construction companies of the Netherlands. Based on these findings,

ABSTRACT

Purpose Purpose Purpose

Purpose: the primary purpose of this research is to list and discuss the success factors of ERP implementations from literature and identify the ones that seem to be most critical in the context of ERP implementation at one of the biggest

construction companies of the Netherlands. Based on these findings,

recommendations were given in order to improve their current implementation method.

Design/Method Design/Method Design/Method

Design/Methodology/Approach ology/Approach ology/Approach ology/Approach:::: Both primary and secondary data collection methods were used in order to conduct this research. Primary data was collected during interviews whereas secondary data was collected by doing an extensive literature review of journals, databases websites and books.

Findings:

Findings:

Findings:

Findings: a list of ten success factors for ERP implementations have been shortlisted based on the frequency of their occurrence in different literature.

Based on the literature, the context of implementation and their constructs that constitute this context were described and discussed.

After that, a gap analysis was conducted in order to analyse which success factors were already incorporated in the current implementation method of the

construction company and in what way improvements could be made. This analysis resulted in a list of recommendations. All recommendations together were incorporated in an improved implementation method.

Useful implications:

Useful implications:

Useful implications:

Useful implications: This thesis provides significant insights which will benefit ERP practitioners during ERP implementation process. It would help consultants, vendors, implementation teams and management to understand the importance of the success factors of ERP implementation. This would reduce the chances of unsuccessful and time-consuming implementation process.

Keywords:

Keywords:

Keywords:

Keywords: ERP, ERP success factors, ERP project success, implementation

methods, project phases

TABLE OF CONTENTS

ABSTRACT ABSTRACT ABSTRACT

ABSTRACT 2 2 2 2

TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS

TABLE OF CONTENTS 3 3 3 3

1. INTRODUCTION 1. INTRODUCTION 1. INTRODUCTION

1. INTRODUCTION 6 6 6 6

1.1 Problem statement 6

1.2 Thesis design 7

2. RESEARCH METHODOL 2. RESEARCH METHODOL 2. RESEARCH METHODOL

2. RESEARCH METHODOLOGY OGY OGY OGY 8 8 8 8

2.1 Research objective 8

2.2 Research question 8

2.3 Data collection 9

2.4 Data analysis 11

2.5 Unit of analysis 12

2.6 Limitations 12

3. VOLKERWESSELS BVG 3. VOLKERWESSELS BVG 3. VOLKERWESSELS BVG

3. VOLKERWESSELS BVGO O O O 13 13 13 13

3.1 VolkerWessels 13

3.2 Construction and Property Development 16

3.2.1 Mission and Strategy 17

3.2.2 Local entrepreneurship 18

3.3 VolkerWessels BVGO ICT bv 19

3.4 Business areas 22

3.4.1 Construction companies 22

3.4.2 Relationship Management 23

3.4.3 Calculation 23

3.4.4 Purchase/Work preparation 24

3.4.5 Execution 25

3.4.6 Project Management 25

3.4.7 Finance 26

3.4.8 Payroll 27

3.4.9 Buyer counselling 27

3.4.10 Warranty and post-construction support 27

3.4.11 Property development 28

3.5 Similarities and the differences 28

4. CRITICAL SUCCESS 4. CRITICAL SUCCESS 4. CRITICAL SUCCESS

4. CRITICAL SUCCESS FACTORS FACTORS FACTORS FACTORS 29 29 29 29

4.1 Enterprise Resource Planning 29

4.1.1 ERP: history 31

4.1.2 The Benefits of ERP 32

4.2 Context of Implementation 33

4.2.1 Stakeholder acceptance 33

4.2.2 System features 34

4.2.3 Organizational context 34

4.2.4 Individual moderators 35

4.2.5 Interaction/holistic approach 35

4.2.6 ERP Implementation 37

4.3 Critical success factors 38

4.3.1 ERP selection 39

4.3.2 Top Management Commitment 39

4.3.3 Business process redesign 40

4.3.4 Visioning 41

4.3.5 ERP strategy 42

4.3.6 Selection and allocation of the right stakeholders 43

4.3.7 Training employees 45

4.3.8 Communication 46

4.3.9 Technological issues 46

4.3.10 Performance evaluation and management 48

4.4 Conceptual framework 49

4.4.1 Contingency factors 49

4.4.2 Stakeholder acceptance 50

4.4.3 Success factors 50

4.4.4 Critical success factors 50

5. ERP AT VOLKERWESS 5. ERP AT VOLKERWESS 5. ERP AT VOLKERWESS

5. ERP AT VOLKERWESSELS BVGO ELS BVGO ELS BVGO ELS BVGO 51 51 51 51

5.1 Program Bouwsteen 51

5.1.1 Centric IT Solutions 52

5.1.2 4PS Construct 53

5.2 Business case 55

5.2.1 Kernel model BVGO 57

5.2.2 Underlying principles kernel model BVGO 57

5.2.3 Implementation method 61

6. GAP ANALYSIS 6. GAP ANALYSIS 6. GAP ANALYSIS

6. GAP ANALYSIS 62 62 62 62

6.1 Critical success factors at VolkerWessels BVGO 62

6.1.1 ERP selection at VolkerWessels BVGO 62

6.1.2 Top Management Commitment at VolkerWessels BVGO 63 6.1.3 Business process redesign at VolkerWessels BVGO 66

6.1.4 Visioning at VolkerWessels BVGO 68

6.1.5 ERP strategy at VolkerWessels BVGO 70

6.1.6 Selection and allocation of the right stakeholders

at VolkerWessels BVGO 72

6.1.7 Training at VolkerWessels BVGO 74

6.1.8 Communication at VolkerWessels BVGO 76

6.1.9 Technologic issues at VolkerWessels BVGO 77

6.1.10 Performance evaluation and management

at VolkerWessels BVGO 79

6.2 Improved method for VolkerWessels BVGO 85

6.2.1 The chartering phase 85

6.2.2 The project phase 86

6.2.3 The shakedown phase 87

6.2.4 The onward and upward phase 88

7. CONCLUSIONS 7. CONCLUSIONS 7. CONCLUSIONS

7. CONCLUSIONS 91 91 91 91

LITERATURE LITERATURE LITERATURE

LITERATURE 95 95 95 95

APPENDIX A: CSF'S AN APPENDIX A: CSF'S AN APPENDIX A: CSF'S AN

APPENDIX A: CSF'S AND THEIR NAMES IN THE D THEIR NAMES IN THE D THEIR NAMES IN THE ACADEMIC LITERATURE D THEIR NAMES IN THE ACADEMIC LITERATURE ACADEMIC LITERATURE ACADEMIC LITERATURE 99 99 99 99 APPENDIX B: SHORT RE

