a useful tool could be developed to analyze technical and organizational capabilities of the firm, and to select the more appropriate ERP implementation strategy. Originality/value – The methodological approach is the result of a research project based on tight collaboration between academic researchers and IT managers involved in ERP implementation processes. Thanks to such collaboration, tacit knowledge and expertise accumulated by IT managers during ERP implementation processes was explicated and evaluated in the proposed methodology. The result is a model that goes beyond descriptive analysis and offers prescriptive advice on how to address the potential challenges prior to and during the implementation processes. Keywords Manufacturing resource planning, Research methods, Change management, Italy Paper type Research paper
Journal of Enterprise Information Management Vol. 22 No. 6, 2009 pp. 642-659 q Emerald Group Publishing Limited 1741-0398 DOI 10.1108/17410390910999567
Introduction As it is widely known, recent literature (Andersson and Muller, 2007; Bernroider, 2008; Grant et al., 2006; Muscatello and Chen, 2008; Yeh et al., 2007) has highlighted numerous cases of failure amongst companies that implemented enterprise resource planning (ERP) systems. The problems underlying the disappointing results of ERP implementation are manifold. They are not only related to technical implementation (e.g. inadequate definition of functional requirements, underestimating the difficulties related to legacy closing, errors in the choice of ERP software, etc.), but also to Some results of this paper were supported by travel fellowship from the School of Sciences and Technology – University of Naples Federico II.
organizational implementation (e.g. lack of commitment on the part of top management, lack of involvement of end-users and their consequent resistance to change, etc). Companies generally tend to underestimate the difficulties related to the organizational implementation of ERP systems, and focus rather on the problems concerning technical implementation (Al-Mashari and Zairi, 2000; Aladwani, 2001; Askenas and Westelius, 2003; El Amrani et al., 2006). Failure to take into account problems related to both the technical and the organizational phases of ERP implementation may lead to risks in the choice of implementation strategy. If both technical and organizational problems are not properly identified and anticipated, they may arise once work is under way, thus seriously affecting IT management staff and increasing the risk of failure in the implementation process. As a consequence, both technical and organizational issue must be considered in choosing the strategy for ERP systems implementation. According to the literature on ERP systems, companies use two main strategies for implementation (Vogt, 2002; Markus, 2004): the “Big Bang” and the “Incremental” strategy. While the first strategy aims at implementing the system in one go, the second one takes on a more gradual approach. The benefits to be gained from the Big Bang strategy are significant since it allows for total integration of information systems within a short time. It is worth noting, however, that this kind of strategy implies low levels of technical customization as it is assumed that the organization should adjust to the characteristics of the system and not vice-versa. This is why the Big Bang strategy presents a series of risks associated with problems of technical and organizational implementation. These risks, therefore, need to be carefully analyzed. On the other hand, the incremental type strategy tends to reduce the risk percentage, since the technical implementation of the different modules of the ERP systems allows for a timely resolution of the criticalities that may occur. Although the technical risks involved are fewer, there are also fewer benefits to be derived from adopting the system, bearing in mind the duplication of computer resources and the high costs to be sustained during the transition phase from the old system to the new one. The paper suggests a methodological approach aimed at representing technical and organizational capabilities of the firm before the implementation process starts, configuring the problems that may occur during the implementation process and selecting the most suitable implementation strategy. The methodological approach presented in this paper is part of a wider research project involving Department of Business and Managerial Engineering (DIEG) and an industrial partner, a shared service company founded by two big Italian groups aimed at supporting all the firms of the groups in the management of the information technology (implementation, adoption, maintenance, etc.). The two groups are representative of several business sectors (both manufacturer and service), of several countries (all around the world), and of different company’s size (small, medium and large). In the early 2000s, as a result of a top-down decision of corporate top management, each firm within the two groups adopted a specific ERP systems. A specific transversal area of the shared company supervised each implementation project. This enabled the company to acquire extensive knowledge of the problems affecting ERP implementation process, in different sectors and in different countries.
