What Are the Factors Affecting ERP System Integration?
Observations from a Large Manufacturing Enterprise
Tommi Kähkönen, Andrey Maglyas and Kari Smolander
Software Engineering and Information Management, Lappeenranta University of Technology,
P.O. Box 20, 53851, Lappeenranta, Finland
Keywords: Information Systems, Enterprise Systems, Enterprise Resource Planning, ERP, Integration, ERP
Development Network, Stakeholders, Affecting Factors, Moderating Factors, Grounded Theory.
Abstract: The first wave of Enterprise Resource Planning (ERP) systems integrated the core internal business
processes and provided operational benefits for companies. The second wave of ERPs introduced additional
challenges due to the need for ERPs to interact also with various other systems beyond organizational
boundaries, highlighting integration as a critical activity during the ERP system development. This paper
takes a Grounded Theory approach to investigate ERP system integration. A model of four groups of factors
affecting on ERP system integration was created. Challenged by the domain, organizational landscape, ERP
development network partners and system characteristics, ERP system integration is a continuous and
cooperative effort during the ERP development, conducted by the dynamic ERP development network. It
struggles through forced-marriage relationships, political games and organizational changes and aims at an
integrated business engine that makes the business more competitive. The model creates a base for further
research to investigate how integration issues are solved in ERP development networks.
1 INTRODUCTION
”If you investigate IT and are searching for an easy
integration between systems, there is no such thing.
Or, if there is, I’m very interested in hearing more
about it.” –Enterprise architect, adopting
organization
Companies have adopted ERP systems to
automate and integrate their core business processes
in order to achieve operational benefits and to
improve the business performance (Beheshti, 2006).
Implementing an ERP system is a challenging and
costly project. It is constant balancing between
customization of the package and re-engineering the
business processes to fit the package (Law et al.,
2010). Moreover, ERP projects are complex socio-
technical endeavours that involve both social
interactions between many stakeholders and
technical aspects in development or customization of
the ERP system (Albuquerque and Simon, 2007).
ERP systems tend to change the organizational
culture and way how people do their work (Liang
and Xue, 2004). Despite the fact that ERP vendors
including SAP, Microsoft and Oracle have been
building additional capabilities to their products, we
repeatedly observe the failures of ERP projects (IDG
Consumer and SMB, 2013). The increased body of
knowledge and more advanced products in the
market have not prevented ERP projects from
challenges.
Even though ERP systems are usually adopted to
replace numerous legacy systems, an ERP system
does not eliminate the need of other information
systems (Lehmann and Gallupe, 2005; Xu, 2011).
During the last two decades, the boundaries between
systems have become fuzzier as systems cross the
organizational borders to collaborate with business
partners besides the integration of internal business
functions (Hsu, 2013). Integrating an ERP system
with non-ERP systems is not considered easy (Doedt
and Steffen, 2011; Momoh et al., 2010). Because of
the extended role of an ERP system as the backbone
enterprise business suite that connects with
customers and business partners (Hvolby and
Trienekens, 2010), integration becomes an important
consideration during the ERP system development.
In our previous study, we analysed the existing
literature on ERP system integration and concluded
that there is a lack of studies with systematic
research approaches and ERP-specific integration
5
Kähkönen T., Maglyas A. and Smolander K..
What Are the Factors Affecting ERP System Integration? - Observations from a Large Manufacturing Enterprise.
DOI: 10.5220/0004866000050017
In Proceedings of the 16th International Conference on Enterprise Information Systems (ICEIS-2014), pages 5-17
ISBN: 978-989-758-027-7
Copyright
c
2014 SCITEPRESS (Science and Technology Publications, Lda.)
strategies have not been widely studied, especially
from the perspective of different groups of
organizations involved in the project (Kähkönen and
Smolander, 2013). Furthermore, integration is not
well understood as a concept (Chowanetz et al.,
2012; Gulledge, 2006). Recognizing this we attempt
to fill the gap and contribute to the knowledge on
ERP system integration. We apply a qualitative
method and use the Grounded Theory methodology
(Corbin and Strauss, 1990) to observe and
understand the practice of ERP system integration in
a global manufacturing enterprise. When making the
inquiry into the practice, we concentrated on the
following research question: what are the factors
affecting ERP system integration?
The next section provides the background for
this study by describing the concepts ERP system
integration and ERP development network. In
Section 3, the research approach is presented. A
model of factors affecting ERP system integration is
developed in Section 4. The model is compared with
the existing literature and future research is
discussed in Section 5. Section 6 concludes this
paper.
2 BACKGROUND
2.1 ERP System Integration
Integration is a general term that has various
dimensions and meanings in the domain of
information systems. According to Linthicum
(2004), integration has technical, business process
and strategic perspectives and it includes data
exchange between systems, standardization of
business processes and also cooperation and
coordination between human actors (Linthicum,
2004). Integration can happen inside a single
organization or it can cross organization boundaries,
which can be considered external integration (Barki
and Pinsonneault, 2005). Gulledge (2006) clarified
the concept of integration related to enterprise
systems by dividing integration into “big I”, in
which business processes are integrated by a single
software application such as ERP, and “little I”, in
which enterprise systems are linked together by
different approaches, such as database-to-database
and application server integration (Gulledge, 2006).
