Realising organizational benefits from enterprise resource planning: Which stage is important?

228 International Conference on Finance, Accounting and Auditing (ICFAA 2018) November 23rd, 2018 Hanoi City, Vietnam Realising Organizational Benefits from Enterprise Resource Planning: Which Stage is Important? Tran Thi Cam Thanha, Dao Nhat Minha, Do Hoang Nhat Yenb aQuy Nhon University, bBinh Dinh College Submission day: 30/10/2018 Review day: 10/11/2018 Acceptance day: 15/11/2018 Abstract Over the past several years, the concerns about Enterprise Resource Planning (ERP) is huge in terms of both academic and practical in Viet Nam. Despite the widespread adoption of ERP systems, many companies can not achieve the expected benefits from ERP. This might result from the fact that most concerns about ERP in Vietnam have focused on the implementation stage, and ignore the post-implementation stage in which the actual benefits and performancing improvements are realised. This paper tries to investigate the important stage in ERP cycle to realise the benefits to help the organization achieving the expected benefits from ERP. In this paper, the descriptive statistics of quantitative methodology are used to analyse data from a survey of 58 CFOs and chief accountants in the companies which have implemented the ERP for more than one year. The expected contribution of this paper to the current literature of the benefits of ERP systems is finding out which stage is important to realise organizational benefits from ERP. Keywords: ERP, Implementation stage, Organizational benefits, Post-implementation stage JEL codes: M15, M41 1. Introduction Enterprise Resource Planning (ERP) systems have been confirmed as a useful tool for improving and maintaining competitive advantage of companies in the globalised market under ever increasing competition. ERP systems integrate and support all the major 229 processes of a company such as accounting, finance, manufacturing and human resource management, by providing an unified platform of database and business applications (Chang, 2006). Most market-leading ERP systems are usually equipped with best practices so that, by simply implementing the systems properly, the companies can effectively improve their business processes (Amoako-Gyampah and Salam 2004). For the above reasons, ERP has been the most popular choice for information system at companies in over the world. However, the implication of ERP market is 10 to 15 years later in Vietnam than the market in Europe and America. For over the years, most of ERP projects in Viet Nam have been focused on ERP functionality such as Finance, stock control and purchase control, and mainly been implemented by large companies. Currently, the ERP market in Vietnam has developed rapidly and been implemented by companies in the same sector. Many companies have implemented ERP in the Beverage industry, such as Hue beer company, Carlsberg beer company; Confectionery industry as Kinh Do, Bibica; in the Textile industry as the Garco 10 JSC, Savimex company; in the Retail industry as Mobile World Corporation, Tran Anh... A lot of companies have implemented ERP and greater competition will facilitate the development of ERP. With this popularity, there have been many academic studies about ERP from various perspectives in the world (Moon 2007, Tingting Huang and Kazuhiko Yasuda 2016). In Viet Nam, there has few studies about ERP, most of articles about ERP are to summarize the experience in implementing ERP, discuss about determinants of the success or failure of implementing ERP in Viet Nam, or find out the impact of ERP systems on the management and business performance of the company. However, despite the practical and academic interests in ERP, many companies still suffer from not being able to gain the expected benefits from it. Some companies even face the threat of bankruptcy from the huge capital investment and unsuccessful implementation (Stein et al. 2003, Muscatello and Parente 2006). A study by Deloitte also pointed out that, in a survey of 64 Fortune 500 companies, 25% suffered from poor performance of ERP in the post-implementation stage (Muscatello and Parente 2006). In Viet Nam, many companies can not achieve the expected benefits from ERP, although consuming a lot of cost, time and human resource for this system. To address the problem, this paper attempts to elucidate ERP benefits realisation along the ERP stages. According to literature review, most articles about ERP benefits focus on implementation stage, and ignore the post-implementation stage. Although the post - implementation stage in which the actual benefits and performance improvements has been realised (Muscatello and Parente 2006), not much attention has been paid to research here (Moon 2007, Tingting Huang and Kazuhiko Yasuda 2016). For example, the study by Moon (2007) shows that of all the surveyed articles on ERP published in 79 journals between 2000 and 2006, the majority deal with either implementation issues or specific areas in the use of ERP. The other study similarly which based on articles from Google Scholar, Science Direct, ACM, IEEE Xplore, and JSTOR, also points out that investigation of ERP at the post- 230 implementation stage is very scarce (Tingting Huang and Kazuhiko Yasuda 2016). It is especially difficult to find articles that provide benefits and how to realise these benefits in the post-implementation stage of ERP. Hence, this study aims to show empirically that additional efforts are required for finding