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A research group composed of DIEG researchers and IT managers thus worked jointly to develop a methodological approach aimed at collecting the knowledge and the expertise matured by the managers. The methodological approach capabilities developed and presented in this paper are the result of focus groups during which researchers and managers discussed two different sets of knowledge: literature review on the one side and field experience on the other. The methodological approach was then tested by means of a validation exercise using experts’ opinion of an Italian TLC firm. The ensuing results highlighted the methodological approach’s ability to predict the best implementation strategy on the basis of the “as is” capabilities of the firm in the pre-implementation stage of the system. The paper is structured as follow: in the next two sections a literature frame on ERP implementation and on methodologies to manage the implementation process will be showed. Then, the development of the methodological approach will be described. Finally, results and conclusion will explain the weak and strength aspects of the methodological approach. Critical issues in ERP implementation process The ERP system is a generic term for a broad set of activities supported by multi-module application software that helps organizations to manage their resources (Teltumbde, 2000). From an IT point of view, an ERP system can be defined as a standard, customizable, software package with integrated modular components which speed up the information flow across the different sectors of a company (Laughlin, 1999; Watson and Schneider, 1999). As far as the hardware architecture is concerned, an ERP system has a shared database that all the different applications interact with, so that the integrity and synchronization of data is guaranteed. Using a common database makes it easier to share information, and means that any decision or strategic action undertaken at any level of the organization reflects directly on the rest of the company (Slack et al., 2001). An ERP lifecycle can be synthesized in the following phases (Esteves and Bohorquez, 2007): (1) Adoption decision phase. (2) Acquisition phase. (3) Implementation phase. (4) Use and maintenance phase. (5) Evolution phase. (6) Retirement phase. As stated in Esteves and Bohorquez (2007), the number of publications that are related to the implementation phase is notoriously greater than the number related to the other phases. This corresponds to the focus on ERP systems given by the trade press, which also deal predominantly with implementation problems. In the last years, due to the high rate of low success of ERP adoption experiences, implementation process of these systems has been one of the main relevant research topic in the area of the interaction/implication between IT and organization (Themistocleous et al., 2001).
The high failure rate in the implementation of ERP calls for a better understanding of the critical issues in implementation process. In order to reduce the failure rate of ERP implementation a number of studies have attempted to identify the critical success factors (CSFs) in the implementation of ERP (Akkermans and van Helden, 2002; Kim et al., 2005; Nah and Delgado, 2006; Ngai et al., 2008). In particular, there are several studies based on an extensive review of the critical success factors that contribute to success in the context of ERP implementations. Large part of these studies are the results of exploratory case studies (Motwani et al., 2002; Subramanian and Hoffer, 2005). And they are the results of studies based on different samples and research settings, which may have placed more emphasis on some CSFs but less on others. The most cited CSFs related to ERP implementation are referable to the following aspects: . Inadequate requirements definition. Research works suggest that inadequate definition of functional requirements accounts for 60 percent of implementation failure (Holland and Light, 1999; Kumar et al., 2002; Wee, 2000). . Legacy status and ERP customization. The complexities of existing business legacy systems must be successfully managed. Customizing an ERP system has been associated with increase in IT costs, longer implementation time, and inability to benefit from the vendor’s software maintenance and upgrades (Al-Mashari and Zairi, 2000; Lee et al., 2003; Bajwa et al., 2004; Light, 2001; Murray and Coffin, 2001; Rosario, 2000; Shanks, 2000; Somers and Nelson, 2004; Sumner, 1999; Bingi et al., 1999; O’Byrne and Wu, 2000). . Absence of strong commitment on the part of top management. Strong commitment on the part of top management is crucial to ensure a successful implementation of the project that must be considered strategic for the company’s future (Ioannou and Papadoyannis, 2004; Umble et al., 2003; El Amrani et al., 2006; Hong and Kim, 2002). . Lack of clear strategy guiding redesign of processes. The introduction of an integrated platform is a strategic choice and, as such, needs to be evaluated by top management. The objectives of the whole organization, as well as an inter-functional and unifying overview, need to be worked out and publicized (El Amrani et al., 2006; Mandal and Gunasekaran, 2003; Holland and Light, 1999; Rosario, 2000). . Resistance to change and lack of involvement on the part of end-users. Resistance to change is often the result of a lack of end-users’ involvement in defining the implementation process (Calisir and Calisir, 2004; Hong and Kim, 2002; Wee, 2000; Somers and Nelson, 2004, 2003; Murray and Coffin, 2001). . Inadequate qualification of end-users. One of the reasons why implementation is often unsuccessful is the lack of adequate preparation and attention given to staff training. ERP implementation courses are extremely important for employees to learn about the new software interfaces as well as the processes affecting the functioning of the whole enterprise (Calisir and Calisir, 2004; Hong and Kim, 2002; Wee, 2000; Al-Mashari and Zairi, 2000).