APPENDIX B: SHORT RE APPENDIX B: SHORT RE

APPENDIX B: SHORT REPRODUCTION OF INTERV PRODUCTION OF INTERV PRODUCTION OF INTERV PRODUCTION OF INTERVIEWS IEWS IEWS IEWS 101 101 101 101

1. INTRODUCTION

The state of the art software package for business today is known as ERP. The Enterprise Resource Planning package promises integration, enhanced flow of information and quick response for the organization. As a complex enterprise system, however, implementing an ERP system is not simple, neither is the realization of its benefits after the implementation. The failure rate of ERP implementations has been estimated at between 60% and 90% (Kwahk & Lee, 2008). Zhang, Lee, Huang, Zhang and Huang (2005) state that ERP

implementation projects are, on average, 178% over budget, take 2.5 times as long as intended, and deliver only 30% of promised benefits. Rao (2000) estimates that only 3.6% of ERP implementation projects finish on time, on budget, without technical problems, and achieve their objectives.

1.1 PROBLEM STATEMENT

ERP systems bring about a whole new dimension to an organization’s IT system by providing seamless integration of all the information flow across different

departments (Davenport, 2000). ERP systems comprehensively address all the requirements of different functions of an organization. There are very high stakes involved in implementation process because of significant budgets and long implementation cycle. Subsequently, the risk and complexity involved in implementation of ERP makes it all together a different research area for academicians and researchers (Davenport, 2000).

The Build and Property Development division of VolkerWessels (‘VolkerWessels BVGO’), a Dutch group of companies with 16,600 employees in 125 operating companies, started their own ERP project in the beginning of 2002. The goal of this project was to facilitate all the operating companies of the division with a new enterprise system. The project was put on hold several times. After a change of software package, the project started again in 2010. The primary goal of the project still is to implement the enterprise system at all operating companies by the end of 2013.

Because of the high failure rates of enterprise system implementation, this thesis

focuses on the critical success factors of ERP implementation. Several authors (Al-

Mashari et al, 2003; Bingi, et al., 1999; Finney and Corbett, 2007; Holland and

Light, 1999; Motwani, et al, 2005; Umble et al., 2003) tested the importance of

CSF’s in their work. Much of the previous work has exhaustively reviewed the

critical success factors for successful implementation of an ERP system. With the

rapid speed of implementing at VolkerWessels BVGO, it is useful to thoroughly

investigate the critical success factors that are mentioned in the literature, and

see if prior research can be helpful in improving the current implementation

method of VolkerWessels BVGO ICT. The purpose of this thesis is to improve the

success rates of ERP implementation at VolkerWessels BVGO.

In order to achieve this goal, a new implementation method will be developed in which critical success factors from academic literature are incorporated. The next chapter will explain how this will be done.

1.2 THESIS DESIGN

The structure of this thesis would primarily constitute of the following chapters:

Introduction:

Introduction:

Introduction:

Introduction: it would include a short introduction of the concept of ERP and the introduction of VolkerWessels BVGO. Next, it described the problem statement for this thesis and the thesis design.

Research methodology:

Research methodology:

Research methodology:

Research methodology: this chapter includes an explanation of the methods used in performing this research. The research questions and objectives, data collection methods and unit of analysis are discussed.

VolkerWessels VolkerWessels VolkerWessels

VolkerWessels BVGO: BVGO: BVGO: BVGO: this chapter includes a description of the VolkerWessels Group, the BVGO department, BVGO ICT and the business processes of

VolkerWessels BVGO.

Critical success factors:

Critical success factors:

Critical success factors:

Critical success factors: This chapter includes a literature study about success factors for ERP implementation. Relevant literature on ERP in general and the critical success factors will be collected. Because ERP projects are executed by human actors in specific social contexts, ERP projects face problems concerning social multidimensionality. This will also be taken into account by explicitly discussing the different views of the concept of ‘success’ of ERP. This will result in a research model that will also highlight the importance of the interaction

between the different components of the total system.

ERP at VolkerWessels BVGO:

ERP at VolkerWessels BVGO:

ERP at VolkerWessels BVGO:

ERP at VolkerWessels BVGO: The next step will be to outline the current

implementation approach of VolkerWessels BVGO. In order to do so, the business case, kernel model and project methodology will be discussed in this chapter.

Analysis:

Analysis:

Analysis:

Analysis: Once the current implementation method of VolkerWessels BVGO is described, a gap analysis can be done in order to identify the gaps between the literature and the current implementation method of VolkerWessels BVGO.

Because of the importance of recognizing the specific context of VolkerWessels BVGO, a contingency approach will be taken in order to analyse the usefulness of the different critical success factors at VolkerWessels BVGO. Based on these gaps, recommendations will be given in order to improve the implementation method of VolkerWessels BVGO. At the end of this chapter an improved

implementation method will be proposed, based on the work of Markus and Tanis (2010).

Conclusion:

Conclusion:

Conclusion:

Conclusion: This section would constitute of the final results and the answer to

the research question.

2. RESEARCH METHODOLOGY

In this research, the objective has not only been to list the existing critical success factors as described in the academic literature, but also to analyse the application of these critical success factors at one company. This thesis will therefore be an embedded multiple case-study about the implementation of Navision 4PS Construct at the 43 operating companies at VolkerWessels BVGO.

The case study is a well-known research method for explanatory research (Yin, 1994). In contrast to an experiment, a true case study requires the researcher to study a phenomenon without affecting the study subject at all. An embedded case study instead draws conclusions about the phenomenon by investigating or analyzing sub-units of the study object. The different characteristics of a case- study as mentioned by Yin (1994) all apply to the research as conducted in this thesis. First, the type of research question of a case-study is typically to answer questions like ‘how’ or ‘why’. Second, the investigator has a little or no possibility to control the events and third, contemporary phenomenon in a real-life context are subject of investigation. Finally, the case study method is an ideal

methodology when a holistic, in-depth investigation is required.

