LUO AND STRONG: FRAMEWORK FOR EVALUATING ERP IMPLEMENTATION CHOICES 323
LITERATURE ON ERP IMPLEMENTATION ISSUES
II. RELATED LITERATURE ciﬁc and may be classiﬁed into three categories: data, process,
A large body of literature on information technology (IT) and output. Davison  highlighted the cultural implications
implementations has been developed during the past several of misﬁts in ERP implementations.
decades –. However, our understanding of the factors Another difference between ERP and traditional information
and processes that lead to ERP implementation successes or fail- system development project is that ERP projects, which tend
ures is still limited because ERP implementation is relatively to be enterprise-wide, are typically larger in scope than tradi-
new and is different from traditional information systems de- tional software development projects, which often focus on one
velopment projects , . Here, we focus on some of the or more departments or business processes. The risks associ-
unique characteristics of ERP systems and review the imple- ated with ERP projects are relatively higher than those tradi-
mentation issues related to these characteristics. A summary is tional projects . Enterprise-wide projects affect many more
provided in Table I. users and these users may have different and possibly conﬂicting
One major difference lies with the fact that ERP systems needs and requirements. In addition, ERP projects require the
are packaged software. Carmel and Sawyer  compared the integration of data, processes, and operations throughout the
development processes of packaged software with traditional enterprise, often on a global scale, which makes ERP projects
information systems at the industry, development, cultural far more complex than traditional systems development projects
milieu, and team levels. Their analysis suggests that vendors of . To achieve integration, dissimilar components and indepen-
packaged software have to satisfy many customers with varying dent business processes need to be ﬁtted together by conforming
needs and requirements in order to capture the necessary market to a uniform standard. For example, integration may be accom-
share and proﬁt to justify their investment. At the same time, plished by changing each business process to ﬁt with the system
there is tremendous time-to-market pressure on the vendors using the ERP system as a standard.
to come out with their new products to stay ahead of their The ﬁt between business processes and ERP systems and
competitors. In addition, packaged software developers are among business processes is believed to be critical to the success
separated from the users organizationally, as well as physically of ERP implementation , , , . Hong and Kim 
and they usually do not participate in the implementation of assessed the impact of data, process, and user ﬁt between ERP
the software package. Intermediaries such as sales and cus- system and organizational requirements on implementation suc-
tomer support staff and third party consultants often provide cess. They found a positive correlation between the initial orga-
the linkage between software developers and users –. nizational ﬁt and implementation success. However, for most
Consequently, unlike traditional software development projects organizations, such a ﬁt can only be achieved through mutual
where a system is tailor-made to suit the existing business re- adaptation of the ERP systems and organization processes .
quirements and processes, packaged software implementation The adaptation of the ERP systems involves the customiza-
involves the users changing procedures and business processes tion of the ERP system to ﬁt existing or reengineered business
in order to use the package, changing some of the programs processes. Davenport  identiﬁed ERP system customization
in the package to ﬁt their unique requirements, and relying on as module selection, table conﬁguration, and code modiﬁca-
package vendors for assistance and updates to the software tion. Similarly, Glass  classiﬁed ERP system customization
package . into conﬁguration, extension, and modiﬁcation. Brehm et al.
The disconnect between an organization’s information and  provided a more detailed categorization of ERP system
process requirements and the solutions provided by ERP is espe- customization, which include nine types of adaptation: conﬁg-
cially pronounced due to the complex nature of the ERP systems uration, bolt-ons, screen masks, extended reporting, workﬂow
. In their study of ERP implementations in Singapore, Soh programming, user exits, ERP programming, interface devel-
et al.  illustrates that the so-called “industry best practices” opment, and package code modiﬁcation. Each type may require
embedded in ERP systems is hardly universal. They suggest that changes to be made at different layers of the ERP system.
the misﬁts between business requirements and ERP capabili- Consequently, such changes may affect the initial ERP im-
ties can be company-speciﬁc, industry-speciﬁc, or country-spe- plementation, as well as future maintenance, upgrade, and
324 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 51, NO. 3, AUGUST 2004
conversions. It is worth noting that these frameworks are only contract facilitation, contract monitoring, and vendor devel-
concerned with the change of systems to ﬁt business processes. opment. Organizations have access to different IT resources
An important stream of ERP implementation research fo- and, thus, possess different IT capabilities. Such differences
cuses on the adaptation of the organization to ERP systems. may explain the divergences among organizations in the use
This research explores the process of ERP implementation of IT and in the beneﬁts they have gained from the usage
and its associated organizational changes from initiation to . They may also one of the major reasons why organiza-
development to completion over time , . ERP imple- tions choose different ERP customization options during ERP
mentation is viewed as a long and complex process with suc- implementation.
cesses and failures at different stages of the implementation.
