• International Journal of Technology (IJTech)
  • Vol 13, No 5 (2022)

Effect of ERP Implementation on Organisational Performance: Manager's Dilemma

Effect of ERP Implementation on Organisational Performance: Manager's Dilemma

Title: Effect of ERP Implementation on Organisational Performance: Manager's Dilemma
Sharbani Harun, Magiswary Dorasamy, Abdul Aziz Ahmad

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Cite this article as:
Harun, S., Dorasamy, M., Ahmad, A.A., 2022. Effect of ERP Implementation on Organisational Performance: Manager's Dilemma. International Journal of Technology. Volume 13(5), pp. 1064-1074

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Sharbani Harun Faculty of Management, Multimedia University, Cyberjaya, Selangor, 63100, Malaysia
Magiswary Dorasamy Faculty of Management, Multimedia University, Cyberjaya, Selangor, 63100, Malaysia
Abdul Aziz Ahmad Faculty of Management, Multimedia University, Cyberjaya, Selangor, 63100, Malaysia
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Abstract
Effect of ERP Implementation on Organisational Performance: Manager's Dilemma

Enterprise Resource Planning (ERP) improves commercial activity control and provides a competitive advantage when combined with existing benefits.  However, end-users oppose ERP implementation because it disrupts the status quo.  In addition, ensuring that all operational units use the same ERP system is not an easy task.   Therefore, a lack of adaptability is the cause of ERP failure.  This study used a qualitative case study approach to analyze an event and understood the ERP system and natural phenomena.  The data was collected using a semi-structured interview.  The researcher reached data saturation at the 15th respondent's feedback.  Documentary data were examined for patterns and themes prior to triangulation.  The result of this study shows that end-user support is critical to a system's daily operation and implementation, especially when it is new.  Only a system that has been effectively designed, delivered, and trained may be used by end users.  Implementing ERP enhances an organization's capacity and performance.  Post-implementation evaluation is needed to determine the organization's potential and the system's value.  Except for financial performance, the organization's overall performance has improved across all Balance Score Card (BSC) perspectives of internal processes, customers, learning, and growth.  Adopting new technologies is expected to enhance the organization's overall efficiency.  Each identified thematic area affects an organization's ability to use its ERP system effectively and efficiently to achieve previously identified benefits.  In addition, the study found that STP organizations focus on the benefits of implementing ERP rather than the associated costs.  Finally, organizations can better plan for the future benefits of replacing or updating ERP systems.

Behaviour of the end-user; ERP system; Enterprise performance; Post-ERP implementation; STP organization

Introduction

   Enterprise Resource Planning (ERP) systems represent the most significant development in the application of information technology.  However, risks associated with implementing an ERP system include the challenge of learning new systems and the need for enterprise-specific procurement plans.  However, by implementing project management, limiting the project's scope, and avoiding extensive system customization, this risk can be reduced.

   Companies frequently run into operational issues after making a sizable ERP investment (Ismail & Harun, 2021).  The Malaysian Science and Technology Park (STP) is also experiencing similar challenges.  In addition, end-users frequently object to ERP implementation because it has resulted in unavoidable workplace changes (Liere-Netheler et al., 2017).  Based on previous research, the failure of ERP implementation may be attributed to the inability of employees to communicate effectively and meet changing standards (Bento et al., 2019).  In addition, employees' attitudes towards ERP implementation may negatively impact productivity and client satisfaction.  Additionally, if a company spends too much to implement an ERP, it may also damage the reputation of the ERP system.

     Notwithstanding the benefits and challenges of the ERP system, the STP for this study had decided to proceed with implementing the ERP as part of its digital transformation initiative.  The STP chose ERP because of its non-financial and financial benefits.  After implementation, the STP did not evaluate the ERP systems to see if their potential had been fully realized.  As a result, preliminary interviews indicated that STP end-users have mixed feelings toward adopting the ERP.  Thus, this ERP study aims to determine how ERP has benefited the STP organization.