When examining integration from the
perspective of an ERP system, it can be concluded
that integration consists of diverse activities.
Integration of business functions is the goal of an
ERP implementation as the ERP system enables data
flow between business processes (Hsu, 2013).
However, numerous other information systems, such
as Decision Support Systems (DSS) and
Manufacturing Execution Systems (MES) are still
needed, and application level integration of ERP
system and these systems is often necessary (Shafiei
et al., 2012; Tao et al., 2004). The functionality of an
ERP is often enhanced by bolt-on applications, such
as CRMs (Customer Resource Management), and
WMSs (Warehouse Management System) (Watts et
al., 2008). Because the purpose of a contemporary
ERP is to provide the backbone for business
collaboration, external integration with business
partners’ systems is unavoidable (Møller, 2005).
Another form of ERP system integration is to
provide interfaces for customers and clients to
access the system on mobile. This type of integration
is called portal-oriented application integration
(POAI) where an interface is built to display the
desired information needed by the intended user
group (Linthicum, 2004). In this paper we
understand ERP system integration as an activity
that builds interfaces and manages interconnections
between the ERP and other internal and external
systems during the ERP development, where the
dimensions of technology, standardization and
business processes must be dealt as a collaborative
effort with proper strategies by the ERP
development network.
2.2 ERP Development Network
Many groups of stakeholders are involved in ERP
projects (Skok and Legge, 2002). Besides the
adopting organization, the ERP vendor can have the
key role in the project by providing support and
tools for development (Somers and Nelson, 2004).
Consultants are often hired to ERP projects to solve
different problems that occur during the
implementation (Metrejean and Stocks, 2011). The
ERP community has been defined as a group
consisting of an ERP vendor, consultant and
implementing organization and it is suggested that
understanding the relationships and interactions
within this group would be a key milestone in the
ERP research (Sammon and Adam, 2002). Koch
(2007) uses the term “ERP network” in his work but
mainly focuses on the complexity of organizational
structures of ERP vendors.
However, it is often the case that this network of
stakeholders involved in ERP development is even
more complex if all the involved organizations are
taken into account. The “flagship” organization,
such as SAP or Microsoft can have a major role in
ICEIS2014-16thInternationalConferenceonEnterpriseInformationSystems
6
the ERP development when a packaged ERP is
adopted. The network also includes supply chain
partners, suppliers of supporting software
(databases, operating systems and tools), as well as
vendors of existing systems that are integrated with
the ERP system. Multiple levels from the key
organizations are involved, including the upper
management, business process owners, mid-level
managers, the IT-department, business
representatives and end-users. Furthermore, the
network is dynamic, which means that it constantly
changes its shape during the ERP development. In
this regard, we define the ERP Development
Network (EDN) as a dynamic group of stakeholders
from different levels of all the involved organizations
that are needed for ERP-related problem solving
during the ERP system development.
3 RESEARCH APPROACH
Qualitative research methods are essential also in
information systems development (ISD) and
software development, because of the central role of
human behaviour in them and due to the fact that
they introduce, besides technological challenges,
also numerous organizational and management
issues (Seaman, 1999). Grounded Theory (GT),
originally developed by Glaser and Straus in 1967,
was chosen as the research method for this study due
the fact that ERP projects are complex and they
include cooperation and collaboration of various
stakeholders. As an inductive research method that
is based on rich real-world research data, GT is
suitable for approaching complex organizational
phenomena (Charmaz, 2006). ERP development is a
socio-technical endeavour making the role of
network of stakeholders and human interactions
evident (Albuquerque and Simon, 2007).
Respectively, ERP system integration is not purely a
technological challenge but includes also
collaboration and knowledge sharing among various
stakeholders (Welker et al., 2008).
Our specific focus on the integration challenges
in ERP development networks required in-depth
knowledge of different stakeholders involved in the
ERP project. Therefore, we needed to approach the
subject with an iterative inquiry into the EDN and
with investigation of the challenges presented from
different viewpoints. Without having a predefined
theoretical model in mind, we investigated the EDN
from the viewpoint of one stakeholder to another,
iteratively collecting and analysing the data, which
GT supported well. This far GT has not been widely
utilised to investigate the integration in ERP
projects. However, we deemed it especially suitable
when investigating broad phenomena, such as ERP
system integration, in depth.
GT is a qualitative research method that allows
to develop theory iteratively based on data that is
systematically collected and analysed (Strauss and
Corbin, 2008). Data is usually collected by
interviewing or observing one or several cases, but
other sources of evidence like written documentation
or other archive material can be used as well
(Urquhart et al., 2010). GT is considered to be useful
for creating context-based and process-oriented
descriptions of organizational phenomena and it
provides, in its Strauss and Corbin version, relatively
clear guidelines for the data analysis (Corbin and
Strauss, 1990). The main benefit of GT is that it
allows a researcher to trace back to the original
sources of data in order to observe how the theory
has been developed and how different instances of
data have emerged into concepts and relationships
between them (Strauss and Corbin, 2008).
The data analysis in Strauss and Corbin’s version
of GT consists of three coding procedures: open,
axial, and selective coding. In open coding, the
transcribed data is first labelled with codes that
capture the meaning of the current piece of data. The
most important procedure in open coding is constant
comparison between the pieces of data in order to
find similarities and differences. In axial coding, the
connections between categories are formed.