In a study of ERP implementation in 15 different companies, III. CUSTOMIZATION IN ERP IMPLEMENTATION
Ross  discovered that most companies go through the
following ﬁve stages in their implementation process: design, The primary goal of customization in ERP implementation is
implementation, stabilization, continuous improvement, and to achieve a ﬁt between the ERP system and the process that the
transformation. Markus and Tanis  describes a typical ERP system supports. Thus, both the system and the process can be
implementation in terms of four phases: the chartering phase, changed or customized to achieve the goal. When the system is
the project phase, the shakedown phase, and the onward and customized to ﬁt the process, we refer to this kind of customiza-
upward phase. Koh et al.  applied this process theory to tion as technical customization. Similarly, when a process is cus-
identify problems and issues of ERP implementation using tomized to ﬁt the system, we refer it as process customization.
a case study. Stages models of IT implementation have also
been used in analyzing ERP implementations , . Al- A. Technical Customization
though these models depict the ERP implementation process When installing an ERP system, companies have many
differently, they share many similar activities and decisions choices about how to change and customize the software
that need to be made by managers. One of the key decisions package . Most ERP software packages are developed in a
in the early stage of the implementation process is whether to modular approach, where each module contains speciﬁc func-
accept the assumptions about business processes built into the tionality and conﬁgurable options . In addition, an open
system . This decision affects the amount of customization or proprietary programming environment is often provided by
needed to the software, as well as to the organization. ERP vendors to their customers for modifying the system. Thus,
The systems development life cycle methodology needs to be companies have three types of technical customization options:
modiﬁed for the unique characteristics of ERP implementation module selection, table conﬁguration, and code modiﬁcation
, . Implementation in the traditional SDLC refers to . In module selection, companies choose to implement
the later stage of system development in which a completed one or more modules using the default conﬁguration set by
system is installed, deployed, and placed into operation or ERP vendors. In this case, technical customization is achieved
production. The stage also includes the conversion to the new through the company’s decision as to which modules to imple-
system, the training of users, and ﬁnal documentation of the ment. This type of technical customization makes minimum
system . ERP implementation involves the understanding alterations to the system and, by itself, is rarely sufﬁcient in
of existing business processes and ERP technologies, the cus- an ERP implementation. Some small companies, however,
tomization of business processes, and ERP modules and tables may take this low cost and low risk approach. For example,
to ﬁt each other, and the management of large-scale business Thermacore decided to implement SAP’s accounting module
process change and system integration projects. Hence, analysis using the default charts of accounts without any changes .
phase activities (e.g., understanding of critical organization Since most ERP systems are table-driven, another type of
processes) and design phase activities (e.g., knowledge of the technical customization is to select conﬁguration options in the
ERP software) of SDLC have to be merged for ERP implemen- tables so that the system ﬁts organizational needs. A key require-
tation . Brehm and Markus  stressed the importance ment for table conﬁguration is to understand the meaning and
of interaction between vendors and adopters during the ERP consequences of each conﬁgurable option in each table. Since
implementation. there are numerous tables in a typical ERP system, this can be a
From a resource-based perspective, the success of ERP im- very complex and time-consuming task, especially when inter-
plementation is affected by the kind of IT-based resources dependencies among options across various tables and modules
possessed by an organization and how they are assembled, need to be considered. For example, Dell Computer spent more
coordinated, and deployed –. IT-based resources can than a year on table conﬁguration alone . The beneﬁts of
be classiﬁed into tangible IT resources (e.g., IT infrastructure), this type of technical customization include the ability to tailor
intangible IT resources (e.g., knowledge bases), and human the system without coding, the full support from the vendor, and
IT resources (e.g., technical and managerial IT skills) , the ease of future upgrades.
