Master’s thesis 28 of January 2019 The effect of the alignment between ERP and business processes on the ERP performance

Master’s thesis

The effect of the alignment between ERP

and business processes on the ERP

performance

28

th

of January 2019

Author: Aryan Homayoun-Bod Student number: S3392112 Supervisor: Prof. dr. Jan de Vries

Second supervisor: Dr. Stefania Boscari

2

Abstract:

Purpose:

The purpose of this research is to investigate the influence of alignment between ERP and business processes on ERP performance in the post-implementation stage.

Design/Methodology/Approach:

This research uses meta-ethnography for collecting and analyzing the data. Findings of six different studies are described and compared to answer the research question.

Findings:

Companies follow different approaches to strive an alignment between ERP and business processes. Each of these approaches has different consequences. This research finds, that even though in many cases an alignment is desired, in different approaches various levels of acquired benefits can be obtained. Consequently, different ERP performances across companies can be detected. In fact, changing business processes or the ERP software slightly will acquire in many cases the most benefits.

Originality/Value:

As such, this research presents a good insight of the ERP performance measured by acquired benefits in the post-implementation stage.

Keywords:

ERP, Business process, alignment, organizational fit, ERP performance

Acknowledgment:

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1. Introduction

In this era, companies are competing with each other on a global level and, at the same time, customers have various requests from companies such as being more flexible and efficient. Thus, one of the solutions to satisfy the customer requests and pursue being competitive in the market, is to connect the information of different departments and integrate the business processes of the company (Finney & Corbett, 2007; Sidorova & Isik, 2010). Due to the ongoing technological developments, a new type of software has emerged which is able to unite all business processes and transactional data throughout the organization. This software is called Enterprise Resource Planning (ERP) (Markus et al., 2000). Su & Yang (2010, p. 458) define an “ERP system as an integrated enterprise computing system that is designed to automate the flow of material, information, and financial resources among all functions within an enterprise on a common database.” Although this type of software comes with all these attractive attributes, the costs of the implementation lie between 0,5 to 300 million USD (Rettig, 2007 IN Hsu et al., 2015). Other than the financial costs, ERP systems also require companies to make other investments such as time, human resources, and technology. The purpose of these investments is to achieve the ERP benefits, such as reducing cost, better decision-making, better productivity, and many others, but in many cases companies fail to generate those (Davenport et al., 2004; Shang & Seddon, 2002). Statistics show, that 67.5 % of ERP implementations did not acquire even half of the anticipated benefits (Panorama consulting, 2010). Failing to align ERP and the business processes is one reason among several others, which results in an unsuccessful ERP implementation (Davenport, 1998).

5 strive for during the implementation stage aims to eventually improve their business performance through the integration of different business processes within the company (Al-mashari, 2003). Moreover, the acquisition of ERP benefits has positive impact on the firm’s performance. To evaluate the acquired benefits, it is necessary to analyse the performance of the ERP system and investigate whether the desired performance and benefits of ERP are achieved during the post-implementation stage (Shen et al., 2016). So far, scholars tend to research more on the implementation stage rather than the post-implementation stage. There are relatively less published articles on ERP in the post-implementation stage compared to the implementation phase (Hsu et al., 2015). Also, less literature exists regarding the ERP performance in the implementation stage (Shen et al., 2016). The low number of studies focusing on the post-implementation phase and the ERP performance as well as the crucial effect of the alignment between ERP and business processes, stimulate the following research question: “How does the

alignment between ERP and business processes affect the ERP system’s performance in the post-implementation stage?”

A successful implementation encompasses all actions taken to finish the implementation in planned time and budget, but the post-implementation success refers to the acquisition of desired benefits and the performance of ERP in the post-implementation stage (Ha & Ahn, 2014; Zhu et al., 2010). Somers and Nelson (2001) point out at the factors for a successful ERP implementation, such as the minimal customization and business process re-engineering (Somers & Nelson, 2001). Additionally, (Holland et al., 1999 IN Nah et al., 2001) mentioned the alignment between the ERP software and the business processes as a crucial element for a successful implementation. Furthermore, these factors that play an important role in the success of the implementation may also affect the post-implementation success (Ha & Ahn, 2014). Scholars highlighted the significant role of the alignment for the implementation stage, but the potential consequences of each approach to achieve an alignment on the ERP performance in the post-implementation stage remains less explored.

6 that can affect the ERP performance in the post-implementation stage. The beneficiary of this research are managers and employees of companies who are using ERP systems. Moreover, the findings will be especially informative for companies, which have recently struggled with the implementation of the ERP software, by highlighting factors for a successful ERP application. Finally, the result of this research will show the role of the alignment of ERP with business processes on ERP performance.

This paper is structured as follows. The second section will provide some theoretical background by defining and explaining the research question and positioning it in the literature. This section will also present the conceptual model of this study. The Methodology section of this study, will introduce meta-ethnography as the underlying research method in addition to providing insights into the study selection process, explaining a framework of analysis of the selected studies, and presenting the procedure of analysing the studies. The last sub-section of methodology is disclosed by illustrating the path of discussion. The findings of each study will be further discussed in the Discussion section, which in the first part of the section aims to compare the studies with each other and then discuss the findings with the relationships proposed in the conceptual model. Finally, the Conclusion section will answer the research question and include recommendations to practitioners. It will also highlight opportunities for future research and record limitations of the study.

2. Theoretical Background

7 conceptual model presents the relationship of the variables and introduces the operationalization for ERP performance and the alignment.

2.1 ERP

8 IN Kohlbacher & Stefan Gruenwald, 2011).

After the implementation of ERP, companies expect to achieve ERP benefits. For instance, in case of fluctuations in customer orders, the organization can be more agile and react more flexible by quicker responding customers and faster delivery of products or services (Laframboise & Reyes, 2005; Koh & Simpson, 2007). Furthermore, ERP can help to facilitate the exchange of data in the system, hence, decreases the production and inventory costs as well as enhancing forecasts (Hasan et al., 2011). Also Seddon (2005) states, that ERP can improve the productivity of processes. Lastly, in the era of growing globalization, ERP systems can facilitate the organizational efficiency and global supply of the organization by integrating the supply chain (Davenport and Brooks, 2004). ERP has many other benefits, which Shang & Seddon (2002) gathered and categorized into five different dimensions: “operational, managerial, strategic, IT infrastructure and organizational” (Shang & Seddon, 2002, P. 277). Table 1 presents an overview of all possible benefits of each dimension.