out the implementation has decided entire organizational benefits received from the ERP system or not? Does the post - implementation play a role in realising the benefits of ERP? This article is structured as follows. First, we present the literature review of the article. Second, we describe the theoretical background on ERP benefits and ERP life - cycle. Before analysing the results, the research methodology is presented in the third part. Finally, we present some conclusions and further work. 2. Literature review Benefits realisation management is an important approach to ensure that projects and programs deliver what they promise. However, in IS research, little attention has been paid to this important step. In this step, we will introduce the trend of researches in ERP and the articles about an ERP benefits, ERP stages. The trend of researches in ERP According to Moon (2007), base on a review of work published in various journals on the topics of Enterprise Resource Planning (ERP) between January 2000 and May 2006, with a total of 313 articles from 79 journals, the major research topics in ERP are (1) implementation, (2) using ERP, (3) extension, (4) value, (5) trends, and (6) education. Therein, the number of articles categorised as “Implementation” is the most, over 40% of the total. The number of articles categorised as “ERP value” is quite few, only 24 articles equivalent 7,6% of the total. Another research of Tingting Huang and Kazuhiko Yasuda (2016), total 86 literature reviews have been accumulated and categorized into three main categories and five sub- categories of literature reviews. Among 86 papers, 14 papers belong to the category of overall, ten papers belong to the category of assorted, and the category of dedicated contains 62 papers. Among the 62 papers, 22 papers go to critical factors, nine papers go to SMEs, four papers go to field approach, 24 papers go to operating themes, and three papers go to type of ERP. In ERP research field, the topics in the post-implementation phase are heating up recently but still in its initial stage. Although more and more research mentions the post issues, few of them will take post issues as their major research object. Therefore, we can see that the research about ERP benefits, especially in the post- implementation stage, is the research area need to conduct. An ERP benefits Because of benefits to organizations, many businesses have spent the big expenses for ERP system and hope to receive benefits in the future. However, according to Petra Schubert and Susan P. Williams (2009), identifying the benefits from the implementation of the ERP system is still a significant challenge for both research and practice. The authors 231 pointed out that although many framework about the benefits of ERP have been taken into consideration, such as the framework of Peter B Shari Shang & Seddon (2002), O'Leary (2004), Lorraine Staehr (2007); there exists certain restrictions in these frameworks. Specifically, these frameworks do not clarify the different contexts, the type and nature of the benefits of ERP and the changes that may occur from this benefit. Therefore, the research on the benefits ERP brings companies is always an interesting topic. Spathis and Constantinides (2004) suggested that the most important benefits for accounting due to ERP implementation were increased flexibility in information generation, increased integration of accounting applications, improved quality of reports – statement of accounts, improved decisions based on timely and reliable accounting information and reduction of time for closure of annual accounts. The other research has focused on the benefits derived from ERP adoption has shown that the implementation of these systems is usually followed by improvements of the decision-making process and enterprise integration (Colmenares, 2009). Furthermore, Brazel and Dang (2008) suggested that ERP implementation appears to reduce reporting lags. Gattiker and Goodhue (2004) analyzed the benefits that a company which had implemented an ERP system was experiencing. They pointed out that the system resulted in many benefits for the organization such as improvements in coordination within the enterprise, and eliminations of reports and data entry chores. In this research, we will apply the framework about the benefits of ERP in Peter B Shari Shang & Seddon (2002) as the theoretical foundation for our study. It is a framework is cited a lot in researches about ERP. Based on an analysis of the features of enterprise systems, on the literature on information technology (IT) value, on data from 233 enterprise systems vendor-reported stories published on the Web and on interviews with managers of 34 organizations using ES, the framework provides a detailed list of benefits that have reportedly been acquired through ES implementation. The ERP benefits found were classified into five benefit categories: (1) operational; (2) managerial; (3) strategic; (4) IT infrastructure; and (5) organisational Therein, Operational benefits arise from the automation of business process. Managerial benefits arise from better planning and management of organizational resources and better monitoring of financial performance of products, for example. Strategic benefits result from the ERP system’s ability to support business growth and competitive advantage. IT infrastructural benefits mainly come from the reduction of IT costs related to the maintenance of legacy systems. The organizational benefits are related to the system enabling business learning and staff empowerment. 