. The ability to assemble, coordinate, and deploy IT-based The third type of technical customization is code customiza-
resources in combination with other resources is referred to tion, where the source code of the ERP system is changed, the
as an organization’s IT capability. Feeny and Willcocks  functionality is augmented, or a new interface is developed
included the following as a set of core IT capabilities: IS/IT to allow the ERP system to interact with other systems ,
leadership, business system thinking, relationship building, ar- . Some ERP systems come with a proprietary program-
chitecture planning, making technology work, informed buying, ming environment to support code customization; others can
LUO AND STRONG: FRAMEWORK FOR EVALUATING ERP IMPLEMENTATION CHOICES 325
interface with higher level programming languages such as of the elements in a business process, including the measures
C++. Code customization provides companies the greatest of performance. Literature on Business Process Reengineering
ﬂexibility in adapting the system to organizational needs and provides numerous examples of radical change. Organizations
allows companies to integrate the ERP system with any existing that are converting from a functional view of business to a
production systems. On the other hand, it also presents the process view often make radical changes to their business
highest risks and costs in technical customization. It is quite processes as well .
expensive to obtain competent technical staff or consultants to These three categories of process change represent in-
perform code customization and there are risks of failures and creasing degrees of process customization on a continuum
budget overruns. Also, too much code customization leads to from no change to radical change. How much change is needed
incompatibility with newer versions of the system and, thus, depends on how well the new technology ﬁts with the existing
difﬁculties in future upgrades. Furthermore, certain integration process. Management has the choice of changing the process
beneﬁts built into the original ERP design may be lost as a to ﬁt the system and vice versa.
result of code customization. Clearly, as we move from module
customization to code customization, the costs and risks in- C. ERP Customization Choices
crease; the beneﬁts, however, may or may not increase. With technical customization and process customization as
ERP vendors have a rather different view of technical cus- dimensions, we derive a table for describing various ERP cus-
tomization than the view of adopting organizations . While tomization choices, as illustrated in Table II.
most vendors provide the above programming environment Each cell in the table represents a possible choice for
for supporting adopting organizations, they consider technical achieving ﬁt between the process and the ERP system. Each
customization as an evolving process where they continuously row shows the process change options given a chosen system
add modules, extend conﬁguration tables, and improve tools conﬁguration option. Each column identiﬁes the system con-
for code modiﬁcation to meet the needs of adopting organi- ﬁguration options to ﬁt a particular process change decision.
zations. Their goal is to reduce the degree, costs, and risks For example, the ﬁrst row shows the three available options if
of customization so that adopting organizations can restrict managers decide to adopt the process embedded in the system
their customization efforts to module selection and table and make any necessary changes in the business process to ﬁt
conﬁguration. the system. In this case, the system process is often regarded
as the best practice or is deemed as the ideal process for the
B. Process Customization organization.
The no customization cell is a valid choice when there is
Fit can also be achieved by changing the process rather already a good ﬁt between the existing business process and the
than the system. Process customization is the degree to which system process. Thus, no process customization is necessary
the business process is changed to ﬁt the system. A business and a good ﬁt can be achieved by selecting appropriate system
process is deﬁned as a set of logically related tasks that use modules. Although rare, it is still possible when, for example,
the resources of an organization to achieve a deﬁned business an organization’s process was used as a model for developing
outcome . This deﬁnition indicates that a business process the system. This cell involves the lowest implementation risk
consists of tasks, resources, the outcome, relationships among among all cells provided that the assessment of ﬁt is accurate.
tasks, and relationships among resources and tasks. Based Managers should ensure that the perceived ﬁt between the
on the changes made to these elements, we classify process existing process and the embedded system process is not just
customization into three categories: no change, incremental their wishful thinking. The cell process adaptation involves
change, and radical change. making moderate process changes to ﬁt system modules. It
In the case of no change, process customization involves only assumes that the existing business process is similar to the
changes in tasks and resources, but no changes in relationships system process and incremental changes are sufﬁcient to achieve
among tasks and conﬁgurations of resources. An example of ﬁt. The risk associated with this cell is primarily related to
such process customization is task automation in which com- the organization’s ability in improving the existing business
puter technologies are substituted for manual labor. Then, the process. If the existing business process is drastically different
resources used to accomplish the task have been switched from from the system process, then the cell process conversion
manual labor to computers but the other elements of the busi- involving radical changes to the current process is necessary
ness process remain the same. to ﬁt the system process. This option is signiﬁcantly riskier
The second category of process customization is incremental than process adaptation.
change in which improvements are made not only in tasks and The second row assumes that technical customization is
resources, but also in relationships among tasks and relation- limited to conﬁguration of the system through tables. Most
ships among tasks and resources. The nature of the process and ERP systems come with conﬁgurable tables that model typical
its outcome measures, however, has not changed. The focus of variations of business processes. Using the technical changes
the change is solving problems found in the process. Most total involved in table customization, organizations can tailor the
quality management (TQM) initiatives are examples of incre- system to a near ﬁt to the process. Any further changes needed
mental change . to achieve complete ﬁt can be accomplished by changing
Radical change is the third category of process customiza- processes. The cell ﬁt system to process is an ideal situation,
tion. It involves the fundamental rethinking and radical redesign where ﬁt has been accomplished through table customization.