Basically, this is the interpretation of codes,
categories, and properties developed in open coding
with the goal of refining the constructs and making
them more abstract and theoretical (Urquhart et al.,
2010). In selective coding, the goal is to choose a
core category and interpret its relationships to other
categories and explain it as a theory.
As data is collected and analysed iteratively, the
main question is when to stop the process. As a
theory emerges, more focus can be needed on some
particular aspects of it. At the same time, categories,
dimensions, and properties become more refined as
more data collected. The situation when a researcher
finds out that any new set of data will not bring
significant new codes, categories and/or
relationships is called theoretical saturation (Strauss
and Corbin, 2008).
3.1 Case Description
The adopting organization (from now on referred as
AO) is a large and global manufacturing enterprise
with an annual turnover over 8 billion euros. AO
WhatAretheFactorsAffectingERPSystemIntegration?-ObservationsfromaLargeManufacturingEnterprise
7
decided to build a fully-customized ERP system for
sales and logistics in order to replace several legacy
systems and also to overcome the year 2000 problem
without having to make the necessary updates to all
the existing systems. The implementation started in
the middle of 1990s and during that time, the
existing ERP packages did not have the desired
functionality to support business processes of the
domain and control the complex supply chain in
AO’s specific business field. The ERP project went
through major challenges, including redesigning the
insufficient system architecture and a merger of
companies. Eventually, the project greatly exceeded
the intended budged. However, the system is
currently in a global use and it was widely
considered as successful in the interviews. It is still
under a constant development in 2014. The supplier
of the system has remained the same from the
beginning and has a long-term relationship with AO.
Major parts of the development have been recently
outsourced to Asia by the supplier to reduce
development costs. Benchmarking against ERP
products in the market is constantly being done, but
for the time being, AO has decided to keep the
system to handle its core business processes.
ERP system integration has been a challenging
endeavour during the early phases of the project,
requiring a vast amount of resources, expertise and
strict processes, and also being the major
consideration of the current development. The ERP
system is integrated with a packaged ERP system
from SAP that is used for administrative processes
such as financial controlling and human resources.
Moreover, according to AO’s global ERP strategy
the system is taken into use in any new facility in
order to achieve synergy benefits. This requires
integrating the system with operative systems in
facilities. In order to let customers and partners to
access the relevant information, a web interface to
the system has been built. Creating an infrastructure
to support mobile use to access the system with
mobile devices has also been under consideration.
Integration with supply chain partners and their
systems, including systems of warehouse and
transportation operators as well as customs systems
has also been made. To ease the supply chain
collaboration, e-business standardization with
competitors and business partners within the same
domain has been considered.
When interviewees were asked about their
thoughts how the challenging project was managed
to be completed, it was pointed out that the timing
was right, there were not much economic pressure
that kept the faith of upper management for the
project. However, the interviewees estimated that if
a similar project would have been carried out few
years later, it had never been completed.
3.2 Data Collection and Analysis
The data was collected by theme-based interviews
that were conducted during February and May 2013.
Instead of determining a large number of fixed
questions addressing specific areas of interest, the
questions for the interviews were open-ended,
focusing on the interviewee’s experiences in the
ERP project. The more detailed questions were
asked based on responses of interviewees. For
example, major challenges and successes
experienced in ERP development were asked. This
way, we were able to get a rich set of data for further
investigation.
The data collection started with discussions with
our key contact person from the upper management
in AO. The goals of the research project were briefly
presented to him in order to identify the right
persons to interview. In general, the snowballing
technique (Strauss and Corbin, 2008) in which the
next interviewee is a referral from the previous one
was used for selecting the interviewees. Rather than
interviewing random persons, we navigated through
the ERP development network from one interviewee
to another in order to get different viewpoints to the
same issues.
In total we interviewed 17 industrial experts
representing different roles in the EDN. The
interviewees had different positions, ranging from
Table 1: Roles and organizations of the interviewees.
Role Organization
AO1 Business-IT negotiator Adopting organization
AO2 IT manager of business area Adopting organization
AO3 Programme manager Adopting organization
AO4 Enterprise architect Adopting organization
AO5 Representative of sales Adopting organization
AO6 IT support manager Adopting organization
AO7 Representative of logistics Adopting organization
AO8 Project manager Adopting organization
S1 Software manager Supplier
S2 Service owner Supplier
S3 Continuous service manager Supplier
S4 Infrastructure manager Supplier
S5 Project manager Supplier
S6 Lean software developer Supplier
S7 Service manager Supplier
C1 Middleware manager Consulting company
C2 Technical consultant Consulting company
ICEIS2014-16thInternationalConferenceonEnterpriseInformationSystems
8
upper management to mid-level management and
developers, and included people from AO, the
supplier of the ERP system and a consulting
company. Due to the long duration of the ERP
system development, the roles and responsibilities of
the interviewees have been constantly changing.
Some of the interviewees have been intensively
involved during the early implementation of the
system whereas others are currently working with
the system.
The duration of interviews ranged from 26 to 73
minutes, the average being 45 minutes. The list of
interviewees’ roles and their organizations are listed
in Table 1.
