Motivation for ERP adoption – Project topics materials

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Costs and Return of Investment

The large ERP providers have made many promises, but many user companies are still asking, “what’s the payoff?’ The answer is still unclear. Implementing wall-to-wall software is not a matter of powering up the computer and installing a program from a CD-ROM. Enterprise Resource Planning is a huge investment in time and money. It can take years of work by numerous managers and cost millions, or in some cases hundreds of millions of dollars. The cost of implementing an ERP application depends on the scope of the effort, size of the enterprise, the ERP application selected, and the Information Technology environment required. Cost for a large system can run to several hundred million dollars. Many large corporations are currently spending between $5 million and $200 million to implement an ERP system (McKinney, 1998).
There are as many success stories as there are failures related to the implementation of ERP systems. In one failure case, Dell Computer cancelled their ERP contract in January 1997 after spending $115 million dollars the original cost of the project was estimated at about $150 million. Dell determined that the system could not deal with the needed sales volume. Likewise, Mobil Europe spent hundreds of millions of dollars on its ERP system only to abandon it when its merger partner objected to the system, and FoxMeyer Drug stated that its ERP system helped drive it into bankruptcy.
On the positive side, Autodesk, a leading maker of computer-aided design software claims a success on an ERP implementation. It used to take an average of two weeks to deliver an order to a customer, but now Autodesk ships 98% of its orders within 4 hours. IBM’s Storage System division used an ERP to reduce the time required to reprise all of its products from 5 days to 5 minutes, the time to ship a replacement part from 20 days to 3 days, and the time to complete a credit check from 20 minutes to 3 seconds. Fujitsu Microelectronics reduced the cycle time for filling orders from 18 days to a day and a half, and cut the time required to close its financial books from 8 days to 4 days, using an ERP system.
Companies are anticipating immediate returns on efficiencies in production and inventories, with additional returns in other areas being realized over the long term. The greatest return will be one that cannot be easily quantified. This is an integrated system that provides timely information, better customer support, and a competitive edge; it addresses strategic goals and objectives, and takes a company into the 21st century. Only time will tell if there are great improvements possible in the bottom line, in strategic competitiveness, in employee and customer satisfaction, and in overall benefits for shareholders/stakeholders.

Measurement of success

The definition and measurement of ERP implementation success is a thorny issue. Markus and Tanis (2000), state that success means different things depending on who defines it. Success depends on the point of view from which you measure it. People meant different things when talking about ERP success. That is to say implementation Consultants, defines success in terms of completing the project plan on time and within budget. However implementers i.e. adopters of ERP system looks at success in terms of achieving business result tended to emphasize having a smooth transition to stable operations with the new system, achieving intended business improvements like inventory reduction, and gaining improved decision support capabilities.
Seddon et al. (1999) recommended that anyone seeking to evaluate an IT investment should have clear answers to Cameron and Whetten’s (1983) seven questions. As stated earlier, the goal of this paper is to compare the performance to the promise of ERP from Top management perspective or what Hammer and Champy (1993:102) term ‘process owners’. Process owners are senior middle managers responsible for what is described as management control and tactical planning.
Below are Cameron and Whetten’s seven questions and our answers to them in our attempt to measure organizational performance.
7 questions for measuring organizational performance Our answers in this study for evaluating investment in ES
1. From whose perspective is effectiveness being judge? Process owners (Top management)
2. What is the domain of activity? Enterprise system
3. What is the level of analysis? Budget and Time
4. What is the purpose of the evaluation? Compare Promise to performance
5. What time frame is employed? Months after the ES went live.
6. What type of data is to be used? Return on investment
7. Against which reference is effectiveness to be judged?

READ Small enterprises/Flexibility, trust and freedom !

Another important issue in the measurement of success is comparing adopters’ objectives, expectation and perception as a standard for defining and measuring success In this case the adopters’ criterion is used to compare an actual performance/achievement.

Empirical findings

In this chapter, the empirical findings from 3 respondents are interpreted. The companies Trelleborg AB, DeLaval AB and Vattenfall AB talked about the factors that motivated the companies to adopt the ERP system and the performance of their systems so far.

Trelleborg AB

Trelleborg is a global industrial group whose leading positions are based on advanced polymer technology and in-depth applications know-how. They develop high-performance solutions that damp, seal and protect in demanding industrial environments. The Trelleborg Group offers technological solutions that meet three principal customer needs: to damp, seal and protect. These functions have many areas of use in various industries worldwide. The Group’s customer groups are to be found primarily within the aerospace, agricultural, automotive, infrastructure/construction, transportation equipment, oil/gas and other industries. The head office is located in Trelleborg, Sweden and other business units in Norway, Moscow, US and UK etc.
The Group has annual sales of approximately SEK 24 billion, with about 22,000 employees in 40 countries with about 100 employees in Sweden Trelleborg’s President and CEO is Peter Nilsson and Anders Narvinger is Board Chairman. (Trelleborg AB, 2006-05-10). Our respondent at Trelleborg group is Leif Anderson a controller and financial Director in charge of the financial administration. Trelleborg uses NeuVis as their enterprise system software. NeuVis is used to support their production and distribution process. The roll out of the software was done in 1993 in a ‘Big Bang’. According to Leif, NeuVis is the first package software the company is using and it is to ensure the total integration of their processes.
On the motivation for the adoption of the system, Leif ranked the under listed proposed perceived promise of ERP which is depicted on the graph below. It must be noted that one (1) is strongest motivation and eight (8) the weakest.

1 Introduction
1.1 Background
1.2 Problem
1.3 Research Question
1.5 Delimitation and focus
1.6 Iterested parties
1.7 Disposition
2 Method.
2.1 Research approach
2.1.1 Quantitative
2.1.2 Qualitative
2.2 Data collection.
2.2.1 Primary data
2.2.2 Empirical Study.
2.2.2.1 Selection of respondents
2.2.2.2 Interview procedure
2.2.2 Secondary data
2.2.2.1 Thoeretical study
2.2.2.2 Reliability and validity
2.2.2.3 Weakness of the method.
3 Theoretical framwork
3.1 What is ERP.
3.2 ERP defined .
3.3 The ERP market
3.4 Motivation for ERP adoption
3.4.1 The desire of standardization
3.4.2 To ‘overcome’ IS legacy problem
3.4.3 The perception of a ‘tried and tested product
3.4.4 To attain best practice
3.4.5 To ‘free up information system function
3.4.6 To implement change
3.4.7 Cost
3.4.8 Bravado .
3.4.9 The role of selling
3.5 Critical success factors in ERP implementation
3.6 Benefit of ERP.
3.7 Risk factors
3.8 Cost and return of invetment
3.9 Measurment of success
4 Empirical finding
4.1 Trelleborg AB
4.2 Vattenfall AB
4.3 DeLaval AB
5 Analysis.
5.1 Perceived promise of ERP
5.2 Implementation budget and time
5.3 Performance of ERP
6 Conclusion .
7 Evaluation .
References.
Appendix