Managing Enterprise

Resource Planning
Adoption and Business
Processes
Managing Enterprise
Resource Planning
Adoption and Business
Processes:

A Holistic Approach

By

Chuck C.H. Law

Managing Enterprise Resource Planning Adoption
and Business Processes: A Holistic Approach

By Chuck C.H. Law

This book first published 2019

Cambridge Scholars Publishing

Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

Copyright © 2019 by Chuck C.H. Law

All rights for this book reserved. No part of this book may be reproduced,
stored in a retrieval system, or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise, without
the prior permission of the copyright owner.

ISBN (10): 1-5275-2752-2

ISBN (13): 978-1-5275-2752-2
Dedicated to the memory of my late parents,
Shing S. and Chung-Sin Law
 TABLE OF CONTENTS

List of Figures ......................................................................................... xiii

List of Tables .......................................................................................... xiv

Preface ..................................................................................................... xv

Acknowledgments ................................................................................. xvii

Chapter One ................................................................................................ 1

The ERP Phenomenon
ABSTRACT .............................................................................................. 1
FUNDAMENTAL CONCEPTS OF ERP......................................................... 2
POTENTIAL IMPACTS OF ERP SYSTEMS ................................................... 3
RECENT TRENDS OF ERP ........................................................................ 4
ERP II or value chain resource planning.......................................... 4
SaaS ERP and freeware .................................................................... 7
THE ERP MARKET AND PRODUCTS ......................................................... 9
THE HYPE AND REALITY ABOUT ERP.................................................... 12
MISTAKES AND PROBLEMS ................................................................... 12
IMPLICATIONS OF FINDINGS .................................................................. 17
OBJECTIVES OF THIS BOOK ................................................................... 18
CONCLUDING REMARKS ....................................................................... 21

Chapter Two ............................................................................................. 22

The Strategic Intent and Critical Success Factors of ERP Adoption
ABSTRACT ............................................................................................ 22
INTRODUCTION ..................................................................................... 23
STRATEGIC INTENT AND ALIGNMENT .................................................... 23
OBJECTIVES OF ERP ADOPTION ............................................................ 24
TYPES OF BENEFITS AND PERFORMANCE MEASURES ............................. 27
CRITICAL SUCCESS FACTORS FOR ERP ADOPTION ................................ 29
ERP product and vendor selection .................................................. 29
Alignment between ERP and business and process requirements .. 30
Business justification and planning ................................................ 30
Business process changes ............................................................... 31
Culture and practices for change management .............................. 31
viii Table of Contents

Planning and management of communications............................... 32

ERP strategy and implementation methodology ............................. 33
Data management ........................................................................... 33
Project management ....................................................................... 34
Composition and expertise of ERP project organization ................ 35
Monitoring and evaluation of performance .................................... 35
Organizational characteristics........................................................ 36
Role of project champion ................................................................ 36
Software development environment and practices .......................... 37
Support and commitment of senior management team.................... 37
National culture .............................................................................. 38
Country-related functional requirements ........................................ 39
On-going maintenance and support ................................................ 40
CONCLUDING REMARKS ....................................................................... 40

Chapter Three ........................................................................................... 41

Methodological and Strategic Considerations
ABSTRACT ............................................................................................ 41
INTRODUCTION ..................................................................................... 41
ERP VENDOR’S PROPRIETARY METHODOLOGIES .................................. 42
THE FULL LIFECYCLE ERP ADOPTION REFERENCE MODEL ................. 46
THE SEVEN PERSPECTIVES OF ERP ADOPTION ...................................... 47
THE SEVEN ERP LIFECYCLE PHASES ..................................................... 49
Phase 1: Assess and plan ................................................................ 49
Phase 2: Elaborate ......................................................................... 52
Phase 3: Select ................................................................................ 53
Phase 4: Design .............................................................................. 54
Phase 5: Build ................................................................................. 55
Phase 6: Transition ......................................................................... 57
Phase 7: Operate and improve ....................................................... 59
THE ERP ADOPTION BODY OF KNOWLEDGE ........................................ 62
STRATEGIC CONSIDERATIONS ............................................................... 65
Aiming for strategic benefits ........................................................... 65
Global standards versus local requirements ................................... 66
Legal structures and reporting requirements.................................. 66
Sequence of module implementation ............................................... 67
Currencies and character sets supported by ERP products............ 67
Highly customized, best of breed, or vanilla with only minor
customization .................................................................................. 68
Functional focus versus process-orientation .................................. 69
Total outsourcing versus other choices........................................... 69
 Managing Enterprise Resource Planning Adoption ix
and Business Processes

Reduced project scope and phased adoption .................................. 70

Business specific ERP training ....................................................... 71
CONCLUDING REMARKS ....................................................................... 71

Chapter Four ............................................................................................. 72

Organizational Issues
ABSTRACT ............................................................................................ 72
INTRODUCTION ..................................................................................... 73
THE INFORMATION MANAGEMENT ENVIRONMENT ................................ 74
IT governance and business-IT strategic alignment ....................... 74
IT infrastructure .............................................................................. 78
ERP adoption and the information management environment ....... 80
CULTURAL AND ORGANIZATIONAL FACTORS ........................................ 85
Impacts of national and corporate cultures on ERP adoption ........ 85
Effects of seniority of business and IT leadership on ERP
adoption .......................................................................................... 89
THE PROJECT ORGANIZATION ............................................................... 91
ERP adoption steering committee ................................................... 92
Project leadership ........................................................................... 93
Functional teams ............................................................................. 93
Data management team .................................................................. 94
Technical team ................................................................................ 95
ROLES AND RESPONSIBILITIES IN TYPICAL ERP PROJECTS .................... 95
Process owners and other users ...................................................... 96
Change agents ................................................................................. 96
PROJECT MANAGEMENT OFFICE ............................................................ 97
STAKEHOLDER AND COMMUNICATIONS MANAGEMENT ...................... 100
Stakeholder management .............................................................. 100
Communications management ...................................................... 104
CONCLUDING REMARKS ..................................................................... 105