3.2.1 Open Coding
After conducting the interviews, they were
transcribed to text format and analysed by using
ATLAS.ti as the coding tool. The first step in GT is
to open code the data by conceptually labelling the
data based on its interpreted meaning. Customer-
supplier relationship, packaged ERP suitability and
evaluating the system architecture are examples of
open codes. The total number of different codes
created was 192. We classified the open codes into
categories. A category gives the context for the code
and provides the data with more concrete meaning.
For example evolution if appearing without the
category, is ambiguous but providing the code with a
category ERP development network will clarify the
meaning. The code ERP development network:
evolution associates the evolution to the EDN. This
means that when identifying the name of the code,
the context for the corresponding piece of data is
also identified. The total of 10 categories were
created in open coding. These categories and their
relations are further described in the next section.
3.2.2 Axial Coding
In axial coding, the relationships between categories
are identified and new categories may be formed
based on them. Open and axial coding are not
necessarily sequential steps in the analysis process,
but are often done concurrently.
The category ERP development network (EDN)
includes all the organizations related to ERP system
development, including Adopting organization (the
company that takes the ERP system into use),
Supplier (takes care of the actual implementation of
the system) and Consultants (external experts
involved in development). Besides these three
groups of organizations, the EDN consists of supply
chain partners, database and infrastructure vendors
among other organizations. In addition,
relationships, conflicts, cooperation, cultural issues
and knowledge transfer were put into this category.
AO operates in Domain, which determines the
business processes to be automated by the ERP
system. External changes and incidents such as the
year 2000 problem or the economic crisis can take
place on the domain. ERP system development
includes all the activities of development, including
specifying the system, testing, change management
and roll-out. Integration contains all the activities
related to integration, for example, providing
interfaces, master data management, integration
with internal systems and integration with the supply
chain. Integration is realized during the ERP system
development. ERP system is the ultimate artifact that
results from the development process. It has a
certain scope and architecture and it evolves through
technological changes. Additional categories were
created for Challenges and Success factors and
codes of these categories can relate to any of the
aforementioned categories.
We interpreted that there were indications of
theoretical saturation in the analysis of last
interviews. The data did not produce new codes and
already observed phenomena and patterns repeated.
Supplier:
Involvement
Expertise
...
Adoptingorganizatio n:
Enterprise
architecture
Costcutting
Structuralchange
...
ERPdevelopment
net work:
Customer‐supplier
relationship
Evolution
Actor–SCpartner
Actor–
Stan dardi zation
organizatio ns
...
Integration:
Internalsystems
Customerinterfaces
Supplychain
Mobileaccess
...
Consult ants:
Involvement
Expertise
...
ERPsys tem :
Scope
Flexibility
Unclear
boundaries
...
Domain:
PackagedERP
suitability
Businessproc esses
Economicsituation
...
ERPsys tem development:
Deployment/rollout
Road‐mapping
Developingpractices
andprocesses
...
Figure 1: Categories with some of their codes after
selective coding.
3.2.3 Selective Coding
Finally, in selective coding, the core category is
selected and the whole data is then looked from the
perspective of this category. Other categories
support the core category in explaining the emerging
theory. We chose Integration as the core category,
because it emerged from the data as an important
matter, having been a major challenge during the
project phase of the ERP system development as
well as being one of the current challenges. Figure 1
WhatAretheFactorsAffectingERPSystemIntegration?-ObservationsfromaLargeManufacturingEnterprise
9
shows the main category and related categories (two
of the categories, Challenges and Success factors
have been excluded from this figure) and some of
the codes of these categories.
From the categories, four classes of factors that
affect ERP system integration were identified. These
levels are Organizational landscape (renaming the
category Adopting organization), EDN partners
(combining categories EDN, Supplier and
Consultants), ERP system and Domain (using the
categories with the same same). The individual
codes from these categories that were identified as
factors affecting ERP system integration are
presented in the next section.
4 FACTORS AFFECTING ERP
SYSTEM INTEGRATION
4.1 Organizational Landscape
The EDN forms around AO, which adopts the ERP
system. Organizational landscape, consisting of
Enterprise architecture (EA), ERP strategy,
Supporting practices and Integrative systems’
characteristics form the base for ERP system
integration. Structural change and Political agendas
can introduce additional integration challenges. The
following chapters describe these factors in more
detail.
Enterprise Architecture: Because of the global
organization and demanding supply chain, the EA of
AO is rather complex. By having a single and
integrated system used by different business units
with different needs, specifying new functionality
for the system is challenging. In order to manage the
EA, as new features are introduced into the ERP
system, an internal architecture check is done first to
see if there is a duplicate feature in the IT
architecture and if the new functionality could be
achieved through integration.