Table 1. The Benefits of ERP, adapted from (Shang & Seddon, 2002, p. 277)

9 organizational benefits require an extended period of time to be perceived (Zhu et al., 2010). Lastly, the dimension of IT benefits is limited to the IT department (Chand et al., 2005) and, therefore, for this research purpose neglectable.

An organization which implements an ERP system successfully will most likely have the opportunity to use the mentioned benefits within the company as well as along the supply chain. (Akkerman et al., 2003). However, in many cases it is difficult to achieve a successful implementation, since the implementation process of ERP is complex and distinct from any other IT innovation due to the socio-technical challenges and different types of end users (Rajan & Baral, 2015). Also, the implementation of ERP is not as straightforward as other IT programs. ERP is a sophisticated software, and it affects the business processes and the structure of the company as well as the organizational culture (Sudhaman & Thangavel, 2015). Furthermore, ERP implementations often are considered to be more a program rather than a project. A project has a start and ending point, while a program has a starting point but throughout the process requires continuous work on both, the organization and the software (Slack et al., IN Ahmed & Cuenca, 2013). To be more precise, the implementation process of ERP has three phases which are: pre-implementation, implementation, and post-implementation. The pre-implementation and implementation phases are both accomplished in a span of time. During the third phase, post-implementation, the ERP software is operating and expected to support the business processes (Ali & Miller, 2016). The post-implementation phase has a starting point but an unknown ending point because continuous work is required, mainly bringing the ERP software in line with the requirements of the company until fully obtaining the desired ERP benefits (Ahmad & Cuenca, 2013; Nah et al., 2001; Nwankpa, 2015). Once the ERP system is implemented it becomes the heart of the company, which merges the business processes via easing the flow of information (Velcu, 2010).

10 revealed in 2015, among the organizations which participated in the survey, only 41% received approximately 50% of the anticipated benefits (Panorama’s consulting IN Hustad, 2016).

2.2 Business process

During the production processes, certain activities are done to transform the raw material to a finished product for the end customers. All various series of activities which are used to transform the input to output is referred to the business process (Lindsay et al., 2003). Scholars provided, however, different definitions for business processes. For instance, Alotaibi (2014, p.703) illustrates the business process as “a set of activities whose final purpose is the production of a specific output which has value to the customer.” Moreover, Erikson & Penke (2000, p. 4) define business processes as “the active part of the business. They describe the functions of the business, and involve resources that are used, transformed, or produced”. Lastly, (Aguilarsaven 2004 IN Alotaibi, 2014, p. 704) define business processes as a “set of organizational procedures that are structured together to achieve the business goals”.

Companies are often trying to enhance the efficiency of production and reduce costs. These two goals can be achieved through the automation of the business process (Lindsay et al., 2003). To automate the business process, and achieve a better flow of information or integration, implementing ERP can be an appropriate tool (Nah et al., 2001). According to a survey conducted by Ehie & Madsen (2005), the main incentive behind implementing ERP is to simplify a company’s business processes. This simplification can eventually assist in improving the company’s overall performance. In other words, the implemented ERP software can automate and integrate different parts of business processes which eventually leads to an improved business process (Su & Yang, 2010; Zhu et al., 2010).

11 & Yang, 2010; Goutsos & Karacapilidis, 2003). Also, ERP makes the business processes more transparent, which eases the handling for users to monitor specific processes. Consequently, the company can spot malfunctioning activities in the business processes faster and work on a solution. In addition, this system also enables the ability to track all data created by business processes from the origin to the final destination and simultaneously analyse and record it (Badewi et al., 2017; Davenport et al., 2002 IN Aslam, 2012). These mentioned benefits are part of the operational and managerial benefits. Lastly, all these contributions of ERP enhance the business process and the overall performance of the organization. However, one of the critical success factors, alignment between ERP and business processes, plays an important role in achieving these benefits (Holland et al., 1999; Nah et al., 2001)

2.3 Alignment

Although ERP vendors tailor the software in a way to fulfill the requirements of their customers as much as possible, in most cases, a gap between the ERP system and business requirements still exists. The gap between the requirements of the organization and the ERP software is called “misfit” or “misalignment” (Soffer et al., 2005; Anderson et al., 2009 IN Parthasarathy & Daneva, 2016). One of the main reasons behind this occurring gap is that companies could not combine their business requirements with the provided embedded structure of the ERP software. For instance, large companies such as FoxMeyer Drug, Dell and Mobile Europe suffered from a misalignment during their implementation process and ultimately failed to establish an alignment. Eventually, these companies encountered an unsuccessful ERP implementation due to the misalignment (Davenport, 1998).

In general, the alignment that companies face while implementing ERP can be divided into two different segments: strategic alignment and organizational alignment (Al-Mashari, 2003). In strategic alignment, the implemented ERP system requires an alignment with organizational goals, the organization’s business strategy, organizational change management and process improvement (Al-Mashari, 2003, Velcu, 2010).

12 integrates each process of the organization’s function. Therefore, a higher dependency among the processes of each function, brings a better alignment between the ERP and the overall processes. According to a European survey, the primary concern of companies is the alignment of their business processes with the newly implemented information system (Van Everdingen et al., 2000). According to different scholars, obtaining an alignment between ERP and business processes is crucial and the organizational fit is also a vital factor, since they both determine the implementation success of ERP and subsequently the ERP performance (Chen et al., 2009). The focus of this study lies on the alignment between ERP and business processes as a part of organizational alignment. In addition, reaching a strategic alignment is as important as organizational alignment for a company, because a strategic alignment has also a significant impact on business success. When the ERP system is implemented it becomes the foundation of the organization, which means that most business processes are managed through ERP (Tallon, 2014). Moreover, strategic alignment is crucial for the performance of ERP and the applied business strategy should be aligned with the abilities of the software. But this alignment emerges after the implementation of ERP during the post-implementation to ensure the strategy and the software are aligned and, therefore, is not directly related to the alignment between ERP and business processes (Velcu, 2010). Therefore, the strategic alignment will not further be analysed and discussed.