326 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 51, NO. 3, AUGUST 2004
The risk factor for this option is slightly greater than no cus- IV. CAPABILITY REQUIREMENTS FOR ERP CUSTOMIZATION
tomization. Mutual adaptation means that similar amounts of
customization are applied to both the system and the process. The customization options depicted in Table II represent
Consequently, the cell is riskier than ﬁt system to process possible customization choices available to managers. No one
and process adaptation. When there is still a signiﬁcant gap option in Table II is necessarily better than the others per
between the system and process after table customization, ﬁt se. Consistent with the resource-based perspective, we argue,
process to system may be required to redesign the process to however, that some options are better for an organization than
achieve ﬁt. This option is even riskier than process conversion others and this is determined by the organization’s capability to
because it not only requires radical process change but also make necessary system and process changes. Such capability
changes in the system. requirements consist of technical change capability and process
In the third row, system customization is not limited to change capability.
only table conﬁguration; changes to the source code are also
considered to be viable. While vendors discourage code cus- A. Technical Change Capability
tomization, they do provide programming environments to
facilitate such changes because there are variations of business Technical change capability refers to an organization’s
processes that cannot be modeled through table customiza- overall ability to customize ERP systems. The ﬁrst ability
tion. For various reasons, managers may decide to make no within technical change capability is concerned with the under-
changes to the process and achieve the ﬁt entirely through standing of default ERP system processes, conﬁgurations, and
changes to the system. This option is referred to as system built-in options. It is crucial to recognize the underlying man-
conversion. Organizations need substantially more expertise agement principles and assumptions made by system vendors
to work with the system than table conﬁguration and, hence, , . This understanding forms the basis for planning and
system conversion is riskier than the ﬁt system to process cell. making appropriate changes to the system. Organizations may
The system conversion and process adaptation cell involves differ in this ability in terms of the scope and depth of their
moderate process improvements, as well as code customization. understanding of the adopted ERP system. For example, some
Depending on the nature of process changes, this option may organizations have a good understanding of the entire system
not be as risky as the system conversion cell because it may and others may focus on a module or a part of the system. That
increase ﬂexibility in the process and require fewer coding is, the scope of understanding can differ. Similarly, the depth of
changes. Finally, system and process reengineering refers to understanding can vary as well. For example, one organization
a scenario in which managers may choose to redesign the knows the processes that are supported by the system, while
business process and make necessary changes to the system another organization also understands the assumptions and
to support the redesigned process. Such changes in both the interconnections within the system well enough to plan any
process and the system represent the most risky cell in the table. desired changes.
LUO AND STRONG: FRAMEWORK FOR EVALUATING ERP IMPLEMENTATION CHOICES 327
The second technical change capability is the ability to de- Creative thinking and process design tools and methodologies
velop and modify large-scale software in a networked database are crucial for designing new or changed business processes.
environment. This ability is directly related to the extent to Creative thinking allows organizations to think “outside of the
which organizations are able to make desired system changes. box” and generate many alternative designs. The ability to use
It is crucial that organizations have the ability to use a variety process design tools and methodologies permits organizations to
of software application development tools such as custom tools simulate and evaluate process design alternatives and to identify
provided by ERP vendors, database management tools, and those with signiﬁcant performance improvements.
