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The critical success factors for ERP implementation: an organizational fit perspective Information & Management 40 (2002) ...
Contents <ul><li>Introduction </li></ul><ul><li>Theoretical Perspectives </li></ul><ul><li>Research model and hypotheses <...
1.  Introduction <ul><li>Information system (IS) strategies   </li></ul><ul><ul><li>Developing information system In-house...
<ul><li>Theoretical Perspectives  : Organizational fit of ERP (1/2) </li></ul><ul><li>In a review of the IS contingency re...
<ul><li>Theoretical Perspectives : ERP implementation contingencies (2/2) </li></ul><ul><li>Two alternative approaches to ...
<ul><li>Research model and hypotheses : ERP implementation success (1/4) </li></ul><ul><li>A critical challenge in ERP imp...
<ul><li>Research model and hypotheses : ERP adaptation (2/4) </li></ul><ul><li>ERP adaptation </li></ul><ul><ul><li>Increa...
<ul><li>Research model and hypotheses : Process adaptation (3/4) </li></ul><ul><li>Implementation of a packaged software  ...
<ul><li>Research model and hypotheses : Organizational resistance (4/4) </li></ul><ul><li>ERP implementation  </li></ul><u...
4.  Research method (1/5) <ul><li>Sample and data collection </li></ul><ul><ul><li>Interviewing (or surveying) a selected ...
4.  Research method (2/5) <ul><li>ERP implementation success </li></ul><ul><ul><li>Measuring in terms of the perceived dev...
4.  Research method (3/5) <ul><li>Reliability </li></ul><ul><ul><li>The internal consistency reliability was assessed by c...
4.  Research method (4/5) <ul><li>Construct validity   </li></ul><ul><ul><li>By relating a measuring instrument to a gener...
4.  Research method (5/5) <ul><li>The result of factor analysis (Table 3) </li></ul>
5.  Results (1/5) <ul><li>Correlations matrix between variables (Table 4) </li></ul><ul><ul><li>Correlations among the pro...
5.  Results (2/5) <ul><li>Testing the contingency relationships </li></ul><ul><ul><li>The typology of moderator variables ...
5.  Results (3/5) <ul><li>Testing the contingency relationships (Table 5) </li></ul><ul><ul><li>The test results of the mo...
5.  Results (4/5) <ul><li>Result </li></ul><ul><ul><li>ERP adaptation </li></ul></ul><ul><ul><ul><li>The interaction term ...
5.  Results (5/5) <ul><li>Result  </li></ul><ul><ul><li>Summaries of the moderated regression analysis (Table 6) </li></ul...
6.  Limitation and conclusions <ul><li>Limitation </li></ul><ul><ul><li>Focus on a limited number of variables for ERP imp...
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Transcript of "The critical success factors for ERP implementation: "

  1. 1. The critical success factors for ERP implementation: an organizational fit perspective Information & Management 40 (2002) 25-40 2005. 04. 28 Yunmi Lee
  2. 2. Contents <ul><li>Introduction </li></ul><ul><li>Theoretical Perspectives </li></ul><ul><li>Research model and hypotheses </li></ul><ul><li>Research method </li></ul><ul><li>Results </li></ul><ul><li>Limitation and conclusions </li></ul>
  3. 3. 1. Introduction <ul><li>Information system (IS) strategies </li></ul><ul><ul><li>Developing information system In-house </li></ul></ul><ul><ul><li>-> Purchasing applications software packages </li></ul></ul><ul><li>Two thirds of ERP project managers </li></ul><ul><ul><li>ERP systems as organizations' most strategic computing platform </li></ul></ul><ul><ul><li>But, three quarters of the ERP projects -> unsuccessful </li></ul></ul><ul><li>What makes ERP implementation so unsuccessful? </li></ul><ul><ul><li>The difference in interests </li></ul></ul><ul><ul><ul><li>Customer organizations who desire unique business solutions </li></ul></ul></ul><ul><ul><ul><li>ERP vendors who prefer a generic solution applicable to a broad market </li></ul></ul></ul><ul><li>In this paper </li></ul><ul><ul><li>Defined: The concept of organizational fit of ERP </li></ul></ul><ul><ul><li>Examined: Its impact on ERP implementation success empirically </li></ul></ul>