In order to link the relevant data to the research questions and conclusions, the research design of this thesis will be outlined below by discussing the components of a research design as opposed by Yin (1994).

2.1 RESEARCH OBJECTIVE

The primary objective of this thesis is to improve VolkerWessels BVGO’s current implementation methodology by conducting an holistic analyse of their current implementation method in light of critical success factors from the academic literature.

2.2 RESEARCH QUESTION

The central question of this thesis is:

“How can ERP implementation variables that appear to be critical for successful implementation best be applied to the implementation method of VolkerWessels BVGO?”

In order to answer this question, the following sub questions have been identified.

1. What is VolkerWessels BVGO?

1.2. What is VolkerWessels BVGO ICT?

1.3. What is project Bouwsteen?

1.4. What process areas can be found at a typical VolkerWessels BVGO company?

2. What are the critical success factors of ERP implementation?

2.1. What is ERP?

2.2. What is a successful ERP project?

2.3. What are the determinants of a successful ERP implementation?

2.4. Which success factors about ERP implementation are mentioned in the literature?

3. How does VolkerWessels BVGO’s current implementation method look like?

3.1 What is the business case?

4. Which critical success factors are useful to implement and in what way at VolkerWessels BVGO in order to improve the implementation programme?

4.1 Which success factors seem to be critical for VolkerWessels BVGO?

4.2 How are these various critical success factors taken into account at VolkerWessels BVGO?

4.3 Which critical successes factors in relation to their contingencies are useful to incorporate in the implementation methodology of VolkerWessels BVGO?

2.3 DATA COLLECTION

Case study in general poses considerable problems in ensuring sufficient rigor and reliability. The case study is therefore known as a triangulated research strategy.

Triangulation encourages a researcher to collect information from multiple sources but aims at corroborating the same fact or phenomenon. The need for triangulation arises from the ethical need to confirm the validity of the processes (Yang, Wu and Tsai, 2004).

In order to improve triangulation of data in this study, multiple sources were used. Qualitative data was obtained through interviews, direct observation, archival records and project documentation. Second, because research of Markus and Tanis (2000) shows that ERP implementation projects go through several stages in which attitudes of stakeholders can change, interviews were held at different points in time during the project.

It was tried to include many different perspectives by interviewing multiple members of the organization. There has been some criticism of the research about critical success factors, however, because it is felt that the approach relied on the opinions of managers only and it was, therefore, biased (Finney and Scott, 2007).

As a consequence, given the fact that an ERP system is expected to affect more groups in an organization than only managers, interviews were held with different representative stakeholders. Only through widespread stakeholder consultation, the process of applying CSF’s to VolkerWessels BVGO can be strengthened. The group of people interviewed was therefore heterogeneous; representing

different functional areas and different hierarchical levels as well as different

roles.

A total of 8 interviews was conducted, four with users, two with members of the management board of BVGO, and two with members of the IT department.

Na Na

Na Nam m m me ee e Organ Organ Organ Organiz iz izati iz ati ati ation on on on Functi Functi Functi Function on on on Rol Rol Rol Role ee e Maurice

Quadackers

Bouwbedrijf Jongen

Financial Manager Projectmanager (at operating

company) Hein Roeks Bouwbedrijf

Jongen

Financial Employee/

Projectmonitoring

Key-user Projectmonitoring Wil Faut Bouwbedrijf

Jongen

Head of Warranty and post-construction

support

Key-user S&O

Jo Consten Bouwbedrijf Jongen

Head of Purchase Department

Key-user Purchase

Besides these key users, interviews were held with other stakeholders:

Na Na Na

Nam m me m ee e Organiz Organiz Organiz Organizati ati ati ation on on on Functi Functi Functi Function on on on Rol Rol Rol Role ee e Harrie

Niessen

VolkerWessels BVGO ICT

ERP Consultant Projectmanager (BVGO ICT) Harrie

Mulder

VolkerWessels BVGO ICT

Manager ICT Program manager

Bert Dijkhuis

VolkerWessels BVGO

CFO Project

authorization Dick Boers VolkerWessels

BVGO

CEO Project

authorization

The interviews started with semi-closed questions, and were related to the research questions. Goal of these interviews was to determine if certain critical success factors were already taken into account and if so, to what degree.

Second, these interviews were also used to derive conclusions about the contingency of certain critical success factors for VolkerWessels BVGO. During the interviews, questions were asked about the success of the project, the success factors as mentioned in the literature and the implementation process. In order to be able to systematically process data, all those interviewed were asked the same questions.

Data was gathered from October 2011 until January 2012. Duration of these interviews varied from 45 till 75 minutes; during these interviews notes were made.

Besides interviews, data was also gathered by direct observation during project

meetings, training sessions, demo’s of the software at more than nine operating

companies and lessons learned sessions of the IT department. During these

sessions, I had the opportunity to observe and listen to the different opinions of

different people who were involved in an implementation project either as

implementer, external consultant, user, key-user, manager, etc. These

heterogeneous group of people thus represented different functions, operating companies or roles in the implementation projects.

Older documentation material has been used to gain insight in the events that led to the implementation project.

Literature was collected by using various online databases like Sciencedirect, ACM Digital Library and ProQuest. The access to these databases was through the RUG (Rijksuniversiteit Groningen) digital library. The specific keywords that were mostly used for data collection during the research process were ERP

implementation , ERP success factors , ERP success , ERP critical success factors .

2.4 DATA ANALYSIS

After collecting all relevant articles a detailed literature review was conducted.

The most important arguments from all articles were compared to each other so that the most relevant and frequently occurring factors could be picked. Some authors use different names for the same critical success factor. In order to get a clear overview of all critical success factors, many critical success factors could be merged into one. Appendix A entails an overview of the most frequently used articles for this thesis and how the csf’s that are mentioned in each article are included in the csf’s that are mentioned in this thesis (see Appendix A). This process resulted in a list of ten critical success factors. Interview questions were derived from this list, whereas during each interview

interviewees were asked about their opinion of the importance of this particular csf and its application at VolkerWessels BVGO. Appendix B provides an overview of all critical success factors and the related interview question and a short summary of the answer the respondent gave to the question. Although respondents were stimulated to tell more about the critical success factor, this overview was made in order to give the reader of this thesis insight into the answers respondents gave during the

interviews. In order to simplify analysis, each answer was ranked on a scale from 1 to 5

(see Appendix B). Averages were calculated to see which critical success factors needs extra attention at VolkerWessels BVGO.

