1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
2. Requesting Chairs:
A. Information Systems Group, Department of Electrical Engineering, Mathematics and Computer Science, UT
B. Business Information Systems, Department of Business, Management and Technology, UT
Prof. dr. Roel J. Wieringa Prof. dr. Jos van Hillegersberg
Department Head, Information Systems Group Department Head, Business Information Systems
Department of Electrical Engineering, Department of Business, Management and
Mathematics and Computer Science Technology
University of Twente University of Twente
P.O. Box 217 P.O. Box 217
7500 AE Enschede, The Netherlands 7500 AE Enschede, The Netherlands
Phone: +53 489 4189 Phone: (31) (0) 53 489 3513
E-Mail: firstname.lastname@example.org Fax: +31 (0) 53 489 2159
3 Type of proposal
This is a project proposal for one AiO with the objective to create synergy between the chairs of Information
Systems (EWI) and Business Information Systems (BBT).
4. Summary of the Project Proposal
4.1 Problem statement and expected results
Current application of Enterprise Resource Planning (ERP) technology mostly takes place in a
networked context, where business actors that are profit-and-loss responsible cooperate by using ERP
software. The success of networked ERP implementations depends on adequate cost estimation.
Traditional software cost estimation methods do not yield accurate results in this context because they
rely on a predefined set of factors that only partially describe this context, and they let each of the
network partners incorporate their own biases and intuition into the estimate.
In COSMOS, we will investigate, compare, and integrate functionality-driven approaches and real-
options-theory based approaches to the problem of estimating cost for networked ERP
implementations. Our approach includes three parts that build upon work in the field of ERP already
performed by the applicants. The project will develop:
• a multidimensional size and effort estimation approach for networked ERP implementation
• a RE approach to networked ERP projects that incorporates an ongoing cost estimation and
risk assessment, and
• a success model that will help network partners visualize and reason about what will
distinguish a successful networked ERP project from a failed one.
The project will be done by means of case study research. The results should strengthen the profile
of the CTIT in the field of enterprise information systems. The project aims at creating synergy
between the chairs of Information Systems (EWI) and Business Information Systems (BBT).
4.2 Research Method
We decompose the cost estimation problem into two sub-problems, namely what factors make up the
effort estimation for networked ERP implementations and how to model the relationship among these
factors. In detail, the research questions we will answer are:
1. What are the essential cost drivers to be considered for inclusion in cost estimation models
for a set of ERP projects simultaneously run in networked settings?
2. What represents a good functionality-based size measure for cross- organizational ERP
3. How to assess the goodness-of-fit of cost models in real life cross-organizational settings?
4. How to incorporate estimation activities into the RE process for networked ERP?
The proposed project aims at delivering:
(i) a multidimensional size and effort estimation framework for cost estimation of networked
ERP implementation projects,
(ii) a RE approach to networked ERP projects that incorporates cost estimation and risk
assessment activities, and
(iii) a success model that will help network partners visualize and reason about what will
distinguish a successful networked ERP project from a failed one.
This will be achieved by employing well-founded and established – but insufficiently deployed in
industry – functionality-driven and real-options-theory-based models and methods in order to
improve the practice of early effort estimation of ERP projects in networked settings. Specifically, we
will (i) use Function-Point-Analysis [GAR01] for sizing the functionality of networked ERP systems
as its worth was proven in previous ERP studies, (ii) use Amram’s real-options theory [AMR00]
because previously published experiences found it suitable for cross-organizational ERP settings
[DAV00, TAU00], (iii) integrate a variety of existing effort estimation models [STE01], because they
offer the vehicles to understand the individual aspects of the multidimensional ERP estimation
problem, and (iv) follow a case study approach because there is not much theory in the field, and
what theory there is, is mostly qualitative; and also because so many variables impinge on cost
estimation that it cannot be replicated in a laboratory.
The project is structured into the following activities
• A1: Assess current cost estimation practices. This is to answer research questions 1 and 4;
it implies analyzing experiences and aims at increasing our state-of-the art understanding of
both the key cost drivers and the good practices in resolving estimation problems as part of
the networked ERP RE process.
• A2: Re-define cost estimation practices. This answers research question 2 and is also
needed as a prerequisite for questions 3. It aims at leveraging existing cost modeling and
estimation processes and integrating them to achieve a valid estimation framework for
simultaneous cross-organizational ERP projects.
• A3: Validate the cost estimation framework. This is to answer research question 3. It aims
at (i) evaluating the goodness of fit of the proposed approach and (ii) explaining why results
from individual assessment studies may differ.