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Modeling ERP implementation process Other research topics related to ERP implementation are focused on the modelization of the implementation process. According to Markus and Tanis (2000), the ERP implementation process stages are the chartering phase, the project phase, the shakedown phase, and the onward and upward phase. The framework allows for both emergence – outcomes that are not deterministic but are influenced by both chance events and human actions – and dynamics – responses to problems and opportunities created by earlier decisions and actions. Then, the framework helps explain why organizations do not always achieve optimal success. Finally, it uses the concept of unresolved risk or variance to explain how errors can have consequences that show up long after the errors originally occurred. This explains why organizations often find it so hard to correct problems and to learn from their experiences with enterprise systems. Another interesting model is the one proposed by Somers and Nelson (2004) who identified six stages of ERP implementation process (initiation, adoption, adaptation, acceptance, routinization, and infusion) and identified the key players and activities for each stage. Results of their analysis revealed that the temporal nature of the key player and activities is less understood than their overall importance. The implementation stage inaccuracies suggest that the first and the latter two stages of implementation are at least well understood. The main contribution of their analysis is the focus beyond the adoption and acceptance stages of implementation to include both pre- and postimplementation behavior. A planned approach to the implementation process management Summarizing the literature review previously presented, and as Esteves and Bohorquez (2007) has noted, it is important to relate critical success factors with implementation methodologies and models. And moreover, there’s an emergence of studies related to organizational issues and change management process in ERP implementations, identifying effective strategies to manage the change. As literature highlighted, implementation process failed because managers of IT aren’t aware of the importance of such problems, they underestimate them, and a low level of project management skills in the early stage of the implementation project is one of the main reason of the high rate of failure (Wong, 2005; Somers and Nelson, 2004). As a consequence, the evidence revealed that a spontaneous approach, in which there’s an underestimation of organizational problems respect to technical one, is a big deal for the success of the implementation process. A planned approach is needed, in which managers should be able to assess and manage in time the problems by using some models and methodologies to represent the risk of occurring of problems in the course of the implementation process. In spite of the need to pass from a spontaneous approach to ERP implementation process to a planned one, in last years literature proposed only few assessment models, focused mostly on technical aspect of the implementation process, without take into account the organizational issues. Hooks (2003, 2006) started from the management of technological change and presented a review of the available change management tools. He focused his research on a subset of change management functions he considered essential to managing change to Enterprise systems. He called this subset as application change management
(ACM), by defining some capabilities needed to implement an optimal ACM for enterprise applications. Then, it was possible to identify tools that would equip any apps support group with capabilities to analyze and process change much faster, and with greater accuracy. Such key change management capabilities for ERP applications include maintaining a current application baseline and tracking changes to the baseline, automating the promotion process, analyzing change resulting from vendor software updates and local extensions/customizations, comparing multiple environment/instances to identify differences, preparing for change resulting from new releases/versions. He also settled some key indicators for an effective ACM strategy: source code management, change trace-ability, maintaining a current baseline, change impact and dependency analysis, both application and database change tracking process, automated code migration processes, vendor software path analysis. Another planned approach highlighted in literature is the one proposed by SAP AG, AcceleratedSAPw (ASAP). ASAP provides