A CONCEPTUAL FRAMEWORK FOR FORECASTING ERP

IMPLEMENTATION SUCCESS

A first step towards the creation of an implementation support tool

Johan Magnusson, Andreas Nilsson

Department of Informatics, University of Gothenburg, Viktoriagatan 13, Gothenburg, Sweden

Fredrik Carlsson

Siemens Business Services AB, Stockholm, Sweden

Keywords: ERP, Implementation, Forecasting

Abstract: The continuing soar in popularity when it comes to standardized information sy

stems sold en masse under

the labelling of Enterprise Resource Planning (ERP) Systems is somewhat kept under control by the ever

flowing stream of reports from the industry of implementations gone bad. According to some researchers it

is possible to assume that as many as 90% of all initiated ERP implementation projects can be regarded as

failures as a result of changes in scope, prolongation of the project time or simply budget overruns. With the

implementation of an ERP system being a very costly and risky endeavour, organizations considering

“getting on the bandwagon” stand much to gain from pre-emptively forecasting the probability of success

for an ERP implementation in their enterprise. Given this, the purpose of this paper is to investigate a

possible conceptual framework for forecasting ERP implementation success and discuss the role of such a

framework in a software based tool. This was achieved through an initial in-depth literary review aimed at

finding factors affecting the outcome of the ERP implementation projects. These results were then

communicated to an industrial support group comprised of possible ERP implementation stakeholders. After

lengthy discussions concerning the usability, validity and reliability of the proposed list of factors, a

conceptual framework was agreed upon for forecasting ERP implementation success. The framework was

then tested against a number of possible stakeholders outside the industrial support group. As the results

show we have been able to create a conceptual framework for forecasting ERP implementation success that

is currently in the second wave of testing. The usability, validity and reliability of the framework is

discussed and elaborated upon, and this paper concludes that the perceived usability and hence also value of

the conceptual framework is substantial, whereas the validity and reliability remain to be tested.

1 INTRODUCTION

With the overall soar in popularity for enterprise

wide systems such as MRP (during the 1970’s)

MRPII (during the 1980’s) and ERP (during the

1990’s) (See for instance Al-Mashari (2001) and

Schtub (1999) for a historical overview of the

evolution of enterprise wide systems), any possible

business benefit that these systems bring to the

adopting enterprise is directly dependant upon a

successful implementation.

Parr & Shanks (2000) take a further look upon

hy ther

e seems to be such an abnormal failure rate

for the implementation of ERP and go as far as

quoting Martin (1998) who stated that as many as

90% of all ERP implementations are either late or

over budget. If the success of a project (such as an

ERP implementation) is supposed to be measured as

for instance Whyte & Fortune (2003) stipulate (with

the variables time, budget, specifications and

consequences of project on organization), this would

lead to a failure rate of 90% for all ERP

Implementations.

These figures might at first seem dismal, but

with

the process o

f ERP implementation

encompassing both the actual implementation of a

447

Magnusson J., Nilsson A. and Carlsson F. (2004).

A CONCEPTUAL FRAMEWORK FOR FORECASTING ERP IMPLEMENTATION SUCCESS - A ﬁrst step towards the creation of an implementation

support tool.

In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 447-453

DOI: 10.5220/0002602404470453

 SciTePress

standard system and a more or less extensive change

in the fundamental process-structure of the

enterprise to fit the processes supported by the

standard system, they are not as extreme as might be

expected. In fact, Procaccino et al (2002) state that

85% of all IT-related projects fail and with this

relative high failure rate for projects spanning the

entire spectra of complexity, a success rate of 10%

for complex IT-related projects such as ERP

implementation projects might even be considered

acceptable.

With the current status of the IT-market being

somewhat in turmoil, any estimation of the global

ERP market is indicative at most. However,

according to Yen, Chou & Chang (2003), over 70%

of the Fortune 1000 companies have implemented

core ERP systems and the license fees for ERP

systems in Europe comprise of over half of the total

software license fees in Europe. When it comes to

the future size of the worldwide ERP market,

estimates vary from 11,90 Billion $US in the year

2007 (ARC Advisory Group, 2002) to 66.6 Billion

$US in the year 2003 (AMR Research, 1999).

As many researchers previously have pointed

out, the risks involved with implementing an ERP

are substantial (see for instance Davenport (1998);

Scott & Vessey (2000) and Sarker & Lee (2003) for

an overview of failed ERP implementations).

However, as the boom in the ERP market has shown

during the recent years, this does not intimidate the

adopters.