  4. 4. <ul><li>Theoretical Perspectives : Organizational fit of ERP (1/2) </li></ul><ul><li>In a review of the IS contingency research, over seventy percent of the studies followed a model </li></ul><ul><ul><li>The better the fit among the contingency variables, the better the performance </li></ul></ul><ul><li>ERP misfit </li></ul><ul><ul><li>The firm-, or country-specific requirements that do not match the capabilities of ERP </li></ul></ul><ul><ul><li>The conflicting interests of user organization and ERP vendors </li></ul></ul><ul><li>The concept of organizational fit </li></ul><ul><ul><li>The core research construct to explain the implementation success in diverse IT implementation contexts. </li></ul></ul>
  5. 5. <ul><li>Theoretical Perspectives : ERP implementation contingencies (2/2) </li></ul><ul><li>Two alternative approaches to the implementation of packaged software </li></ul><ul><ul><li>Package adaptation to organizational needs </li></ul></ul><ul><ul><li>Organizational adaptation to the package </li></ul></ul><ul><li>ERP implementation </li></ul><ul><ul><li>Business process change (BPC) and ERP adaptation to align the software with the business processes </li></ul></ul><ul><li>ERP vendors: Process adaptation </li></ul><ul><li>User departments of the customer organization: ERP adaptation </li></ul><ul><li>Table 1. Operational definitions of variables </li></ul>The strength of negative organizational response to ERP implementation 0rganizational resistance The extent of efforts and time spending in process change to align with ERP Process adaptation The extent of efforts and time spending in ERP alteration to align with organizational process needs except for ERP customization ERP adaptation The degree of alignment between ERP model and organization needs in terms of data, process and user interface Organizational fit of ERP The degree of deviation from project goal in terms of expected cost, time, system performance and benefits Implementation success Operational definition Variable
  6. 6. <ul><li>Research model and hypotheses : ERP implementation success (1/4) </li></ul><ul><li>A critical challenge in ERP implementation </li></ul><ul><ul><li>First, identifying gaps between the ERP generic functionality and the specific organizational requirement </li></ul></ul><ul><ul><li>Then, deciding how these gaps will be handled </li></ul></ul><ul><li>For the successful implementation of ERP </li></ul><ul><ul><li>A high level ERP implementation success measure is required </li></ul></ul><ul><ul><li>Organizational fit of ERP is important </li></ul></ul><ul><li>Research model </li></ul>Hypothesis 1. Organizational fit of ERP is positively related to ERP implementation success.
  7. 7. <ul><li>Research model and hypotheses : ERP adaptation (2/4) </li></ul><ul><li>ERP adaptation </li></ul><ul><ul><li>Increases the feature-function fit between ERP and the adopting organization </li></ul></ul><ul><li>ERP implementation success </li></ul><ul><ul><li>Depends on the type and extent of ERP adaptation </li></ul></ul><ul><li>ERP adaptation types </li></ul><ul><ul><li>ERP extensions </li></ul></ul><ul><ul><li>ERP modification </li></ul></ul><ul><li>The low level of ERP adaptation </li></ul><ul><ul><li>Organizational fit of ERP will be more strongly associated with ERP implementation success. </li></ul></ul>Hypothesis 2. There is an interaction effect of the level of ERP adaptation on the relationship between organizational fit of ERP and ERP implementation success.
  8. 8. <ul><li>Research model and hypotheses : Process adaptation (3/4) </li></ul><ul><li>Implementation of a packaged software </li></ul><ul><ul><li>Some of its organizational processes adapts to fit the basic business practices </li></ul></ul><ul><ul><li>Other organizational components and their interactions must be changed together </li></ul></ul><ul><li>The adaptation of organizational process in BPC </li></ul><ul><ul><li>It emphasizes the need to take account of the management of organizational change </li></ul></ul><ul><ul><li>Change management is the most critical source of BPC implementation </li></ul></ul><ul><li>The low level of process adaptation </li></ul><ul><ul><li>Organizational fit of ERP will be more strongly associated with ERP implementation success </li></ul></ul>Hypothesis 3. There is an interaction effect of the level of process adaptation on the relationship between organizational fit of ERP and ERP implementation success.