• A4: Define a cost-and-risk-driven RE process for networked ERP. This is to answer
research question 4. It aims at identifying ways of how cost estimation and risk assessment
can be best incorporated into the early stage of networked ERP implementation projects.
4.3 Relevance of this Research for CTIT
ERP implementation is one of the core disciplines in the field of enterprise information systems. The
problem of networked ERP implementation so far has received scant attention from research, even
though there are many research challenges to be met, that could lead to huge improvements in
practice. Cost estimation is the key issue in this improvement [DAV00, STE01] and is also
recognized as a key factor in networked architecture decision making [KAZ02]. That there is a link
between architecture and project cost analysis worth investigating is now evident from the increasing
number of authors addressing this topic [KAZ02]. A closer look into this link, as defined by these
authors, reveals the following: first, conceptual architecture components, like process models and
entity-relationship data models, represent descriptions of the functionality that should be embedded in
an enterprise system under development. As the architecture gives us an early understanding of the
functionality at the requirements stage of the project, we are able to come up with size numbers, for
example, based on the Function Point Analysis technique [JON97]. Size data is then used to estimate
the effort that it would take to build and deliver this functionality to business users. Second,
knowledge of the costs involved in enterprise system implementation projects has its impacts on our
architecture choices: project costs often impose constraints ERP adopters have to consider when
revising architecture components. Early availability of cost estimation data helps us (i) make cost-
conscious and well-informed architecture decisions, and (ii) focus the team's efforts on those
architecture assets that are implementable at decent cost and that seem to bring the greatest returns
For networked ERP implementation projects, there is a shortage of both relevant metrics and
historical project datasets, coupled with an absence of proper methodologies to evaluate size, effort,
productivity and other cost factors. Even established approaches such as the COCOMO family of
models [BOE00] are not suitable to cross-organizational projects [STE01]. Literature does report on a
few approaches that partially resolved the cost estimation problem in specific intra-organizational
cases [STE01, BOH00, DAN00]. However, in all these case studies, cost estimation issues are tackled
in a fragmented way and, thus, have no or little linkage to ERP RE [DAN05b].
Our project proposal fills this gap. It is intended to create synergy between the chairs of Information
Systems (EWI) and Business Information Systems (BBT), made possible through the start of Prof. dr.
van Hillergersberg at BBT. We intend to create a critical mass of knowledge in the area of
implementing networked business applications. This should create increased visibility of the CTIT in
this area. Due to the multidisciplinary nature of the research, funding organizations currently do not
have funding programs aimed at enterprise information systems. The results of the COSMOS projects
should lead to improvements in the practice of networked business applications as well as start a new
research program in this area. The newly acquired expertise will be used as a foundation for building
a network for excellence in RE for networked systems development projects.
4.4. Local Embedding
The research will be performed in tied collaboration at the chairs of Information Systems (EWI) and
Business Information Systems (BBT). It builds up on previous results published by members of the
chairs [EVE00, DAN05a, DAN05b]. The applicant, Daneva, is a member of the VITAL project
managed by the Information Systems group (http://www.vital-project.org/), in which techniques to
design networked business systems are developed and investigated, taking the value offered by those
systems, and the costs incurred, into account. The proposed research will be part of the GRAAL
(Guidelines Regarding Architecture Alignment) research program of the group
(http://is.cs.utwente.nl/GRAAL). It is also related to the RE research done in the group [DAN05a,
DAN05b]. The proposed project continues the RE line but refocuses on ongoing cost and risk
analysis as part of the cross-organizational ERP RE.
4.5 Related Work
Software economics schools of thought [BOE00, JON97] have been developing models of size/cost
relationships since 1965, but none of the suggested models has been applied in networked ERP
settings. Notwithstanding the importance of early ERP cost estimation, the existing literature sources
have added up too little to link cost estimation and risk assessment to RE as well.
We position our cost estimation approach as a framework that extends and integrates existing
methods, processes and models. This extension is fourfold: (i) we focus on networked businesses, (ii)
we defined size and effort as multidimensional measures, (iii) we focus on success and failure
phenomena in networked ERP systems, and (iv) we aim at a strong and explicit linkage between cost
estimation and networked ERP RE processes.
[AMR00] Amram M., N. Kulatilaka, Real Options: Managing Strategic Investment in an Uncertain World, Harvard
Business School Press, Boston, 2000.
[BOE00] Boehm, B., C. Abts, S. Chulani, Software Development Cost Estimation Approaches – a Survey, Annals of
Software Engineering, 10, 2000, pp 177-205.