ERP Strategy: AO has a global ERP strategy, in
which they aim to reach synergy benefits by
implementing the system globally in every new
facility. AO is constantly road-mapping the ERP
system to develop the strategy. A representative of
AO commented the challenges of road-mapping:
”You never reach the ideal world, you end up in
having lots of stuff [different systems] here and
there, maybe all the possible ERP vendors in some
way. Then you have this company-level roadmap
and it constantly evolves.” –AO1
It was also pointed out that the current ERP
strategy needs often to be explained to new
managers:
“Our manager has changed a couple times over
the past years, and every time at the three-month
mark the new manager wonders why we have two
ERPs instead of one.” –AO5
Furthermore, it appeared that the ERP strategy
has been changing, which has caused a need for
additional integrations:
“The scope has changed somewhat, as far as
logistics goes we've moved away from the system
and we've replaced it with external ERP systems,
and integrated those with the system.” –AO3
Supporting Practices: Developed through trial
and error, AO has created well-established practices
and processes to support ERP development. These
practices appeared to have a significant role in roll-
outs, when integrating the ERP system with facility
systems:
”I think that ERP and its network are not just the
system, but also the supporting processes and
service processes that we have been building.” –
AO6
“Auditors haven't produced any findings for
years regarding our process control. […] We've
been told by our auditor that they have never seen
processes controlled this well anywhere.” –AO5
Deployments of the system to facilities have
been challenging projects that have required active
participation of different members of EDN,
including the supplier, managers, facility managers,
end-users and business representatives. Moreover,
decent practices and processes for integration have
been necessary. The first roll-out did not succeed
because of serious performance issues due to the
lack of systematic testing practices and because the
initial testing environment did not match the real
environment. Integration testing was seen as one
area where strict processes are necessary:
“Then we arranged a pretty massive testing. We
tested with the facilities’ real business cases that
[the system] works the way it’s supposed to and is
compatible with the system of the facility and other
integrated systems, because [the system] had to be
integrated with each facility system.“ –AO2
“And the more successful the testing sessions are
between the facility system and the ERP, the better
everything will start off. In that sense the testing of
the facility integration is absolutely the key”–AO5
Integrative Systems’ Characteristics: Because
the system replaced several existing legacy systems,
the parallel run of the ERP system and a legacy
system could take from several months to one year
of time. Because of the heterogeneity of the facility
ICEIS2014-16thInternationalConferenceonEnterpriseInformationSystems
10
systems, the system integration approach is different
in each location due to varying functionality of the
facility system in question. Different templates for
roll-outs have been made to deploy the system. The
interviewees commented on the deployments:
“It was a big thing to first integrate it to each
facility system, and in [the system’s] case we even
had to modify it a little bit in each facility because of
their differences, and then all that testing and
launching and such, it required a lot of work.” –
AO2
“In many cases it will require big changes to
[the system], depending on the facility. Some
facilities don't require many changes […] The ease
of the roll-out may vary greatly between facilities.”
–S2
“We have big differences between facilities,
depending on how well the integration was carried
out, and how well the interface is managed.” –AO5
Structural Change: The organizational structure
of AO appeared to be constantly changing during the
development of the ERP system. A big merger of
two companies took place when the system was not
yet taken into use. The merger did not only
introduce competing systems but also changed the
power structures inside AO:
”But then came the merger into the picture and
then started the fight whose systems to be utilized in
where. And unfortunately, the upper management
gave too much freedom for the units to determine,
which systems to use. This caused at least one year
of uncertainty of how to move forward.” –AO7
Political Agendas: Because of the structural
changes in AO, different functional areas became
under a changed leadership. This led to decisions to
take some of the functionality away from the ERP
system to be implemented in other systems, which
required additional integrations with the ERP
system. As a result, the original scope of the system
changed. This was mentioned as one of the major
challenges in the current state of the system and it
has also increased the costs:
“So the strategy has been changed allowing
units to have more decision power on which
direction to take […] I would have maybe... thought
harder on detaching our logistics systems from it.
Because one of the strengths of the ERP system was
that it was so comprehensive, everything was
included. All the logistical functions could be done
within it. So to then go and detach them from the
system.” –AO3
“They [logistics] started making separate
islands, they wanted to “freeze” the system to a
certain point and started to include all kinds of
additional systems there. It has been ongoing for ten
years now and we have ended up to serious
problems and the costs have increased in that area.
[Consultants] have evaluated the systems and made
this great finding that it’s a spaghetti and a new
transportation management system needs to be built
there…” –AO1
One interviewee also criticized the replacing the
functionality of the ERP system with additional
integrations:
“Now and then you underestimate things like the
demands of system integration. […] The relevant
data produced by logistics systems should also be
imported to the ERP system. That is the area where
we probably have the biggest gaps at the moment.
We do not have sufficient transparency in the sales
and supply chain system, this being the ERP system,
with regard to logistical processes.” –AO5
4.2 EDN Partners
ERP development is a cooperative effort of the EDN
in which AO forms relationships with other
members of the EDN. These relationships appear to
change during the ERP development. For example,
AO ended up in a conflict with a database vendor,
which eventually led to the change of the provider of
ERP database. Customer-supplier relationship,
Supplier’s expertise, Software vendors, Consultants’
involvement, Supply chain (SC) partners and
Standardization partners appeared to have an impact
on ERP system integration.
Customer-supplier Relationship: AO has had a
long-term relationship with the supplier of the
system. Both AO and the supplier had a positive
viewpoint on their relationship:
“I have to give credit to the supplier as well, they
had worked with us before. And they knew our
business. They understood our needs, and they knew
how to look for the right solutions.” –AO3
“We've had the benefit of very skilled
representatives from the supplier side, with a long
history with [the system] and system integration.