a large number of tools and utilities for simplifying the implementation process. The issue proposed by SAP to reach the goal of getting a fast return on investment is based on the idea of facilitating a quick implementation of SAP applications based on a clearly definition of the mission, objectives, and the scope of the project, increasing the feasibility of realizing a detailed planning at the beginning of the project, standardizing and establishing a single project or implementation methodology and creating a homogeneous project environment. The main limitation of ASAP is that is a methodology especially suited for those implementation projects where the number of changes to standard SAP applications is reduced to a minimum. Both the illustrated methodologies are aimed to support IT managers to identify, before the starting of the implementation process, which capabilities are required, in the specific context of the firm, for successful implementation. But they are strongly focused on the capabilities related to technical issues (legacy status representation, understanding of requirements for ERP customization and of functional requirements of the ERP, etc.) and only partially encompasses the organizational capabilities required for facing with the CSFs highlighted and summarized in section two. Thus, if we assume that managers should carefully analyze and manage the factors (both from technical and organizational side) that may be critical in the course of the implementation process, more efforts and methodologies are needed in order to: . analyze the technical and organizational configuration of the firm before the implementation process; . understand the sources of the critical factors; and . identify the more appropriate strategy on the basis of such characteristics. Considering the last element, if we assume that the Big Bang strategy is the solution that can ensure the highest benefits in a firm, how should be managed the implementation process? A Big Bang strategy means the reengineering of all the processes, the closure of all the old legacy systems, the training of all the employees, the re-definition of roles and responsibilities, the acceptance of the new routines by the employees. If the firm lack the capabilities to manage the implementation of a Big Bang strategy, then the risk that the implementation process will be not successful as planned will be high.
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Which are the capabilities to manage the implementation process? How can they be identified? How can they be evaluated? The methodological approach proposed in the next section tries to answer to these question. Starting from a set of critical success factors, a set of technical and organizational capabilities firm should have to implement an ERP system will be identified and a methodological approach for the evaluation of such capabilities will be proposed. The methodological approach is aimed at assessing the capabilities of a firm to implement an ERP system, and as a result, the best strategy in term of change management activities and BPR will be identify to reinforce thus capabilities. Proposed methodological approach The aim of the proposed methodological approach is to develop a tool IT managers can use in an affordable and useful way when planning and managing ERP implementation process. As a consequence we argue that the development of our assessment methodology should necessarily involve both researchers and practitioners with experiences in ERP projects. Researches had to bring framework based on literature to describe and manage the process, while practitioners had to validate such frameworks on the basis of their expertise and knowledge, in order to identify which factors really were crucial for the success of the project, how to measure, represent, and analyze them. On the basis of these consideration, the research strategy we choose for the development of proposed methodological approach was the result of a common work in which academicians an practitioners work together to develop, test and validate the proposed methodological approach. To reach these objective, focus group technique was chosen because of its ability as an explanatory research tool to quickly and inexpensively grasp the core issue of the topic (Cooper and Schindler, 2003). Since it is often preferable to run separate focus groups for different subsets of the population, two sets of focus group were dropped as shown in Table I. In both the focus groups, the moderator was the academic researcher responsible for the research project in which the industrial partner was involved.
