Quality of postimplementation review for enterprise resource planning systems

1. Quality of postimplementation review for enterprise resource planning systems Summary of the following paper: Nicolaou, A. I. Quality of postimplementation review for enterprise resource planning systems. International Journal of Accounting Information Systems, 5, (2004), 25-49 指導老師: 吳思佩 教授

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3. Abstract • Examines(檢查) the process of system review during the postimplementation review (PIR), and identifies factors that contribute to high-quality PIRs. • In two organizations (fictitious named as): • MANU • UTIL

4. Introduction • The two factors that influence the process of system development： • Organization performance • User perceptions about the system after its implementation and continued use in an organization.

5. Introduction • The quality of PIR： • Heavily dependent on the quality of the implementation process itself and on its effectiveness. • Could represent a key element in the examination of the relationship between system implementation and the realization of anticipated benefit form the use of ERP.

6. ERP systems implementation • The major advantage of ERP systems • The application software suites, which still service accounting conventions and needs. • Integration of all information flowing through a company.

7. ERP systems implementation • Critical factors for the success of an ERP： • Top management support. • An effective implementation team. • Organizational-wide commitment. • The effective resolution of misalignments between organization needs. • ERP package functionality.

8. Expected benefit from ERP systems implementation • ERPs are designed to help manage： • organizational resources in an integrated manner. • Intangible benefits： • Related to internal integration, improved information and processes, and improved customer service. • Tangible benefits： • Related to cost efficiencies in inventory, personnel , procurement and the time needed to close books.

9. Factors of failure in ERP systems implementation • Meta group(1999): • The average implementation time for a full-blown ERP system was 23 months, at a cost of US$10.6 million for the implementation and another US$2.1 million for maintenance over a 2 year period. • Several studies exist of companies that were led into severe financial distress because of system integration problems after the implementation of ERP systems: • Unisource Worldwide、Dell Computer、 Dow Chemical、Hershey Food Cooperation…

10. Factors of failure in ERP systems implementation • The computer integration problems. • The implementation ERP systems suffer from system integration problems. • The lack of alignment between people, processes, and new technology. • System led implementations have a higher incidence of failure compared to those that are business led.

11. Factors of failure in ERP systems implementation A well-planned and well-executed PIR of the system implementation should assist organizations to effect needed changes in organizational plans and process. • Avoid implementation risks • Realize potential operational and strategic benefits.

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13. 2.2 PIR of ERP systems • PIR is used to improve the design and effectiveness of an already developed system.

14. 2.2.1 PIR in capital budgeting research Capital budgeting literature define PIR or PCA as a feedback device.

15. PCA(postcompletion audit) • Use of quantitative model to identify poorly performing assets. • Use of regular periodic review versus one-time review. • Extent of documentation of postaudit(事後審計) procedures. • Extent to which postaudit procedures were applied as a percentage of capital project postaudited by a firm. • Use of formal versus informal postaudit procedures

16. The level of postauditing sophistication is an important issue. • The sophistication postaudit were useful in making decision abandon, continue, or enhance project or to suggest changes to improve future project selection

17. PIR in IS literature • PIR for IS has also been presented in the early system implementation literature. • PIR should include an evaluation(審計) of system impacts using a long-term view, be conducted(經營) by user, and formalized.

18. Three major stages after ERP implementation • Company may experience a 3-6 month productivity decline • Use 6-8 month to involve skills development, structural change, process integration, and add-on technologies that expend ERP functionality. • Involve business transformation,

19. Four different organizational interventions for ERP implementation • Business process reengineering(重組) • Detail requirements specification(詳述) for system selection. • System testing prior(預先) to implementation. • Monitoring of the system after it’s implementation(完成).

20. Research Proposition • The quality of post-implemantation review that is carried out in an organization will have a significant influence on the realization of expected outcomes from the use of ERP system.

21. Research method • Step1:Personal interviews (carried out with corporate directors of information technology in both companies) • Step2:Second interview with the same individual followed for further(深入) explanations. *The semi-structured interview were guided by an interview protocol.

22. Interview Protocol (1) • What were the driving force for the system change to an ERP architecture? • Was there a strategic plan in place to guide the deployment of the new ERP system? What were the specific principles that guide system development as part of the strategic? • Looking back at the implementation process, what were those factors that critically determined implementation success or failure?

23. Interview Protocol (2) • On a postimplementation basis, what action were taken to enhance system functionality, review the system’s service potential, or evaluate user acceptance? • Could specific success factors be identified that were discovered during the postimplementation phase of the system life cycle? What tools were used for their measurement, if any?