Finally, all collected data was used as a basis for writing the analysis of this thesis.

If data contradicted, I always tried to understand the cause of this contradiction.

1

The interview with the CFO and the program manager and consultant of

VolkerWessels BVGO was mainly used for gathering information about VolkerWessels BVGO. Whereas these interviews took place before the literature study about the csf’s was conducted, they were not explicitly asked about the csf’s. However, if useful, their answers have been used for analyzing the application of critical success factors.

2

The answers of the CEO were not ranked because he was not closely involved during

the implementation projects. As a consequence, it was difficult for him to assess the

application of the critical success factors during particular implementation projects.

In most cases this was due to the fact that different people see things differently and as a consequence can have contradicting opinions about a given situation.

2.5 UNIT OF ANALYSIS

The unit of analysis for this thesis will be all operating construction companies of VolkerWessels BVGO in The Netherlands. This unit of analysis will be described in chapter 1 and partly in chapter 3 .

2.6 LIMITATIONS

As a research method, the findings of a case study are in general low on

generalisability of findings. Although the literature study of critical success

factors and the conceptual model as discussed in the conclusion of chapter 2 can

be useful for other companies, the major limitation of this thesis is the fact that

results are only applicable at VolkerWessels BVGO.

3. VOLKERWESSELS BVGO

In this chapter a detailed description of the VolkerWessels Group will be given.

The goal is to provide a clear picture of the organization as a whole and in particular of one division: Construction and Property development The Netherlands.

The chapter starts with a general description of the VolkerWessels Group and a brief overview of its history. After that, the focus will be on one division of the VolkerWessels Group, namely the Construction and Property Development

division (BVGO) in The Netherlands. This division will be the focal point of interest throughout the rest of this thesis and therefore will be more extensively

discussed. The chapter continues with a discussion of the several companies that together constitute the Build and Property Development division. An explanation will be given about how the companies are related to each other and to the group.

Also, the way in which the division is organized will be discussed. Next, the different types of companies and their business activities will be listed. Finally, the differences and similarities between the companies, as based on their business processes, will be discussed.

The information as described in this chapter comes from a number of sources, including my own knowledge. Major input is from an interview with Bert Dijkhuis, concern controller of BVGO and one of the members of the board of management of VolkerWessels BVGO. An additional interview was conducted with Harrie Mulder, IT Manager at VolkerWessels BVGO ICT.

3.1 VOLKERWESSELS

This section starts with a general description of the VolkerWessels Group and a brief overview of its history. After that, the different business activities of the Group will be described as well the management structure.

VolkerWessels is a Dutch group of companies with offices in The Netherlands, Belgium, Germany, the United Kingdom, Canada and the United States. The group was originally founded out of a merger between the Kondor Wessels Group and Royal Volker Stevin. Before they merged, Royal Volker Stevin was especially active in infrastructure, whereas the Kondor Wessels Group was active in

construction industry. In 1997 the companies started working together under the name Royal Volker Wessels Stevin nv. The trademark ‘VolkerWessels’ has been used since 2002. Because of these mergers, VolkerWessels is still active in many different areas. Examples are Housing and utility construction; Industrial construction; Property development; Civil engineering; Road construction;

Network infrastructure; Telecommunications infrastructure; Railway construction

and maintenance; Technical installations; Traffic technology; Plant and machinery

management; Park management; Building supplies; Consulting and services. In

2011, operating revenues were 4.713 million Euros. On average, the group employed 15.996 employees in 2011 (Annual Report VolkerWessels, 2011).

The focal point of activity is in The Netherlands (75% of sales) with headquarters in Amersfoort since January 2012 (Annual Report VolkerWessels, 2010). In addition there are offices in the United Kingdom, Belgium, Germany, Canada and the United States. The operating companies are involved in projects on a global scale. VolkerWessels operates in a decentralized organizational structure, divided into six business clusters:

• Construction and Property Development, The Netherlands

• Infrastructure, The Netherlands

• Energy, Infrastructure Technology and Telecoms

• VolkerWessels United Kingdom, United Kingdom

• VolkerWessels Canada/United States

• Supplies and Maritime

VolkerWessels is a privately owned company. Shareholders are the Wessels family (42.5%), CVC Capital (42.5%) and management (15%) (www.volkerwessels.com).

The clusters are centrally managed by the Management Board of VolkerWessels as one can see in Figure 1, where the VolkerWessels Management Structure is being depicted:

Figure 1. Management Structure VolkerWessels

As can be seen in figure 1, the different business clusters are further divided

according to the different business activities within each cluster. The first

business cluster (Construction and Property Development – The Netherlands) is further divided into five different business activities: property development, industrial construction, integrated development, utility construction and housing construction.

The Management Board of the VolkerWessels Group leads the six business clusters and consists of four members. The management board is supervised by the supervisory board which consists of five members.

The organizational structure of VolkerWessels’ is decentralised. That means that the operating companies are independent companies with their own profit and market responsibility and are part of a close-knit internal network. The companies operate relatively independently and take responsibility for their own markets, customers and profit. According to the annual report, such a structure ‘allows entrepreneurial spirit to flourish optimally and it leaves room for a customer- focused, local, flexible approach’ (Annual report, 2011). The operating companies collaborate across the Group in the areas of business development, legal affairs, staff development, insurance, finance and communication. Facilities are also shared in the fields of IT, equipment, purchasing and services.

VolkerWessels’ strategy aims at three important themes; operational excellence, market leadership and broadening the position in the value chain (Annual Report, 2011). With operational excellence, the organization wants to set up their

activities better, smarter and at lower costs to achieve higher margins. Market

leadership should result in a leading position in the markets in The Netherlands,

the United Kingdom and Canada through organic growth and acquisitions. And

third, by broadening the position of VolkerWessels within the value chain, the

company also expects to achieve higher margins and turnover. This is partly due to

the fact that companies within The Group cooperate in a more frequent manner.

3.2 CONSTRUCTION AND PROPERTY DEVELOPMENT

In this section focus will be on one of the division of the VolkerWessels Group, namely the Construction and Property Development division. First the

organizational composition of the division will be discussed and after that a few themes that play an important role at the division will be discussed.