This is worth its weight in gold, and more.” –AO5
“I think [the relationship] is some kind of a
partnership. We are in a close cooperation daily, we
are making things together. It is not a traditional
customer-supplier…” –S6
However, it was pointed out that neither of the
partners has always been satisfied with this
relationship. AO has even considered of buying the
source code of the system from the supplier, but
according to interviewee “it did not turn out to be a
realistic option”. One interviewee comments the
WhatAretheFactorsAffectingERPSystemIntegration?-ObservationsfromaLargeManufacturingEnterprise
11
relationship:
“We have understood for a long time that we are
in a kind of a forced marriage” –A05
The customer-supplier relationship appeared to
have a major importance in ERP system integration.
Deploying the system to new facilities has been
carried out by close cooperation between AO and
supplier. However, it seems that AO is locked to the
supplier, because it may not be possible to replace
the well-established cooperation and knowledge
base built during many years of collaboration.
Supplier’s Expertise: It turned out that the
supplier has had the key role in ERP system
integration. Because of the long-term relationship,
the supplier has built many of the current systems
used facilities and has the required knowledge on
these systems when integrating systems.
Furthermore, the supplier’s knowledge on AO’s
business has proven to be a major facilitator in
cooperation.
Software Vendors: It appeared that database
vendors affected the decisions on integration
technologies in the early phases of the ERP project.
The supplier was relying on the solution of a large
database vendor as the main technology for the ERP
system. AO was also relying on the supplier’s
expertise in this matter and the project ended up in
difficulties because of a non-scalable system
architecture. Consultants from a small middleware
company were not able to convince AO to choose
their technology until later when the architectural
problems occurred.
Consultants’ Involvement: Consultants were
involved in the beginning of the system
implementation to redesign the system architecture
by replacing the original 2-tier architecture with a
middleware solution based on transaction processing
monitors. This made the system architecture more
scalable for a broader user base and enabled the
integration of business functions. Consultants’
relationship with the supplier appeared to be crucial
when redesigning the system architecture:
“Practically, they [the supplier] didn’t have a
clue of how to make it work, and when we looked at
it, it seemed that the way of implementing the system
and the use of object model was completely wrong.”
–C2
A middleware consultant also mentioned that the
cooperation with the supplier was challenging in the
beginning, but after the initial challenges, an
improved system architecture was realized.
Supply Chain (SC) Partners: Due to a need to
collaborate with the supply chain, SC partners have
been introducing external systems to be integrated
with the ERP system. It was pointed out that a
sudden need to integrate a system can occur:
”And later came – it was not originally specified
as a requirement of the system – this transportation
cost management system came there.” –AO7
Connecting the system with SC partners’ systems
was occasionally seen challenging:
“ERP has connections to various logistics
providers, since the system also handles logistical
functions. So third party companies are involved,
freight forwarders, harbor operators, warehousing
and such. But they are not giving us any sort of
definitions, the system simply has connections to
these third parties. This has sometimes been
challenging.” –S2
Standardization Partners: AO has participated
in e-business standardization efforts within the
domain in order to develop standardization with
other companies. Standardization partners appear to
be another EDN group that has an impact on ERP
system integration: – AO develops standards in
cooperation with these partners to ease the business
integration in SC.
4.3 ERP System Characteristics
At the system level, the Amount of customization
and System architecture were identified as important
factors affecting ERP system integration.
Amount of Customization: The interviewees
commented the benefits of the customized system by
highlighting the control of development, being free
of licensing costs and the advanced functionality
provided through customization:
“[The system] is a tailored system for us and the
input for development comes 100% from us” –AO4
“With SAP or another such solution, there's
always other parties driving development, you don't
have to come up with everything you need, ideas
from other sources get productized as well. That's
something we're completely missing.” –AO5
“They couldn’t have had a better system what
they got when they made a glove to a hand […] I
have never seen such advanced functionality
anywhere, you can just drag a shipping container
and drop it to a ship” –S4
However, development of an extremely
customized system introduced some of the specific
challenges, such as the performance issues due to
non-scalable system architecture. Moreover, the
benefits of a customized ERP do not come for
granted. The development is expensive and there are
no other parties driving the development as it is the
case with packaged ERP systems:
ICEIS2014-16thInternationalConferenceonEnterpriseInformationSystems
12
“We have a big burden in driving development.
We need to come up with everything that we want in
the system. There is no baseline of a ready-made
package.”–AO5
In the interviews, the discussion often ended up
comparing the amount of customization and
business process change in ERP development. The
interviewees generally saw that having a fully
customized system is not very common due the fact
that ERP systems are usually implemented with
packaged products, either by using a single vendor
strategy or a best-of-breed approach by combining
software packages from multiple vendors. By having
a customized ERP system, AO can have a total
control over the system and its integration
capabilities. AO is not affected, for example, by the
version updates made by the ERP flagship
organization, such as SAP. A middleware consultant
commented on updating a packaged ERP in another
organization:
“Based to all that how difficult it was to make
version updates in SAP, from the spectator’s
perspective I can only estimate that there is a hell of
a lot of home-made ABAP-code [in the system].” –
C2
Also, the supplier commented the situation, in
which additional layers for integration had to be
made whereas as in AO the integration logic could
be built directly to the system itself:
“We made for [the competitor] these integration
portions where they integrate existing ERP systems,
but because their functionality was not sufficient, we
made additional layers which had intelligence for
processing the supplied goods, it was processed into
a form that the ERP systems could handle it. At
[AO] we didn’t have to make these additional layers
because we could build the intelligence into the
actual resource planning system.” –S1
System Architecture: The system architecture
had to be flexible enough to allow the integration
with external systems. One interviewee saw that
integrating ERP with external systems has been
relatively painless:
“One benefit of the system is that is a has many
things that allows the external partners to operate in
it” –AO7
However, it also appeared that replacing certain
functionality in the system has not always been
straightforward, because of the architectural design
of the system.