Given the complex nature of the implementation

of enterprise wide and enterprise critical systems,

and the often painful and arduous experience that the

ERP adoption process leads to, the purpose of this

paper is to present a conceptual framework for

forecasting the probability of ERP implementation

success and discuss the role of such a framework in

a software based tool.

The process of ERP implementation is in this

paper regarded as any alteration in the current

system architecture of the enterprise related to some

kind of enterprise wide information system. With

this broad definition of ERP implementation, we

encompass such alterations to the system

architecture as upgrades and continued roll-outs. The

notion of “ERP implementation success” is defined

as the success of the implementation project, and

“probability of ERP implementation success” is

measured by to what extent an organization fulfils a

number of factors.

2 METHODOLOGY

A schematic graph of the research-process is

presented in Figure 1 below.

As can be seen in Figure 1, the first step was to

identify a number of factors (15) through an

extensive literary review (encompassing a total of

155 articles or books) and present these to the

Industrial Support group. The factors were then

discussed and one factor (Competence) was added

along with a division of the now 16 factors into 4

categories. In addition to this a lengthy discussion

concerning the usability of the resulting conceptual

framework and the scientific validity and reliability

was held, creating further input for the academic

representatives and their further work with the

conceptual framework.

Figure 1: Methodological design

After designing the framework taking all input

into consideration the academics decided to

distribute the results through a software-based tool

with a web interface. This decision was based on

previous experience from the researchers stating that

the spread out usage of web-based technology would

in this way work in our favour, but several other

possibilities like workshop-methodology and expert

interviews were taken into consideration.

The software based tool ERP Scorecard was

designed as simply an electronically distributed

version of the questions comprising the conceptual

framework. Along with some additional

functionality regarding the management and

distribution of results, the tool was distributed free-

of-charge to 10 organizations currently undergoing

some sort of ERP implementation. As the tool

underwent initial testing during the summer of 2003

and was redesigned in accordance to the test-results,

the end results were a tool ready for extensive

dissemination during the late fall of 2003. As part of

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448

ongoing research at the University of Gothenburg,

the tool pools all data centrally, creating a large

database for future quantitative analysis. The results

from the testing towards the Industrial Testers (see

Figure 1) was information regarding the perceived

usability of the software based tool and the

conceptual framework, along with data to be used as

a means of measuring the validity and reliability of

the framework.

3 RESULTS

The conceptual framework is as previously stated a

framework comprised of a number of un-weighed

factors with the ERP implementation project as a

focus. This highlights the link between fulfilment of

the factors and a positive outcome of the project, and

for the framework to as usable as possible we have

based the total level of factor fulfilment on how

many of the final 16 factors were fulfilled. For

instance; if the responding organization fulfils 12 out

of the 16 factors (simply yes or no based on 5

questions per factor), this will result in the

forecasting of a 75% probability of success, and in

the tool a text describing what the organizations

strengths and weaknesses are related to the different

factors will be presented along with a quick-list of

possible future managerial actions to strengthen the

identified weaknesses.

A description of the 16 factors with the

corresponding literary support can be found in Table

1 below. As shown under the heading of “Factor

description”, the object of analysis is the

organization.

During the industrial feedback sessions

concerning the first draft of the conceptual

framework, a need for the user to see some sort of

structure in the 16 factors was identified (see Figure

1 for further information regarding the research

methodology). This resulted in the reorganizing of

factors into four overlying categories or that would

enhance the usability of the framework. The

reliability and validity of such a categorization was

considered to be irrelevant, with the need of the

future user in sharp focus.

The four categories were identified as Top

Management, Project, Organization and System; and

they are presented together with the underlying

factors in Figure 1 below. As previously described

the fulfilment of the factors is in the basic outline of

the framework measured by five questions each (Q1-

5 in Figure 2), resulting in a total of 80 questions.

These questions have been left out of this paper as

an affect of them constantly being under revision

and testing.

Table 1: Factor name, description and corresponding literary references

Factor Name Factor Description Literary support

Strategy The organization should have a clear, communicated business

strategy and an aligned IS/IT strategy.

Aladwani, 2001;Al-Mashari et al, 2003

Al-Mashari, 2001; Cooke & Peterson, 1998; Davenport,

1998; Donovan, 1999 ; Holland 6 Light, 1999; Pinto &

Slevin, 1987; Schneider, 1999 ; Stevens, 1998; Umble

et al, 2003; Whyte & Fortune, 2002

Leadership The organization should have a strong and committed

leadership that has the ability to motivate the employees to

change.