The previous paragraphs mentioned the importance of striving an alignment for the companies. In most cases, alignment can be one of the prerequisites of a successful implementation and enhancement of ERP performance. As mentioned earlier, some companies either re-design the business process or customize the ERP software to solve the misalignment and reach the desired ERP performance and its benefits (Somers & Nelson, 2001). Each of these approaches have different level of changes and subsequently different consequences and impacts on the company. The following section presents explanations of these different levels of changes and their impacts.

13 respectively (Luo & Strong, 2005, p. 325). The first level entails just deviations in the tasks and resources. Basically, it is automating the business processes or in other words, the substitution of employees with computers. Moreover, rearranging the responsibilities of employees and changing the organizational structures such as reorganizing the departments or adjusting the job duties can also be considered in the first level of changes (Brehm et al., 2001; Luo & Strong, 2005). The second level of redesigning the business process involves enhancing the relationship between tasks and resources. In general, it intends to solve the problems that the business process encounters with (Luo & Strong, 2005). The last level is a fundamental change of the entire business processes within the organization. Literature defines the third level as business process re-engineering (BPR) (Luo & Strong, 2005). Companies often practice their business processes for a long time and may even have a unique business process. Therefore, re-engineering the business process may lead to a loss of competitive advantage (Parthasarathy & Sharma, 2016; Bingi et al., 1999). Moreover, ERP is a process-oriented software. Therefore, when the ERP is implemented, the software tries to compel to change the mindset and structure of the company from function-oriented to the required mindset of ERP. The workflow within the company requires modifications and some changes (Soh et al., 2003). One of the consequences of changing the workflow is the emergence of inefficiencies throughout the processes (Brehm et al., 2001).

14 (Luo & Strong, 2005). Lastly, the most major customization in this context, coding modification, involves alterations within the program itself. At the first glance, this is a very competent and perfect solution for achieving an alignment, but it has several flaws. It is riskier and more expensive compared to the first two. Moreover, due to alteration in the coding of the software, some benefits of the software may not be achieved (Luo & Strong, 2005). In addition, Bingi et al., (1999) also indicate, that this customization has a direct relation with costs: the more customization is desired the higher the costs and the longer the time needed for the implementation. Lastly, when the codes change the company can encounter some problems for future upgrades (Holland & Light, 1999 IN Soffer & Dori, 2005).

Table 2 depicts a summary of the approaches and their level of changes. The left column shows the different level of change severeness on both business processes and ERP.

Table 2. Different level changes in ERP and the business processes (adapted from Luo & Strong, 2005)

2.4 ERP Performance

15 (2003) mentioned in section 2.1 is comprehensive and gives a good overview of ERP benefits, the BSC by Chand et al. (2005) is more suitable for the purposes of this research because of various reasons. In general, due to the classification of BSC, it is more appropriate for evaluating ERP performance. Moreover, a timeline which shows when the benefits are achieved does not exist in the framework of Shang & Seddon (2003). The BSC specifically shows which benefits are achieved prior to the others. Also, the content of the BSC is more helpful for the evaluation of IT such as ERP software (Chand et al., 2005; Davenport, 2000; Markus & Tanis, 2000 IN Chand et al., 2005).

This BSC contains a combination of Kaplan and Norton’s four dimensions (process, innovate, finance and customer) and the ERP benefits according to Zuboff’s classifications (“Automate”, “Informate” and “Transformate”). As a brief explanation, the implementation of ERP starts with automating the business process and collecting the data which is the “Automate” level (Chand et al., 2005). Due to the automation and data transparency, managers and other employees can acquire sufficient information regarding the organization. Therefore, practitioners eventually make better decisions which lead to the “Informate” classification (Chand et al., 2005). After achieving those benefits, the third classification, “Transformate”, can be reached. It entails, that ERP can make the company more flexible and responsive to market needs, which eventually helps to gain a competitive advantage (Chand et al., 2005). Each of these benefit classifications of Zuboff are analysed in the four different dimensions of Norton and Kaplan. On the horizontal axis the three levels of ERP classification are written: “Automate”, “Informate” and “Transformate”. In addition, on the vertical axis the four dimensions are given: “Process” “Customer”, “Finance” and “Innovation”. In total there are twelve cells which entail goals and possible outcomes.

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Table 3. The balanced scorecard, adopted from Chand et al., (2005)

2.5 Conceptual Model

So far, scholars acknowledged the importance of alignment between ERP and business processes during the implementation stage and its significant effect on the implementation success. An approach to strive an alignment is to change the business processes or even redesign them. In section 2.3 the alignment has been discussed and it was also argued, that the alignment between ERP and business processes is a sub-division of organizational fit. Organizational fit is defined as “the congruence between the original artifact of ERP and its organizational context” (Markus & Robey, 1983 IN Hong & Kim, 2002, p. 27). The changes in business processes to fulfill the requirements of ERP also involve specific changes within the organization, such as re-assigning the task of employees or restructuring the organization (Brehm et al., 2001). Therefore, it would be interesting to investigate the influence of organizational fit on ERP performance. Hence, the impact of organizational fit on ERP performance will be analysed as well as the alignment between ERP and business processes. Therefore, a second research question is proposed: “How

does the organizational fit affect the ERP performance in the post-implementation stage?”

17 variables that are the focus of the research. In this research both changes, on ERP and business processes which occur in the implementation stage to achieve an alignment, are taken into consideration. Initially, the effect of alignment between ERP and business processes on ERP performance is analysed. It is expected that the alignment between ERP and business processes will have a positive impact on ERP performance. Furthermore, due to the reasons mentioned in the previous paragraph, the alignment between ERP and business processes affect the organizational fit. And also the organizational fit can help to have an alignment between ERP business processes. So a new topic emerges aiming to evaluate the effect of organizational fit on ERP performance. It is expected that the organizational fit will also positively influence the ERP performance.

