Benefit Realization – Introduction

Since the mid-1990s, organizations have abandoned legacy systems in favor of commercial software packages variously called enterprise resource planning systems (ERP), enterprise-wide systems or enterprise systems (Somes et al, 2003). The pace with which organizations have been implemented ERP systems over the past decades has been phenomenal. Despite the global economy downturn, Enterprise Resource Planning (ERP) is still the largest segment of the application budget (34%) (AMR Research, 2002) and returned to the centre of most corporations’ enterprise system architectures (AMR Research, 2003). The overall ERP penetration has reached 67% according to a survey among 509 companies (AMR Research, 2002). Designed to solve the problem of fragmentation of information in large organizations and promising the seamless integration flowing through a company (Davenport, 1998), a properly selected and implemented ERP system can have significant benefits (Somers and Nelson, 2003). However, an ERP implementation can take many years to complete, and cost tens of millions of dollars for a moderate firm and upwards of 100 million for large international organizations. Even with significant investments in time and resources, there is no guarantee of a successful outcome (Mabert et al., 2000). At early stage of ERP adoption, organizations implemented ERP system to avoid Y2K issues or replace legacy systems that did not work (Kumar et al., 2002). As organizations progress through the learning curve, they are looking for more strategic motivations and focusing on tangible and intangible benefits from ERP implementation. In a recent study, improving productivity, competitive advantage and increasing revenue are among the top business drivers (AMR Research, 2002). In other hand, the ERP system is a central enabler to recent managerial concepts such as supply chain management (SCM), e-commerce and virtual enterprises, may at times mean the rise or fall of organizations in an increasingly competitive market (Sarkis and Gunasekaran, 2003). While many companies have enjoyed considerable benefits from ERP implementation, there is no shortage of horror stories about failed ERP implementations. A failed or out-of-control project means not only huge write-off towards company’s bottom line but also negative impact on company’s capabilities to compete in the marketplace. Agilent Technologies Inc. lost $105 million in revenue and $70 million in operating profit for third-quarter 2002 due to the problems during the go-live of its ERP system (Shah, 2002). Hershey Food was unable to make delivery to its largest customers during the busiest season of the year while fixing glitches in the order-processing and shipping functions in its $115 million ERP system. As the results, third-quarter sales dropped by a staggering 12.4 percent compared with prior year, and earnings were off 18.6 percent (Osterland, 2000). A week after Hershey’s disappointment, Whirlpool experienced delays in shipments of appliances to many distributors and retailers (Osterland, 2000). In fact, the above are just a few examples among a long list of companies that have struggled in varying degrees with ERP implementations. What factors lead to successful implementation of an ERP system in an organization? While to date there is no empirical evidence that sheds light on this question (Abdinnour-Helm et al, 2003), many practitioners and academic researches attempted to find the linkage between ERP success and various aspects of implementation issues: organizational fit (Hong and Kim, 2002; Abdinnour-Helm et al., 2003; Somers and Nelson, 2003), change management strategy (Aladwani, 2001; Legare, 2002), implementation process (Marbert  et al., 2000, 2001, 2003), and benefit realisation approach (Thorp, 1999; Al-Mashari et al., 2003). Built on top of prior researches, the objectives of this dissertation are to analyze critical success factors (CSF) in ERP implementation in the context of benefit realization, to investigate the relationships between identified CSFs and ERP benefits, and to recommend an integrative benefit realization framework based on results from both primary and secondary researches. This dissertation is an attempt to fundamentally change the IT-oriented ERP implementation approach so that organizations can yield greater benefit from ERP systems. An extensive literature review on the subject is conducted to identify key elements in benefit realization approach. In order to understand why a benefit-oriented approach is more appropriate for ERP implementation, we need to understand the driving force behind each stage of ERP evolution (Chapter 2) and the importance of aligning ERP with the business (Chapter 3). Although critical success factor approach is more of reaction to “implementation problems”, a comprehensive review of critical success factors in ERP implementation forms the foundation of benefit realisation approach (Chapter 4). Finally, we discuss the key elements of benefit realization approach focusing on organization’s perspective on ERP systems, the formulation of ERP benefit as well as the role of business process reengineering and change management activities in ERP implementation (Chapter 5). The hypothesis presented in Chapter 6 is supported by a survey conducted among companies implemented ERP systems (Chapter 7). After analysing the results (Chapter 8), a proposed framework is presented in Chapter 9. The dissertation concludes with recommendations and further research topics in Chapter 10. As a SAP  consultant for past 7 years, I have been served more than 10 clients in Asia, Europe and United States. As a practitioner, I fully understood the issues discussed on academically oriented papers and may have different opinion on several issues. Staying away from technical aspects of ERP implementation, this paper presented an opportunity for me to consolidate my past experiences and to build expertise in the area of Program Management.

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