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25. Case evidence • MANU It’s large Fortune 500 manufacturing corporation globally • UTIL It’s a medium-size utility operating in European country

26. Why MANU implements ERP?

27. Internal question of MANU • System need of upgrading • The cost of associated with these systems • Data inconsistency • Fragmentation

28. External questions of MANU Lack the ability to present a single “face” to the customer

29. Implementation of The SAP • Configure the program • The benefits of Implementation of the SAP system

30. Why UTIL implements ERP?

31. Why UTIL Implement the ERP system? • Primary objective – a. Improving operation efficiencies • Matched a strategic plan - a. Customized reporting • The effect of Implementation the ERP system a. Hindered process integration b. Limited the process

32. UTIL failure reasons • The top management’s wrong policy • Lack of the in-house technical expertise • Lack the overall understanding of business process • The implementation was turned over to the IT

33. What The UTIL comprehend from the failure • System implementation effort has to be viewed as an ongoing process • It’s viewed as an overall long-term effort for the development of a new business model

34. Analysis of similarities and differences in PIR practices at MANU and UTIL

36. Review of overall project scope and planning

37. 4.4.1 Evaluation of system fit with organizational strategic vision • MANU • The ERP system implementation was part of a larger reorganization effort • System was viewed as a medium to ensure competitive advantage, facilitate corporate expansion • For postimplementation - continuously evaluate system fit and expansion • UTIL • ERP system was much more limited in scope, combined with idiosyncratic reporting requirements • Low level of fit between the SAP system and the organization’s objectives • System was not viewed as critical for attainment of any business objectives

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39. MANU: evaluated and changes instituted in subsequent implementation teams UTIL: no formal evaluation of project panning but instituted changes after initial failure 4.4.2 Project planning

40. MANU Information infrastructure was considered critical for survival Data Warehouse UTIL Information infrastructure was not a driver for competition Identified significant deficiencies in helping the organization meet its current objectives 4.4.3 Evaluation Of Infrastructure Development(基礎建設的評估)

41. MANU Has formal review of process integration, global support, reevaluation pf initial system UTIL Has no formal review of process integration, business justification 4.5 Review Of Driving Principles For The Deployment Of The enterprise system(事前的部署)

42. MANU Evaluate process simplicity and implemented 80:20 rule UTIL Evaluated process and reporting inadequacies and developed “workaround” to bypass system deficiencies 4.6 Effectiveness of misfit resolution strategies(有效的解決對策)

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44. 4.7. Evaluation of attained benefits (1) • The success of the system implementation effort in terms of attaining anticipated benefits depended on two critical factors: (a) The design of the system around the enterprise supply chain. (a) →provided the opportunity for increased efficiency in (a) → operations and had a pervasive effect throughout the whole (a) → enterprise. (a) →related to improvements in customer service.

45. 4.7. Evaluation of attained benefits (2) • The success of the system implementation effort in terms of attaining anticipated benefits depended on two critical factors: (b) An early focus of the system design effort on quantifiable (b)business outcomes. (b)→has forced MANU's business units to make decision that (b) →eliminated nonvalue adding process or to simplify complex (b) →processes into a more simple structure that was common (b) →across the whole company.

46. 4.7. Evaluation of attained benefits (3) • MANU － → An important PIR activity that MANU carried out is to formally → assess customer satisfaction using specially design customer → surveys and the results of those surveys were subsequently used → to further institute necessary changes in business processes. → is currently embarking on a “supply chain transformation” → initiative, building on its enterprise infrastructure and on supply → chain directed applications (including both Web-based and Web- → enabled applications).

47. 4.7. Evaluation of attained benefits (4) • UTIL adopted its ERP system － →the implementation problems that were encountered and its → process misfits with system requirements did not allow the company → to realize these desired benefits. →there was no formal activity in place to evaluate attainment of → benefits on a postimplementation basis. → primarily due to significant user complaints relating to process → inefficiencies introduced by the new system.

48. 4.8. Evaluation of learning4.8.1 User training (1) • After the installation of the SAP system － Users were overwhelmed and not well prepared for the process changes brought about by the enterprise system. → for instanceIn MANUsuch asentering a sales order. Customers →did not receive the products they had ordered and experienced → delays in delivery. → Part of the problem was due to the fact that employee training → was initially constrained only to the functionality within SAP that → users needed to do their jobs,without being provided with a clear → and overall view of how the software operates.

49. 4.8. Evaluation of learning4.8.1 User training (2) • After the installation of the SAP system － Users were overwhelmed and not well prepared for the process changes brought about by the enterprise system. → MANU responded to these initial problems by radically radically → changing its training methods, instituting a certification process, → where employees would have to pass a certifying test before → given access to the system.

50. 4.8. Evaluation of learning4.8.1 User training (3) • After the installation of the SAP system － Users were overwhelmed and not well prepared for the process changes brought about by the enterprise system. → UTILwere just trained on performing specific functions within → SAP that were necessary for their day-to-day responsibilities.In → conclusion, the steep learning curve associated with the use of → a complex enterprise system has led to errors and delays, → significantly obstructing both companies' ability to realize → anticipated benefits from the use of their ERP system.