Figure 1. The conceptual model

18 stage, but the “Transformate” level requires a longer period of time to be acquired. Therefore, with a slight adjustment on the BSC of Chand et al., (2005), just the “Automate” and “Informate” benefits with their dimensions are included in Table 4. The second section about the alignment, entails three different sub-groups: customization, business process changes and organizational fit. The second section is inspired by Luo & Strong (2005), which highlights keywords for different approaches to achieve an alignment. Lastly, organizational fit encompasses gaining an overall organizational fit or reaching alignment between the business processes and ERP software. This table provides the operationalization of the variables and prepares for the analysis part of the research. In other words, the data used for the analysis in the following parts are extracted from Table 4.

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3. Methodology

As mentioned earlier, the purpose of this research is to investigate the impact of the alignment between ERP and business processes on ERP performance in the post-implementation stage. On this basis, the alignment of ERP and business processes and organizational fit are assessed as well as the performance of ERP and the interfaces among them. The following section will, therefore, focus on the methodology of the study. In this section, first the research design and specifically the meta-ethnography approach is explained. Next, the procedure for collecting suitable studies is presented. In the third part, the method for analysing selected studies are explained step-by-step. The last stage of the meta-ethnography approach is synthesis. Therefore, after presenting the analysis procedure, criteria for the synthesis are determined.

3.1 Research design

This paper is based on a qualitative research approach. According to Yin (1984), a qualitative research is suitable for exploratory purposes, because the researcher observes a current situation and, therefore, has less control over the results. The research question illustrates the gap which was found in the literature. For this research the data used to answer the research question is derived from the literature. Conclusions cannot be established by just using the data of previous literature. Instead, it requires to compare the data of different literature sources and interpret those. For this comparison, a detailed and systematic framework is required, which illustrates the analysis steps applied on each article and presents a clear and concise way to compare the data (Campbell, Pound, Pope, Britten, Pill, Morgan & Donovan, 2003). To systematically compare the analysed literature and extract data, a meta-ethnographic approach is chosen. With the help of a meta-ethnographic approach a few number of studies, which fit the pre-determined selection criteria will be analysed in depth (Hammersley and Atkinson 2007 IN Kakos & Betina, 2017; Noblit & Hare, 1988). As such, it does not seem to differ from conducting a case study. But the main difference between these two research methods lies within the data gathering. Instead of interviewing a single or multiple companies, this study will only use secondary data retrieved from popular scientific journals.

20 conceptual model. Also, this approach is useful in evaluating the influence of a particular practice or situation (Kakos & Betina, 2017). The steps of conducting this approach are inspired by Boonstra & de Vries (2015) and defined as followed.

3.2 Study selection

21 was only limited to the alignment topic and there was no information regarding the ERP performance this study was eliminated because it was not value adding. The following paragraph will give precise reasons for each elimination decision for different studies.

Although study 1 covers most benefits of ERP according to Chand et al. (2005) BSC, nothing is mentioned concerning the organizational fit or ERP customization and business process changes. Study 4 and 9 cover the benefits which are mentioned in study 1 and discuss more precisely the alignment and organizational fit. Therefore, study 1 was eliminated. Another study which was removed from the analysis is study 3. Although study 3 analysed ERP and business processes, the focus was more on the outcomes of business processes rather than on the acquired ERP benefits. Therefore, the information of this article is less suitable for the research purpose. Study 6 assesses the post-implementation success of ERP. Even though, the analysis can be helpful for this research, the ingredients of study 6 are not associated with the required ingredients of this research and, therefore, study 6 has been omitted.

Another study which could have provided valuable information was study 8. This study investigates overall ERP benefits in the post-implementation stage. But the evaluation approach and the hypotheses require to explain other aspects of ERP which are not relevant for this research. Therefore, study 8 was also not used for the analysis.

Last but not least, study 10 was left out of the analysis because it explains just the financial ERP benefit for evaluating the performance. In addition, this article mentions changes in ERP, but since it is very concise it cannot contribute to make a proper analysis in the next section.

22 After the elimination procedure, the remaining studies are study 2, 5, 9 and 12 which are surveys. Study 4 is a case study and study 7 is a Data Envelopment Analysis (DEA). The selected studies are found to be the most appropriate studies for this research. Table 5 addresses general information of each study. It contains the year, name of the journal, the region and the research method (case study, survey or DEA). Moreover, to ease the distinction between selected and eliminated cases, the background of the selected cases is shadowed.

Study Year Journal Region Type of study

1 2015 Computer in Industry East Asia Survey

2 2009 Enterprise information

management Turkey Survey

3 2007 Management

information system U.S Survey

4 2007 Industrial Management

& Data system Europe Case study

5 2002 Information and _Management East Asia Survey

6 2015 Information and

Management Taiwan Survey

7 2016 Computers in Industry US, UK, India & Singapore DEA

8 2005 MIS Quarterly US Survey

9 2010 Information of _Management Europe Survey

10 2005 _{Information Systems} Accounting N/A Survey

11 2009 Systemics, Cybernetics

and Informatics Taiwan Survey

12 2010 _Management Information China Survey

Table 5. General overview of the selected studies in the first round

The selected studies fulfill the required criteria. In the following subsection the analysis procedure is presented.

3.3 Analysis

23 implementation stage regarding the ERP software and the business processes. Solely obtaining an insight into the alignment and organizational fit which occurred during the implementation stage is not sufficient for evaluating the ERP performance. Therefore, it is necessary to assess the ERP performance by detecting the acquired benefits. For each study an answer for the below provided three questions was obtained.

• What are the acquired benefits?

• Which approach has been chosen to strive an alignment?

• What are the interfaces between the changes in implementation stage and the acquired benefits in post-implementation stage?

