ASSESSING CRITICAL SUCCESS FACTORS FOR ERP...

ASSESSING CRITICAL SUCCESS FACTORS FOR ERP IMPLEMENTATION

SATISFACTION: A STUDY OF CONSULTANTS PARTICIPATION AND USER

TRAINING

SHEIDA SOLTANI

A dissertation submitted in partial fulfillment of the

requirements for the award of the degree of

Master of Science (Information Technology - Management)

Faculty of Computer Science and Information Systems

Universiti Teknologi Malaysia

JANUARY 2013

iii

This dissertation is dedicated to my family for their endless support and

encouragement.

iv

ACKNOWLEDGEMENT

First and foremost, I would like to express heartfelt gratitude to my

supervisor Dr. Nor Hidayati Zakaria for her constant support during my study at

UTM. She inspired me greatly to work in this project. Her willingness to motivate

me contributed tremendously to my project. I have learned a lot from her and I am

fortunate to have her as my mentor and supervisor. Besides, I would like to thank the

authority of Universiti Teknologi Malaysia (UTM) for providing me with a good

environment and facilities which I need during research process.

http://www.is.fsksm.utm.my/hidayati

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ABSTRACT

An Enterprise resource planning (ERP) system is a company wide

information system that integrates all aspects of a business and promises one

database, one application across the entire enterprise. ERP implementation has been

an important activity for improving efficiency and is a critical investment that can

significantly affect future performance of a company. Consultant participation and

user training are essential factors that can contribute to ERP implementation

satisfaction. Studies examining the effects of consultant participation and user

training on ERP implementation satisfaction are rare. Thus, this present study was

designed to fill this gap in research. A relevant research model was developed to test

three (3) hypothesized paths among the study’s variables, namely consultant

participation, user training, ERP implementation satisfaction. Data was collected by

survey questionnaires from 109 of ERP users. The Smart PLS tool was used for data

analysis. In sum, the results of this research show that (1) ERP implementation

satisfaction depends on consultant participation especially on the quality of

consultants’ services and user training. (2) User training plays a mediator role

between consultant participation and ERP implementation satisfaction.

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ABSTRAK

Sistem ERP merupakan sistem maklumat yang mengintegrasikan semua

aspek perniagaan deusan menggunakan satu pangkalan data. Pelaksanaan ERP amat

penting bagi sesebuah syarikat meningkatkan kecekapan dan prestasi syarikat. Kajian

literatur menunjukkan perunding dan latihan pengguna adalah faktor penting yang

boleh menyumbang kepada kepuasan pelaksanaan ERP. Bagaimanapun, kesan

penyertaan perunding dan latihan pengguna pada kepuasan pelaksanaan ERP ini

tidak meudapat perhatian sewagarnyc didakm kajian lirctur. Sustem kajian ini telah

dijalankan untuk mengisi jurang ini dalam penyelidikan. Satu model kajian yang

berkaitan telah dibangunkan untuk menguji tiga (3) hipotesis iaitu penyertaan

perunding, latihan pengguna, pelaksanaan ERP kepuasan. Data telah dikumpulkan

oleh tinjauan soal selidik daripada 109 pengguna ERP. Smart PLS telah digunakan

untuk kerja analisis data. Keputusan penyelidikan ini menunjukkan bahawa (1) ERP

kepuasan pelaksanaannya bergantung kepada penyertaan perunding terutama pada

kualiti perkhidmatan perunding dan latihan pengguna. (2) latihan pengguna

memainkan peranan pengantara di antara penyertaan perunding dan kepuasan

pelaksanaan ERP.

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TABLE OF CONTENTS

CHAPTER TITLE PAGE

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENTS iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES xi

LIST OF FIGURES xiii

1 INTRODUCTION 1

1.1 Introduction 1

1.2 Motivation of the Study 2

1.3 Research Questions 5

1.4 Research Objectives 5

1.5 Project Scope 5

1.6 Significance of the Study 6

1.7 Chapter Summary 6

2 LITERATURE REVIEW 8

2.1 Introduction 8

2.2 Enterprise Resources Planning Systems 10

2.2.1ERP Overview 10

2.2.2History of the Largest ERP Vendors 11

2.2.3ERP Vendor Selection 11

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2.2.4The Stages of ERP Implementation 12