Chapter Five ........................................................................................... 108

Managing Human Resources and Expertise
ABSTRACT .......................................................................................... 108
INTRODUCTION ................................................................................... 109
ERP KNOWLEDGE AND SKILLS REQUIREMENTS .................................. 110
CHALLENGES IN MANAGING ERP EXPERTISE...................................... 112
MERITS AND ISSUES OF CONSULTANT INVOLVEMENT ......................... 113
Problems with external consultants .............................................. 114
CONSEQUENCES OF INAPPROPRIATE TRAINING PRACTICES ................. 116
A HOLISTIC APPROACH FOR MANAGING ERP EXPERTISE .................... 118
x Table of Contents

ERP-RELATED REQUIREMENTS AND WORKFORCE PLANNING ............. 119

MANAGEMENT OF SERVICE PROVIDERS .............................................. 119
MANAGEMENT OF INTERNAL HUMAN RESOURCES .............................. 124
Staff retention and competitive compensation .............................. 124
Motivation and project assignments ............................................. 126
Senior management support, performance appraisal, and team
morale ........................................................................................... 128
KNOWLEDGE MANAGEMENT FOR THE ERP ENVIRONMENT ................ 129
KNOWLEDGE TRANSFER ..................................................................... 131
TRAINING ........................................................................................... 134
Identifying training needs and planning ....................................... 135
Matching training to the right types of stakeholders at the right
time................................................................................................ 135
CONCLUDING REMARKS ..................................................................... 137

Chapter Six ............................................................................................. 140

Change Management Theories and Principles
ABSTRACT .......................................................................................... 140
INTRODUCTION ................................................................................... 140
FUNDAMENTAL CHANGE MANAGEMENT CONCEPTS ............................ 141
CHANGE MODELS AND THEORIES ........................................................ 142
Lewin’s three-step change model .................................................. 142
Kotter’s eight-stage change model................................................ 143
The Prosci ADKAR model............................................................. 144
The emergent change management theories ................................. 145
MISTAKES AND OBSTACLES OF CHANGE MANAGEMENT ..................... 148
RESISTANCE EXPLAINED ..................................................................... 150
THE NEGATIVE AND POSITIVE SIDES OF RESISTANCE........................... 152
PERSONAL FACTORS FOR CHANGES .................................................... 153
GUIDELINES FOR CHANGE MANAGEMENT ........................................... 157
Organizational readiness, visions & communications .................. 158
Leadership .................................................................................... 158
Roles & responsibilities ................................................................ 159
Use of cross-functional work teams .............................................. 159
CONCLUDING REMARKS ..................................................................... 160
 Managing Enterprise Resource Planning Adoption xi
and Business Processes

Chapter Seven......................................................................................... 161

Managing Business Processes Changes
ABSTRACT .......................................................................................... 161
INTRODUCTION ................................................................................... 161
BUSINESS PROCESS CHANGE APPROACHES.......................................... 162
THE HYPE AND REALITY ..................................................................... 163
CIRCUMSTANCES AND TYPES OF BUSINESS CHANGES ......................... 164
Levels of business transformation ................................................. 165
Information systems and business process changes ...................... 169
The symbiotic relationship between process changes and ERP
implementation .............................................................................. 171
Choosing business process change approaches............................ 171
BUSINESS PROCESS ANALYSIS AND PROCESS MODELS ........................ 173
OPPORTUNITIES FOR IMPROVEMENT ................................................... 175
ROLES IN BUSINESS PROCESS EXERCISES ............................................ 176
GUIDELINES OF BUSINESS PROCESS CHANGES ..................................... 176
A PROCESS CHANGE EXAMPLE ............................................................ 178
Tradeco’s sales order fulfilment process ...................................... 178
Problems of the “As-Is” process................................................... 181
The “To-Be” process model and opportunities for improvement . 183
Contribution of ERP systems ........................................................ 184
Alternative process change opportunities ..................................... 185
Improvement unaccomplished ....................................................... 186
CONCLUDING REMARKS ..................................................................... 186

Chapter Eight .......................................................................................... 190

Post-Implementation Issues
ABSTRACT .......................................................................................... 190
INTRODUCTION ................................................................................... 191
NATURE OF ERP MAINTENANCE ......................................................... 191
CLIENT-VENDOR PARTNERSHIP ........................................................... 193
ERP VENDORS’ POLICIES, SERVICES, AND IMPACTS ON ERP
ADOPTION ........................................................................................... 194
PERSPECTIVES AND PRACTICES OF ERP MAINTENANCE AND SUPPORT 196
IMPLICATIONS FOR ERP STRATEGY .................................................... 199
Consequences of customization, and full lifecycle approach
for ERP adoption .......................................................................... 199
A three-pronged approach to ERP expertise ................................ 200
Managing user requests and continuous improvement ................. 201
Other post-implementation practices ............................................ 203
CONCLUDING REMARKS ..................................................................... 204
xii Table of Contents

Chapter Nine........................................................................................... 205

The TradeCo Case
ABSTRACT .......................................................................................... 205
INTRODUCTION ................................................................................... 205
IMPROPER BELIEF AND MALPRACTICES CONCERNING INFORMATION
OWNERSHIP ......................................................................................... 206
RESISTANCE TO BUSINESS PROCESS CHANGES .................................... 207
MIS-USE OF ERP FEATURES ................................................................ 207
DISCUSSIONS AND IMPLICATIONS ....................................................... 209
Organizational culture issues ....................................................... 209
Education and training ................................................................. 209
CONCLUDING REMARKS ..................................................................... 211