Focus group Participants 1 2
Table I. Focus group realized
Academic researchers
Topic
Factors influencing ERP implementation process as stated in literature Academic researchers and Discussion of the lists of factors, identification of IT managers expert in critical areas, ERP implementation development of projects capabilities to face with critical areas, identification of appropriate indicators to measure such capabilities
Result List of factors on the basis of the literature review Development of hierarchy of factors influencing ERP implementation process: Critical areas ! capabilities ! indicators ! measurement scales
Number of focus group 4 5
The first four focus groups were run among researchers to identify the factors that influence the implementation process of an ERP system. Researchers discussed the critical success factors, then, a first list of factors affecting ERP implementation process was developed (Capaldo et al., 2007). In the second focus group run, researchers discussed with manager whom have been involved in a real ERP implementation process the list of factors. The discussions within the all focus groups had been moderated by a researcher, who asked the managers the following questions: (1) Were these factors relevant and crucial in your ERP project experiences? (2) Were you faced with all the factors we reported in the list? (3) To what extent? (4) Would you have predicted and planned the existence of such factors? On the basis of the discussion, the proposed list of critical factors was revised. A set of critical areas was identified on technical and organizational side. Technical issues Software standardization: if the system is adopted without interfering with the programming logic, i.e. when the modules are adopted as the producer intended, the term used is standardization. In this case the system is used as originally planned by the software house, thus, customization criticalities will not occur. Software integration: the level of pervasiveness of the ERP needs to be carefully defined; that is, a detailed list of all the legacies in use before the introduction of the system needs to be made (in particular, which organizational functions are supported by legacy systems), and all the legacies that can be closed because their functions are supported by the ERP system. In this case, criticalities deriving by a low level of integration between the EPR and the legacy are avoided. Organizational issues Business process reengineering (BPR) propensity. ERP systems are process oriented; therefore only in a process-based organization they can completely express their integration potentiality. In this way, criticalities such as resistance to change and difficulties in redesign the process are reduced. End users propensity. The level of readiness of the end users is a critical issues where, if well managed, won’t determined lengthiness in the effective use of the system. Further steps of the focus groups were the development of capabilities firms should have to manage technical and organizational issues. In this way, the participants to the focus group try to answer to the following questions: (1) Which factors should be considered to assess and manage these issues? (2) How to measure such factors? (3) Which criterion should be used to select the factors? The discussion bring the participants to the awareness that firms must have a set of capabilities to reveal and faced with technical and organizational issues in order to achieve a successful implementation process. And to measure such capabilities,
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indicators should respect two main criteria: easiness in the measurement and availability of information. On the basis of these considerations, in Tables II-III, capabilities and indicators to assess technical and organizational issues are shown. As concerns the critical areas within the technical issues, the attitude to standardize the system is the capabilities to measure the ability of the firm to adapt the organizational structure to the ERP. To measure this capability, we identified two indicators: “software personalization” (based on the actual strategy, which is the orientation of the firm whether or not standardize the ERP?) and “software parameterization” (on the contrary, how many parameterization, based on the actual situation, is needed within the firm?). By the way, the level of software integration is also determined by the needed ERP size implementation (number of business area to be Critical area
Capabilities
Software standardization Attitude to standardize the system Software integration Attitude to close legacy system
Table II. Hierarchy of technical issues
Needed ERP size implementation
Critical areas
Capabilities
Business process reengineering (BPR) propensity
Process orientation of the organization
End users propensity
Table III. Hierarchy of organizational issues
Indicators Software personalization Software parameterization Number of legacy with function not supported by the ERP, that will not be closed Number of legacy with function supported by the EPR that will be closed Number of legacy with function supported by the ERP that will not be closed Level of integration legacy-ERP Business process coverage level with the ERP
Indicators
Orientation of organization and structure toward process Level of organizational flexibility Cross functionality of the individual objectives and performance Resources and systems to monitor processes quality Project management capability Cross functional project team Availability of potential project manager Capability to monitor the risk System to monitor resistance to change related to BPR Skill development and job conversion activities End users profiling Educational background Experience in the use of information systems Frequency of job rotation Availability of change enablers Human capital Commitment of top management Incentives towards innovative attitude
covered by the ERP, how any legacies should be integrated with the ERP, etc). Based on these considerations, capabilities and indicators to measure the level of software integration are shown in the next table. As concerns the organizational implementation, the capabilities able to represent the level of BPR propensity are the process orientation of the organization (if the organizational structure is functional- or process-oriented or something in the middle, how many time the structure has been changed in the past, the level of cross functionality of business performance monitoring systems), the capability of the firm to deal with project management (determined by indicators such as the availability of project managers and the ability of the firm to manage project involving all the firm’s divisions,) and the capability to deal with risk related to BPR (where appropriate indicators measure the actual capability of the firm to plan skill development plan or job conversion activities and the existence of some system to evaluate the resistance to change of the employees). The end users propensity can be evaluated analyzing the capabilities of the firm on the basis of the end users profiling (where some indicators such as the background of the end users and their previous experiences with information systems usage and implementation are defined) and the availability, within the firm, of change enablers (based on the measurement of the human capital activities, the level of commitment of the top management and the ability of the management to awards innovative attitude by the employees). Final question to get the methodological approach affordable and usable by IT mangers was “how to represent technical and organizational issues, and how to select the implementation strategy that best fit with the firm’s characteristic?”. In Figures 1-2, matrices for the strategy selection are shown. Technical assessment matrix. This is the result of the level of capabilities of the firms to face with software standardization and software integration. Whether both areas are high, maybe the firm is ready, form a technical point of view, to adopt the system following a Big Bang strategy. The other three boxes in the matrix represent three different implementation strategies, and the position of the firm depends on the level of capabilities of the firm to face with technical critical areas:
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Figure 1. Technical matrix of strategic choice
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Figure 2. Organizational matrix of strategic choice . . .