  9. 9. <ul><li>Research model and hypotheses : Organizational resistance (4/4) </li></ul><ul><li>ERP implementation </li></ul><ul><ul><li>Affect most of the company's business functions </li></ul></ul><ul><ul><li>Influence users directly </li></ul></ul><ul><li>Resistance to a change stems from </li></ul><ul><ul><li>Change in the job content </li></ul></ul><ul><ul><li>Uncertainty of the new system </li></ul></ul><ul><li>The organization and process changes </li></ul><ul><ul><li>Force involuntary changes </li></ul></ul><ul><ul><li>Frequently lead to different power and resource allocations </li></ul></ul><ul><li>The low level of organizational resistance </li></ul><ul><ul><li>Organizational fit of ERP will be more strongly associated with ERP implementation success. </li></ul></ul>Hypothesis 4. There is an interaction effect of the level of organizational resistance on the relationship between organizational fit of ERP and ERP implementation success.
  10. 10. 4. Research method (1/5) <ul><li>Sample and data collection </li></ul><ul><ul><li>Interviewing (or surveying) a selected number of participants </li></ul></ul><ul><ul><li>Sending about 350 survey questionnaires to the ERP project manager of each firm </li></ul></ul><ul><ul><li>Collecting one hundred and six questionnaires from 34 firms </li></ul></ul><ul><li>Measurement development </li></ul><ul><ul><li>Conducting a series of in-depth interviews </li></ul></ul><ul><ul><li>Developing the questionnaire items </li></ul></ul><ul><ul><li>Conducting a pilot study </li></ul></ul>
  11. 11. 4. Research method (2/5) <ul><li>ERP implementation success </li></ul><ul><ul><li>Measuring in terms of the perceived deviation from the expected project goals </li></ul></ul><ul><li>Organizational fit of ERP </li></ul><ul><ul><li>Examining in terms of data, process, and user interface fit of ERP before or at the initial implementation period </li></ul></ul><ul><li>Characteristics of respondent firms </li></ul><ul><ul><li>Consisting of 25 manufacturing firms and nine non-manufacturing firms </li></ul></ul><ul><ul><li>Using four ERP products: SAP R/3, UniERP, Oracle ERP, and Bann BPCS </li></ul></ul><ul><li>Content validity </li></ul><ul><ul><li>Establishing through the adoption of the relevant construct in the literature, a series of reviews with the help of business process experts with deep ERP knowledge, and a pilot pretest </li></ul></ul>
  12. 12. 4. Research method (3/5) <ul><li>Reliability </li></ul><ul><ul><li>The internal consistency reliability was assessed by calculating Cronbach's alpha values </li></ul></ul><ul><ul><li>The reliability results of the constructs are summarized in the fifth column </li></ul></ul><ul><ul><li>The internal consistency (Cronbach's alpha) of the construct range </li></ul></ul><ul><ul><ul><li>0.75 (for implementation success) ~ 0.93 (for process adaptation) </li></ul></ul></ul><ul><ul><li>Given the exploratory nature of the study, the result seems acceptable </li></ul></ul><ul><ul><li>Table 2. Summary of reliability and validity of the measurement </li></ul></ul>
  13. 13. 4. Research method (4/5) <ul><li>Construct validity </li></ul><ul><ul><li>By relating a measuring instrument to a general theoretical framework </li></ul></ul><ul><ul><li>Convergent validity </li></ul></ul><ul><ul><ul><li>Evaluated the item-to total correlation, based on the correlation of each item to the sum of the remaining items </li></ul></ul></ul><ul><ul><ul><li>The correlations for each of research variables whose item-to-total correlation score was greater than 0.4 </li></ul></ul></ul><ul><ul><li>Discriminant validity </li></ul></ul><ul><ul><ul><li>Was checked by factor analysis </li></ul></ul></ul><ul><ul><ul><li>Was confirmed when items for each variables loaded onto single factors with loadings of greater than 0.5. </li></ul></ul></ul>
  14. 14. 4. Research method (5/5) <ul><li>The result of factor analysis (Table 3) </li></ul>
  15. 15. 5. Results (1/5) <ul><li>Correlations matrix between variables (Table 4) </li></ul><ul><ul><li>Correlations among the proposed moderating variables do exist but would not pose a serious problem since their values are less than 0.5 </li></ul></ul><ul><ul><li>Each of them will be analyzed separately </li></ul></ul><ul><li>Testing the base relationship </li></ul><ul><ul><li>The base relationship between organizational fit of ERP and ERP implementation success </li></ul></ul><ul><ul><ul><li>Significant , supporting the Hypothesis 1 </li></ul></ul></ul><ul><ul><ul><li>The value of R 2 and adjusted R 2 was 0.26 and 0.24, respectively </li></ul></ul></ul><ul><ul><ul><li>24% of the implementation success variance is explained by the organizational fit of ERP </li></ul></ul></ul>