2.2.4.1Design Stage/ Pre Implementation 13

2.2.4.2Implementation 13

2.2.4.3Stabilization/ Post Implementation 14

2.3 Overview on Critical Success Factors (CSFs) 14

2.3.1Consultants Participation 18

2.3.1.1Introduction 18

2.3.1.2Consultants Selection Criteria 18

2.3.1.3Role of Consultants for ERP

Implementation Success 19

2.3.1.3.1Knowledge and Training 19

2.3.1.3.2Communication with Client 21

2.3.2Consultants Participation 23

2.3.2.1Introduction 23

2.3.2.2Training for ERP Implementation 23

2.3.2.3Concept of Training for ERP 24

2.3.2.4The Main Reasons of Training Services 24

2.3.2.5The Effect of Training on ERP

Implementation Success 26

2.3.2.6The Effect of Inadequate Training on

ERP implementation 26

2.4 Existing Models 27

2.4.1Holland and Light's (1999) Model 27

2.4.2Sommers and Nelson’s (2001) review 28

2.4.3Finney and Corbett’s (2007) Model 30

2.4.4Delone and Mclean’s (1992) IS Success Model 31


3 RESEARCH METHODOLOGY 38

3.1 Introduction 38

3.2 Initial Planning (Phase 1) 40

3.3 Literature Review (Phase 2) 40

3.4 Research Model Development (Phase 3) 41

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3.5 Survey Development (Phase 4) 41

3.6 Data Collection (Phase 5) 45

3.7 Data Analysis (Phase 6) 47

3.7.1Assessing the Measurement Model 47

3.7.1.1Internal Consistency 48

3.7.1.2 Convergent and Discriminant Validity 48

3.7.2Assessment of Structural Model 49

3.8 Conclusion and Recommendation (Phase 7) 49


4 FINDINGS AND ANALYSIS 51

4.1 Introduction 51

4.2 Research Model Development 52

4.2.1Dimensions of Research Model 53

4.2.1.1IS Success Model 53

4.2.1.2Critical Success Factors 53

4.2.2Hypotheses Formulation 54

4.2.2.1Consultants Participation 54

4.2.2.2Consultants Participation and User

Training 55

4.2.2.3User Training 56

4.3 Reliability and Validity of the Measurement Model 57

4.3.1Internal Consistency 57

4.3.1.1Consultants participation 58

4.3.1.2User training 60

4.3.1.3ERP Implementation Satisfaction 61

4.3.2Convergent and Discriminant validity 62

4.4 Structural Model Test 63

4.5 Discussion and Findings of the Research 65

4.5.1 Hypothesis 1 65



4.6 Conclusions 68


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5 CONCLUSION AND RECOMMENDATION 71

5.1 Introduction 71

5.2 Achievement 72

5.3 Research Contributions and Implications 75

5.4 Limitation of the Research 77

5.5 Future Research Areas 77

5.6 Conclusion 78


REFERENCES 80

APPENDICES A 86

Survey Questionnaire 86

xi

LIST OF TABLES

TABLE NO. TITLE PAGE

2.1 Review of CSFs for ERP Success 15

2.2 Review of Studies of Consultants Participation 16

2.3 Review of Studies Related to User Training 17

2.4 The Main Reasons of Consultants Participation

for ERP Success 34

2.5 The Summary of ERP Consultants’ Services for

ERP Success 35

2.6 The Reasons of User Training for ERP Success 36

2.7 The Summary of Effects of User Training on

ERP Success 37

3.1 Consultants Participation’s Items 43

3.2 Indications for Consultants Participation’s Items 43

3.3 User Training’s Items 44

3.4 ERP implementation Satisfaction’s Items 45

3.5 Profile of Respondents 46

4.1 Item Loading for Consultants Participation 59

4.2 Reliability for Consultants Participation 59

4.3 Item Loading for User Training’s Measures 60

4.4 Reliability Measurement for User Training 60

4.5 Item Loading for ERP Implementation

Satisfaction’s Measures 61

4.6 Reliability Measurement for ERP

Implementation Satisfaction 62

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4.7 Inter-Construct Correlation, Including AVE,

The Square Root of AVE 63

4.8 The Summary of the Results 64

4.9 The Summary of Chapter 4 70

5.1 Consultants Participation and ERP Satisfaction 74

5.2 User Training and ERP Satisfaction 75

xiii

LIST OF FIGURES

FIGURE NO. TITLE PAGE

2.1 Literature Review Framework 9

2.2 Holland and Light’s (1999) Model 28

2.3 Finney and Corbett’s (2007) Model 30

2.4 Delone and Mclean’s (1992) IS Success Model 32

3.1 Operational Framework of the Study 39

4.1 Finding and Analysis Framework 52

4.2 The research model showing the formulated

Hypotheses 54

4.3 The Smart PLS 2.0 Results for the Tested

Relationships 64

xiv

LIST OF APPENDICES

APPENDIX. TITLE PAGE

A Survey Questionnaire 86

CHAPTER 1

INTRODUCTION

1.1 Introduction

Enterprise Resource Planning (ERP) System is an IT innovation that

enhances organizational performance (T. Somers & Nelson, 2001). It is one of the

most important development in information technology and one of the fastest

growing segments in the software market (T. Somers & Nelson, 2001). ERP

integrates an extensive range of business functions to provide a broad view of the

organization from a single IT architecture (Gable, Klaus, & Roseman, 2000). ERP’s

goal is every department or functional area work together, enables an organization to

automate and integrate business processes, share data through one central database in

entire organization.