Although the answers of these questions can be helpful, they are not sufficient for the analysis. To gain a complete insight of both, the alignment and organizational fit in the implementation stage, as well as the ERP performance in the post-implementation stage, this study followed an inductive reasoning approach. In inductive reasoning the data of this research are collected by observing different studies and their findings are merged (Mantere & Ketokivi, 2013). Consequently, the coding is also a based on inductive reasoning (Gioia et al. 2013). Table 4, in the previous section indicates the keywords and operationalization of variables which are used for each subcategory in the analysis. The following paragraph will explain the coding process and, specifically, the aggregate dimension and subsequent order codes.

24 and text sections were allocated to their matching second order codes, such as “Alignment of ERP” and “business processes”, “organizational fit”, “ERP customization” or “Business process changes”. These four second order codes were finally connected to the alignment construct on the aggregate dimension. The coding tree for each study can be found in Appendix A.

3.4 Synthesis

There is a major difference between an analysis and a synthesis. Unlike the analysis which implies to look at single constructs (Boonstra & de Vries, 2015), the synthesis implies a broader perspective. A synthesis views different constructs as a whole to come up with an answer (Noblit & Hare, 1988). After analysing each study and highlighting interfaces between changes of the ERP system or business processes and the acquired benefits, it is necessary to compare the findings. The synthesis section is based on the analysis.

The studies followed different approaches in their implementation stage and had different outcomes. The synthesis involves comparing the differences and similarities of what occurred in the implementation stage of different studies and which benefits were perceived. In total, there are four possible phenomena in the comparisons:

• Studies had the same approach in the implementation stage but different perceived benefits. • Studies had the same approach in the implementation stage and had the same perceived

benefits.

• Studies had different approaches in the implementation stage and had different perceived benefits.

• Studies had different approaches in the implementation stage but the same perceived benefits.

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4. Findings

All six studies are analysed in a similar structure. Firstly, the purpose of each study is explained and particular information regarding the methodology disclosed. After describing each study setting, for surveys the hypotheses are explained followed by their results. For the DEA study the results of the data analysis and for the case study findings of each analysed company are further discussed. At the end, information of each study are connected to this research. A table at the end of the findings section summarizes each study.

Study A:

Calculating process efficiency is one of the elements which helps evaluating the ERP performance. Hence Parthasarathy & Sharma (2016) conducted a research to analyse the efficiency of the ERP package when the software is customized. The study by Parthasarathy & Sharma (2016) states, that in most of the implemented cases a gap between the business processes and ERP package exists. For conducting the study, a DEA model is introduced, which draws a correlation between efficiency and customization (Koch, 2007 IN Parthasarathy & Sharma, 2016). 12 companies in the education industry were analysed which already implemented ERP. The software which was provided by the vendors were considered as “best practice” for this industry.

As a method to diminish the gap between the ERP software and business processes the customization approach is chosen and analysed. In this study, the customization degree varies, which is helpful to gain a better insight into the effect of the level of customization on the alignment. The different degrees of customization in this study are: Configuration, Functionality, and User interface design (Parthasarathy & Sharma, 2016, p. 23). Configuration entails the lowest degree of changes, for instance adjusting the tax rate according to the country that is being used. In contrast to that, functionality involves a more customized level compared to configuration. The former adds new functions to the software or edits the functions according to the requirements. Lastly, User Interface has the highest level of customization, which results in designing or amendment of certain codes (Parthasarathy & Sharma, 2016).

26 higher (Kitchenham, 2002 IN Parthasarathy & Sharma, 2016). In addition, the degree of customization is considered in the formula. A higher level of customization has a higher weight in the formula, which affects the percentage of efficiency adversely.

Four of those companies practiced the off-the-shelf package while the remaining eight companies customized the software based on the company’s requirements. This study finds, that the four companies which practiced the standard software had relatively a better efficiency compared to the businesses which used a customized ERP package. The efficiency of the standard software was between 65 to 100 %. One company which had minor customization obtained a 65.71 % efficiency level according to the article. Despite, Parthasarathy & Sharma (2016) conclude, that a good fit between the ERP software and business processes could lead to a higher chance of a successful implementation. However, the findings of this research show, that customizing the ERP software to tighten the existing gap between ERP and the business processes leads to less efficient processes. Basically, a standard ERP package or minor customization (configuration) has a higher efficiency. It can be concluded, that the level of customization if it is higher than configuration, has a negative relation with efficiency. Companies which practiced the standard ERP software without any customization or minor customization such as configuration achieved a higher process efficiency (Parthasarathy & Sharma, 2016).

Study B:

27 study, but only three of them are chosen for the analysis of the present research. All of the chosen hypotheses were accepted.

The first hypothesis proposes, that the changes in business processes have a positive relation to internal process efficiency benefits. Despite, changing the business process yields the chance of the company to loose its competitive advantage, customization of the ERP software can also be costly (Velcu, 2010). The result of the first hypothesis is, that an implementation which involves changes in business processes leads to a higher internal efficiency. As such, an alignment which is perceived due to changing the business processes has a high impact on a successful implementation and internal efficiency benefits (Velcu, 2010).

The second hypothesis considers customer complaints due to changes of business processes. In fact, customer complaints occur after the implementation, due to errors and delayed response time (Velcu, 2010). It is expected to gradually reduce the number of errors and ultimately increase the satisfactory level of the customers. Therefore, the second hypothesis states, that a higher process efficiency has a positive impact on ERP customer benefits. Even though, at first sight it does not seem like process efficiency has a positive impact on customer satisfaction, the results show a reduction in customer complaints. Moreover, certain benefits such as more accurate customer invoices, better customer service and customer value-added activities which lead to customer satisfaction were perceived (Velcu, 2010).

The internal process efficiency is not only impacting customer benefits, but it also creates certain financial benefits. The third relevant hypothesis states, that the internal process efficiency can eventually enhance the ERP systems financial performance. In fact, the results of the study indicate, that process efficiency has a positive impact on both, financial and customer benefits. The obtained financial benefits are “lower headcount, administrative, general costs and higher inventory turnover” (Velcu, 2010, p. 162).

