ERP systems

Competing Values Framework - HRM

De Gaauwe
1 Abstract

This dissertation plan has been written following the preliminary literature review for the course Research Methods at the Metropolia Business School in Helsinki.

It will be an advisory report looking into the possibility of the implementation of an ERP (enterprise resource planning) system. This request is coming from the PCU (Peterson Control Union) Group on behalf of CEO Mr. Tompot and Deputy Director Mr. Sabelis.

2 Introduction

This paper contains a dissertation plan outlining the current issues and debates on enterprise resource planning (ERP) for small and midsized companies (SMEs). According to Gartner, a leading advisory company, the overall ERP software market was worth US$23.8 billion in total revenue for 2008. ERP software systems are one the fastest growing segments of the business-software industry. They offer a single system linking operations within the company, including i.e. planning, manufacturing, sales, human resources, and accounting. Companies around the world spent billions of dollars on the software packages and installing ERP systems. The definition of ERP by Boonstra (2004, p.41) explains perfectly that it is more than IT and replacing the legacy systems. Information systems (e.g., ERP-systems) are not simply technical systems but socio-technical systems and their design, implementation and use involve dynamic social and political processes in articulating interests, building alliances and struggling over outcomes. My search for structuring the use of ERP systems for SMEs began with a wide-ranging review of the IT value literature since 1970. The history of ERP can be traced back even further of which the development of it will be clarified in the literature review. A shift in the understanding and usage of ERP is noticeable and nowadays even SMEs are looking into the possibility of implementing such a system. This brings me to the company for which I will conduct this research. The PCU group, of which Peterson SBS (a fully integrated logistics service provider) is a part, has given me the opportunity to investigate what is the best implementation of an ERP-system within the entire organization. The implementation of these kinds of systems has proven for companies to be challenging. Nowadays the mid-sized companies, like the PCU group, are looking into the possibility of implementing such a system into their organizational structure. Although ERP has become more accessible and affordable, numerous cases of budget overspending, deadline postponements and even bankruptcies are giving many senior managers to take a close look at the question if the organization is really benefiting from such a new system. In order to conduct my research properly the below stated research question has been formulated: Is an ERP system for the PCU group desirable?; What is the best way for the PCU group to effectively and efficiently implement an ERP system?

3 PCU group

In Aberdeen, Scotland, I had the pleasure to work for Peterson SBS, a fully integrated logistics company. The actual work was in line with the requirements set for my placement and had nothing to do with IT or ERP systems for that matter but it quickly became clear that something “big” was happening within the company. I was working April 2009 for 4 months at the Transport department, which was a part of Operations. Already in an early stage I was introduced to the new thing that was going to be implemented in the Transport department. This was Microsoft Dynamics AX, an ERP system that was going to be unrolled first in the Transport department and proven successful, other departments within the company would follow. I was fortunate to work on the manual and training for the Transport department, this together with the project manager Gero Krueger.

Microsoft had developed this system especially for the mid-sized companies and making it easy for them to keep running the familiar interface of Windows and i.e. Words but, combined this with an interface that completely replaces all other, older systems that PSBS uses in their daily operations. Gartner published in May 2009 a Magic Quadrant for Midmarket and Tier 2-Oriented ERP for Product-Centric Companies showing that Microsoft Dynamics AX is a leader and among the visionaries in the industry. PSBS has invested in a system, as was concluded in the report that is highly flexible, simple to use but lacks the market momentum.

This is the technical analysis of a system by Gartner and my attention and fascination for the system has been caught by what it is doing for the organization and its people. The system itself is a change to the company, not only because it will replace the older IT systems but also because it will affect the way employees need to work. This process of transition has caused issues between senior management and the people dealing with the daily operations. I was not there from the beginning and have not seen the full implementation of the system in Aberdeen but have noticed the changes on the work floor.

3 Literature review

As explained earlier the numerous cases and my personal interest in ERP systems has made me wanting to research this topic and come up with an advisory report for the PCU group.

The literature review has been conducted through searches of bibliographic databases as well as searching for journals and library searches of books. The following databases were searched: MetCat; ABI Inform:ProQuest; Science Direct (Elsevier); HBO Kennisbank; Business Source Elite; Business Week and Ebrary. The initial terms used for the search were: ‘ERP', ‘enterprise software system', ‘ERP implementation', ‘cases ERP systems', ‘history enterprise planning', and the search was not limited to a certain number of years of geography. The literature research has resulted in the finding of materials resulting from journals, books, cases, financial statements and internet publications. Some articles and books are published a long time ago. The focus of these older publications lies on managers and the usability of a basic functional ERP-system. The publications which are more recent show the shift towards leadership styles of managers and look more in-depth at the companies and how they are affected by the implementation of an ERP-system.