programming languages. The more tools an organization is able Third, organizations must be capable of managing and co-
to employ, the broader the scope of their technical change capa- ordinating large-scale business process changes. As discussed
bility. With each development tool, the degree of proﬁciency in earlier, ERP implementation can be viewed as a series of cus-
using that tool signiﬁes the depth of an organization’s technical tomization projects that involves signiﬁcant business process
change capability. changes. As such, managing large-scale business process
The third technical change capability is an organization’s changes consists of managing individual projects, as well as
ability to manage large-scale systems development projects. integrating and coordinating multiple projects. To successfully
This includes setting unambiguous and realistic goals for the manage individual projects, organizations need to have the nec-
project, providing necessary resources to match the goals, essary skills in project management and organizational change
maintaining clear communication channels among project management. Integrating and coordinating multiple projects re-
participants, monitoring project progress, and detecting and quires the ability to decompose large projects into smaller ones,
correcting any problems within the project . ERP im- manage the interfaces among these projects, and integrate their
plementation may be viewed as a series of coordinated IT results to achieve overall objectives. The advantage of a series
customization and implementation projects. As such, organi- of projects is the opportunity for organizations to learn. That
zations would need not only the ability to manage individual learning includes the exchange of knowledge within and across
projects, but also the ability to coordinate and integrate multiple multiple project teams. Furthermore, knowledge acquired from
interconnected projects. earlier projects can be applied to future projects.
An organization’s technical change capability consists of the We measure an organization’s process change capabilities
scope and depth of its ability to understand the ERP system, its in terms of their scope and depth. For instance, the scope of
ability to make changes to software, and its ability to manage the organization’s capability in managing process changes
large-scale ERP implementation projects. We consider an or- is broad when an organization is capable of managing very
ganization to have high technical change capability if it has large-scale projects. Furthermore, we consider an organization
broad scope and great depth in all three abilities. Conversely, we to have in-depth capability if that organization has a large
consider an organization to have low technical change capability set of alternative tools and techniques for managing process
if it has narrow scope and limited depth in all three abilities. changes. We consider an organization to have high business
process change capability if it has broad scope and great depth
B. Process Change Capability in all three abilities, the ability to understand existing business
The other change capability that an organization needs is processes, the ability to design and implement business process
process change capability, which refers to its overall ability changes, and the ability to manage large scale organizational
to customize business processes. Organizations ﬁrst need to changes. Conversely, we consider an organization to have low
have the ability to understand their existing business processes business process change capability if it has narrow scope and
and their business environment. That understanding should limited depth in all three abilities.
include not only the current state of existing business processes
but also the history and evolution of these processes. Since C. Overall Capability
ERP systems cross functions, enterprise-wide understanding
of processes is more valuable than just the understanding of Combining the technical change capability and process
individual functional areas. Therefore, an organization would change capability, we can assess an organization’s overall capa-
have higher process change capability if it has enterprise-wide bility in implementing and customizing ERP systems. Table III
understanding of its business processes and their history shows the four possible combinations of such an assessment.
and evolution, as well as its products, customers, and other A novice organization has low capabilities in both technical
stakeholders. change and process change. That places severe constraints on
Second, organizations must have the ability to design new or what an organization can do to customize its own processes, as
changed business processes, as well as implement these designs. well as the software package.
328 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 51, NO. 3, AUGUST 2004
FRAMEWORK FOR EVALUATING ERP CUSTOMIZATION CHOICES
A technician organization has high technical change capa- ﬁrms and sending employees to technical training. Similarly,
bility, but low process change capability. It has high ability to a technician organization can acquire process change ability
ﬁt the system to the organization’s needs, but it may not be able by employing consultants to help it learn from earlier im-
to take full advantage of the possible process improvements. A plementation projects. So organizations should periodically
technician organization should guard against the temptation to evaluate their own capability, identify their needs for capa-
over customize the system. An organizer is an organization that bility improvements, and direct necessary resources to meet
has high process change capability, but low technical change those needs.
capability. It is in a better position to take advantage of process
improvement associated with ERP systems. Due to the inability
V. A FRAMEWORK FOR EVALUATING ERP
to change the system, an organizer may not be able to realize a
good ﬁt between the process and the ERP system.
An expert organization has high capabilities in both tech- The framework presented in Table IV combines our dis-
nical change and process change. This kind of organization is cussion of process and technical customization options with
in the best position to focus on business strategy without wor- process and technical change capabilities. The table shows the
rying about limits in its capability. It can pursue various alter- customization choices that are feasible for various organiza-
natives of ERP implementation. An expert organization may tional capabilities. For instance, a novice has the customization
over-customize both the process and the system so it should options in the upper left of the framework. An expert, on the
guard against the temptation to use all available expertise. other hand, can choose from any of the customization possi-
In addition to assessing its overall capability, an organization bilities. Thus, an expert has far more options available to it
should also evaluate its capability with respect to each process than a novice. Customization options that require more process
and each module within the ERP system. An organization’s changes are better suited for organizers than for technicians. On
overall capability may be different from that with respect to the other hand, customization options that require ERP system
individual processes and modules. For example, an organiza- changes are appropriate for technicians.