Organizations are progressively replacing their legacy systems with ERP

packages and have spent billions of dollars for ERP implementation (Eric T.G. Wang

& Chen, 2006) and thousands of businesses are running these integrated systems

successfully worldwide (Gargeya & Brady, 2005).The growing demands for ERP

have some reasons, for example, expectations of revenue growth, competitive

pressures to become a low cost producer, and ability to compete globally(T. Somers

& Nelson, 2001). Benefits of a correctly selection andimplementation of ERP system

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can be significant leading to great reductions in inventory cost, lead time for

customers, production time, and production costs (T. Somers & Nelson, 2001).

1.2.1 Motivation of the Study

Despite the popularity of ERP systems, the failure rate of ERP system

implementation has remained high (Amid, Moalagh, & ZareRavasan, 2011).Frequent

reports of ERP failure indicate that ERP failure rates remain at between 67% and

90% , and 35% of ERP implementations are canceled (Amid, et al., 2011). ERP

implementation projects are, on average, take 2.5 times as long as intended, 178%

over budget, and deliver only 30% of promised benefits (Amid, et al., 2011; Z.

Zhang, Lee, Huang, Zhang, & Huang, 2005).

These statistics imply ERP software packages are complex (Gargeya &

Brady, 2005; Umble, Haft, & Umble., 2003) and their implementations are difficult,

expensive and also places tremendous demands on organization time (Lapiedraa,

Alegreb, & Chiva, 2011; T. M. Somers & Nelson, 2004; E. Umble, R. Haft, & M. M.

Umble., 2003; Z. Zhang, et al., 2005). ERP implementations are more complicated

than other packages because of their integrative nature (Lapiedraa, et al., 2011), so

the implementation process must be managed as a program of wide-ranging

organizational change initiatives rather than as a software installation effort (Hong &

Kim, 2002). According to Gargeya and Brady (2005), partial failure and complete

failure are two levels of failure for ERP systems implementations. In partial failure,

organization will gain some modifications processes and it will have some

disruptions in daily works. In complete failure, ERP project is stopped before

implementation or cause serious functional and financial damage to the organization.

Much effort has been done by IS researchers in order to avoid such failures

and helping companies better make use of their resources. Some IS researchers have

provided valuable insights into the process of ERP implementation (Yusuf,

Gunasekaran, & Abthorpe, 2004) and some identified a variety of CSFs affecting for

the ERP implementation (P Ifinedo, 2011; T. Somers & Nelson, 2001; T.M.Sommers

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(P Ifinedo, 2011; T. Somers & Nelson, 2001; T. M. Somers & Nelson, 2004).

Most of these researches assigned to developed countries rather than developing

countries because only 10–15% of global ERP system sales involve to developing

countries (Amid, et al., 2011). However, it is believed that developing ones have

become interest for expansions of ERP implementations (Amid, et al., 2011; Hawari

& Heeks, 2010).

There is only some reports that have emerged of ERP failures in developing

countries including suggestions that developing country implementations face

specific difficulties over those found in developed countries (Xue, Liang, Boulton, &

Snyder, 2005) . One of the difficulties is ERP software packages are designed by

western vendors and the structures and processes embedded in these systems reflect

western processes (Amid, et al., 2011). It is assumed that fundamental misalignments

are likely to exist between requirements of companies in developing societies and the

functions of western ERP systems (Amid, et al., 2011). Consequently, these

misalignments lead ERP implementation failures tend to occur when organizations in

developing countries effort to adopt foreign ERP systems (Amid, et al., 2011; Xue, et

al., 2005).

Due to lack of experience, high investment of funds made by organizations in

developing countries to implement or move to ERP systems, and high failure rate of

ERP implementations in developing societies (Hawari & Heeks, 2010), Finding the

CSFs would be desirable because Critical success factors (CSFs) are crucial to

achieving the predetermined goals of a project, and vital to the success of an ERP

implementation.In terms of an ERP implementation, the CSFs are those conditions

that must be met in order for the implementation process to happen successfully and

in fact CSFs are well-defined as factors required to guarantee a successful ERP

project (Holland & Light, 1999). Companies must be aware of the factors that

influence the success of their implementations to prevent failures (Tsai, Lee, Shen, &

Lin, 2011).