Chapter Ten ............................................................................................ 213

The Controlco Case
ABSTRACT .......................................................................................... 213
BACKGROUND .................................................................................... 214
THE FIRST ERP PROJECT ..................................................................... 214
NEGATIVE OUTCOMES OF THE FIRST ERP PROJECT ............................. 218
THE SECOND ERP PROJECT ................................................................. 220
OUTCOMES OF THE SECOND ERP PROJECT ......................................... 226
DISCUSSION AND IMPLICATIONS ......................................................... 227
Maintenance and support of the ERP ........................................... 227
Improvements in project management practices ........................... 229
CONCLUDING REMARKS ..................................................................... 233

Appendix A ............................................................................................ 235

Maturity Levels of IT Governance

References .............................................................................................. 237

Index ....................................................................................................... 254

 LIST OF FIGURES

Figure 3- 1The Oracle Unified Method (OUM) ....................................... 45

Figure 3- 2 The Full Lifecycle ERP Adoption Reference Model ............. 61
Figure 4- 1The Elements of IT Infrastructure ........................................... 83
Figure 4- 2 An Example of Project Organization for ERP Adoption ....... 99
Figure 7- 1 Five Levels of IT-Enabled Business Transformation .......... 169
Figure 7- 2 The “AS-IS” Model of Tradeco’s Sales Order Fulfilment
Process .......................................................................................... 188
Figure 7- 3 A Potential “To-Be” Model of Tradeco’s Sales Order
Fulfilment Process ........................................................................ 189
 LIST OF TABLES

Table 1- 1 A Partial List of Commercial ERP Products and Vendors

2016 ................................................................................................ 11
Table 1- 2 Problems and Mistakes in ERP Adoption ............................... 15
Table 2- 1 Drivers of ERP Adoption ........................................................ 25
Table 3- 1 Phases of SAP AG’s Accelerated SAP (ASAP)
Methodology ................................................................................... 43
Table 3- 2 Phases of Oracle’s Application Implementation
Methodology ................................................................................... 44
Table 3- 3 Seven Perspectives of ERP Adoption ..................................... 48
Table 3- 4 ERP Adoption Body of Knowledge (EABOK) ....................... 64
Table 4- 1 A Subset of Shared IT Infrastructure Services ........................ 84
Table 4- 2 The Elements of Stakeholder Register .................................. 106
Table 5- 1 Key Skills Recommended for Graduates of University
ERP Programs ............................................................................... 137
Table 5- 2 Knowledge and Skills Required of ERP Project Leaders
and Managers ................................................................................ 139
Table 6- 1 A Summary of Selected Change Models............................... 146
Table 6- 2 Kubler-Ross Grief Cycle ....................................................... 154
Table 8- 1 Types of Internal ERP-Related M&S Requests .................... 201
Table 9- 1 A Summary of Findings of the Tradeco Case ....................... 212
Table 10- 1 Critical Issues Concerning ERP Maintenance
and Support ................................................................................... 228
Table 10- 2 Improvements in Project Management in the Second
ERP Project ................................................................................... 230
 PREFACE

Enterprise resource planning (ERP) systems are the lifeblood of

modern business enterprises. Unfortunately, this important phenomenon is
also associated with many negative stories. Unsatisfactory system
adoption outcomes may be attributable to a number of mistakes such as
unclear adoption objectives, poor support from management and users,
excessive customization, poorly managed business process changes, and a
misplaced focus primarily on implementation with the requirements of on-
going maintenance and support understated or neglected.
Besides, some of these organizations placed their focus primarily on
the technical aspects of ERP adoption but not on business objectives and
requirements. Generally speaking, ERP adoption should be treated as a
business project. It is necessary to stress the very close relationship
between ERP systems, and business and organizational issues. An ERP
cannot be successfully deployed in isolation of such requirements and
constraints while the major challenge of ERP adoption lies in the difficulty
of integrating and satisfying the highly diverse requirements originating
from the multiple facets of an organization.
In addition to technical requirements associated with setting up and
operating an ERP system, it must also be planned and deployed with due
considerations given to such issues as IT governance and strategic
alignment, business practices and process improvement, change management,
ERP customization, on-going system maintenance, human resources
development and training. Moreover, the long lifespan of an ERP
installation makes sound lifecycle management particularly important.
Thus, the holistic full lifecycle approach espoused by this book
emphasizes a broader and comprehensive view that encompasses the
technical, business and organizational factors of an ERP project. This
approach also urges ERP adopting organizations to treat post-
implementation requirements as important factors that must be carefully
considered in ERP planning and strategy formulation. System design and
implementation decisions must be made appropriately to result in a stable,
and maintainable system for the long run.
This book intends to address ERP adoption and management together
with many of the aforesaid business and organizational issues.
xvi Preface

