ERP Implementation Management in Different Organiz

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  See discussions, stats, and author profiles for this publication at: ERP implementation management in different organizational and culturalsettings  Article CITATIONS 2 READS 148 3 authors:Some of the authors of this publication are also working on these related projects: eGovernment capacity building through knowledge transfer, AusAID PSLP Project   View projectEnhancing the Quality of Planning of Software Development Projects   View projectArjen WassenaarUniversity of Twente 21   PUBLICATIONS   983   CITATIONS   SEE PROFILE Shirley GregorAustralian National University 155   PUBLICATIONS   5,919   CITATIONS   SEE PROFILE Dirk SwagermanUniversity of Groningen 25   PUBLICATIONS   67   CITATIONS   SEE PROFILE All content following this page was uploaded by Shirley Gregor on 29 May 2014. The user has requested enhancement of the downloaded file.   Paper given at the European Accounting Information Systems Conference 2002, Copenhagen Business School, 23-24 th  April –  Please do not cite without permission of the author.   ERP IMPLEMENTATION MANAGEMENT IN DIFFERENT ORGANIZATIONAL AND CULTURAL SETTINGS Arjen Wassenaar Department Business Information Systems Faculty of Technology and Management University of Twente, Enschede, The Netherlands e-mail: Shirley Gregor    School of Business and Information Management Australian National University, Canberra ACT 0200 e-mail: Dirk Swagerman Department Financial Management and department Business Information Systems Faculty of Technology and Management University of Twente, Enschede, The Netherlands e-mail: ABSTRACT: ERP-system implementation implies a much stronger organizational change than normal information system development. Organizations have to customize the software packages and transform their existing sub optimal business processes and organizational arrangements into industry “best practices”. This transformation is more an organizational than a technical challenge, because of the required fundamental changes in the existing business processes, skills, knowledge of the workforce and organizational arrangements. Therefore our research objective is explanation of the differences in ERP-implementation and their success in relation to their organizational and cultural setting. Based on a review of (transaction governance) literature, a research model is developed for exploring practice. The core of this model is three types of change governance (social contracting, hierarchical contracting and quasi market contracting) and three requisites of effective governance (enough variety in goal integration mechanisms, enough rich and common transaction model and enough variety in common managerial interventions). The differences in ERP-implementation and their success can be explained by a consistent and appropriate change governance approach in a given organizational and cultural setting. KEYWORDS:  ERP-implementation, transaction economics, change management accounting Information Systems   Paper given at the European Accounting Information Systems Conference 2002, Copenhagen Business School, 23-24 th  April –  Please do not cite without permission of the author.   2 1. INTRODUCTION 1. Background The University of Twente in the Netherlands is cooperating in the area of education and research with the ITB in Bandung Indonesia and the National University in Canberra Australia. One part of this cooperation is exchange of students and a research project in the field of ERP-implementation management in western and non-western companies. Enterprise resource planning (‘ERP’) systems are defined as configurable information system packages that integrate information and information  based processes within and across functional areas in an organization (Kulmar et al. (2000). An ERP-system enables companies to integrate data used throughout the whole organization and embraces operation and logistic, procurement, sales and marketing, human resource and financial modules. There are several characteristics of ERP-systems, which distinguish them from normal information systems (Markus and Tanis, 2000). ERP-systems are much more integrated and flexible than normal information systems because of their integrated component based software and their evolving architecture and expanding functionality promising cross functional integration of all information flowing through a company. These systems are not developed by the organization itself like normal information systems but developed and sold by specialized software vendors. Beside that, software vendors try to sell with their ERP-systems “industry best practices” which are generic business processes that may differ substantially from the way any particular organization operates. Therefore ERP-system implementation implies a much more organizational change than normal information system development. Organizations have to customize the software packages and to change - often supported by specialized ERP consultants - their existing sub optimal business processes and organizational arrangements. In  practice many companies have spent millions of dollars on the introduction of ERP systems. Brown (1993) noted that while the relative percentages of successful and unsuccessful implementation of ERP differ from study to study, the unifying theme that binds them all is the surprisingly high failure rate. In 1995, US firms spent an estimate $ 59 million in cost overruns on information systems projects and another $ 81 million on cancelled software projects. These debacles are partly rooted in the technical rolling out of profoundly complex pieces of software. However, most of the research is concluding that without good management the organizational embedding of ERP systems fails to bring benefits to organizations (Appleton, 1997; Davenport, 1998). 