28 benefits. The financial benefits are at an “Automate” level, while the customer benefits belong to both levels: “Automate” and “Informate”.

Study C:

The study by Velcu (2007) analyses eight different companies in the Nordic region, which implemented ERP and obtained certain benefits. All companies are either medium or large sized companies and currently practicing ERP in the post-implementation stage. Velcu (2007) gathered the data of eight companies throughout semi-structured interviews. The findings of this study are explained below.

This study categorizes the perceived benefits into four different segments inspired by Chand et al. (2005) BSC. These four different segments are: Process, Finance, Customer and Innovation & Learning (Velcu, 2007, p. 1320). Moreover, the business process changes are defined as automating and streamlining the processes which lead to various benefits (Velcu, 2007). The companies which manage to align their business processes and the ERP system through changing their business processes, can observe various benefits in different segments.

Five of these companies changed their business processes on a high level (BPR) to align it with ERP, while one company just automated the processes. Another company did not alter the business processes at all and just implemented the off-the-shelf software. The remaining company changed the business strategy but sufficient information is missing regarding the business processes. Therefore, this company will not be analysed further.

29 comprehend the flow of information and are eligible to make decisions by themselves. This results in more optimal decisions, since the entire flow of information is observable.

After identifying the acquired benefits of companies which could manage to change their business processes, it is insightful to gain an overview of the perceived benefits of the company which developed an in-house ERP system and automated the processes. The benefits that this company acquired are a “better financial cycle times”, “better customer satisfaction”, “better customer response” and “reduced headcount cost” Velcu, 2007, p. 1333, 1334).

Lastly, the company which did not have any alteration in the business processes and used the off-the-shelf software, only acquired one benefit, namely “managing the materials better”.

From the findings of this study it can be concluded, that the companies which had an alignment between the ERP software and their business processes, managed to acquire more ERP benefits and higher ERP performance in comparison with the ones which encountered a misalignment. However, an existing misalignment between the ERP software and the business processes does not necessarily mean that the company cannot acquire benefits or fails to implement the software. Moreover, customizing the ERP software is less effective compared to re-designing the business processes to achieve an alignment as well as the benefits.

Study D:

30 respondents experienced working in the company prior to the implementation. Therefore, respondents are familiar with the performance of business processes without ERP software. As mentioned previously, changing business processes may affect the entire organization. Therefore, the barriers which may arise from changes of business processes and the correlation of those barriers with the ERP benefits are investigated. There are three hypotheses which relate to this research. The first hypothesis investigates ERP benefits, which have a relation with the barriers of implementing ERP. The second hypothesis regards the benefits which are related to user satisfaction in an ERP project. Lastly, the third hypothesis examines the barriers, which are related to user satisfaction in an ERP project.

Instead of discussing the benefits one by one similar to the previous studies, all three are merged and discussed together. The most important barrier in achieving user satisfaction is “Difficulties to change from an old to a new system”. Kumar et al. (2002) also affirm, that “Difficulties to change from an old to a new system” is the main barrier in an ERP implementation. This barrier is related with three operational benefits, which are “cost reduction”, “more efficient business process” and “Faster, more accurate transactions”. Another barrier is “coordination among functional group” (Saatçıoğlu, 2009, p. 698). The essence of organizational change is to switch the organization to being oriented. Therefore, transforming the company to a process-oriented environment has been identified as the largest difficulty of the company. Lastly, the benefits which are correlated with user satisfaction are eight operational benefits and four managerial benefits. The operational benefits are “possible of redesigning ineffective business functions”, “productivity improvement”, “better logistics”, “more efficient business processes”, “cost reduction”, “lowered inventory levels” and “improved on time delivery”. The managerial benefits are “better resource management”, “performance improvement”, “quality management” and “control flow of goods” (Saatçıoğlu, 2009). The mentioned barriers and the benefits which are correlated with the barriers all arise from the changes of business processes, mostly BPR, on the organization. These changes prevented the company to achieve certain benefits.

Study E:

31 implementation and post-implementation success. Previously, it was argued that cost and time are the two elements connected to an implementation success and acquired benefits and performance of the software are the elements to measure the post-implementation success. In this study, implementation success refers to all elements: cost, time, benefits and performance. The researchers analysed the effect of business process changes and ERP customization on the relation between organizational fit and ERP implementation. They prepared a Likert type questionnaire and distributed it among project managers, who experienced an ERP implementation. These managers then further distributed them to their team members. In total 106 questionnaires were received from 34 firms.

Three hypotheses in this study are interesting for this research. The first hypothesis examines the effect of organizational fit on the ERP implementation success. In fact, the findings show that the organizational fit and the implementation success have a positive relation. When the organizational fit is greater, subsequently, the potential of having a successful ERP implementation is higher. The second hypothesis investigates the negative impact of process adaption on the relation between implementation success and organizational fit. It is assumed a lower level of process adaption has a better effect on the relation between organizational fit and the implementation success. The last hypothesis is similar to the second. Instead of analysing the effect of process adaption, the effect of ERP adaption is analysed. Therefore, a low level of customization has a positive effect on the relation between the organizational fit and implementation success. Furthermore, the adaption of either the ERP software or the business processes has an adverse effect on the relation of organizational fit and a successful ERP implementation. It is indicated that the adaption has a positive effect on the relation between the successful implementation and organization, but when this adaption increases the positive effect turns to an adverse effect. Hence, a low level of changes on ERP and business processes can have a positive effect on the relation between the organizational fit and ERP implementation. But when the level of changes increases the effect on the indicated relation will turn negative.

32 organizational fit and a successful implementation. Therefore, to reach a successful implementation, the process adaption and the ERP adaption should be both minimized.