Al-Mashari & Zairi, 2000; Al-Mashari et al, 2003;

Mandal & Gunasekaran, 2003; Sarker & Lee, 2003

Schneider, 1999; Skok & Legge, 2002

Whyte & Fortune, 2002

Support The organization should have a top management and steering

committee of the ERP Implementation project that is highly

committed to the implementation and is comprised of

individuals with differentiated views of the implementation.

Aladwani, 2001; Kerzner, 1987; Mabert et al, 2001;

Mandal & Gunasekaran, 2003; Parr & Shanks, 2000;

Pinto & SLevin, 1987; Procaccino et al, 2002; Skog &

Legge, 2002 ; Umble et al, 2003

Whyte & Fortune, 2002

Competence The organization should have individuals with a broad

competence of ERP, BPR or other IT-related projects involved

in both the steering committee and the entire project.

No clear support found

Team The organization should have an implementation project team

that is comprised of individuals representing different views

and perceptions of the enterprise and the enterprise system.

Mabert et al, 2001; Sarker & Lee, 2003; Schneider,

1999; Skog & Legge, 2002; Umble et al, 2003; Whyte

& Fortune, 2002

Management The organization should have an excellent project

management for the implementation project and ensure that

the management does not present only a business- or technical

perspective of the implementation.

Cooke & Davis, 2002; Kerzner, 1987

Kirby, 1996; Mandal & Gunasekaran, 2003; Parr &

Shanks, 2000; Procaccino et al, 2002; Skog & Legge,

2002; Umble et al, 2003; Whyte & Fortune, 2002

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Plan The organization should have a previously defined and well

communicated project methodology that envelops both

documentation procedures and clear performance

measurements with routines for monitoring progress.

Al-Mashari et al, 2003; Cooke-Davis, 2002; Mabert et

al, 2001 ; Mandal & Gunasekaran, 2003; McDonough

III, 2000; Parr & Shanks, 2000; Pinto & Slevin, 1987;

Procaccino et al, 2002; Schneider, 1999; Skog & Legge,

2002; Umble et al, 2003; Whyte & Fortune, 2002

External The organization should have an ability to manage the

influence of external consultants in the implementation project

and also be able to optimally transfer the knowledge from the

consultants into the organization.

Skog & Legge, 2002; Whyte & Fortune, 2002

Culture The organization should have a business culture that highlights

the importance of learning, knowledge, past experience and

change, as well as a strategy for knowledge management.

Al-Mashari, 2001; Ash & Burn, 2003; Chan, 1999;

Cooke-Davis, 2002 ; Davenport, 1998 ; Gable et al,

1998 ; Holland & Light, 1999; Krumbholz & Maiden,

2001; Schneider, 1999; Scott & Vessey, 2000; Soffer,

Golany & Dori, 2003; Stevens, 1997; Sumner, 1999;

Whyte & Fortune, 2002

Change The organization should have a fundamental willingness and

readiness for change as well as an explicit change

management strategy.

Aladwani, 2001; Al-Mashari & Zairi, 2000; Al-Mashari

et al, 2003; Ash & Burn, 2003; Hall, 2002; Hammer &

Stanton, 1999; Hong & Kim, 2002; Jiang & Muhanna,

2000: Kerzner, 1987; Laughlin, 1999; Mabert et al,

2001; Mandal & Gunasekaran, 2003;

Markus & Tanis, 2000; Parr & Shanks, 2000;

Schneider, 1999; Skog & Legge, 2002 ; Umble et al,

2003 ;

Whyte & Fortune, 2002

Process The organization should have a high level of process-maturity

and explicit guidelines for process management.

Al-Mashari et al, 2003; Al-Mashari, 2001; Bingi et al,

1999; Cooke-Davis, 2002; Edwards, 1999; Hong &

Kim, 2002; Hong & Kim, 2002; Koch et al, 1999;

Mandal & Gunasekaran, 2003; Marius & Ashok, 1996;

Palaniswamy & Frank, 2000; Skok & Legge, 2002;

Soh et al, 2000;Weil & Olson, 1989

Communication The organization should have a detailed communication plan

and strategy that ensures the successful communication of

project plan and progress to all relevant stakeholders.

Aladwani, 2001; Al-Mashari & Zairi, 2000; Al-mashari

et al, 2003; Mabert et al, 2001; Mandal & Gunasekaran,

2003; Pinto & Slevin, 1987; Schneider, 1999; Skog &

Legge, 2002; Swan et al, 1999; Whyte & Fortune, 2002

Technology The organization should have a clear understanding of the

existing legacy environment and the technological aspects

involved in the implementation of the ERP system.