  16. 16. 5. Results (2/5) <ul><li>Testing the contingency relationships </li></ul><ul><ul><li>The typology of moderator variables </li></ul></ul><ul><ul><ul><li>Cell 1 : An intervening, exogenous, antecedent, suppressor, or predictor variable </li></ul></ul></ul><ul><ul><ul><li>depending on its other characteristics </li></ul></ul></ul><ul><ul><ul><li>Cells 2-4 : Moderator variables </li></ul></ul></ul><ul><ul><ul><ul><li>Cell 2 : Homologizer. Influences the strength of the relationship between the predictor and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>criterion variables across homogeneous subgroups </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cell 3 : Quasi moderator. Not only interacts with the predictor variable but is a predictor </li></ul></ul></ul></ul><ul><ul><ul><ul><li>variables itself </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cell 4 : Pure moderator. Interacts with predictor variables while having a negligible </li></ul></ul></ul></ul><ul><ul><ul><ul><li>correlation with the criterion itself </li></ul></ul></ul></ul>
  17. 17. 5. Results (3/5) <ul><li>Testing the contingency relationships (Table 5) </li></ul><ul><ul><li>The test results of the moderated regression effects </li></ul></ul><ul><ul><ul><li>The test results of the three moderating effects are summarized </li></ul></ul></ul><ul><ul><ul><li>First line: the results of the regression run without interaction </li></ul></ul></ul><ul><ul><ul><li>Second line: the results of the regression run with the interaction </li></ul></ul></ul>
  18. 18. 5. Results (4/5) <ul><li>Result </li></ul><ul><ul><li>ERP adaptation </li></ul></ul><ul><ul><ul><li>The interaction term was significant at the level of 0.01 </li></ul></ul></ul><ul><ul><ul><li>Hypothesis 2 : In the correlation matrix, ERP adaptation was negatively correlated with both organizational fit of ERP (-0.58) and ERP implementation success (-0.49) </li></ul></ul></ul><ul><ul><ul><li>-> quasi-moderator </li></ul></ul></ul><ul><ul><li>Process adaptation </li></ul></ul><ul><ul><ul><li>The interaction term was significant at the level of 0.01 </li></ul></ul></ul><ul><ul><ul><li>Hypothesis 3 : In the correlation matrix, Process adaptation is neither associated with organizational fit of ERP nor associated with implementation success </li></ul></ul></ul><ul><ul><ul><li>-> pure moderator </li></ul></ul></ul><ul><ul><li>Organizational resistance </li></ul></ul><ul><ul><ul><li>There is no interaction effect </li></ul></ul></ul><ul><ul><ul><li>In the correlation matrix, Organizational resistance is negatively associated with both organizational fit of ERP and implementation success </li></ul></ul></ul><ul><ul><ul><li>-> not a moderator </li></ul></ul></ul>
  19. 19. 5. Results (5/5) <ul><li>Result </li></ul><ul><ul><li>Summaries of the moderated regression analysis (Table 6) </li></ul></ul>Processa daptationis is pure moderator ERP adaptation is quasi-moderator Interaction with predictor Organizational resistance is not moderator No interaction with predictor Not related to criterion and predictor Related to either criterion or predictor
  20. 20. 6. Limitation and conclusions <ul><li>Limitation </li></ul><ul><ul><li>Focus on a limited number of variables for ERP implementation success </li></ul></ul><ul><ul><ul><li>Ex) P roject team competence </li></ul></ul></ul><ul><ul><li>Used perceived project metrics in defining implementation success </li></ul></ul><ul><ul><ul><li>Leaving out factual aspect of success outcome in the IS research </li></ul></ul></ul><ul><ul><li>Has a common method bias </li></ul></ul><ul><ul><ul><li>Because the dependent variable and independent variables rated by the same respondent. </li></ul></ul></ul><ul><li>Conclusion </li></ul><ul><ul><li>Many ERP vendors just ignore the organizational fit concept and urge blind trust on ERP from their clients </li></ul></ul><ul><ul><li>For successful ERP implementation, ERP implementation managers should be able to assess the fit between their organization and the target ERP system before its adoption </li></ul></ul><ul><ul><li>Once adoption is decided, should measure and manage the impact of ERP and process adaptations from a risk assessment approach to minimize the potential business disruptions and user resistance </li></ul></ul>
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