Study F:

The study by Zhu et al. (2010) facilitates a better understanding of the relation between organizational fit and post-implementation success. As such, it provides a more precise insight into the effect of organizational fit on the post-implementation success of the ERP software. Besides the organizational fit, the relation between the system configuration and the post-implementation success are analysed. The researchers propose three different hypotheses of which two are relevant for this research. To test these hypotheses, the authors prepared a survey and distributed it to Chinese retailers. Initially, the questionnaires had been sent to 139 people, but only 65 responded. The respondents of the questionnaire were either CIOs (Chief of information officer) or IT managers from various industries.

The first hypothesis examines the positive relation between implementation quality and ERP post-implementation success. Here, the implementation quality has two components: “project management” and “system configuration” (Zhu et al., 2010 p. 269). Effective “project management” means to successfully automate the operations which consequently enhance productivity and facilitate the achievement of operational benefits. Also, automation reduces the errors made by employees. Moreover, “system configuration” implies the consistency of the ERP software’s functional attributes with the organization’s requirements (Zhu et al., 2010 p. 270). There is a positive relation between organizational readiness and ERP post-implementation success. The configuration component which is important for this research has a heavy weight on this result. In fact, a well-configured ERP software affects the ERP post-implementation success.

33 the assurance and support of successful deployment in the post-implementation stage. The second hypothesis shows that a suitable BPR helps achieving an organizational fit and influences the post-implementation success. In other words, re-engineering the business facilitates striving for an organizational fit and matches the business requirements of the ERP system. Consequently, the organizational fit has a positive relationship on post-implementation success which eventually supports to achieve the ERP benefits. It can also be concluded from both hypotheses, that a suitable configuration and a newly designed business process for ERP have a positive impact on the ERP post-implementation success.

As a result, this study presents configuration as a crucial essence for post-implementation success. In the context of this research, a low level of ERP customization, such as configuration, is necessary to achieve the ERP benefits. The second hypothesis, approved the importance of organizational fit and its significant effect on ERP post-implementation success. Moreover, an organizational fit can be achieved through BPR.

The information which are extracted from each single study can be found in Table 6. Study _{Business Process Changes ERP Customization} Alignment/

Organizational fit ERP performance

Study A

Configuration, high level of Customization (amending the codes)

Misalignment between ERP and business processes. Or strived alignment through ERP customization

The effect of having a misalignment or configuration process efficiency was positive. Customization has negative effect on process efficiency Study B

Changes on business processes, specifically business process re-engineering.

Strived an alignment between ERP and business processes. Changes of BP and an existing alignment brought processes efficiency and consequently more benefits such as financial and customer benefits.

Study C

Five companies changed their business processes.

One company automated business processes and developed their own software.

One company just customized

The companies which changed their business processes acquired higher level of alignment in comparison with the companies which did not do it.

34 Study D

Changes of business process in the highest level, business process re-engineering

Changes on business processes affect the organization. Certain “barriers” prevents to achieve the majority of operational and managerial ERP benefits. Study E

High level of business process changes have negative effect on the relation between

Organizational fit and ERP implementation success. Low level business process changes have a positive impact on the indicated relationship

High level of ERP changes have negative effect on the relation between Organizational fit and ERP

implementation success. Low level ERP changes have a positive impact on the indicated relationship

Business processes and ERP do affect the congruence of the organization.

If there is an

organizational fit and minimum changes on business processes and ERP, then there is a positive relationship between

organizational fit and ERP implementation success.

The acquired benefits are not mentioned specifically.

Study F

Low level of ERP customization, Configuration is necessary to have.

Positive effect of organizational fit

Organizational fit & configuration affect post-implementation success which means ERP benefits acquisition

Table 6. A summary of the analysis

5. Discussion

35 and D. When the organization experiences changes on the business processes, similar to what occurred in study B and C, some benefits might be more difficult to achieve. Some of the ERP benefits are correlated with several barriers. Therefore, it is necessary to have an organizational fit. Hence, study E and F will be used to investigate the relationship between an organizational fit and the performance of ERP and how the changes of ERP and business processes affect this relationship. Moreover, study A, E and F have configuration in common, which will be compared. Lastly, the first three studies are compared with the last two studies.

As mentioned earlier, study A analysed the effect of an achieved alignment through ERP customization, such as configuration, or a presence of misalignment by using “best practice” on process efficiency of the ERP software. Same applies for study B, with a different alignment approach through changing the business processes instead of ERP. In study A, the customization had a negative relation to process efficiency. In other words, when the level of customization increases more than the initial configuration level and involves changing the codes, the process efficiency of the company decreases. Therefore, to gain greater efficiency, it is recommended to use - despite the existence of the gap - the “best practice” of ERP in the industry and employ configuration but avoid any customization (Parthasarathy & Sharma, 2016). Unlike study A, study B shows that the achieved alignment through reengineering business processes has a positive effect on the process efficiency (Velcu, 2010). In study A, the strived alignment through ERP customization is only limited to process efficiency and no further benefits.

In contrast, in study B, further benefits have been achieved through the alignment by changing the business processes. Moreover, process efficiency was enhanced. There are specifically acquired financial and customer benefits at the “Automate” level. Due to the adverse effect of ERP customization on process efficiency, these customer and financial benefits are not observed in study A.

36 processes brought all the “process efficiency,” “financial” and “customer” benefits at “Automate” level and the customer benefits at “Informate” level (Velcu, 2010). One of the companies in study C just customized ERP software, and the only acquired benefit was “better managerial planning” and “lower operational cost.” Although, customizing ERP affects process efficiency negatively, it brings two benefits. Both of these benefits are at an “Automate” level in the category of “process” and “finance” (Velcu, 2007). However, in one case of study C, where the company developed an in-house ERP software and automated the business processes it could achieve “Process”, “Finance” and “Customer” benefits at the “Automate” level (Velcu, 2007). Study A indicates, that the ERP customization has an adverse effect on process efficiency. By comparing study, A and C, the process efficiency is affected negatively by just customizing ERP, and there are just two acquired benefits. But besides just customizing, automating the business can have a better influence on ERP performance.