Al, Mashari et al, 2003; Al-Mashari, 2001; Bancroft et

al, 1998; Barnes, 1999; Bingi, 1999; Harrell et al, 2001;

Holland & Light, 1999; Hong & Kim, 2002; Keller &

Teufel, 1998; Koch et al, 1999 ; Mabert et al, 2001 ;

Mandal 6 Gunasekaram, 2003; Parr & Shanks, 2000;

Schneider, 1999; Soffer, Golany & Dori, 2003; Swan et

al, 1999; Umble et al, 2003; Xu, Nord, Brown & Nord,

2002

Training The organization should have a clear educational strategy

concerning the ERP implementation that involves routines for

early hands on training for the employees.

Aladwani, 2001; Al-Mashari et al, 2003 ; Mabert et al,

2001; Mandal & Gunasekaran, 2003; Skok & Legge,

2002; Umble et al, 2003; Whyte & Fortune, 2002

User The organization should have an implementation process that

strives for a high level of user acceptance early on through the

use of constant presumptive end-user consultations.

Mandal & Gunasekaran, 2003; Pinto & Slevin, 1987;

Procaccino et al, 2002; Skog & Legge, 2002; Whyte &

Fortune, 2002

Empowerment The organization should have a high level of implementation

process transparency and a staff policy that empowers team

members, end-users and management.

Aladwani, 2001; Grifith et al, 1999 ; Hong & Kim,

2002 ; Mabert et al, 2001 ; Markus & Robey, 1988 ;

McDonough III, 2000; Parr & Shanks, 2000; Sarker &

Lee, 2003; Schneider, 1999

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Figure 2: The resulting conceptual framework

4 DISCUSSION

With the methodology applied to exploring the

possible conceptual framework for forecasting

ERP implementation success involving a literary

review followed by a re-evaluation of the

identified factors towards industrial

representatives, there are some implications

concerning the usability, validity and reliability of

the framework that need to be addressed.

When it comes to the usability and the

pragmatic value for the users of the conceptual

framework it has through our first meetings with

the industrial representatives and the first wave of

testing been rated as very high. The outcome of the

assessment is according to our findings not

primarily the forecasting of the probability of

success, but rather the pedagogic value of, on a

conceptual level, identifying relevant factors of

importance for the outcome of the ERP

implementation project. By disseminating the

questionnaire (and perhaps also the results)

throughout the organization to relevant

stakeholders, the organization will act to heighten

the level of consciousness concerning possible

pitfalls during a potential ERP implementation and

hence be better prepared for the project. After the

initial wave of testing, this (along with the creation

of a material for discussion in the Steering

Committee or equivalent) is regarded as the chief

added value of the forecast.

Concerning the validity of the 16 factors as

representing the basis for forecasting the total

probability of success, it is fairly weak. Very little

research has been conducted with data that

provides the opportunity to see the relationship

between the fulfilment of one factor and a positive

outcome regarding ERP, and this clearly limits the

possibility of creating a conceptual framework

with high validity. There is also the issue

concerning the relationship between the different

factors and their interlacing. It is natural to assume

that they both overlap and miss several necessary

factors that in the end will be necessary to

correctly forecast the outcome of the project, IF

this is at all possible.

When it comes to the reliability of the approach

of using the fulfilment of a number of un-weighed

factors as the basis for assessing and forecasting

the outcome of the project in focus, it can be

regarded as weak. We can not be sure that we have

the correct instruments to measure what we set out

to measure, but this is a question that more or less

becomes an issue for the future design of possible

methods for collecting the necessary data.

As we have described in this paper, the current

design of the forecasting is through the use of a

A CONCEPTUAL FRAMEWORK FOR FORECASTING ERP IMPLEMENTATION SUCCESS - A FIRST STEP

TOWARDS THE CREATION OF AN IMPLEMENTATION SUPPORT TOOL

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distributed web-based questionnaire encompassing

a total of 80 questions, five per factor; but this is in

no way the only design possible for conducting the

assessment. Alternative designs such as workshop-

based meetings with future stakeholders within an

organization and semi-structured interviews with

organizational representatives are also quite

possible, and also most likely to result in a higher

degree of reliability when it comes to the final

forecast. This can be seen as a trade-off between

quantity and quality in the resulting data, and with

the current design we have chosen to aspire a high

quantity, perhaps at the cost of quality.

Concerning the role of the conceptual

framework in the software-based tool, we can

conclude that according to our initial findings we

regard the pragmatic value as substantial.

ACKNOWLEDGEMENT

This work was made possible through the Paper

Mill and EKIT-project at Gothenburg School of

Economics and Commercial Law/University of

Gothenburg, and the Enterprise Systems Research

Group.

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