tion may regard itself as an organizer overall, but consider it- Because both technical capability and process capability of
self a novice in manufacturing because it has little experience an organization may evolve over time, previously unrealistic
in changing its manufacturing processes. options may become available as organizations learn from their
Both technical change and process change capabilities will experiences. Process change capability may improve when cer-
change over time as an organization goes through the ERP im- tain business processes are improved. Technical capability may
plementation process. A novice organization, for example, may improve when organizations gain experience in project man-
improve its technical change ability by employing consulting agement, acquire more technical talent, and so forth. Because
LUO AND STRONG: FRAMEWORK FOR EVALUATING ERP IMPLEMENTATION CHOICES 329
capabilities are dynamic, organizations should anticipate and have never been integrated. Each university has unique busi-
facilitate capability growth. For example, in its initial selection ness processes that distinguish itself from other competitors.
of ERP implementation projects and associated customization Furthermore, ever changing government regulations play a
options, an organization should choose projects and options major role in how state universities operate. In sum, the Banner
that will allow it to grow in the future. system and ERP implementations in higher education possess
the same general characteristics of ERP implementations using
VI. FRAMEWORK APPLICATION: A CASE STUDY SAP in large business organizations.
PU selected Banner because it provided a common database
The purpose of the proposed framework is to assist the and integrated applications using this common database. PU
evaluation of ERP customization options. As such, it provides was an early adopter and served as a beta site for the Banner
a methodology for choosing customization options based on system. Over time, PU provided input to the vendor developing
an organization’s technical and process capabilities. It suggests Banner, System and Computer Technology (SCT), and has
that customization decisions should involve: 1) determining implemented Banner modules, as they became ready for beta
the degree of system and process customization desired; testing. The student module went online in 1988, the alumni
2) determining the organization’s capabilities to do technical and development module in 1995, the ﬁnance module in 1998,
and process customization; and 3) selecting a feasible cell that the HR/payroll module in 1999, the ﬁnancial aid module in
matches customization options with capabilities. early 2000, and implementation of the scheduling module is in
Given a desired ERP customization option, the framework process.
can help assess the needs for additional technical change and/or The general implementation process for each module was
organization change capabilities. Such needs can then be met as follows. First, the department or departments were selected.
by obtaining external consultants, offering training to existing At PU, ERP implementation has taken primarily a functional
employees, and deploying change agents. orientation because, for many of the modules, a single pri-
Since in many companies ERP system implementation is a mary department is responsible for the functions covered by
series of implementation projects, the framework can be used to the module. Second, members of the selected department and
plan these projects by anticipating and facilitating the growth of the implementation team decided how much process reengi-
technical and process change capabilities and choosing projects neering and redesign to do. This decision was made from a
and options that allow for capability growth over time. Taking continuous improvement viewpoint. In making this decision,
this dynamic view, we can envision difﬁcult customization and the functionality available in the Banner module was consid-
implementation projects becoming feasible over time as capa- ered. Finally, the submodules within the module were selected,
bilities build during prior implementation projects. conﬁguration options were selected, and code was added or
In the remainder of this section, we illustrate the use of the changed to ﬁt the module to the redesigned process. Overall,
framework through an analysis of an ERP system implementa- PU ﬁrst made process customization choices with some con-
tion at a private technological university. While this case study sideration of the module functionality, and then customized
is a post-hoc analysis since the framework did not exist when the system modules to whatever extent was needed to achieve
the implementation projects started, the analysis shows the im- ﬁt. Because of PU’s technical expertise and its role as the
plicit technical and process customization choices made, how beta test site, such a sequence was feasible.
these choices changed over time, and how capabilities were built Over time, the customization choices made have moved
through customization choices. from primarily technical customization to primarily process
This private university (PU) has a rather unique undergrad- customization, but these choices depend on the criticality of
uate academic curriculum and schedule. Instead of 15-week the functionality to the mission of PU. We illustrate the nature
semesters, PU employs a 7-week term system, where there are of these choices by discussing the implementation of three
four terms in each academic year. All undergraduate students different modules, student, ﬁnance, and scheduling. Table V
are required to do junior and senior projects. This project-ori- shows the framework as applied to PU’s customization choices
ented curriculum, started in the 1970s, distinguishes it from for these three modules.
other technological universities and is the core of its academic
program. To support university operations, PU adopted and
A. Student Module
began to implement the Banner system as early as 1988.