Legacy oriented solution: reduction and rationalization of existing legacy system. Partial ERP solution: standard implementation of some modules/sub modules. Local ERP compliance: standard implementation of residual planned modules.
Organizational assessment matrix. This is the result of the level of capabilities of the firms to deal with BPR propensity and end users propensity. Whether both areas are high, maybe the firm is ready, form an organizational point of view, to adopt the system following a Big Bang strategy. The other three boxes in the matrix represent three different implementation strategies, and the position of the firm depends on the level of capabilities of the firm to face with organizational critical areas: . Incremental after major change management interventions: Human Resources (HR) development activities and BPR interventions are critical to pursue a successful implementation project. . Incremental after minor change management interventions: redefinition of organizational processes, roles and responsibilities. . Big bang after change management interventions: competencies evaluation and recruitment of employees with high project management experiences. Field analysis: a validation exercise Aim of the validation exercise is to verify the usefulness and the level of application of the technical and organizational capabilities, in order to understand the added value deriving from the assessment of the capabilities before the implementation process start. The company in which the validation exercise was realized is a big Italian firm operating in the TLC sector. The number of the employees is about 50,000, with office geographically dispersed in the Italian country. The firm had recently implemented an ERP and IT managers decided to adopt an incremental strategy. This decision wasn’t the result of a planning oriented approach, but just a decision by IT managers based on their perception and their knowledge.
We realized with IT managers and their collaborators a retrospective inquiry, in which they were asked to rebuild the company situation, according to our methodological approach, before the implementation process. Thus, the validation exercise was carried out by tracing backwards the Company’s situation at the time when the firm had not yet adopted the ERP, and to verify if the chosen strategy was the one best fitting with the firm’s capabilities. First, technical and organizational pre-implementation scenarios were rebuild on the basis of interviews with IT managers (Tables IV and V). According to these scenarios, our methodological approach was used to represent the technical and organizational capabilities of the firm (Tables VI and VII). On the basis of the results, the most suitable strategies for the company’s situation are defined in Figure 3. On the technical side, the results show low level in software standardization, and medium-high level in the software integration (this is the results of the aggregation of the value. A simple medium is calculated for the evaluation). As a consequence, the more appropriate technical strategy is the incremental one, through implementation of a module or a sub-module, with low level of personalization, and step-by-step implementation of other modules/sub-modules Attitude to standardize the system
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Attitude to legacy closure
Some business process were not supported by any Top management planned to implement large part informatics system of the modules The current legacies were adopted following a standard configuration
Half of legacies working at the time had functions that could not be supported by the ERP systems
Some business processes were sufficiently structured
All functional areas were supported by legacy systems
BPR propensity
End users propensity
Table IV. Technical scenario
Organizational structure based on processes with A total of 50 percent of the technicians has project a stable use of cross functional teams and project management capabilities managers In the last two years 25 percent of the processes changed
High level of education
System for the evaluation of individual performances and competences, also at cross functional level
Vast experience in the use of legacy systems
Little job rotation experience (involving less than The organizational climate is constantly monitored (management is aware of resistance to 10 percent of employees) change problems and of job conversion difficulties) Use of a system for the monitoring and evaluation Top management is involved in project of the quality of processes management There are no incentives for innovative attitude
There is no planning for future end-users training
Table V. Organizational scenario
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Software parameterization needs Software integration Attitude to close legacy system
Table VI. Values for technical indicators
Needed ERP size implementation