    The most challenging phase of an ERP system is system implementation.   ERP/SAP implementation uses the SAP Accelerated SAP (ASAP) methodology (Mueller et al., 2019). The ASAP methodology is an effective SAP project management tool for planning, managing, and implementing SAP (Supriyono & Sutiah, 2020).  However, the current ASAP methodology lacks an evaluation element to assess the ERP post-implementation benefits.  After years of ERP implementation, a post-implementation evaluation is recommended to determine if benefits were realized.  Following ERP implementation, a new framework for ASAP will be created by adding evaluation components.  Therefore, this study aims to provide managers with the knowledge necessary for a successful ERP implementation.

1.1.   Implementation Challenges

ERP systems have the potential to help businesses improve their operations and develop a competitive edge (Alomari et al., 2018).  It is because the ERP system integrates best practices, management capabilities, real-time reporting, and data analysis to increase value creation and efficiency within the organization.  Furthermore, in today's business environment, an ERP system enables the organization to manage all aspects of its operations comprehensively (Ullah et al., 2018).  As a result, ERP systems improve process efficiency, streamlined inventory, supply chain communication, and customer experience (Govindaraju et al., 2018).  Furthermore, an ERP system can reduce costs and increase investment return, improving consumer decision-making (Seyal & Rahman, 2017).  Additionally, the ERP reduces turnaround times, order cycles, and inventory levels (AboAbdo et al., 2019).

Notwithstanding the above, the organization often faces business issues after significant investment in an ERP system, which receives no return (Abd-Elmonem et al., 2017).  This study was done on STP ERP systems because they face similar implementation challenges.   The fact that no system performance evaluation had been carried out despite years of ERP implementation also motivated this study.  Therefore, the study findings will assist future ERP system implementations by understanding key issues and potential solutions.  Furthermore, IT managers and managers must be able to quantify the system's benefits to justify ERP maintenance costs (Beric et al., 2018).  When an ERP system is fully implemented, only then its benefits become apparent.

1.2.  Research Gaps

Gap 1: The research gap on ERP post-implementation within STP focuses on end-user resistance to change to a new system.

Gap 2: There is a research gap in the success of ERP implementation in STP, which focuses on organizational performance using a balanced scorecard.

Gap 3: The ASAP methodology has a research gap in the post-ERP implementation component.  i.e., ERP success requires post-implementation evaluation.


Relevant Theories and Models to the Implementation of ERP System

        STS, UTAUT, and BSC are among the theories/model that may explain the challenges, as shown in Table 1 below.  This section provides an overview of relevant theories and approaches to the study.

Table 1 Relevant Theories/Models


The following are the objectives of this paper:

a)    To review post-implementation research gaps in the Malaysia STP organization,

b)    To propose an STP conceptual framework based on research results.

2.1. Conceptualisation

Figure 1 shows a conceptual framework for post-implementation studies emphasizing the evaluation stage.  The two predominant theories and the BSC method for comprehending these three distinct facets:

a)    Sociotechnical system (STS) theory: End user behavior

b)  A unified theory of technology acceptance and use technology (UTAUT) for ERP implementation

c)    A Balanced Scorecard (BSC) approach to measuring organizational performance 

 

Figure 1 Conceptual Framework

Experimental Methods

This study is based on an interpretive paradigm appropriate for investigating natural phenomena using the qualitative research method (Thelwall & Nevill, 2021).  As a result, this study employs a case study methodology (Vega, 2018).  Interviews were collected using semi-structured questions (Boulos et al., 2022).  Triangulation was used to check the accuracy of the interview data (Goodman-Scott, 2022).  The study's case organization is a Malaysian STP.   Therefore, the sample for this study was chosen using purposive sampling (Doan, 2018).  Purposive sampling is a non-random sampling design in which respondents were selected based on their similarity to the phenomenon under study (Agapiou, 2022).