The Construction and Property Development division of VolkerWessels is one of the leading groups of construction companies in The Netherlands. Companies within the Construction and Property Development (BVGO) division are active in the areas of house construction and office construction, industrial construction and property development. In addition, activities are undertaken in the field of construction supplies, advice, services and technology installation. Based on the 1.877 million Euros of operating income in 2011, the Construction and Property development division is the second largest division of VolkerWessels. The division employed an average number of 4094 employees in 2011 (Annual Report, 2011).

The division consists of 43 companies that can be further divided into four regional clusters of construction companies (North-East, West, Centre, and South), a property development cluster, an industrial construction cluster and an integrated development cluster:

Figure 2 Composition of Construction and Property Development

In Figure 2, all operating companies are listed according to the cluster they belong to. Each operating company has its own responsible director. Each region is managed by a executive district director. The overall management board of the BVGO division consists of two persons: Dick Boers, who is also a member of the management board of VolkerWessels, and Laurens Elmerdorp.

In general the Constructing and Property Development cluster consists of two types of companies: construction companies and property development companies (or companies performing both property development and

construction activities). However, risk profiles are very different for these two types of companies. The business activities of property development are much riskier than those of construction companies. Because of these different risk profiles, each property development company is individual liable for their business while at the four regional construction clusters the region as a whole is liable for all the companies in the region. So, in the event that something serious occurs at a property development company, the other property development companies can never be held responsible.

3.2.1 3.2.1 3.2.1

3.2.1 Mission and Strategy Mission and Strategy Mission and Strategy Mission and Strategy

Although each operating company can have its own mission and VolkerWessels BVGO as a whole doesn’t have a formalized mission, the concern controller said, when asked, that it is the mission of VolkerWessels BVGO to ‘contribute to sustainable long-term profitability of BVGO as part of VolkerWessels’ . He explains that VolkerWessels passes through difficult times because of the crisis.

Compared with the peak year in 2008, construction output in 2011 – 2012 is expected to halve. The fall in (consumer) confidence, the limited availability of financing and uncertainties about the mortgage interest tax allowance continue to affect the construction sector (Annual Report, 2011).

According to the concern controller, especially in the tender market times are

though. Projects are being accepted by competitors at cost price and are thus very

low in profit margins and in the coverage of overhead costs. Therefore, BVGO

tries to avoid the tender market as much as possible; however, it is sometimes

necessary to participate as to stay competitive. According to the concern

controller, in difficult times, added value must be sought in collaboration

between the companies. As such, it happens sometimes that BVGO as a whole

applies for a tender. Given the current market trends (potential) clients

increasingly pay attention to the stability of construction and development

companies. This gives VolkerWessels an important advantage as being one of the

leading construction companies in The Netherlands. According to the Annual

Report, when acquiring new contracts, the financial strength and reputation of

VolkerWessels along with that of the operating companies is an increasingly

decisive factor for potential clients.

VolkerWessels puts the focus in this sector on operational excellence (Annual Report, 2011). The merger of three property development companies, who are now as ‘VolkerWessels Vastgoed’ operating from one location, is an example of this.

3.2.2 3.2.2 3.2.2

3.2.2 Local entrepreneurship Local entrepreneurship Local entrepreneurship Local entrepreneurship

Local entrepreneurship is a very important issue at VolkerWessels BVGO. This is underlined by a statement of the concern controller: ‘We really believe in the quality of our local management, we don't want to interfere in that’ . Because of this culture, the structure of the division is decentralized and the operating companies are, to a certain degree, free to determine their own business policy.

An example of the independence of local entrepreneurship is most evident in the fact that every company in the VolkerWessels Group can keep his own company name and brand once they become member of The Group (see Figure 2).

Companies are autonomous and expected to be self-employed. They conduct their own acquisition and are, to some extent, free to determine whether or not they want to accept a new project. Only for projects of more than one million Euros they have to ask permission to the management board of the division.

Companies are strongly recommended by the management board to collaborate and do business with each other but this is never an absolute requirement.

However, although local entrepreneurship is an important theme, a trend towards more uniformity has been set in motion in the last couple of years. BVGO wants to regulate more things at a central level so that it can exploit the potential benefits of being such a big group of companies. According to the concern controller history has shown that in some cases it is better to settle things at a central level.

Through centralization companies can learn from each other, work more efficient and economies of scale can be realized. However, it is hard to integrate this with a culture of local independence. Although the nature of business activities is the same for most of the companies, each company has its own history and by that it has an own way of doing business. The concern controller admits that it is difficult to find a good balance between centralizing and decentralizing and that

VolkerWessels is always striving to exploit the benefits of both extremes.

According to him VolkerWessels wants to be ‘small where we want to be small and

large where needed’ . The goal is to respect the identity of the company as much

as possible. But to fully exploit the benefits of being big, more uniformity and

more conformity to certain standards is needed as well. However, according to

the concern controller, this is a process of change in which VolkerWessels BVGO

will have to grow. The goal will always be to preserve local autonomy while

maintaining a certain degree of corporate control.

3.3 VOLKERWESSELS BVGO ICT BV

In this section a detailed description of the IT function within the VolkerWessels BVGO division will be given. The organisation of the IT function will be described as well as the use of IT at the operating companies.

Before 2010, IT was a shared service across the entire VolkerWessels Group.

However, in 2010 the management board of VolkerWessels decided to make the IT department a responsibility for the different divisions. From that moment, the divisions were forced to set up their own IT services. For BVGO this resulted in the formation of VolkerWessels BVGO ICT bv, which was founded in May 2010.

At this moment, VolkerWessels BVGO ICT BV employs 25 FTE. In Figure 3, the organizational structure of BVGO ICT is depicted:

Figure 3 Organizational chart VolkerWessels BVGO ICT (2011)

The department is responsible for the following activities:

First-line support. BVGO ICT has an own helpdesk where 6 people are ready from 8 am till 6 pm to help users from operating companies with IT-related issues. According to the IT Manager, it’s important that the IT department itself has contact with the people at the operating companies. They don’t want to outsource that to a third party.

Second-line support. BVGO ICT employs application managers who are

responsible for second line support in case the helpdesk can’t solve an issue. The

application managers are also responsible for the technical maintenance of the

business applications (upgrades, etc.).

Functional support. There are 5 functional coordinators who together are responsible for the implementation of the business applications (Navision 4PS Construct and Centric PayMaster). These functional coordinators can also play a supportive role for second-line support if there are complex issues concerning the ERP-systems.