“It would have been better to create the system
in such a way from the start that different aspects
had been more like separate modules. So that you
could have taken them and combined them more.” –
AO3
4.4 Domain
Domain was identified to have an indirect impact on
integration by defining the suitability of packaged
ERPs, defining the environment where AO operates,
including Business processes and Economic
situation.
Business Processes: During the time when AO
made the decisions about the system, business
process support of available ERP products in the
market was not comprehensive. This was seen as the
major driver that led to the decision to make a fully
customized ERP. The business processes were said
to be “challenging” and “difficult to change to fit
the packaged ERP”. The business processes affected
the amount of customization of the system which in
turn have been affecting ERP system integration.
Economic Situation: Economic situation was
pointed out to be another issue affecting ERP system
integration by constantly introducing changes to the
organizational structure of AO. These changes have
sometimes altered the business processes that the
ERP system must support and further caused
rearrangements to the system:
“[The system] has enabled many things that we
have been doing over the years to increase our
competitiveness and supported the organizational
changes. We have been able to rearrange the
services by fluently combining different machine
lines and production pipelines according to how we
want to arrange our business.” –AO6
Recently, AO has been constantly cutting the
development costs, which has postponed the
development of lower-priority features, such as the
mobile access to the system. A representative of the
supplier pointed out that “selling” new features, like
the mobile access to the system has been challenging
because of the cost cutting of AO.
4.5 Summary of Results
Figure 2 presents a model of factors affecting ERP
system integration. ERP system integration is a
collaborative effort of AO and EDN partners. ERP
strategy and enterprise architecture manage the ERP
system integration by determining when to integrate
the ERP system with other systems. Supporting
practices and involvement of all the relevant
stakeholders need to be present when integrating the
ERP system internally. Different integration
approaches must be created based on the
WhatAretheFactorsAffectingERPSystemIntegration?-ObservationsfromaLargeManufacturingEnterprise
13
characteristics of integrative systems. Additional
challenges can be caused by structural changes in
AO and political agendas of managers that may
introduce competitive systems to be integrated with.
Figure 2: Factors affecting ERP system integration.
Supplier is the most important EDN partner in
solving ERP system integration issues. Supplier’s
expertise and relationship to AO create a base for
successful ERP system integration. Other EDN
partners that can have impact on integration are
software vendors (that affect the decisions on
integration technologies), consultants (that can enter
the project to solve integration problems), supply
chain partners (that can suddenly introduce
additional systems to be integrated with) and
standardization partners (who are involved in
development of standards to facilitate the supply
chain collaboration).
ERP system characteristics at the system level,
including the amount of customization and system
architecture can either facilitate or hinder the
integration. It seems that by having a full control on
the system characteristics, modifying the system is
possible and integration can be less troublesome.
However, the system architecture may introduce
challenges when parts of the ERP system
functionality are replaced with other external
integrative systems.
Domain on which AO operates has indirect
impact on integration by determining the business
processes and economic situation of AO. It also
determines the standardization environment and
business environment including the business
partners to be collaborated with. The amount of
customization of the ERP system is determined by
the extent to which business processes of AO are
supported by the ERP products on the market.
5 DISCUSSION
Our findings contribute to the field of ERP and IS
integration by highlighting the socio-technical nature
of ERP system integration and especially the role of
different organizations affecting it. In our literature
review (Kähkönen and Smolander, 2013) we pointed
out that ERP system integration is often studied with
non-systematic research methods, and integration
between ERP and a specific target system is usually
considered by means of technical solutions. The role
of EDN is not often emphasized in the studies of
ERP system integration. We believe that considering
EDN becomes especially relevant when managing
the complex architecture consisting of ERP and
multitude of other systems and their integration.
Moreover, it has been suggested that methods for
enterprise systems integration have not been aligned
with the advances on integration technologies (Xu,
2011). A literature review on IS integration research
pointed out that we do not know much about
moderating factors on IS integration (Chowanetz et
al., 2012). Our study addresses this gap in this field.
Studies addressing affecting factors on ERP
implementation and studies on ERP success factors
are partly related to our findings. For instance, a
socio-technical model for ERP implementation has
been proposed (Somers et al., 2000). In this model,
ERP implementation process is affected by the
external environment and the organization itself.
This model does not discuss about EDN, which may
be explained by the early publication time of the
study. ERP success factors have been studied
comprehensively (e.g. Momoh et al., 2010; Ngai et
al., 2008). Even though critical success factors are
often organizational, they generally lack the EDN
perspective. Our findings suggest that EDN
relationships, such as customer-supplier and also
supplier-consultant relationship, have a key role
when solving integration issues during ERP
development. The relationship between the client
and the vendor has been identified as a success
factor in ERP implementation (Ngai et al., 2008).