232 However, in this framework, the ERP benefits are not linked to the reasons for implementing ERP, or to determine at what point in time the various benefits are expected to materialise. ERP stages Many studies have tried to find out the stages of the life-cycle of the ERP system. The phases of the ERP life-cycle consist in the several stages that an ERP system goes through during its whole life within the hosting organization. They are the following: adoption decision phase, acquisition phase, implementation phase, using and maintenance phase, evolution phase and retirement phase (Jose M. Esteves and Joan A. Pastor, 1999). Fig. 1. The stages of the ERP life-cycle Source: Jose M. Esteves and Joan A. Pastor, 1999 In the other studies, the process of achieving additional benefits from an ERP implementation is referred to as “second wave” implementation (Deloitte, 1999). Deloitte (1999) believed that there are a number of phases that occur post-implementation. In the “stabilise” phase, companies familiarise themselves with the implementation and master the changes which have occurred. The “synthesise” phase is where companies seek improvements by implementing improved business processes, adding complimentary solutions, and motivating people to support the changes. The final stage, “synergise”, is where process optimisation is achieved, resulting in business transformation. The notion of different stages of ERP implementation is reinforced by Nolan and Norton Institute (2000), who grouped implementations into levels of maturity. They argued that when evaluating costs of an ERP implementation, the company’s previous experience with ERP systems should be considered. Their maturity classifications were: • beginning – had implemented SAP in the past 12 months; • consolidating – had implemented SAP for between one and three years; and • mature – had implemented SAP for more than three years. Therefore, we can see the post - implementation stage includes using and maintenance phase, evolution phase till the retirement phase, is the “second wave” implementation and would be either in the “consolidating” or “mature” stages. In this stage, the actual benefits and performance improvements resulted from the ERP system are realised. Unfortunately, many researchers focus on the implementation stage and ignore this stage. The basic underlying premise of most of these studies is that the success of ERP is largely determined by the initial implementation. Post - implementation Acquisition Implementation Value Use Early ehances Later ehances Firm Performance 233 To fill the gap in literature, this study focuses on the post-implementation stage, while it does not deny the importance of the initial implementation success. The implementation does play a very important role, because it can determine the quality of the installation and affect the atmosphere of the organisation (Hong and Kim 2002). The failure of the implementation can result in run over of budget and time, unstable installation or an unfavourable organisational attitude towards the system. The study will investigate which stage is important to realize organizational overall benefits from ERP, the implementation stage or the phases of the post-implementation stage include the stabilise phase, the synthesise phase and the synergise phase. 3. Theoretical framework Chaos theory Chaos theory relates to some non-linear, dynamical systems that exhibit apparently erratic or random behavior even though the system has limits and contains no random variables. Chaotic systems are generally noted for their sensitivity to initial conditions that result in vastly different outcomes. Chaos is somewhat counter to the notion of complete determinism, that every event or action is an inevitable result of preceding events or actions - and can be predicted, in advance, with absolute certainty. With the fundamental principle that no real measurement can be infinitely precise, chaotic systems will have unpredictable outcomes because initial conditions cannot be specified with infinite accuracy. Moreover, initial condition imprecision in dynamic systems will grow at an exponential rate. This sensitivity to initial conditions is generally called chaos in mathematics and physics. Chaotic systems are deterministic within limits and not forever expanding or contracting; they tend to “orbit” around one or more points, called attractors. A related area of chaotic systems involves fractals. A practical implication of chaos theory is that two nearly-identical sets of initial conditions for the same system may result in significantly different outcomes, albeit within limits. Adopting Chaos theory to this research, benefits which an ERP system brings to companies is not an inevitable result of preceding initial implementation success. In different stages of an ERP system, the benefits received might be different. Moreover the benefits maybe is not as companies expected in the beginning in the post-implementation stage. Therefore, finding out the benefits which ERP system brings to the companies in each stage is very important. 