In addition to the employees who are permanent, BVGO ICT currently also hires people. However, the management wants to decrease the number of hired people so that the dependence on third parties can be reduced and knowledge can be kept in-house.

To discuss problems and to get a solid base, involvement of top management in IT is great, according to the IT manager. Top management is closely involved and IT is a primary responsibility of the CEO of the division. The IT managers and the CEO meet every six weeks. During these meetings, the CEO is being informed by the IT managers about the succeeding of the different IT-projects. There are also meetings with the management board of the different regions each six weeks.

During these meetings, the problems and challenges of IT are discussed from IT- as well as a business perspective. According to the IT Manager, there is no top- down approach during these meetings, but an interaction between management and IT.

According to the Manager ICT the attitude towards BVGO ICT at the operating companies is not as desired. BVGO ICT has a bad reputation due to many failed projects in the past. IT projects are rarely delivered on time and within budget.

Besides that, there was dissatisfaction about the reliability and speed of the technical IT infrastructure. BVGO ICT hopes to improve this through the transition to a complete new IT infrastructure for all BVGO ICT users, a project that was finished at the end of 2011.

The attitude to IT in general isn’t very positive either. Construction industry has never been one of the most innovative IT branches. According to the ICT manager, this is also true for the operating companies at VolkerWessels BVGO. People are not used to think in terms of ‘integrated systems’ and their main requirement is that they have the ability to use an IT system to support their daily businesses.

‘ Things just have to work’ is a commonly held statement. Organizations are working with many different legacy systems that together make it impossible to integrate business processes. Besides these systems, Microsoft Office Excel is very popular. According to the IT manager, most people lack the knowledge to work with integrated systems and to think about their own tasks as element of a bigger business process. They complete their tasks without asking what is done before and after them in the process. For that matter, people are easy to satisfy with an integrated system; their requirements are not very high. The IT manager sees it as part of the role of the IT department to guide the companies in

developing a more process-oriented view of their organization: ‘what we think is

important is that we can increase the level of IT knowledge and business process-

awareness, that we can show that things can be done more efficient. That's our

job’. However, this must always take place in very close consultation with the Finance & Control department.

In order to stimulate innovation in a way that fits VolkerWessels, a team has been set up whose primary responsibility is to search for possibilities to keep

VolkerWessels innovative. The goal of this team is to develop a vision concerning innovation at VolkerWessels. The ICT Manager said: ‘It's not that we are negative towards innovation but in a way that fits the mentality of Volker Wessels’ . The members of this team are the representatives of the operating companies and BVGO ICT.

The manager ICT is very clear about the right to exist for BVGO ICT: ‘Our primary goal is to facilitate BVGO: we exist because of the operating companies’ . As said before, in the last couple of years, a trend towards more uniformity has been set in motion by the management board of BVGO (see section 3.2.2). This trend also has a big impact on IT. The concern controller admits that while in previous years the management board of VolkerWessels would have argued that an ERP system would have to adapt to the organization, that attitude is now changing. The main reason for this change is the lesson they learned from the project with Centric, where VolkerWessels and a company called Centric, attempted to develop a new ERP system solely based on the demands and wishes of VolkerWessels. From 2003 until 2010, effort has been put in order to create and deliver this ERP solution.

However, in 2010 only six of all operating companies were working with this ERP package and the solution wasn’t stable at all. As a result, in the summer of 2010, the CEO of the BVGO department decided to start a proof of concept phase in which an alternative solution to the ERP solution of Centric was presented. There was a strong perception among key-users but also from the ICT department that the ERP solution of Centric would never deliver its promised functionality. After the proof of concept phase, management decided to choose the alternative and VolkerWessels BVGO ICT started a pilot to implement Microsoft Dynamics NAV 4PS Construct at one of the operating companies in Landgraaf, South Limburg.

After the pilot project, the CEO of VolkerWessels BVGO gave final permission to start implementing Microsoft Dynamics NAV 4PS Construct at all other operating companies of VolkerWessels BVGO.

This project is discussed in more detail in chapter 4.

3.4 BUSINESS AREAS

In this section the operating companies and their business processes will be discussed. First, an overview is given of all the operating companies, their number of employees and their business processes. Next, a general description of how all business process are currently supported by IT-systems and how they will be supported in the future when working with 4PS Construct will be given.

The operating companies of VolkerWessels BVGO can be split into three types of companies, based on their business activities:

• Companies that only perform construction activities.

The division consists of 23 companies that only perform activities in the construction industry (Annual Report, 2011). These companies are active in housing and utility construction all over The Netherlands. Their primary process is the building of houses and/or offices. However, every company is different and can have its own specialities. For example, a company can be specialized in renovation, while another can be specialized in large utility construction.

• Companies that only perform property development activities.

The division consists of 15 companies (Annual Report, 2011) that only perform activities in the property development industry. These companies are active in The Netherlands and Europe. Their core business is to develop new construction projects.

• Companies that perform a combination of both activities.

The division consists of 5 companies (Annual Report, 2011) that perform a combination of both property development as well as construction activities.

However, the property development part is in most cases a separated legal entity.

3.4.1 3.4.1 3.4.1

3.4.1 Construction Construction Construction Construction companies companies companies companies

VolkerWessels has set up detailed process descriptions in order to map the business processes of the operating companies. Based on these descriptions, the different processes areas will be discussed below. Business processes in

construction industry are less standardized than in manufacturing: each project has a different owner, is managed by a different project team, requires different specifications, etc. (Chung, Skibniewski, Lucas and Hoon Kwak, 2008).

Not all processes areas as described below can be found at all companies.

Especially buyer counselling, payroll and service & maintenance are sometimes

outsourced to an external party.

3.4.2 3.4.2 3.4.2

3.4.2 Relationship Management Relationship Management Relationship Management Relationship Management

This process area deals with the registration and maintenance of contact information. Contacts can be either companies or persons. The capturing of acquisition projects is also seen as part of relationship management. Acquisition projects are used for capturing potential new projects in the system. All kinds of contact moments with the potential client and all necessary actions that need to be done can be linked to the acquisition project.