Capabilities BPR propensity Process orientation of the firm
Project management capability Capability to monitor the risk related to the BPR implementation End users propensity End users profiling Table VII. Values for organizational indicators
Change enablers
Indicators Changes made to the software (not provided by the vendor) in order to meet specific requests of the organization Changes made to the software (provided by the vendor)
1
2
Orientation of organization and structure toward processes Level of organizational flexibility Cross functionality of the objectives and performance systems Capability to monitor the quality of the system Use of cross functional project team Availability of potential project manager Capability to deal with resistance to change Capability to deal with skill development and job conversion activities Educational background Experience in the use of information system Frequency of job rotation Human Capital Commitment of top management Incentives towards innovative attitude
4
5
£ £
Number of legacy with function not supported by the ERP, that will not be closed Number of legacy with function supported by the EPR that will be closed Number of legacy with function supported by the ERP that will not be closed Level of integration legacy-ERP Business process coverage level with the ERP
Indicators
3
£ £ £ £
1
2
£
3
4
5
£ £ £ £ £
£
£ £ £ £ £ £ £
On the organizational side, the results show medium-low level in BPR propensity, and medium-low level in the end users propensity. The more appropriate strategy to implement the ERP system from an organizational point of view is an incremental one. Discussion The representations of the position of the firm on the matrices of strategic choices where been presented and discussed with IT managers who confirmed that the implementation
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strategies defined through the methodological approach effectively was the ones they adopted for the implementation. Thus the methodological approach showed great capacity to support decision making in ERP implementation strategy selection. Moreover, based on the opinion of the IT managers, our methodological approach was able to recover the best change management activities the firm should have applied, if the implementation process would had been managed following a planned approach. On the basis of the results of the validation exercise, they realized that the following change management interventions would have helped the firm in accelerating the implementation process, and in increasing the efficiency of the whole project: . Investments in HR development. . Creation of an executive committee to monitor the project. . Adoption of systems to evaluate the competences and the resources of employees. . Recruitment of employees with experiences in IT projects. . Planning incentive systems that consider the end-users’ effective use of ERP system. Conclusion As highlighted in recent literature, companies generally tend to underestimate the difficulties related to the organizational implementation of ERP systems, and focus rather on the problems concerning technical implementation. This represents a serious risk for successful ERP implementation process. If both technical and organizational problems are not properly identified and anticipated, they may arise once work is under way, reducing the effectiveness of ERP adoption. In this paper we argued that IT Managers should move from a spontaneous approach in implementation process, in which there’s an underestimation of organizational problems respect to technical one, to a planned approach, in which managers should be able to assess and manage in time the problems by using some models and methodologies to represent the risk that some problems may occur in the course of the implementation process. We proposed a methodological approach aimed at representing technical and organizational capabilities of the firm before the implementation process starts, and selecting the most suitable implementation strategy. It goes beyond descriptive
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analysis, however, and offers prescriptive advice on how to address the potential challenges prior to and during the implementation processes. The methodological approach was tested in the course of a validation exercise in a big Italian TLC firm who implemented an ERP system. The results were been validated with IT managers who confirmed the predictability capacity of the model. In fact, results of the validation exercise revealed the ability of the methodological approach in identifying the right level of capabilities (both from technical and organizational side) belonging to the firm and the more appropriate implementation strategies on the basis of firm’s capabilities level. IT managers involved in the validation exercise perceived the added value deriving from the possibility to analyze the technical and organizational capabilities before