Chapter 1 presents the basic concepts about ERP systems, information

about vendors, and mistakes made by ERP projects. It also discusses the
reasons that incentivize me to write this book.
Chapter 2 discusses the strategic intent, and critical success factors of
ERP adoption.
In Chapter 3, the Full Lifecycle ERP Adoption Reference (FLEAR)
model is proposed and illustrated in simple plain English. The FLEAR
model highlights seven perspectives to guide an organization to
understand the requirements and constraints pertaining to ERP adoption.
Strategic considerations for ERP adoption are also discussed in this
chapter.
Chapter 4 discusses organizational issues which include strategic
alignment, organizational culture, IT governance, IT infrastructure, and the
relationship between ERP deployment and the overall information
management environment. This chapter also discusses the structure, roles
and responsibilities of a typical project organization, and stakeholder and
communications management issues.
In Chapter 5, human resources management issues, particularly those
pertaining to the development and retention of critical skills, consultant
management, knowledge transfer and training, are discussed.
Chapter 6 and Chapter 7 address the important issues of managing
changes in ERP adopting organizations. Chapter 6 focuses on high level
change management theories and principles while Chapter 7 discusses the
levels and issues of IT and ERP-enabled process changes. Guidelines for
change management and process changes are presented respectively in
these two chapters. The order fulfillment process of Tradeco is also
analyzed as an example of business process changes in Chapter 7.
Chapter 8 discusses the maintenance and support activities, and other
post-implementation issues of the operations phase of the ERP lifecycle.
Two in-depth case studies are also included in this book for the
readers. Chapter 9 presents the Tradeco case, and Chapter 10 the
Controlco case. Both are the Asia Pacific operations of American multi-
national conglomerates. In addition, the ERP experience of these two
international firms is referenced to support our discussion of various
important ERP and management issues throughout this book.
The case studies and many topics presented in this book are selected
with the needs and interests of several categories of readers in mind (such
as MIS practitioners, business professionals, and advanced university
students). I hope readers would find this book interesting and useful.
 ACKNOWLEDGMENTS

I was motivated to write this book by many people, including my

colleagues, clients, and students over the years as a management
practitioner, and later as an academic. The completion of this book project
was delayed until recently because of many other priorities in my hectic
life that competed for time allocation.
First of all, I would like to sincerely express my appreciation to the
following ERP researchers: Prof. Eric W. T. Ngai, Hong Kong Polytechnic
University; Prof. Charlie C. Chen, Appalachian State University; Prof.
Bruce J. P. Wu, Tamkang University; and, Prof. Samuel C. Yang, California
State University at Fullerton. In addition to successfully publishing
together several frequently accessed and cited ERP articles, I enjoyed
working with them, and was always impressed and enlightened by their
ideas and research skills.
I would like to thank quite a number of inquisitive students for their
inspiring questions concerning ERP adoption and business process
management, which have contributed to the incentive of writing this book.
I would like to express my appreciation to those in the graduate school of
Chaoyang University of Technology, Taiwan. In particular, I would like to
thank those who worked under my supervision for their Master’s theses,
and those who attended my graduate seminar of commercial practices in
MIS, and graduate seminar of business process re-engineering. Special
thanks also go to my friend, Prof. Thomas C. Hsiang, and students in his
MBA quality management classes at Hong Kong Polytechnic University,
some of whom are highly seasoned professionals. Prof. Hsiang invited me
as a guest lecturer to his quality classes several times, and the interactions
with Prof. Hsiang and his students were highly rewarding and inspiring.
I was lucky to have benefited from the knowledge of many scholars
throughout the process of learning to become a management researcher. In
this respect, I would like to express my gratitude to Prof. Ngai, Prof. Peter
P. M. Yuen, and Prof. Margaret Shaffer who taught me quantitative and
qualitative research methodologies while I was a student of the Doctor of
Business Administration Programme at Hong Kong Polytechnic
University.
Several other organizations have also contributed to the completion of
this book, resolving many hurdles in the publication process. I sincerely
xviii Acknowledgments

thank the following organizations for granting me permission to incorporate

some of their copyrighted materials in this book: Oracle Corp. for the
Oracle Unified Method diagram, ISACA for the model of Maturity Levels
of IT Governance, and IEEE Publishing for the interviewee comments of
my ERP article published under the journal of IEEE TEM. Last, but not
least, my sincere gratitude is also extended to the external reviewers who
reviewed sample chapters, and the proposed topics and structure of this
book, and the editorial and production teams of Cambridge Scholars
Publishing for their great efforts and timely assistance.

C. C. H. Law
Edmonton, Alberta
 CHAPTER ONE

THE ERP PHENOMENON

Abstract
This chapter begins with an introduction to the concepts of enterprise
resource planning (ERP) systems. It then shares with readers basic
information about top-ranking ERP vendors and their products in the
world. As the author points out, ERP adoption is an important global
phenomenon in recent decades, but unfortunately, many ERP projects
across the world have failed. In this chapter, he explains the difference
between the hype and reality about ERP, and highlights the mistakes made
in ERP projects in advanced and developing countries.
One of the misconceptions and malpractices commonly found in many
ERP projects is a misplaced focus that stresses implementation, and
downplays the importance of post-implementation requirements of the
ERP lifecycle. In concluding the chapter, he explains why he writes this
book. In order to avoid, or at least mitigate, the problems reported by so
many ERP-adopting organizations, he emphasizes a full lifecycle approach
by which an organization takes a broader view of the requirements of the
whole ERP lifecycle when it plans for an ERP project. By this approach,
organizations do not limit its focus to implementation, but should also
consider post-implementation requirements (such as those of on-going
maintenance and support) when defining the overall strategy for the ERP
project. A balanced set of resources and competence supporting this
strategy must be recruited, developed, and retained to get the organizations
ERP-ready ahead of time for not only the implementation phase but also
the remainder of the ERP lifecycle.
2 Chapter One