Banner is an ERP system designed for educational institu- The student module implementation began in 1988. At that
tions . As such, Banner has modules for students, alumni time, the implementation team viewed ERP implementation in
and development, ﬁnancial aid, and room scheduling, as well the context of traditional systems design and development. The
as modules common to most business ERP systems, such as team determined what the primary user, the registrar’s ofﬁce,
ﬁnance, human resources, and payroll. Over 1300 universi- wanted and what the process was. They then worked with
ties and colleges worldwide have adopted Banner systems, SCT to acquire technical expertise that allowed them to make
including University of Arizona and Yale University . Im- major changes to the student module in order to ﬁt the existing
plementing ERP systems, such as Banner, in universities is no process. That is, they chose the “system conversion” cell, which
less complicated than that in large corporations since it could is feasible only if the implementation team possesses technical
involve tens of thousands of users from various constituents change capabilities (labeled Student Module 1 in Table V).
including current and prospective students, faculty, staff, ad- Technical customization of the student module is necessary
ministrators, and alumni. Many universities have fragmented because educational programs are the core advantage and
computer systems attending different business functions that competency of an educational institution. In particular, PU has
330 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 51, NO. 3, AUGUST 2004
FRAMEWORK APPLIED TO PU’S ERP IMPLEMENTATION CHOICES
a project-oriented undergraduate program. Although students and manages its ﬁnances was similar to most other colleges and
take courses, their curriculum is driven by the completion of universities and was not considered as a competitive advantage
three signiﬁcant projects, a humanities sufﬁciency project, a for PU. Learning from the costs of technical customization of
project involving the interaction of technology and society, and the student module, the implementation team decided to mini-
a project demonstrating competency in their major area of study. mize technical customization, and focused on training users for
The last two projects have credit equivalent to three courses. In the ﬁnancial process embedded in Banner’s ﬁnancial module.
addition, the academic year is divided into seven-week terms That is, the “ﬁt process to system” cell was selected, which
(half semesters) and students may be off-site for one term requires expert capabilities, i.e., both technician and organizer
during the year at one of PU’s global project centers in London, abilities (labeled Finance Module in Table V).
Bangkok, etc. This unique educational design is considered PU’s technical change capabilities were well developed, but
PU’s competitive advantage, and cannot be changed simply its organizer abilities were lacking. To develop the organiza-
because the ERP system does not support such functionality. tional change capability, PU initiated a reengineering project to
The heavily customized student module, however, requires improve the operation of the process. The reengineering was
signiﬁcant resources to maintain because new versions of done in cooperation with consultants from SCT so that the re-
the student module need to be implemented. For example, sulting process would be a close ﬁt to the process embedded in
the recent implementation of the new web-based registration the Banner system. To ﬁt the process to the system, PU made
submodule required signiﬁcant customization for registration many changes in its ﬁnancial processes, including changing its
in seven-week terms and registration for projects. entire chart of accounts to ﬁt Banner, changing retirement de-
Through the implementation of the student module, the team duction calculations to the method used in Banner, and training
learned the costs and beneﬁts of relying on PU’s technician all users that normal account balances were now negative. The
capabilities. The beneﬁts are a well-functioning customized
changes to the process required negotiations with the user com-
module that supports PU’s project-oriented educational mis-
munity and extensive training, both of which have served to
sion. The cost is over customization through overuse of its
build PU’s organizer capabilities.
technician capabilities. It was realized that not all technical
changes to the ERP system provided strategic beneﬁt to PU.
Current implementations of student sub-modules take a more C. Scheduling Module
balanced approach between technical customization and process
customization (labeled Student Module 2 in Table V). Decisions about implementing the scheduling module are un-
derway now. The implementation team knows that the changes
B. Finance Module required are at least those of the “mutual adaptation” cell, that
The implementation of the ﬁnance module took a very dif- is, at least incremental process change and table customization.
ferent approach. The process by which PU does its accounting A concern is that the process changes may be radical rather
LUO AND STRONG: FRAMEWORK FOR EVALUATING ERP IMPLEMENTATION CHOICES 331
than incremental and the system changes may require signiﬁ- A. Contributions to Practice
cant coding. There is a major difference in project difﬁculty and
This framework allows ERP implementers to examine many
risk between a “mutual adaptation” project and a “system and
implementation possibilities rather than simply following the
process reengineering” project (labeled Scheduling Module in
“conventional wisdom” of ﬁtting processes to the system. The
Table V). On the system side, there is concern that Banner’s
framework shows nine customization options that depend on
scheduling module does not have adequate functionality and,
how much to change the business process and how much to
thus, implementation may require coding. On the process side,
change the ERP system. To illustrate the contribution of this
the PU team is deciding how much reengineering is needed to
framework to the practice of engineering management, we de-
improve the scheduling process. For example, one issue is which
scribe how a typical organization implementing an ERP system
rooms should be centrally scheduled. Departments like the ﬂexi-
would use the framework.
