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1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)
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1 COSt estiMation of crOSs-organizational ERP systems (COSMOS)

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  • 1. 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 Contact Persons: 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: roelw@cs.utwente.nl 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 projects, • 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? 1
  • 2. 2. What represents a good functionality-based size measure for cross- organizational ERP projects? 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 2
  • 3. 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 [KAZ02]. 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. 4.6. References [AMR00] Amram M., N. Kulatilaka, Real Options: Managing Strategic Investment in an Uncertain World, Harvard Business School Press, Boston, 2000. 3
  • 4. [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, 2005. Accepted. [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, pp. 309-324. [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 Report CMU/SEI-2002-TR-035. [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. 5. Requester Dr. Maya Daneva PostDoc Researcher 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: m.daneva@utwente.nl 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. Accepted. 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. 4

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