It is not possible to capture acquisition projects in the current information systems most companies are using; in some cases companies are using

extracomptabel systems to facilitate the acquisition process. Most companies are currently using their current ERP system specifically for capturing debtors and creditors. Each company works with a local database in which contact information is being stored. These stand-alone databases are making it very difficult, not to say impossible, to set up consolidated purchase analysis with data of all operating companies of BVGO. In order to get a complete picture of volumes and prices at different suppliers, relationship management needs to be more centralized. On the other hand, each operating company wants to have an own local database that can’t be approached by users of other companies and in which they can keep the more confident contact information like employees and local contact persons.

4PS Construct has functionality that can support a combination of

central/decentral relationship management. Based on that functionality, all companies will have two relationship databases at their disposal: a local database in which contact persons and employees can be entered, and a central database in which customers, suppliers and subcontractors (debtors and creditors) are being recorded. The central database links all operating companies. Contact

information that is being entered in the central database, is also available in the local database, while data entered in the local database is only available in the local administration. A limited number of people at a limited number of companies will have the rights to change, delete or add data in the central database.

In this way VolkerWessels expects that making analysis will be a lot easier and less time consuming. Another advantage of a centralized database is the fact that changes need to be made only once.

3.4.3 3.4.3 3.4.3

3.4.3 Calculation Calculation Calculation Calculation

This process area deals with calculating the construction costs for a project based on a detailed budget. Required quantities and prices necessary for executing a new project are determined during this process so that a final offer- or commercial price can be determined.

Because of the fact that calculation requires specialized software, the

management of VolkerWessels decided to choose a separate, specialized system.

A workgroup has been set up to investigate the different specialized software

packages that are available in the market. After selecting two alternatives,

companies had to make a choice between the two alternatives. They uniformly

choose for ‘IBIS TRAD’ from the Brinkgroep. The implementation of this software has no direct impact on the implementation of 4PS Construct. All calculators are already trained in using IBIS Trad and standard interfaces are available so that a created calculation can be uploaded in an ERP-system. As soon as a calculation becomes definitive it is uploaded into the system. This calculation serves as a reference framework during the execution of the project. It is a very detailed enumeration of all materials, labor, equipment and other costs needed to execute the project. All these budget lines have a unique code based on a standard coding system. Required quantities and prices serve as budget lines for purchasing.

3.4.4 3.4.4 3.4.4

3.4.4 Pu Pu Pu Purchase rchase rchase/Work preparation rchase /Work preparation /Work preparation /Work preparation

The boundaries between the purchase department and the work preparation department are sometimes blurred. There are companies that have completely merged the purchase- and the work preparation department. Here, they will be discussed together.

This process area deals with the purchasing of materials and services that are necessary to successfully execute a project. This includes among other things the request and management of tenders to determine final order prices and -

conditions. Other tasks are the preparation of a time schedule for the project.

This function isn’t supported by current legacy systems. Most departments are used to work with extracomptabel systems. Orders and other mailings to suppliers are typed in Microsoft Word and comparison between tender prices from different suppliers is done with Microsoft Excel. To keep track of what has already been purchased, the calculation is printed on paper and comments are made manually. Payments to suppliers and subcontractors are done in the system but are the responsibility of the Finance department. Because of this lack of integration with other business processes, most purchase departments are used to work as ‘islands’ within the company.

This will change once a company starts working with 4PS Construct. Purchasing data in the form of purchase tenders, purchase orders and supplier details will be entered into the system. The calculation made by the calculation department must be uploaded in 4PS Construct and will serve as the starting point for purchasing. Purchase is being done based on the budget lines of the calculation.

Orders can be generated by the system and the system keeps track of what already has been purchased and at what cost.

In order to profit from scale advantages, VolkerWessels BVGO has established a

purchasing platform in which the various purchasing departments can meet and

discuss with each other. Cost reductions are being achieved on materials by

centrally closing annual admeasurements contracts with suppliers. VolkerWessels

BVGO closes admeasurements contracts with a few hundred suppliers in which

prices are set for a whole year. These contracts are closed with big suppliers all

over The Netherlands. Guarantying a minimum quantity, prices of these contracts

are lower than general market prices. The operating companies can make use of

these contracts but are free to buy the same products at another supplier for a

lower price. The fact that suppliers are entered in the central contact database of

4PS Construct, makes it possible to record the purchase data of all different operating companies for specific suppliers. In this way, consolidated purchase analysis of all operating companies of VolkerWessels BVGO is expected to be less time-consuming. Based on the quantities and prices the companies report, new admeasurements contracts can be closed.

3.4.5 3.4.5 3.4.5

3.4.5 Execution Execution Execution Execution

This process area deals with the construction of new buildings.

In the current situation people do not have access to the ERP system at the construction sites. As a result most data is first registered on paper by the project manager or general foreman and subsequently send or brought to the office. At the office, the financial administration enters the data, such as receipts or worked hours into the system. The current ERP systems does not have functionality to support use of the system at the construction site. However, 4PS Construct has a module that is specially designed for use at construction sites. With this module, data can be entered by the general foreman and imported in the financial

administration. Next, financial workers have the opportunity to check the data and book it into the system.

However, in general, VolkerWessels BVGO chooses not to charge general foremen with administrative tasks. This is mainly a matter of principle; it is believed that general foremen need to focus on the technical aspects of their work and should not be bothered with administrative tasks. Second, because of their technical background, they are not educated to perform administrative tasks. Because of that, one is afraid that errors in the system will be made easily.

3.4.6 3.4.6 3.4.6

3.4.6 Project Project Project Project Management Management Management Management

This process area deals with the intermediate monitoring of project results and determining final results of finished projects. This includes among other things the recording and monitoring of project costs and the progress of the work.

In the current situation, the projects and their associated costs and revenues are all entered into the system. The system can generate different kinds of reports. In general, the available project reports provide information about the amount of budget spent relative to the progress of the projects, their financial status and purchase results. Other reports provide information about payment behavior of creditors. However, because these reports are not adjustable to match all reporting requirements, in order to meet VolkerWessels BVGO reporting

standards, many reports still have to be made extracomptabel in Microsoft Excel.

Although project management is often seen as a sub administration of the financial administration, it is the heart of every construction company.