ERP has a history dating back to the 1960s with the focus of systems mainly towards inventory control. It was all about the handling of inventory within the traditional inventory concepts. A decade later the shift of focus was towards the so-called MRP (Material Requirement Planning). The American automobile industry had trouble keeping up with the Japanese way of doing business. Oliver Wight evolved the MRP, bringing more concepts to the classical MRP and calling it MRP II. As can be read in Manufacturing Resource Planning: MRP II Unlocking America's Productivity Potential. The focus of the software industry was mainly on the American market and so by the end of 1989 about one-third of the organizations were running the front runner of ERP, MRP II.[1]

Slowly organizational structures were beginning to get more diverse and complex with areas like HRM and Finance. This put a strain on the limited resources of MRP II. ERP was born, covering the integration of the business processes and being able to cope with all the activities that were needed to run the daily business. In the beginning of ERP only the larger corporations were able to afford such big investments and were able to benefit from the change. ERP software packages were offered to organizations especially to the American and European market as the highest demand came from, i.e. the Fortune 500 companies. The main aim for the implementing such a system was for most of the companies to overcome the problems with their legacy systems and improve competitiveness, as mentioned in the beginning of the article by Wang, Chou and Jiang; The impacts of charismatic leadership style on team cohesiveness and overall performance during ERP implementation. In the beginning the major players in the market were: Baan, Oracle, Peoplesoft and SAP. This has changes and the global players nowadays are IBM, Microsoft, Oracle (which has taken over Peoplesoft for US$10.3 billion in January 2005) and SAP. Most of them are American companies, except SAP which is based in Germany. This is not a reflection of the origins in the literature that has been found. Articles, books, studies and cases are from all over the world, as must be said that most of the focus is on the American markets. Albert Boonstra (2004, p.41) has described the change of ERP systems as information systems (e.g., ERP-systems) are not simply technical systems but socio-technical systems and their design, implementation and use involve dynamic social and political processes in articulating interests, building alliances and struggling over outcomes.

The debate about the usefulness and importance of ERP the past 5 years has been intense. This is best described by Chao Liang and Qing Li (2008, p.810) although many surveys, …, have validated benefits and opportunities of these enterprise information systems, many researchers also show that enterprise information projects are often with high costs and high risks. The software vendors like SAP are not deaf to this critique and started to offer standard, right of the shelf, easier to implement packages. Critique on this approach has also been from Chao Liang and Qing Li (2008, p.810) as many effects from enterprise information system projects, such as standardization and improvement of business processes, are intangible and hard to be measured by money. But it has become reality that not even the Shells of this world can afford themselves and see the necessity of an ERP system, the smaller midsized companies like the PCU Group also want to benefit of one system operating within the entire organization. The Group is therefore more complex and a bigger challenge because the company operates not only in the logistics industry but also in quality and quantity management, inspections, audits and certification. It is a decentralized, diversified group operating all over the world but their reputation of being reliable and having the expertise is highly valued by their customers. Microsoft has proven to be successful candidate for many companies to use. As it still is a new system, most of the companies started using it by mid 2009, there is not much known on the plus- and downside of the system. The success stories are on the Microsoft website and numerous other partner related websites but that does not give a full inside in the pros and cons of this particular system. With the help of the project manager getting me in contact with the local partner in Aberdeen, the hope will be that more information on the flaws of the system will be presented which can be used in the advisory report.

The book on the Business Value of IT by the Harvard Business Review has several articles related to IT, ERP and managing these types of projects. An article on important dimensions of the organizational change issues related to ERP-projects called Interpreting an ERP-implementation project from a stakeholder perspective. In the book important questions are being asked by CEOs like: “What is the true cost?”, “Does the benefit equal the investment?” and “Are we getting the expected value from ERP systems?” These questions are particularly relevant to the Board of Directors (BoD) of the PCU group who are facing the same issues. The economic and financial crises have made companies of every size, in every industry, in every country more critical and skeptical on implementing ERP systems. Not only because this type of business software requires large investments but also a change in company strategies.

The other article looks at the significant relationship between a project manager's leadership competencies and project success called Do project managers' leadership competencies contribute to project success?

In the literature that is available on ERP, narrowed by my research topic, there are the studies and articles with success stories and on problem solving. Next to that is de discussing on the constant change of the context of the system and if ERP is still the right name for this type of business software. The topic on problem solving is a phenomenon that has been developing over the last decade, as numerous cases were showing companies going bankrupt as a direct effect of wrong implementation of an ERP software system.

Every author read until now has an own way of explaining the reader what is the best and most successful set of rules that will lead to a trouble free working ERP-system e.g., in the article of Liang and Li they analyze an Analytic Network Process (ANP) that is a multi-criteria decision-making method which will facilitate all stakeholders in the project. Also Thomas H. Davenport (1999, p.162) relates to this by saying: An enterprise system, by its very nature, imposes its own logic on a company's strategy, organization, and culture.

