ERP Implementation:

An Exploratory Study of Customization Levels

Marcus RothenbergerUniversity of Nevada, Las Vegas

Mark SriteUniversity of Wisconsin-Milwaukee

Objective

ERP System is an integrated information system that coordinates key internal processes of a firm across multiple functional areas

Adoption is a major challenge Appropriate versus excessive levels of

customization Study investigates underlying customization

factors

Problem

High customization has been associated with– High adoption cost– High maintenance cost– High upgrade cost– Higher adoption risk– Lower perceived organizational risk– Lower organizational benefit (lost opportunity for BPR)

Companies pursue different customization strategies1. “Vanilla” and BPR (modifications limited to configuration)2. Modifications only through add-ons3. Modifications only through ERP code changes4. Both 1 & 2 (often associated with little BPR)

Research Questions

Why do some organizations highly customize their ERP implementation?– What are the project factors that promote high

customization? – What are the environmental factors that promote

high customization?

How do the factors cause high customization?

Qualitative Research Approach

ComparativeCase Studies

ConsultantInterviews

Literature

Multiple Sources of Evidence

(Construct Validity)

AnalyticalGeneralization

(External Validity)

ExplanationBuilding

(Internal Validity)

ExplanationBuilding

(Internal Validity)

•Theory Building from Case Studies (Eisenhardt, 1989)

Data Collection

Structured Interview Questions Pre-Tested with an SAP Expert and Refined

Case Studies– 2 interviews, 50-70 minutes each

A technical project lead at each ERP adopter A functional project lead at each ERP adopter

Consultants– 3 Consultants, 50-70 minute interview with each consultant

North America Central Europe Southern Europe

Continuous Analysis and Refinement of Questions during Early Stages of Data Collection

All Interviews Taped and Transcribed

Case Variations

Customization Level / Type– “Vanilla”, Add-ons, Code Modifications

Role of Consultants– Educating internal staff, selected for specific tasks, leading project

Culture– Dimensions of culture including Power Distance

Internal ERP Knowledge– Up-front knowledge, benchmarking, learning from consultants

Role of Operational Departments– Project lead, team members, low involvement

Motivation for Adoption– Organizational (merger, process improvements)– Technical (Y2K, “need for new system”)

“Success”– Schedule, Budget, User Satisfaction, Maintainability

Customization Model

ERP Knowledge at Beginning of the Project

Extent of Organizational Project Motivation

(+) A

Organizational Culture:Top-Down Decision Making

Experience of Implementation Team

(Consultants and Employees)

Reliance on Consultants

Involvement of Operational Departments

Perceived Organizational Importance of ERP

Adoption / Project Acceptance

(-) G

(+) F

(-) C

(+) B

(+) H

(+) D

(+) E

Duplicate Implementation of Existing System

Functionality

Ability to Counter Resistance to Change

Profit Maximization (“give customerswhat they want”)

Resistance to Change

(-) I

(+) J

(+) K

(-) N

Organizational Culture:Risk Taking

Fear of Personal Disadvantage from Change

(-) O

(+) P

Implementation Team’s Understanding of Business

(-) L

(+) M

Ext

en

t o

f E

RP

Sys

tem

Cu

sto

miz

atio

n

(+)

(+)

(+)

(-)

(-)

Causal R

elationship

Southern E

uropeanU

tility Com

pany

Southern E

uropeanF

ood and Beverage M

anufacturing C

o

Central E

uropeanF

inancial Institution 1

Central E

uropeanF

inancial Institution 2

North A

merican

Business P

roduct Manufacturing C

o

North A

merican

Engineering C

ompany

North A

merican

Utility C

ompany

North A

merican

Consum

er Products M

anufacturing C

o

Southern E

uropeanC

onsultant

Central E

uropeanC

onsultant

North A

merican

Consultant

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Empirical Support

Generalizability

Study investigates SAP adopters in various industries Results developed to broaden theory by consolidating

them with existing theories (analytic generalization supports external validity)

May apply to other ERP systems or even other COTS Software as adoption issues are similar

May apply to other industries as adoption issues are not industry specific

Future Research: Testing of the Model through Larger Scale Survey

Questions?