Hence, study B and C find, that changing the business processes has inevitable benefits for the company. On the contrary, study D provides the reason behind not achieving the remaining benefits. When a company changes their business processes, specific barriers have to be considered to acquire the whole benefits. These barriers are “difficulties in changing from old to the new system” or “coordination between functional groups”. They are correlated with different benefits of ERP. Subsequently, if these hurdles are not solved the company cannot achieve the benefits of the software (Saatçıoğlu, 2009). Although study B and C state, that many ERP benefits could be acquired through changes of the business processes, study D counters, that changing the business processes is not sufficient and the solution is to solve those barriers. An alignment of the business processes and ERP through changing the business processes supports the acquisition of most of the managerial and operational benefits of Shang & Seddon (2003). Study D argues, that changing the business process affects the organization and prevents from gaining some managerial and operational benefits of ERP.

In the following paragraph, the importance of an organizational fit will be discussed and how changes of ERP and business processes can affect the organizational fit analysed.

37 organizational fit has a positive relationship to post-implementation success. Study E concludes, that a high level of changes on ERP and business processes would adversely affect the relationship between the organizational fit and the success of the implementation and, therefore, a lower level of acquired benefits. The importance of organizational fit on the acquisition of benefits is evident, but controversial towards the argumentation of study B and C. Study E states the level of business process changes should be minimal, but in study B and C re-designing the entire process brought upon the acquisition of certain ERP benefits. Besides, the barriers mentioned in study D regarding the business process changes existed due to the highest possible level of business processes change. This is in contrast with the findings of study E.

Moreover, study F mentions, a well-configured software also plays a vital role in the post-implementation success. Study A mentioned, that configuration positively affects the process efficiency, while study E highlights minimum customization on ERP software but not explicitly states configuration. These three studies have in common the unavoidable role of configuration in acquiring benefits.

From the comparison it becomes clear, that a low level of ERP customization, configuration, is necessary to achieve a better performance. But when the level of customization increases, despite an existing alignment between ERP and business processes, it might have a negative impact on the ERP performance. At most a better “material planning” and “lower operational cost” exist, but at the same time a negative effect on the process efficiency can be apparent. Therefore, using the “best practice” software can be more effective rather than customizing ERP. Furthermore, companies which changed their business processes perceived more benefits. There is no doubt that changing the business processes and possessing an alignment have significant impacts on ERP performance. However, the positive influence is limited on the benefits at an “Automate” level and customer benefits at the “Informate” level. The two companies in study C, which involved the employees during their implementation process could acquire better transparency of information, which led in turn to achieve better “decision making” and “empowerment of employees” (Velcu, 2007).

38 new system” and “coordination between functional groups” (Saatçıoğlu, 2009). Several ERP benefits in both, “Automate” and “Informate” level, are correlated with those barriers. Hence, it is crucial while re-designing the business processes to obtain an alignment between ERP and business processes to aim for an organizational fit. The organizational fit has more impact on achieving the ultimate benefits of ERP on both levels of “Informate” and “Automate.”

Table 7 presents a summary of acquired benefits in different alignment approaches.

Alignment Level

Automate

Informate

Configuration

“Process” -

ERP customization

(Amending the codes)

“Material planning” “reduce operational cost” negative effect on process efficiency

-

Changing business

processes

“Process” “Customer” “Finance” “Learning & Innovation”

In some cases “decision-making”, “transparency of information” in “Process” category and “Customer satisfaction” in Customer category

Organizational fit

“Process” “Customer” “Finance” “Learning & Innovation”

“Process” “Customer” “Finance” “Learning & Innovation”

Table 7. Summary of discussion

6. Conclusion

To sum up, this research aimed to investigate the influence of the alignment between ERP and business processes on ERP performance. The alignment which occurs during the implementation stage has an impact on ERP performance in the post-implementation stage. To answer the research question, six different studies were elaborately analysed and their findings compared with each other.

39 customizing ERP an alignment between ERP and business processes is attempted, the influence on ERP performance is not significant.

The previous paragraph briefly summarized the answer to the research question. Hence, it can be concluded, that changing the business processes has the most significant impact on ERP performance. Later it is argued that changing the business processes affects the organization’s congruence. Organizational fit not only entails the alignment between ERP and business processes, but also the alignment of organizational structure and other elements in the organization with ERP requirements. The organizational fit has a positive influence on ERP performance.

Moreover, the changes of business processes affect the organization. Therefore, in this research the influence of organizational fit on ERP performance is also analysed. Earlier it is discussed that the ERP system requires a process-oriented organization. The changes of business processes towards a process-oriented environment involve some amendment on the organization. Therefore, solely having an alignment between ERP and business processes by changing the business processes is sufficient to increase the ERP performance. When business processes are process-oriented just the benefits of the “Automate” level will be acquired. When the entire organization is process-oriented most likely the remaining benefits at an “Informate” level will be achieved.

Lastly, a low level of ERP customization, namely configuration, is an essence which needs to be done in the implementation stage. Although configuration is not sufficient for gaining all ERP benefits, without configuration it is more clearly difficult to acquire the ERP benefits. Regardless which approach companies take in the implementation stage configuration should not be neglected.

40 business processes and requires redesigning the business processes not customizing the software. Moreover, if the benefits at “Automate” level are achieved but the “Informate” level are not reached yet, companies could not enhance decision-making, better demand forecasting or other benefits in “Informate” level. One of the possible reason can be lack of organizational fit in the company.

Limitations:

The analysis of this research is based on secondary data. Even though, this method has benefits as previously described in the methodology section it also causes some limitations to the presented research. Different studies have been used to draw a conclusion. Therefore, the exact required information was difficult to extract from each article. However, if different studies were chosen the final result might have been affected by that as well.

Theoretical Implication:

The presented study aims to fill an existing gap in the literature. It can be seen as a starting point, but it also leaves room for further research. The results of this research should be measured in a real context. For instance, a survey or case study can apply the gathered results of this study to investigate and validate this research. Furthermore, the consequence of alignment between ERP and business processes on the organizational fit. Since ERP functions in a process-oriented environment it is very important to assess precisely the business processes of the organization before the implementation of ERP and after. A longitudinal study may be insightful and able to investigate this topic more detailed.

41

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