This certainly has made me aware of the usability of this, and maybe others, decision model for my report. The set of steps mentioned by Musaji: Project definition and requirement analysis; External design; Internal design; Pre-implementation; Implementation and Post-implementation are useful but not specific enough for the PCU Group. Through investigating internally

Everyone offers different solutions and in the literature a shift is noticeable, from the older publications to the newer ones, that the organization as a whole is becoming more important to acknowledge when implementing a new system.

4 Research plan

The next important step in the preparation for writing my dissertation will be a meeting with the ERP research team of the PCU Group. On 6 January 2010 the meeting will be held in Den Helder, the Netherlands, and I will present my research topic and dissertation plan. The Deputy Director, Hein Sabelis, of with whom I had a meeting on 29 October 2009, will be attending. On the 6th of January I would like to discuss the results from the research I have done so far and explain my role as a consultant to the company. Furthermore I would like to know more about the other activities and branches of the company worldwide. This will not only be of importance for me to better understand the company but it might also be a helpful to understand cultural differences.

The global planning after 6 January can be seen in the flow diagram as shown above. These will be the necessary steps and time in order to come up with a satisfying dissertation plan.

Already many consultancy companies analyze ERP systems and discuss models of implementation. This is an area of knowledge of which I would like to know more about and therefore would like to arrange meetings with KPMG and/or any other consultancy agency having specialized departments on IT. Reading more cases of companies will be also useful on gathering information not only on how wonderful ERP systems work within the organization but also the story from the other side is meaningful. Discovering the different packages offered by the major software vendors is also a very important aspect of research that has to be done. Within the PCU Group there are also people that might be of use to my research. In particular Aberdeen, because of the connection with the ERP team leader there but also other directors might be in my opinion a source of information.

All these different sources of information are a part of the quantitative approach, were the data contains more information and is more natural.[2]

Supervisors are important in the guidance and start up phase towards the dissertation plan. An email has been sent to the course coordinator, Mr Theo Soeteman, and hopefully there will be an answer soon who will be my supervisors in order to get the research going.

A lot of research still has to be done and even the research question might be changed by either the supervisor or the research team. Factors that create uncertainty but at the same time give more time to investigate and go after more information. The research topic is big enough and daily articles are published. The software market is dynamic, the changes are quick and so many companies are enrolled to some sort of an ERP system that getting information is not a problem. Filtering is another story, as looking at my research topic and the company, looking at what is the best way is already a challenge in finding the right information. SMEs are a specific size of company and the PCU Group's different

Personally my thoughts about what is the best way for the PCU Group in implementing an ERP system, the answer might not be in finding the best model but will be more complex with company culture and management styles taken into consideration. Because in the literature, for instance the article of Cooke-Davies, discusses not only what is the best ERP system but also what are the success factors related to this kind of projects.

5 References

Ahlemann, F. “Towards a conceptual reference model for project management information systems.” International Journal of Project Management. (2009): 19-30

Boonstra, A. (2004) “Interpreting an ERP-implementation project from a stakeholder perspective.” International Journal of Project Management (Elsevier): 38-52.

Bredillet, Christophe N. “Mapping the Dynamics of the Project Management Field: Project Management in Action (Part 1).” Project Management Journal. 39.4 (2008): 2-4

Cooke-Davies, T. “The real success factors on projects.” International Journal of Project Management. (2002): 185-190

Davenport, Thomas H. (1999) Putting the Enterprise into the Enterprise System. Boston: Harvard Business School Press.

Geoghegan, L., and Dulewicz, V. “Do Project Managers' Leadership Competencies Contribute to Project Success?” Project Management Journal. 39.4 (2008): 58-67

Harvard Business University. Harvard Business Review on The Business Value of IT. Boston: Harvard Business School Press, 1999.

Heindel, Lee E., and Kasten, Vincent A. “Next generation PC-based project management systems: implementation considerations.” International Journal of Project Management. 14.5 (1996): 307-309

Heindel, Lee E., and Kasten, Vincent A. “Next generation PC-based project management systems: the path forward.” International Journal of Project Management. 14.4 (1996): 249-253

Koedijk, A., and Verstelle, A. ERP in bedrijf. Den Bosch: Tutein Nolthenius, 1999.

Liang, C., and Li, Q. “Enterprise information system project selection with regard to BOCR.” International Journal of Project Management. 26 (2008): 810-820

Musaji, Yusufali F. Integrates Auditing of ERP Systems. New York: John Wiley and Sons, Inc., 2002.

Wang, E., et al. “The impacts of charismatic leadership style on team cohesiveness and overall performance during ERP implementation.” International Journal of Project Management. (2005): 173-180

[1] Wikipedia. Material Requirements Planning: History. Visited on 20 December 2009.

[2] Nyenrode College INHOLLAND. Module Guide Graduation Assignment 2007-2008

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