Our study pointed out its relevance also to ERP
system integration.
Lam (2005) studied enterprise application
integration (EAI) success factors and concluded that
they are partly similar to general ERP success
factors – successful EAI needs to consider the
factors on the levels of business, organization,
technology and project. Chowanetz et al. (2012)
extended this list with environmental factors
surrounding the organization. Hoverer, neither of
these classifications is addressing the role of EDN.
Domain
Business
processes
Economic
situation
Systemcharacteristics
Amountofcustomization
Systemarchitecture
ERPdevelopmentnetwork
partners
Customer‐supplier
relationship
Supplier’sexpertise
Softwarevendors
Consultants’involvement
Supplychainpartners
Standardizationpartners
Organizationallandscape
ERPstrategy
Enterprisearchitecture
Supportingpractices
Integrativesystems’
characteristics
Structuralchange
Politicalagendas
ERPsystem
integration
ICEIS2014-16thInternationalConferenceonEnterpriseInformationSystems
14
Besides the role of supplier, our evidence suggests
the important roles of consultants and business
partners in ERP system integration.
As the integration requirements of ERPs have
increased and ERP has been extended towards SCM,
the relationship between ERP and e-business have
been increasingly studied. Thus, factors affecting e-
business adoption can be partly related to our
findings. For instance, there is quantitative evidence
on organizational factors, such as company’s scope
and skills affecting e-business adoption from the
adopting organization point-of-view (Nurmilaakso,
2008). Smolander and Rossi (2008) observed that
political and organizational forces affect the
development process of cross-organizational e-
business initiatives. Xue et al. (2005) and Chen
(2003) discuss the affecting factors on e-business
standardization and identified stakeholders, such as
IT product vendors and systems integrators, and also
organizational factors, including company size,
industry type and IT-infrastructure as factors
affecting the adoption of e-business standards. Our
study highlighted the relationship between ERP and
e-business and is aligned with these findings, but we
see standardization as one (but just one!) important
part of ERP system integration.
5.1 Future Research
By identifying the factors affecting ERP system
integration, our study creates a baseline for future
research on strategies and approaches to effectively
solve the integration issues in different EDNs.
Because they are not widely studied, EDNs need to
be investigated further, especially from the
integration point-of-view. A comparison between
the EDNs of packaged and customized ERPs and
their integration strategies could be an interesting
topic to study further. The EDN of a company
utilizing a packaged ERP is most likely very
different due to a number of external consultants and
the presence of a flagship ERP company, such as
SAP. Moreover, it would be interesting to
investigate how the amount of customization affects
integration. Quantitative studies are also needed to
investigate the factors affecting ERP system
integration in a larger scope.
5.2 Limitations of the Study
This study has some limitations. As in all qualitative
studies, the findings of this study cannot be easily
generalized. The findings are related only to the
specific case and all generalizations are theoretical
(Lee and Baskerville, 2003), i.e. they generalize
specific observations to theoretical concepts. With
these concepts we can explain the events in the
studied organization and we also strongly believe
that these affecting factors on ERP system
integration are similar in other contexts as well.
Understanding the factors can help managers to pay
more attention to integration and interoperability of
ERP systems and evaluate the flexibility of ERP
packages and to further develop approaches to solve
integration issues in ERP projects.
6 CONCLUSIONS
We have proposed an empirically grounded model
of factors that had an effect on ERP system
integration in a large manufacturing enterprise. We
found four classes of factors affecting ERP system
integration: Domain, Organizational landscape,
ERP development network partners, and ERP system
characteristics.
The Domain has an indirect impact on
integration through economic situation and business
processes by affecting all the other classes of factors.
In the Organizational landscape, ERP strategy and
enterprise architecture have a role in managing the
integration of the ERP system with other systems.
Structural changes can introduce political agendas
within the organization by making the ERP system
integration more challenging. ERP system
characteristics can determine the ease of technical
integration. With a fully customized ERP system,
the company has a total control over the interfaces of
the system, which seems to make the integration less
painful, bypassing some general integration
challenges of packaged ERPs.
What has not been discussed earlier in detail is
that ERP system integration is affected by many
stakeholders including software vendors and
suppliers, consultants, supply chain partners and
standardization organizations – ERP development
network partners. We found that the relationships in
the ERP development network can be tightly
coupled and this can have a significant effect on
ERP system integration. In order to be realized, ERP
system integration demands cooperative practices. A
long term customer-supplier relationship and
supplier’s expertise as well as collaboration between
supplier and consultants turned out to be key
enablers of integration.
The developed model of factors affecting ERP
system integration reflects the nature of ERP
development as socio-technical endeavour. The
WhatAretheFactorsAffectingERPSystemIntegration?-ObservationsfromaLargeManufacturingEnterprise
15
current literature often ignores the role of the EDN
by focusing on the adopting organization only. This
study established a base for further research on ERP
system integration to investigate strategies and
approaches to effectively solve the integration issues
in different EDNs.
ACKNOWLEDGEMENTS
This study was funded by Academy of Finland grant
#259454.
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