Fundamental concepts of ERP

Enterprise resource planning (ERP) systems refer to suites of
application systems comprising multiple integrated software modules that
help organizations to manage their resources (Teltumbde 2000). The
predecessors of ERP first appeared in the 1960s as material requirements
planning (MRP) and, later, evolved into a more advanced system called
manufacturing resources planning (MRP II). MRP is a system that is used
in planning and scheduling production. It translates the requirements of
finished goods into those of low-level materials (i.e. raw materials,
component parts, and subassemblies) for various time fences. MRP II
extends the functionality of MRP to include the functionality of capacity
requirement planning and those for other functional areas such as finance
and marketing. Today, ERP systems are generally more sophisticated, and
more effective in supporting multiple functional and business units,
including but not limited to, accounting and finance, sales and operations
planning, order management, purchasing, supply chain management,
manufacturing, human resources management, and customer relationship
management.
ERP enables seamless integration of business processes (Mabert, Soni,
and Venkataramanan 2003), and information sharing (Davenport 1998)
across departmental boundaries within a company, and even with its
business partners. The capability of information sharing along a company’s
value chain is vital to effective decision-making and operating efficiency.
In general, ERP packages provide built-in workflow engines to enable
workflow automation. With these engines, companies can define business
rules and approval matrices so that information, messages, and documents
can be routed automatically to operational users for actions to be taken for
business transactions, and to managers and directors for review and
approval.
ERP is the lifeblood of daily business operations for many companies.
However, its importance is not limited to online transaction processing
(OLTP). Because of its integrated database, it is a facilitator or an enabler
for organization-wide knowledge management, strategic planning, and
decisions at levels well above the transaction processing level (Bendoly,
Soni, and Venkataramanan 2004). ERP vendors enable online analytical
processing (OLAP) by supplying clients OLAP tools, and business
intelligence modules.
 The ERP Phenomenon 3

Potential impacts of ERP systems

Accompanying the ERP is a remarkable phenomenon of empowerment,
occurring at the various levels of the organization. It may have profound
impacts on how work is to be accomplished, and thus consequently on the
effectiveness and efficiency of the whole enterprise. We may illustrate the
potential impacts of an ERP by taking a glance at the tasks performed by a
sales assistant or customer service staff before and after ERP
implementation.
Without an ERP system, he captures sales orders using either paper-
based forms, or a standalone sales order management system. The sales
orders are then routed to the various departments that are involved in the
order fulfilment process. The information pertaining to the sales orders is
later entered into the standalone systems of the departments involved. The
whole process is inefficient and infested with several problems, namely,
duplication of efforts, potentially more data entry errors, and delay in
information processing. As information concerning sales orders and order
fulfilment-related activities is scattered over more than one unintegrated
functional system, information sharing among various departments is
limited. In many circumstances, he lacks the ability to respond promptly to
customers’ queries about order status. Generally speaking, workers
involved in each stage of the order lifecycle are blind-folded, and
straitjacketed by the lack of information about what has been completed
by colleagues in other departments.
An ERP addresses the abovementioned problems by bringing together
all those involved in the value chain through integrating the application
modules used by various functional and business units. For instance,
information integration enables sharing of information along the order
fulfilment process. It provides those involved a consistent picture of the
sales order at every point of the order lifecycle. With the ERP, the sales
assistant or customer service staff may be granted access to the relevant
information about customer credit status, inventory level, and warehouse
and shipping schedules, whenever appropriate, to support his order-related
decisions. Such information can be displayed at the screen of the
workstation within seconds as requested to facilitate his work activities.
With access to real-time information, he is able not only to inform the
customer of the estimated order delivery date but also to remind
procurement staff of the requirements of the order.
With the ERP, the same worker is empowered with information to do a
lot more in a more effective and efficient manner. In short, the ERP helps
the company realize the benefits of eliminating data entry errors, reducing
4 Chapter One

order fulfilment cost and cycle time, enabling speedy delivery of goods
and services, and raising customer satisfaction levels. Generally speaking,
ERP deployment is not solely a game of system implementation and
process automation. Its potential benefits can be maximized only if those
involved are willing and committed to take advantage of system
capabilities to innovate and improve the business practices and processes
of the company on an ongoing basis.
Given the wide range of features available from ERP products, many
executives and management information systems (MIS) consultants
believe that ERP systems can deliver strategic competitive advantages. In
fact, ERP systems have demonstrated to result in significant reduction in
operational costs, and improvements in efficiency, productivity, and
service quality if they are implemented properly. ERP systems can
contribute not only to internal, cross-functional, integration, but also
supply chain integration which will be discussed further in the following
paragraphs.
Therefore, it is not surprising that many companies, especially large
enterprises, have already adopted ERP systems (Van Everdingen, Van
Hillegersberg, and Waarts 2000), while many small and medium-sized
enterprises (SMEs) are also eager to embark on the journey of ERP
implementation. The recent years have witnessed an upward trend for the
number of SMEs adopting ERP systems. Many enterprises in developing
countries such as Brazil, India and China are also actively pursuing their
ERP dreams.

Recent trends of ERP

ERP II or value chain resource planning

Since the last decades, business enterprises are increasingly aware of

the value of collaboration between business partners in the value chain or
network. Linkages to business partners’ systems and B2B e-commerce
sites are implemented first using electronic data interchange (EDI), and
later using web-based technologies. ERP consultants and scholars have
also proposed extensions to the concept of ERP for the extended
enterprises. Gartner Group called its new conceptual model ERP II (Bond,
Genovese, Miklovic, Wood, Zrinsek, and Rayner 2000). ERP II
emphasizes inter-enterprise collaboration while a pure ERP system has its
focus on the internal requirements of an enterprise.
Bendoly and colleagues described their conceptual model as value
chain resource planning (VCRP) system (Bendoly, Soni, and Venkataramanan
 The ERP Phenomenon 5