 This sample included fifteen (15) respondents who were interviewed from four different employee groups at the Malaysian STP organization.  End users of ERP systems and those working on ERP implementation projects in Malaysia STP are eligible for participation because they meet the criteria of the sample.  At the fifteenth (15) participant, data saturation was achieved.  Data saturation aims to determine when to end data collection (Lassig, 2022).  In addition, according to Yin (1994), a diverse group of respondents gives more useful answers (Ye, 2022).
         In this study, a qualitative data analysis methodology was employed.  The qualitative data revealed recurring patterns in underlying themes or beliefs (Darko, 2022).   Furthermore, themes and patterns from the qualitative data analysis were extracted, and the results were triangulated with data from the supporting documentation.  Therefore, this study used respondents' semi-structured interview data and other relevant documents related to the implementation of the ERP.  Thematic analysis was used to analyze the study interview data.  Analysis of interview data revealed the shape and meaning of substances (Maming, 2022).  The use of thematic analysis has made it possible to identify common themes.  Thematic studies include, but are not limited to, data profile analysis and visualization (Ozuem et al., 2022).   The interview questions were sent to three subject matter and methodology experts before the data collection to identify potential mistakes and enhance the interview questions.  After amending the interview questions in response to a review by a subject-matter expert, cognitive interviews with two chosen sample respondents were carried out.  A cognitive interview evaluates the clarity of statements, instructions, and unclear elements in the session (Simler et al., 2022).  After receiving feedback, the interview questions were refined and used for real interview sessions with respondents.

Results and Discussion

        The researcher used thematic analysis to search for common themes in the research data.  Thematic analysis is a technique that allows the identification, analysis, and communication of data trends (themes).  Three major themes emerged:

4.1. Themes 1:  Frequent Use, On-going Training, and Adequate Resources Will Improve ERP Acceptance

         The first theme is "Frequent use, ongoing training, and adequate resources will improve ERP acceptance".  These themes focused on end-users reluctance to adopt a new Enterprise Resource Planning (ERP) system.  It is linked to Research Question 1.  (RQ1).  End-user support is critical to the day-to-day implementation and operation, mainly when the system is brand new.  On the other hand, end-users cannot use a system efficiently unless designed, trained, and delivered efficiently.  Therefore, the ERP will not accomplish its objective due to end-users resistance.

         The researcher used Nvivo software and a word frequency request for visual analysis to find themes identified by end-users of the ERP system.  The most popular words found are activities, knowledge, and support, with 72 counts for activities, 49 for knowledge, and 40 for support (Table 2).  This result confirms that end-user support is crucial to the success of an ERP system and the optimal use of the system by end-users.  Figure 2 illustrates a Word Cloud showing the frequency of words used in response to Research Question 1.

Table 2 Themes

Themes / Set of Themes

Sub Themes

Frequent Use, On-going Training, and Adequate Resources Will Improve ERP Acceptance

Activities (72)

Knowledge (49)

Support (40)


Figure 2 Word Cloud Illustrating Word Frequency – Response to Question 1

4.2. Themes-2: The Effects of ERP Implementation on Organizational Performance

The second theme is "The Effects of ERP Implementation on Organizational Performance". This second theme relates to the ERP's post-implementation success and its impact on organizational performance as measured by the balanced scorecard.  This theme supports Research Question 2 (RQ2).  Implementing Enterprise Resource Planning (ERP) improves an organization's organizational capacity while enabling it to reach higher levels of organizational performance.  Furthermore, ERP systems should reduce costs by increasing efficiency through automation and improving decision-making by providing accurate and timely information across the enterprise.

The researcher used Nvivo software and a word frequency query for visual analysis to find the themes identified by the ERP system's end-users.  The most frequently used words were identified as organization, process, and structured, with 44 counts for organization, 32 for process, and 31 for structured (Table 3).  Thus, this confirms that the ERP system significantly impacts organizational performance as it is an organized and systematic approach.  Figure 3 illustrates a Word Cloud showing the frequency of words used in response to Research Question 2.

Table 3 Relevant Theories/Models

Themes / Set of Themes

Sub Themes

The Effects of ERP Implementation on Organizational Performance

Organization (44)

Process (32)

Structured (31)