[DAN05a] Daneva, M., R.J. Wieringa, Requirements Engineering for Cross-organizational ERP Implementation:
Undocumented Assumptions and Potential Mismatches, 13th IEEE Requirements Engineering Conference (RE’05), Paris,
[DAN05b] Daneva, M., R.J. Wieringa, A Conceptual Framework for Research in Cross-organizational ERP Cost
Estimation, Workshop on Requirements Engineering and Project Management in Software Projects, in conjunction with
the 13th IEEE Requirements Engineering Conference (RE’05), Paris, 2005. Accepted.
[DAN00]M. Daneva: Practical Reuse Measurement in ERP Requirements Engineering, Proc. of the 12th Intl Conf. on
Advanced Information Systems Engineering (CaiSE’00), Stockholm, Sweden, June 5-9, 2000, LNCS, Springer Verlag,
[DAV00] Davenport, T., Mission Critical: Realizing the Promise of Enterprise Systems, HBS Press, 2000.
[EVE00] Everdingen Y. van, J. van Hillegersberg, E. Waarts: ERP Adoption by European Midsize Companies. Commun.
ACM 43(4) , 2000, pp.27-31
[GAR01] Garmus, D, D. Herron: Function Point Analysis: Measurement Practices for Successful Software Projects,
Addison Wesley, 2001
[JON97] Jones, C, Applied Software Measurement, McGraw-Hill, 1997.
[KAZ02] Kazman, R., J. Asundi, M. Klein, "Making Architecture Design Decisions: An Economic Approach", Technical
[STE01] Stensrud E., Alternative Approaches to Effort Prediction of ERP Projects. Information & Software Technology,
43(7), 2001, pp. 413-423.
[TAU00] Taudes A., M. Feurstein, A. Mild, Options Analysis of Software Platform Decisions : a Case Study, MIS
Quarterly, 24(2), 2000, pp. 227-243.
Dr. Maya Daneva
Information Systems Group
Department of Electrical Engineering, Mathematics and Computer Science
University of Twente
P.O. Box 217
7500 AE Enschede, The Netherlands
Phone: +53 489 2889, E-Mail: email@example.com
6. Related Publications by the Requester
1. M. Daneva, R.J. Wieringa, Requirements Engineering for Cross-organizational ERP Implementation: Undocumented
Assumptions and Potential Mismatches, 13th IEEE Requirements Engineering Conference (RE’05), Paris, 2005.
2. M. Daneva, R.J. Wieringa, A Conceptual Framework for Research in Cross-organizational ERP Cost Estimation,
Workshop on Requirements Engineering and Project Management in Software Projects, in conjunction with the 13th IEEE
Requirements Engineering Conference (RE’05), Paris, 2005. Accepted.
3. M. Daneva, Patterns of Success and Failure in ERP Requirements Engineering: an Empirical Study, Proc. of 14th Intl.
Workshop on Software Measurement (IWSM’04), Nov.2-5, 2004, Berlin, Germany, Shaker Verlag, pp. 527-546.
4. M. Daneva, ERP Requirements Engineering Practice: Lessons Learnt, IEEE Software, Vol. 21 (2), pp. 26-33.
5. M. Daneva, Lessons Learnt from Five Years of Experience in ERP Requirements Engineering, Proc. of the 11th Intl.
Conf. on Requirements Engineering (RE’03), 2003, Monterey Bay, CA, USA, IEEE Computer Society, pp. 45-54.
6. M. Daneva, Using Maturity Assessments to Understand the ERP Requirements Engineering Process, Proc. of the 10th
Anniversary IEEE Joint International Conference on Requirements Engineering (RE’02), Sept. 9-13 2002, Essen,
Germany, IEEE Computer Society, pp. 255-262.
7. M. Daneva: Practical Reuse Measurement in ERP Requirements Engineering, Proc. of the 12th Intl Conf. on Advanced
Information Systems Engineering (CaiSE’00), Stockholm, Sweden, June 5-9, 2000, LNCS, Springer Verlag, pp. 309-324.
9. M. Daneva: Establishing Reuse Measurement Practices in SAP Requirements Engineering, Proc. of the 4th Intl Conf. on
Requirements Engineering (ICRE'00), Schaumburg, IL, 2000, USA, IEEE Computer Society, pp. 168-177.
10.M. Daneva, Function Point Counts Derived from SAP Business Scenario Requirements, In: Software Measurement:
Current Trends in Research and Practice (Eds: R. Dumke, A. Abran), Gabler Verlag, Wiesbaden, 1999.