2004). At the centre of the model is the ERP domain of the firm which is
connected to other internal applications such as data warehouse. The ERP
domain has an intra-firm focus, managing the operations and relationships
of the internal units of the firm. Added to this internal ERP domain are
supplier and customer relationship (SRM, and CRM) modules and
connections to e-commerce systems that make up the value chain resource
planning domain. The VCRP has an inter-firm focus, meaning that the
value proposition and business strategy of this model have shifted from an
emphasis on the firm to the collaborations across the value chain or
network.
Implementing and managing an inter-firm ERP II or VCRP system will
doubtlessly be more complicated and challenging than a pure ERP because
each of the individual firms participating in a value chain may have their
own business objectives, requirements, and constraints, some of which
may be incompatible with those of their business partners. ERP vendors
have noted such concepts, and recognized the ever growing importance of
collaborative commerce (or c-commerce). They have responded by
producing more system features or modules that cater to the requirements
of managing customers and business partners such as the customer
relationship management (CRM) and supplier relationship management
(SRM) modules, or by acquiring such application modules through
merging with or taking over other pure-play CRM and SRM software
producers. ERP II suites also began to appear in the market recently. These
enhanced software products emphasize a new design oriented towards
inter-firm collaboration. Among them is the ERP II suite produced by Data
Systems Consulting Co. Ltd. of Taiwan, and marketed in many Asian
locations under the subsidiaries of Digiwin Software. It would surely be
interesting to hear clients’ assessment about this product and the like.
Although the VCRP and ERP II are idealistic models that are very
complicated and challenging for ERP vendors to fulfil all of the proposed
functionality requirements (Bendoly, et al. 2004), vendors have at least
demonstrated the intention to move towards such an inter-firm
collaborative model. In recent years, many ERP vendors (such as SAP
AG) have added to their portfolios of ERP solutions application modules
that support inter-firm interactions with customers and suppliers. Such
modules enable and facilitate collaborative planning, procurement,
replenishment, logistics management, and product design.
Some enterprises are also pursuing the dream of c-commerce by
themselves, taking the “best-of-breed” approach. They have added to their
core ERP system third-party supply chain management (SCM) modules
such as those offered by i2 Technologies and Manugistics (both of which
6 Chapter One

are now part of JDA Software Group, Inc.) to support collaborative

activities with business partners. Such attempts successfully enable, to
some degree, the benefits of collaborative planning, forecasting, and
replenishment (CPFR) and vendor managed inventory (VMI) (JDA
Software Group, Inc. 2010). Bendoly, and colleagues discussed the efforts
of several large enterprises in building their own versions of VCRP
(Bendoly, et al. 2004). For instance, Georgia-Pacific connected its core
SAP R/3 to a supply chain management system developed by RedPrairie
to manage carriers, and a collaborative logistics system offered by Nistevo
to enhance fleet-sharing capabilities with other companies. Georgia-
Pacific also linked its SAP ERP to a B2B e-commerce exchange using
software offered by webMethods, a software firm taken over later by
Software AG in 2007.
Some companies facilitate CPFR, for instance, by granting data
warehouse access to business partners. An example offered by Bendoly, et
al. (2004) was Wal-mart which did so using NCR’s Teradata software
product. In fact, collaborative efforts between suppliers and retailers began
much earlier. It was pioneered in the late 1980’s by Proctor & Gamble
with Wal-Mart and K-Mart on continuous replenishment. The value of
such a development was so well received by Wal-Mart and other companies
that it was later expanded into a full-fledged CPFR functionality (Koch
2002).
When c-commerce is becoming increasingly important nowadays, and
business strategies are shifting more and more from originally an intra-
firm focus towards an inter-firm focus, we should anticipate more
innovations in ERP or ERP II software products. However, in my opinion,
the advent of c-commerce and VCRP or ERP II is not by any means
heralding the death of the ERP as suggested by Bond and colleagues
(Bond, et al. 2000). Even in the perfect scenario that all partners share the
same objectives of unselfishly maximizing the total profitability of their
value network, every participating firm in the network would still
inevitably have its own profit and loss requirements, assets, and other
resources to manage. Simply put, you need to keep your own house in
order before being qualified for partnership. In fact, realizing the idealistic
vision of VCRP depends on two requirements, namely, those at the
technological, and relationship management levels. Firstly, partners need
to agree on the common technological and data standards, and ERP
solutions to be adopted. While there exist so many brands of ERP products
in the market which may complicate the planning, implementation and
management of inter-firm ERP solutions, data sharing across enterprises
has become simpler with the advent of XML-based solutions. This is a
 The ERP Phenomenon 7

consolation to VCRP or inter-organization system (IOS) advocates.

Secondly, adoption of VCRP and data sharing is not possible unless there
exists an acceptable degree of trust among business partners. Thus, the
challenges for VCRP are not only technological, but also relationship
management issues.
Because of the above-mentioned reasons, the traditional core
functionality of ERP and look-alive software will continue to exist,
perhaps in more sophisticated forms and possibly in different system
architectures while the collaborative features of such systems will be
accorded increasing importance in future ERP releases.
The future is uncertain but indisputably interesting. What is certain at
this moment is the increasing demand for project management skills for
the deployment of more sophisticated and complicated enterprise or inter-
enterprise systems.