4. Methodology Data collection In line with the goal of the study, the companies have implemented the ERP system for more than one year were considered as the targets of data collection. Questionnaires were 234 sent to 150 companies. It was required that the questionaire should be answered by a person working for ERP at CFO or chief accountant position in the companies. Each company has only one questionnaire. E-mails were sent to the target companies. The response rate was very high, about 40%. In total, 62 answers were collected. From the 62 samples, 4 companies were excluded because they have been running ERP for less than 1 year at the time of the questionnaire. Data from the remaining 58 samples were used as the data for this study. Data analysis The descriptive statistics was used. Using likert scale 5 points, where 1 means ‘low’ and 5 ‘high’, people surveyed were asked to rate their perception, the authors check an average ERP benefits percentage for each benefit dimension in each ERP stage: implementation stage and the phases of the post-implementation stage include the stabilise phase, the synthesise phase and the synergise phase. 5. Results Table 1. Descriptive Statistics Descriptive Statistics ERP benefits dimension N Implementation stage Post-implementation stage Stabilise phase Synthesis e phase Synergise phase 1. Operational 58 2.80 3.33 4.80 4.80 2. Managerial 58 3.33 4.70 4.90 4.90 3. Strategic 58 2.00 3.80 4.00 4.90 4. IT infrastructure 58 4.80 4.80 4.80 4.80 5. Organisational 58 2.80 3.33 4.50 4.80 Valid N (listwise) 58 Table 1 displays the results of our survey, presenting the each ERP benefit demension realisation percentage in each stage. Comparing with the research objectives in the Introduction section, we can conclude that the implementation stage has not decided entire organizational benefits received from the ERP system, it just realises IT infrastructure benefits dimension. The findings suggest that all the ERP benefits dimensions are realised in the post-implementation stage, especially in the synthesise phase and the synergise phase. So, the post-implementation stage plays the most important role in realising the benefits of ERP. Next, we discuss each of these ERP benefits dimensions in more detail: - Operational: the benefits from the automation of business process have just been realised in the Post-implementation stage, but mainly in the synthesise phase and the synergise phase of the Post-implementation stage. In the Implementation stage, we could not see these benefits. 235 - Managerial: the benefits from better planning and management of organizational resources and better monitoring of financial performance of product could be seen clearly in all phases of the Post-implementation stage. In the Implementation stage, the opinion of people surveyed is neutral. Some companies see these benefits at the beginning after initial implementation success while the others have to wait for the Post-implementation stage to realise it. - Strategic: The findings suggest that benefits from the ERP system’s ability to support business growth and competitive advantage are realised in the Post-implementation stage. In the Implementation stage, we could not see these benefits. - IT infrastructure: the benefits from the reduction of IT costs is these only benefits realised in 2 stages: Implementation stage and Post-implementation stage. - Organisational: The findings suggest that in this dimension, all the organisational benefits are realised in the Post-implementation stage, but mainly in the synthesise phase and the synergise phase of the Post-implementation stage. In the Implementation stage, we could not see these benefits. 6. Conclusion This research study tries to find out the important stage in ERP cycle to realise the benefits to help the organization achieving the expected benefits from ERP. The findings from our paper have shown us the post-implementation, especially the synthesise phase and the synergise phase, is the most important stage in realising the benefits from the ERP system, not the implementation stage. This analysis suggests that ERP benefits realisation dimensions are interconnected, and business managers should perceive ERP benefits realisation as a continuum cycle along the ERP cycle. They should not only focus on the implementation stage, although the success of the initial implementation is very important, the benefits of ERP system cannot be seen at this stage, most of the benefit is in the Post- Implementation. This study also contributes to the existent theory and practice on IS evaluation by taking into account a time perspective on benefits realisation. The limitation of this study is small data and we have just used the descriptive statistics, a simple statistics tool. In future work, we will use a bigger data and statistics tools which are more intensive to make clear about this subject. In practical terms, the result of this study can help many companies in Viet Nam and developing countries like Viet Nam where ERP is still a new subject realise the right important stages to gain the expected benefits from the ERP system, such as if the companies want to reach the benefits in operational dimension, they need to focus on the synthesise phase and the synergise phase in the post-implementation stage, if they want to reach the benefits in IT infrastructure dimension, the success of the initial implementation will bring it. 7. References Amoako-Gyampah, K. and Salam, A.F., 2004. An extension of the technology acceptance model in an ERP implementation environment. Information & management, 41(6), pp.731-745. 236 Brazel, J.F. and Dang, L., 2008. The effect of ERP system implementations on the management of earnings and earnings release dates. Journal of information systems, 22(2), pp.1-21. Chang, M.J., and Ou-Yang, C., 2006. 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