starting the implementation of the system. And, as a consequence, they appreciate the powerfulness of the methodological approach as a predicting tool in the identification of the implementation strategy that best fit with company’s configuration and of appropriate change management strategies to enhance the success of the process. Further development of the research should be focused on some currents limits such as the metrics proposed for the measurement of capabilities and indicators and the change management interventions. For the indicators, more analytic mechanism to synthesize the value of the indicators should be developed in order to enhance the model in the acquisition of the high level of complexity and uncertainty in revealing firm’s capabilities. In fact, it is not always so clear, for management, to analyze and measure the level of technical and organizational capabilities of the firm in a certain time. Thus, specific tools able to capture the uncertainty of the assessors should be developed. As for the change management interventions, and in depth study should be realized in order to relate a specific firm’s configuration with the more appropriate change management interventions and with the different effort level to get into these activities on the basis of the capabilities’ level. As far as the resolution of these problems, it is opinion of the authors that such tools and models must be adapted to the SMEs context. The awareness of risks associated with ERP implementation is in fact particularly strong in the SMEs, where usually the entrepreneurs turn to consulting firms for EPR implementation and management. And the consultants are the only interlocutor with the entrepreneur in this process, whereas the entrepreneur lack of competencies and knowledge to understand the real criticalities in ERP implementation process, both from technological and from organizational point of view. And, if we consider that the large enterprise market for ERP is almost overfilled, authors’ suggestion are reinforced. References Akkermans, H. and van Helden, K. (2002), “Vicious and virtuous cycles in ERP implementation: a case study of interrelations between critical success factors”, European Journal of Information Systems, Vol. 11 No. 1, pp. 35-46. Aladwani, A.M. (2001), “Change management strategies for successful ERP implementation”, Business Process Management Journal, Vol. 7 No. 3, pp. 266-75. Al-Mashari, M. and Zairi, M. (2000), “The effective application of SAP R/3: a proposed model of best practice”, Logistic Information Management, Vol. 13 No. 3, pp. 156-66.
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Themistocleous, M., Irani, Z. and O’Keefe, R. (2001), “ERP and application integration”, Business Process Management Journal, Vol. 7 No. 3, pp. 195-204. Umble, E.J., Haft, R.R. and Umble, M.M. (2003), “ERP: implementation procedures and critical success factors”, European Journal of Operational Research, Vol. 146 No. 2, pp. 241-57. Vogt, C. (2002), “Intractable ERP: a comprehensive analysis of failed ERP projects”, Software Engineering Notes, Vol. 27 No. 2, pp. 62-8. Watson, E.E. and Schneider, H. (1999), “Using ERP in education”, Communications of the AIS, Vol. 1. Wee, S. (2000), “Jugging toward ERP success: keep key factors high”, ERP News. Wong, A. (2005), “Critical failure factors in ERP implementation”, Pacific Asia Conference on Information Systems. Yeh, T.M., Yang, C.C. and Lin, W.T. (2007), “Service quality and ERP implementation: a conceptual and empirical study of semiconductor-related industries in Taiwan”, Computers in Industry, Vol. 58 Nos 8-9, pp. 844-54. About the authors Guido Capaldo received a PhD in Business and Management from the University of Rome Tor Vergata (Italy) in 1996. He is full Professor of Business Economics and Organizations at the Faculty of Engineering of the University of Naples Federico II (Italy). He carries out his research activity in the Department of Business and Managerial Engineering at the University of Naples Federico II. His main research interests include management and organization of public services companies, small innovative companies, and human resource management evaluation through the competency-based approach. His papers have been published in Omega, R&D Management and Small Business Economics. Pierluigi Rippa completed his PhD in Business and Managerial Engineering at the University of Naples Federico II. He currently works as Researcher at the Department of Business and Managerial Engineering, University of Naples Federico II (Italy). His research interests include information technology adoption and organizational interaction, ERP systems development and adoption, supply chain management, statistical and fuzzy application in decision support systems. He is author of several papers in the above fields, published in international journals and presented at international conferences.
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