SaaS ERP and freeware

In terms of the evolution of product features, many ERP products

nowadays have embraced the service-oriented architecture (SOA) and are
enabled to support web-based technologies, RFID, cloud computing, and
the Software as a Service (SaaS) model. Social media look and feel is
usually added to user interfaces of recent ERP products, and some ERP
products support access by mobile devices (such as smart phones and
tablets).
Traditionally, when we talk about ERP, we are referring to on-premise
ERP systems which are implemented for and under the control of
individual firms. In recent years, cloud and SaaS-based ERP products
began to emerge in the market. SaaS originally refers to software vendors’
or application service providers’ business models for providing (selling)
software services to subscribing clients, while cloud-computing is a term
that describes the distributed computing architecture of IT systems.
However, both terms are often used together by the trade press nowadays
for ERP products, and their original meaning is blurred.
SaaS-based ERP products are often set up and managed as multi-tenant
systems by the ERP vendors (such as Epicor and UNIT4) or application
service providers (ASP), and shared by multiple clients who subscribe to
such services. This kind of ERP products and subscription model would
allegedly save client firms from the intimidatingly high initial costs of
software licenses and implementation, and the trouble of on-going
management of on-premise ERP systems. An advantage of cloud-based
ERP systems is related to the scalability and ease of deployment of their
8 Chapter One

functionality. Potentially, such characteristics may contribute to the

adoption of a multi-tier ERP architecture by some enterprises in which less
complex cloud-based ERP modules are added to co-operate with the main
centralized on-premise ERP (Shinde 2015).
In adopting an on-premise ERP system, a firm not only has to incur the
initial investment for software licenses and implementation, but also has to
worry about the acquisition and retention of ERP implementation and
system administration expertise. By contrast, a small enterprise could gain
access to SaaS-based ERP services as long as it has network connectivity
to the ASP’s system infrastructure. The rest would be taken care of by the
ASP. Thus it is a good news for small and medium-sized enterprises
(SMEs) which usually do not have a sizable IT department. However, it is
worthwhile to bear in mind the reminders from some ERP experts, such as
Eric Kimberling of Panorama Consulting. For the shorter term, it is less
expensive to subscribe to a SaaS-based system, which, unfortunately, may
be more costly than on-premise systems in the long term. SaaS-based ERP
systems require a recurring monthly or annual subscription fee, while on-
premise systems are estimated to have a break-even point of
approximately five years. After this point, an enterprise would have to pay
for primarily maintenance and support (M&S) expenses for its on-premise
ERP-installation (unless new modules are to be added). Thus, the use of
SaaS-based ERP may be more costly than on-premise systems over the
longer term (Teach 2016).
In addition, there are other concerns about cloud and SaaS-based
systems. Many larger enterprises are still looking at multi-tenant cloud and
SaaS-based ERP environments with suspicion (unless the cloud-based
systems are implemented in company-controlled private clouds which are
used exclusively by themselves). Their concerns are primarily about data
security, and the degree of flexibility in configuring the ERP instances to
support their more complicated business processes (Wailgum 2008a;
Shinde 2015; Webster 2016). First, they naturally have concerns over
placing confidential and proprietary business data in a shared environment
that is not under their own control. Second, traditional on-premise ERP
systems provide a large number of parameters for client firms to configure
the ERP instances to support their own business practices and processes.
At present, many cloud-based ERP products are still weaker in terms of
functionality breadth and configurability than on-premise ERP products
(Webster 2016). How much of such flexibility would be available to a firm
in a multi-tenant cloud and SaaS-based ERP environment? This is surely a
valid question for ERP-adopting firms. An on-premise ERP permits a firm
the flexibility to select its own combination of application modules, and if
 The ERP Phenomenon 9

necessary, to integrate legacy or other applications with the ERP instance.

Thus, the advantages of SaaS-based (multi-tenant) ERP for SMEs
discussed above may possibly be perceived as constraints by some larger
enterprises. That explains why on-premise systems will continue to
account for a significant share of the ERP market though cloud and SaaS-
based ERP products are gaining in popularity (Columbus 2013).
According to Panorama Consulting, fifty-six percent of ERP systems
adopted are on-premise systems, thirty-three percent are implemented as
SaaS-based systems, and eleven percentage are cloud-based ERP hosted
and managed off-site (Teach 2016).
Nevertheless, the upward trend for cloud and SaaS-based ERP systems
must be noted. Some consultants predict that the concerns about data
security, functionality breadth, and configurability may eventually become
less of an issue, and cloud and SaaS-based ERP would be increasingly
accepted in the market (Teach 2016).
Recent years have also seen the advent of open-source ERP products
such as OpenERP, Compiere, WebERP and others. Such software
products are free of charge. Unlike proprietary commercial ERP products
(such as Oracle and SAP), firms adopting open source ERP have access to
the source codes so that they can customize (or modify) the modules
directly, instead of only adding bolt-on functionality, to fit their specific
functional and process requirements. These are the advantages offered by
open-source ERP software. Firms, in particular SMEs, may find it
appealing considering the cost savings.
However, unlike commercial products which are supported by their
vendors and consulting partners to guarantee the quality of software and
on-going enhancement, firms adopting open-source ERP are on their own.
They will have to be fully responsible for developing the needed expertise,
the quality of the software, and on-going maintenance and support of the
system implemented. That is the price to pay in exchange for the benefits
of using a free software and the flexibility of customizing the source
codes. Firms which intend to take this route of the ERP journey can also
contact independent consultancies for help. Some consulting firms offer
open-source ERP implementation and support services.

