ERP Implementation:

An Exploratory Study of Customization Levels

Marcus Rothenberger
University of Nevada, Las Vegas

Mark Srite
University of Wisconsin-Milwaukee

Objective

ERP System is an integrated information system that coordinates key internal processes of a firm across multiple functional areas Adoption is a major challenge Appropriate versus excessive levels of customization Study investigates underlying customization factors

Problem

High customization has been associated with

High adoption cost High maintenance cost High upgrade cost Higher adoption risk Lower perceived organizational risk Lower organizational benefit (lost opportunity for BPR) Vanilla and BPR (modifications limited to configuration) Modifications only through add-ons Modifications only through ERP code changes Both 1 & 2 (often associated with little BPR)

Companies pursue different customization strategies

1. 2. 3. 4.

Research Questions

Why do some organizations highly customize their ERP implementation?

What are the project factors that promote high customization? What are the environmental factors that promote high customization?

How do the factors cause high customization?

Qualitative Research Approach

Theory Building from Case Studies (Eisenhardt, 1989) Comparative Case Studies
Explanation Building (Internal Validity) Multiple Sources of Evidence (Construct Validity) Analytical Generalization (External Validity)

Consultant Interviews
Explanation Building (Internal Validity)

Literature

Data Collection

Structured Interview Questions Pre-Tested with an SAP Expert and Refined Case Studies

2 interviews, 50-70 minutes each

A technical project lead at each ERP adopter A functional project lead at each ERP adopter

Consultants

3 Consultants, 50-70 minute interview with each consultant

North America Central Europe Southern Europe

Continuous Analysis and Refinement of Questions during Early Stages of Data Collection All Interviews Taped and Transcribed

Case Variations

Customization Level / Type

Vanilla, Add-ons, Code Modifications Educating internal staff, selected for specific tasks, leading project Dimensions of culture including Power Distance Up-front knowledge, benchmarking, learning from consultants

Role of Consultants

Culture

Internal ERP Knowledge Role of Operational Departments

Project lead, team members, low involvement

Organizational (merger, process improvements) Technical (Y2K, need for new system)

Motivation for Adoption Success

Schedule, Budget, User Satisfaction, Maintainability

Customization Model
(+) B ERP Knowledge at Beginning of the Project Experience of Implementation Team (Consultants and Employees) (-) I Duplicate Implementation of Existing System Functionality (+)

(+) J (-) C Ability to Counter Resistance to Change (+) K (+) D (-) L Extent of Organizational Project Motivation (+) E Involvement of Operational Departments (+) M (+) F Organizational Culture: Top-Down Decision Making (+) H Perceived Organizational Importance of ERP Adoption / Project Acceptance Implementation Teams (-) Understanding of Business Profit Maximization (give customers what they want) (+) (-)
Extent of ERP System Customization

Reliance on Consultants

(+) A

(-) G

(-) N

Organizational Culture: Risk Taking

(-) O (+) P Fear of Personal Disadvantage from Change

Resistance to Change

(+)

North American Consultant

Central European Consultant

Empirical Support

Southern European Consultant

North American Consumer Products Manufacturing Co

North American Utility Company

North American Engineering Company

North American Business Product Manufacturing Co

Central European Financial Institution 2

Central European Financial Institution 1

Southern European Food and Beverage Manufacturing Co

Southern European Utility Company Causal Relationship A

P J I

Generalizability

Study investigates SAP adopters in various industries Results developed to broaden theory by consolidating them with existing theories (analytic generalization supports external validity) May apply to other ERP systems or even other COTS Software as adoption issues are similar May apply to other industries as adoption issues are not industry specific Future Research: Testing of the Model through Larger Scale Survey

Questions?