bility of having local scheduling control over various conference
The ﬁrst step in using the framework is to assess how well the
rooms and other space near their department. Central scheduling
selected ERP system matches the business process. Typically,
of such space, however, may provide better utilization of lim-
this must be assessed for multiple ERP modules and multiple
ited space. Making decisions about whether and how to change
business processes. Then, the organization can use the frame-
scheduling of space on campus is a critical part of the ERP im-
work to think about the possibilities of changing the system and
plementation process. Since scheduling decisions affect most
changing the business process to provide better ﬁt between the
departments and individuals in these departments, changing the
system and the process. As a result, the organization will have
scheduling process radically could be risky.
a set of options, some involving more process change and some
These decisions about reengineering the scheduling process
involving more system change, for achieving better ﬁt.
determine the process customization choice, that is, whether
The next step is to assess the organization’s ability to make
implementing the scheduling module requires incremental or
these changes. The paper describes organizational capabilities
radical process change, which in turn affects the organiza-
as technical change capabilities and process change capabilities.
tional capabilities required and the size, scope, and risk of the
Depending on the results of assessing these capabilities, the list
implementation project. Through the implementation of the
of options developed in the previous step can be evaluated for
student module and the ﬁnance module, PU has built expert
feasibility for that organization. The ﬁnal step is to consider
level ERP implementation capabilities. Thus, deciding to do
a longer-term plan depending on which options are the most
radical process reengineering and signiﬁcant code customiza-
feasible for the organization over time.
tion is feasible, which gives PU the ﬂexibility to choose any
We have suggested that ERP system implementation should
customization option. PU or any other organization must, how-
be viewed as a series of implementation projects. This view
ever, avoid projects that are more complex than needed.
has several implications for engineering management. First, or-
The above discussion illustrates the dynamic use of the
ganizations have overall process change and technical change
framework for evaluating ERP customization choices. At PU,
capabilities that may differ from their change capabilities with
the implementation of each ERP module, and sometimes each
respect to an individual project. Second, these capabilities can
submodule, is an implementation project in itself. Each project
change over time as organizations learn from previous projects.
involves decisions about how much to change the associated
Third, it is important to plan the path of implementation projects
business process and, simultaneously, how much module cus-
so that more difﬁcult projects become feasible through learning.
tomization to allow. These choices must be made within the
That is, an organization should not only focus on the customiza-
context of organizational capabilities. Since organizational ca-
tion options for the current projects but should also consider op-
pabilities develop and change over time, the sequencing of
tions for capability growth.
implementation projects is important, so that each project is
The result of such an approach is to view ERP implemen-
feasible from the perspective of organizational capabilities at
tation as a portfolio of projects. Different projects may require
the time it is initiated.
different levels of effort, resources, and expertise. Thus, they
should be managed in their own ways. The framework provides
VII. CONCLUSION a way of thinking about the implementation choices to be made
and helps engineering managers understand and evaluate these
The framework developed in this paper identiﬁes nine cus- choices.
tomization options based on the degree of changes undertaken
for both the ERP system and the business process. It is de-
B. Contributions to Research
signed to help organizations understand which customization
options are available and which of these are feasible given an The “conventional wisdom” in the literature is that orga-
organization’s capabilities. The applicability of the framework nizations should change their business processes to ﬁt the
was illustrated through a case study of an organization that ERP system, which embeds “best practices.” Any review of
employed a phased implementation of several ERP modules. case studies of ERP system implementation will ﬁnd many
This phased implementation also illustrated the growing capa- exceptions to the conventional wisdom. Managers need better
bility of an organization as it undertook ERP implementations advice from the literature.
involving technical and organizational changes and how addi- To date, there are frameworks in the literature describing
tional customization options became feasible with increased the possibilities for technical changes, that is, options for
organizational capabilities. adapting the ERP system to the business process, e.g., ,
332 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 51, NO. 3, AUGUST 2004
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index.html Information Quality.