The ERP market and products

There are over 100 proprietary commercial ERP products in the market
that target customers in various business sectors (Teach 2016). Table 1-1
lists 15 popular ERP vendors and their profile information. Oracle
Corporation and SAP AG are by far the largest vendors in the global ERP
10 Chapter One

market, and they are often called the “tier-1” vendors (Columbus 2013).
Other vendors trailed far behind these two giants in revenue and market
share. Readers who are interested in pursuing further information about
these companies can browse their websites, using the URLs provided by
Table 1-1.
The global ERP market in the recent decade can be characterized as
anything but “dull”. It was full of dramatic mergers and takeovers. The
global ERP market was traditionally dominated by a few big players, and
it is even more so today after rounds of consolidation in the last decade. In
2003, J. D. Edwards was purchased by Peoplesoft, Inc, which was taken
over by Oracle Corp. in 2005. In fact, Oracle has also bought Siebel (a
pure-play CRM producer) in 2005, and Primavera Software, Inc. (a project
portfolio management system producer) in 2008. In the same period of
time, Baan, an ERP producer founded in the Netherlands in 1978, was
acquired by SSA Global Technologies in 2003. In 2006, SSA Global
Technologies was bought by Atlanta, Georgia-based Infor Global
Solutions. In the same year, Infor took over MAPICS, and Geac Computer
Corporation. In 2014, SAP also took over Concur, an USA-based vendor
of cloud-based travel and expense management solutions. Both SAP and
Oracle have added cloud-based products to their product mixes in recent
years.
According to Gartner Group, the overall ERP market grew only a
meagre 2.2 percent in 2012, and the ERP market may see further
consolidation in the coming years. An interesting observation by Gartner
Group, and other ERP consultancies (such as Panorama Consulting) is that
the sales of cloud and SaaS-based ERP products have expanded at a faster
rate in recent years than traditional on-premise ERP. It is predicted by
many consultancies that the upward trend for cloud and SaaS-based
systems will continue into the future (Columbus 2013; Teach 2016).
In addition to the popular global commercial ERP products, many
countries and regions produce their own local or regional products. I list
only five examples here. Data Systems Consulting (Digiwin Software),
YonYou, and Kingdee products are popular in the Greater China area.
Netsoft is an Indian ERP producer and consultancy based in Bangalore
while TOTVS is a Brazilian vendor. There are many more small ERP
producers in various countries that serve the local or regional markets
which are not covered in our discussion.
 The ERP Phenomenon 11

Table 1-1 A Partial List of Commercial ERP Products and Vendors 2016

Company Primary ERP Products Company Website

Data Systems Consulting TIPTOP ERP; Workflow ERP II; Smart ERP http://www.dsc.com.tw;
Co. Ltd. http://en.digiwin.biz/
Epicor Software Corp. Epicor ERP; Epicor Cloud ERP; Epicor Eclipse http://www.epicor.com
Infor Global Solutions Infor Cloud Suite; Enterprise Asset Management; www.infor.com
Financial Management; CRM
Kingdee International Kingdee Enterprise Application Suite (EAS); K/3; K/3 www.kingdee.com/en/;
Software Group Ltd. Cloud; Business Operation System (BOS) http://www.kingdee.com.hk
Kronos Incorporated Global Workforce Solutions; HR & Payroll http://www.kronos.com
Microsoft Corp. Microsoft Dynamics AX www.microsoft.com
Netsoft Solutions Ltd. Impact ERP, CRM, HRM & SCM Solutions www.netsoftindia.in
Oracle Corp. Oracle E-Business Suites, Peoplesoft, & cloud products www.oracle.com
Plex Systems Cloud/SaaS ERP for business & manufacturing http://www.plex.com/
QAD, Inc. QAD Cloud ERP (formerly MFG/PRO) http://www.qad.com/erp/
Sage Group Sage ERP X3 and related products www.sage.com
SAP AG SAP ERP (SAP Business ByDesign, SAP Business www.sap.com
One, SAP Business One Cloud)
UNIT4 Business Software UNIT4 Cloud ERP & industry specific solutions http://www.unit4software.com
TOTVS Distribution & logistics, manufacturing, & financial http://en.totvs.com/
Yonyou Software Co., Ltd Yonyou financial management, supply chain, human http://www.yonyou.com.hk
(formerly UFIDA) capital, and CRM solutions
12 Chapter One

The hype and reality about ERP

The advent of ERP systems is one of the most amazing phenomena in
business management. If implemented properly, ERP helps a business
enterprise to achieve its strategic and operational goals. Many vendors
have touted their products as representing the “best business models”.
Needless to say, the “best practices” incorporated in their products are
advertised as the panacea for many operational problems encountered by
client organizations.
That is impressive indeed. Unsurprisingly, many large corporations
and small and medium-sized enterprises (SMEs) in advanced countries
either have already implemented or are planning to implement their ERP
systems. The ERP movement has also made inroads into developing
economies such as India, China, Brazil and others in the last decade.
However, a reality check would awaken any rational business manager or
IS professional from idealism and optimism. The last two decades have
seen many ERP disasters that are so unforgettably disappointing. Among
the most notorious failures are ERP projects of Hershey Foods, Nike and
HP (Wailgum 2009b). Organizations which got trapped in such disasters
not only suffered substantial financial loss from wasted project
investments, but also enormous loss of revenue, and tarnished corporate
image.
According to Robbins-Giola LLC, fifty-one percent of the ERP
projects they surveyed were reportedly unsuccessful (Robbins-Gioia 2002).
Likewise, forty percent of the one hundred and seventeen organizations
participated in a Conference Board Canada survey said that their ERP
projects had failed to meet business case objectives (Cooke, Gelman, and
Peterson 2001). A review of academic studies and the reports published by
trade magazines has shed light on many problems and mistakes that might
be the culprits for the disappointing outcomes of ERP projects. Among the
critical problems reported by consultants and researchers are the misfits
between the ERP products selected and the business requirements of the
ERP adopting organizations, and failures in redesigning or integrating
business processes with the ERP systems. We shall take a closer look at
more problems below.

Mistakes and problems

I have listed in Table 1-2 a subset of the mistakes and problems found
in ERP projects reported by the trade press and academic literature. I have
also mapped the entries in the table to the relevant sources which readers