VolkerWessels has developed a special method for project monitoring, called the

PER (prognose eindresultaat), and decided that Navision 4PS Construct must be

customized according to this methodology. Special functionality is programmed

into Navision 4PS Construct for VolkerWessels BVGO so that all companies can

monitor their projects according to this methodology. While Navision 4PS

Construct is adapted to the wishes of VolkerWessels BVGO in some other areas,

this is the only kind of customization that won’t become part of the standard 4PS Construct solution. Once the PER functionality is successfully delivered by 4PS, the functionality and the associated report will be managed by the IT department of VolkerWessels BVGO.

3.4.7 3.4.7 3.4.7

3.4.7 Finance Finance Finance Finance

This process area deals with the receiving and processing of financial transactions of other business processes but also the processing of financial transactions for external relations. It includes among other things the registration and handling of sales- and purchase invoices, handling of payments, processing of journal entries and payments and the preparation of various financial- and consolidation reports about the financial status of the company.

Many activities of the financial administration are supported by the system.

Reporting is an important task of the financial administration. As members of the group, all operating companies have to report to the head office of the division in Rijssen. Reporting is expected to be done in a frequent manner; the companies have to submit quarter reports every quarter and four additional month reports in the months before they submit the quarter reports. Quarterly reports are more extensive than month reports because additional explanation is requested. The information in these reports is very diverse and offers among other things an insight into profits, revenues, costs, number of homes sold, number of unsold homes, lead time, debtors, creditors, working capital, etc. of the companies. Once the reporting is finished and submitted, the controllers at the office in Rijssen receive and check the reports and based on that information, the head office in Rijssen reports to the head office of VolkerWessels in Amersfoort. All this information is used for general financial information about the companies, but also serves other purposes such as being the basis for the closing of the

admeasurements contracts.

Unfortunately, most of the reports cannot be generated directly out of the current systems and thus have to be prepared via extracomptabel systems.

According to the concern controller, it takes the controllers at the operating companies approximately three days to finish the required reporting because most of the data has to be retyped from the different systems into Microsoft Office Excel. Although this thus already takes a considerable amount of time, the concern controller of the division has the wish of increasing the reporting

frequency. According to him the need for reliable, real-time information increases at The Group. He thinks that IT can play a very important supporting role in the process of reporting if reports could be extracted automatically out of an ERP- system. Therefore, during the configuration of 4PS Construct, reporting

requirements were taken as guiding principles. Reports will be build according to reporting requirements so that controllers just have to push a button in order to generate the right reports.

However, besides the technological possibility of automatically generating

reports, a certain degree of standardization at the operating companies is also

necessary. To further ease the process of reporting, many configuration issues are

determined in the kernel model in order to create a common basis. For example, there is a standard general ledger chart that all companies must use. Although companies are free to add specific general ledger accounts, the basis is the same for all companies.

3.4.8 3.4.8 3.4.8

3.4.8 Payroll Payroll Payroll Payroll

This process area deals with the calculation of salary and the management of the personnel information.

Because of the specific regulations and calculations required for the payroll process, the wage-and salary administration requires a separate, specialized system. The necessary functionality to support this process isn’t available in 4PS Construct. VolkerWessels has therefore chosen for Paymaster from Centric IT Solutions. Most companies of VolkerWessels BVGO are already using PayMaster to facilitate wage and salary administration. Paymaster works with a wage model in which all applicable legislation and specific VolkerWessels BVGO regulations are set. Administrations in Paymaster are linked to this wage model and

consequently must conform to the design and configuration of this model. In this way VolkerWessels is assured that all companies perform their wage- and salary calculations in a uniform way. A workgroup has been set up to signal upcoming changes in legislation and regulations in order to keep the wage model up to date.

There is a standard interface between PayMaster and 4PS Construct so that data can be imported from 4PS Construct into PayMaster and vice versa.

3.4.9 3.4.9 3.4.9

3.4.9 Buyer counselling Buyer counselling Buyer counselling Buyer counselling

In The Netherlands many projects are realized in which a large number of houses (or apartments) are built. In many cases, the construction company has direct contact with the private customers that buy these houses. Each of these buyers has its own specific requirements and desires that ultimately lead to specific choices for certain options (extensions contracts). This process area deals with the support and managing of these buyers and their requirements. They conduct the (commercial) communications to buyers and coordinate and manage the

questions from buyers during the execution phase.

The current system does not have any functionality to support the process of buyer counseling. As a result, the process of buyer counseling is completely performed in extracomptabel systems such as Excel and Word. Just like the purchase department, buyer counselling functions isolated from other business processes. 4PS Construct possesses complete functionality to support this process.

3.4.10 3.4.10 3.4.10

3.4.10 Warranty and post Warranty and post Warranty and post Warranty and post----construc construc construc construction support tion support tion support tion support

This process area deals with the service, maintenance and post construction

support of completed projects. This includes the logging of requests and

complaints and the preparing and executing of service and maintenance these

orders.

The process of service and maintenance isn’t supported by the system. The registration of complaints and requests is done in a separate system. This system is based on Microsoft Access and developed in-house by one of the operating companies. Besides registration, this system is also used to make analysis.

4PS Construct has specific functionality to support the registration of service and maintenance projects. Complaints and requests of buyers can also be registered.

3.4.11 3.4.11 3.4.11

3.4.11 Property development Property development Property development Property development

Besides all construction companies, there are also operating companies whose primary business activity is property development. The process of property development deals with the acquiring, planning, designing and contracting of the necessary parties for the development of construction projects. This includes among other things determining the land price, determining the environmental planning procedures and analyzing the market environment for a new project.

It is difficult to automate the property development process. A good execution of this process depends decisively on the knowledge and craftsmanship of the people involved rather than on the IT systems used. Besides that, it’s hard to define a uniform methodology because each developer has its own unique methods. At this moment, a team of representative users is setting up a kernel model especially for property development companies.

3.5 SIMILARITIES AND THE DIFFERENCES

Not all business processes can be found at all companies and some are executed in slightly different ways, but one can surely speak of a common denominator that applies to all construction companies of VolkerWessels BVGO. The main

difference between the different construction companies is the scope of their supportive processes. Project monitoring, financial administration and purchase form the core of each company. It is confirmed by the IT Manager that these three functional areas are the minimal scope during the ERP implementation.

Although all construction companies are very much alike, there is a big difference between the construction companies and the property development companies.

Property development companies have different business processes compared to

construction companies. However, it is expected that the critical success factors

from the literature will be beneficial for the implementation of 4PS Construct at

both the construction- as well as the property development companies.