I would exam two salient critical success factors, namely consultant

participation and user training on ERP implementation satisfaction. If a company

wishes to implement an ERP, it can rarely be done completely in house because of

4

the complexity of the system. So, most organizations collaborate with their

ERP suppliers and/or consultants(Tsai, et al., 2011). These suppliers and consultants

are external facilitators that affect ERP success (Wu & Wang, 2007). ERP suppliers

and consultants help not only in improving the quality of the ERP products, but also

in ensuring user knowledge (Tsai, et al., 2011). Consultants’ experience, expertise,

and knowledge allow clients to have an appropriate ERP system and help train users

to fully exploit the technology (T. M. Somers & Nelson, 2004; Eric T.G. Wang &

Chen, 2006;Wong, Scarbrough, Chau, & Davison, 2005).

I select user training as second CSF for two reasons: first, According to

previous studies, I found consultant participation and user training can be interrelated

because user training is one of the services that are provided by ERP consultants but

they have not investigated the mediator role of user training between consultant

participation and ERP implementation. Also, they have not justified what is the

effect of ERP consultants on user training. Second, people element is one of the most

important factors affecting organizational ISs implementation and deployment (Z.

Zhang, et al., 2005). User training is a critical intervention to support the successful

implementation of information systems innovations (Sharma & Yetton, 2007).

So, the present research is motivated, in part, by the desire to shed light in

this area of study because of two reasons: first, when adopting an ERP system in a

developing country, there is a need to recognize unique Asian context because

developing countries have different conditions from developed countries (Amid, et

al., 2011; Z. Zhang, et al., 2005), and there is lack of research in order to examine

CSFs on ERP implementation satisfaction in organizations of developing societies.

Second, there is no study to investigate the effect of consultant participation and user

training on ERP implementation satisfaction. Third, there is no study to empirically

investigate the relationship of consultant participation with user training for ERP

implementation satisfaction.

5

1.3 Research Questions

The research questions of this study are as follow:

i. What are the CSFs that influence ERP implementation satisfaction?

ii. What are the effects of consultant participation and user training (CSFs) on

ERP implementation satisfaction?

iii. What is the effect of consultant participation on user training?

1.4 Research Objectives

The research objectives of this study are as follow:

i. To identify CSFs for ERP implementation satisfaction.

ii. To identify the effects of consultant participation and user training (CSFs) on

ERP implementation satisfaction.

iii. To investigate empirically the effect of consultant participation on user

training.

1.5 Project Scope

This research focuses on an Iranian organization because ERP vendors are

extent their market into developing countries and ERP systems are being adopted by

companies in such societies. Iran also as a developing country has been trying to

implement ERP systems but high failure rates of implementations are announced

(Amid, et al., 2011), and there is no comprehensive study that identifies CFFs for

ERP implementation satisfaction in Iranian industries and other similar cases.

This research would propose a research model which is composed of

consultant participation, user training and ERP implementation satisfaction. I would

some place without internet connection it is the best choice to use this.

6

I examine the research model in ERP implementation and ERP post

implementation stages and our respondents will be the users of the ERP system.

1.6 Significance of the Study

This research study on CSFs, namely, consultant participation and user

training for ERP implementation satisfaction in Iranian company because no

significant study has been addressed CSFs for ERP implementation satisfaction in

developing countries such as Iran that has not had noticeable experience in this area.

So, the results of this study can be interesting for vendors, developers and other cases

in developing countries.

This research will propose a research model in order to make a new direction

for managers. Managers will be informed on what CSF should be given high

precedence and consideration, and what the effects of such factors on ERP

implementation are. So, this study could enhance ERP implementation because the

key goal of this research is to identify CSFs and their effects on ERP implementation

satisfaction.

1.7 Chapter Summary

This chapter discussed the overview of this study which included a brief

introduction of ERP systems and motivation of the study that reflected problem

background and research gap. Since research gap highlighted there was no empirical

study for investigation the effects of consultant participation (CSF) and user training

on ERP implementation satisfaction and also there was no empirical study for

investigation the relationship between consultant participation and user training

(CSFs), I proposed three project objectives, namely to identify CSFs for ERP

implementation satisfaction, to identify the effects of consultant participation and

user training (CSFs) on ERP implementation satisfaction, and to investigate n some

case user test with unsuccessful process and asked them to start form beginning.

7

They think if same problem happen in real process it could be harmful for business

empirically the effect of consultants participation on user training that are needed to

successfully be achieved in order to fill up the research gap. Likewise, I justified the

“project scope” reflecting the area of our research which is ERP implementation and

post implementation. Finally, I defined “significance of the study” reflecting the

contribution of the research which enhance ERP implementation through justification

of CSFs (consultant participation and user training) and their effects on

implementation satisfaction. it

80

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