2. Aim and structure paper In summary, we conclude that organizations often fail in ERP-system implementation, characterized as a transaction of resource exchange between the ERP-system provider and the business users of the ERP-system. In this implementation, two things need to  be accomplished in the provider/user relationship. First to invest organizational resources effectively, the cost and the features of the new system should be agreed upon and monitored during the implementation. Second, the user must find value in the installed system. Based on transaction economics (Williamson, 1985; Benjamin et al., 1995; Wigand et al., 1997), ERP implementation management is considered as governance of a transaction between the system provider and the users; in this respect it is not enough that a system is delivered that matches the requirements: it is also necessary that it is used effectively and generates the expected benefits. Therefore our   Paper given at the European Accounting Information Systems Conference 2002, Copenhagen Business School, 23-24 th  April –  Please do not cite without permission of the author. 3 scope is the pre-implementation, implementation, but also the post-implementation  phase. The objective of our research is explanation of the differences in ERP-systems implementation and their success, considered from a managerial point of view. Finally, we aim to provide practitioners with guidelines for implementation management in different organizational and cultural settings. In the first explorative step we develop a theory to a point where it can further empirical tested and some  principal guidelines can be formulated. The paper proceeds by discussing the research model of ERP-system implementation from a managerial perspective. Finally, we explore this research model in two case studies resulting in differences and similarities of ERP-system implementation management explained by emergent factors in the organizational and cultural setting. Finally, we draw some conclusions in the last chapter. 2. CONCEPTUAL RESEARCH MODEL 1 ERP system implementation from a transaction governance perspective ERP-implementation is often related with installation of hardware and software, but Aldrich (1999) argues that in a digital economy, offerings consist of a tangible container element (typical a physical product) and an enhanced intangible content element (typical the accompanying information, knowledge or service) that adds the additional value to the container. What is new is, that with the advent of sophisticated new digital tools, the content of any container can now be tailored to address the individual needs and requirements of each customer. Therefore ERP-implementation results in an organizational ERP-system consisting of a (customized) component  based ERP-application and their underlying integrated data bases (coined as ERP-application system) together with the required the human skills and knowledge and organizational commitment for institutionalizing (using, exploiting and continuous improving) of the system. Based on Souder et al. (1990) ERP-system implementation can be considered as a transaction regarding transfer of resources from a source organization (software vendor, ICT consultant) towards a user organization (customer, user). This transfer of resources consists of a tangible component based software package element (container) and of intangible knowledge and service element (content), which has to be embedded in a specific organizational and cultural setting. Not surprisingly those companies are employing the new IT-capabilities to come up with digital enhancements of their tangible products. Therefore ERP-system offerings are becoming must more knowledge intensive by focusing on transferring “best industry practice”. This means that the transfer of content elements (knowledge) is becoming relatively more important than the container elements (component based  packages). From a transaction governance point of view, ERP-implementation management consists of creating and maintaining conditions for a successful match between the customer system requirements together with their intended organizational impact and the supplier ERP-system solutions and their costs. ERP-implementation management can be seen as setting up a contract for a transaction between provider and user, monitoring and evaluation of (intermediate) outcome of a transaction. Based on Ashby’s law of “variety destroys variety” (Ashby, 1951) we define three requisites for effective transaction governance (De Leeuw, 1986; Wassenaar, 1995):

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