ERP Systems Implementation: Drivers of Post-Implementation Success

Andreas I. Nicolaou

Department of Accounting and Management Information Systems

Bowling Green State University
Bowling Green, Ohio 43403, USA
Email: [email protected]

Abstract
This paper examines the determinants of success during the post-implementation stage of ERP systems and
identifies drivers that contribute to successful implementations. The present study employs past literature to
identify important factors and utilizes a qualitative research approach in validating their potential importance
in successful ERP system implementations. Insights from the analysis of two case studies are used to validate
the importance of such drivers of success during the post-implementation stage of a system. The study presents
important implications useful in the development of conceptual research models for ERP system success.

Keywords
ERP Systems; Post-Implementation Review; ERP System Implementation.

1. INTRODUCTION
Information systems development has been conceptualized in past research as a process that leads to a decision
about the choice, design and development of an information system (e.g., Nicolaou 1999). Past research
findings suggest that the effectiveness or success of an information system depends on a variety of factors, most
importantly those relating to the extent of user participation and involvement in system development, the extent
of business process and needs assessment during the analysis stage of the systems development process, and the
level of data integration designed into the system (e.g., Govindarajan and Fisher 1990; Nicolaou 2000; Zaheer
and Venkatraman 1994). In a similar fashion, researchers in the fields of management decision making have
promoted the shared assumption that a better designed information system would contribute to the efficiency
with which organizational functions are carried out and the effectiveness of attaining desired outcomes (e.g.,
Galbraith 1995). Consequently, the factors that influence the process of system development would also have a
significant effect on both organizational performance and user perceptions about the system after its
implementation and continued use in an organization, that is, during its post-implementation stage.
The post-implementation stage in a system’s life cycle encompasses a number of processes that are critical for a
system’s success. Following the implementation of the system, an organization would engage in a number of
activities, such as post-implementation review, support and maintenance (e.g., Gelinas and Sutton 2002). The
focus of this paper is on the factors that drive successful implementations during the post-implementation
process of an ERP system. Even though past literature has provided a useful descriptive analysis of the post-
implementation process (Benchmarking Partners 1998; Holland and Light 2001; James and Wolf 2000;
Peterson, Gelman and Cooke 2001), the focus has mostly been on the development of stage models that
describe a set of sequential activities useful for the planning of future actions and not on the examination and
understanding of factors that contribute to process effectiveness. In a stage model of system development, the
success of the post-implemenation process is heavily dependent on the quality of the implementation process
itself and on its effectiveness to influence appropriate modifications or enhancements that can improve the
performance of the system or improve the project management and system development processes. With the
recent expansion in the number of organizations using enterprise-wide systems, including both large and small
organizations, and the web-based capabilities they now offer, the successful implementation of these systems
has become a critical issue. In addition, a very significant investment in resources is required for the
implementation of ERP systems, while the realization of system benefits is reported to significantly lag
expectations (Benchmarking Partners 1998; Meta Group 1999; Peterson et al. 2001). As a result, the issue of
successful implementations, as evaluated during the post-implementation process and the potential effects on
the realization of potential system outcomes, provide a solid motivation for the present study.

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2. REVIEW OF LITERATURE
ERP systems are organized around the basic economic rationale of the enterprise value chain. They are
designed around a process view of the business, and they contain data useful in the value accumulation
sequence. It is widely reported in the literature that enterprise-wide applications promise seamless integration
of all information flowing through a company: accounting and financial information, human resource
information, supply chain information, and customer information (Davenport 1998; Kumar and Van
Hillegersberg 2000). Several studies on ERP implementation (Murray and Coffin 2001; Ross and Vitale 2000;
Scott and Vessey 2000; Soh, Kieh and Tay-Yap 2000; Stephanou 2000) have identified such issues as top
management support, an effective implementation team, organizational-wide commitment to the system, and
the effective resolution of misalignments between organizational needs and the ERP package functionality, as
critical factors for the success of an ERP implementation project.

2.1 Expected Benefits from ERP Systems Implementation

ERPs are designed to help manage organizational resources in an integrated manner. The primary benefits that
are expected to result from their implementation are closely related to the level of integration that is promoted
across functions in an enterprise. The professional literature has been proactive in determining the types of
benefits that companies might anticipate from their ERP systems and to what extent organizations had actually
attained those benefits on a post-implementation basis. Expectations for improved business performance after
adoption may result from both operational and strategic benefits (Irving 1999; Jenson and Johnson 1999). In
the Benchmarking Partners study (1998), respondent companies anticipated both tangible and intangible
benefits. The most significant intangible benefits related to internal integration, improved information and
processes, and improved customer service, while tangible benefits related to cost efficiencies in inventory,
personnel, procurement and the time needed to close books, as well as improvements in productivity,
cash/order management, and overall profitability. In assessing the extent to which they had actually attained
those benefits, however, on a post-implementation basis, it was evident that they were not able to improve
profitability or lower personnel, inventories, or system maintenance costs as much as they had hoped. On the
other hand, respondents noted better-than-expected results in overall productivity and in order-management
cycle time, as well as procurement, on-time delivery, and the ability to close financial cycles. Likewise, in the
Conference Board study (Peterson et al. 2001), responding companies reported anticipating similar types of
tangible and intangible benefits, although it was evident that the realization of those benefits required more
time than expected.

2.2 Factors of Failure in ERP Systems Implementation

An AMR research study (Carlino, Nelson and Smith 2000) has projected that the enterprise applications
market will reach $79 billion by 2004. Despite such huge investments in ERP systems, many implementations
have been plagued with failure. In a survey of 63 large Fortune 500 companies, META Group (1999) reports
that over a five to six year period, the average company incurred a negative return of $1.5 million from the
ERP system implementation. In addition, the average implementation time for a full-blown ERP system was
twenty-three months, at a cost of $10.6 million for the implementation and another $2.1 million for
maintenance over a two-year period (Meta Group 1999). In addition, several case studies exist of companies
that were led into severe financial distress because of system integration problems after the implementation of
ERP systems. For example, Unisource Worldwide, Inc., wrote off $168 million in costs related to an
abandoned implementation of SAP software (Stein 1998). The computer integration problems that FoxMeyer
Health Corp. has faced after the implementation of SAP software, have led the company to a bankruptcy filing,
instead of realizing the expected benefits of cost reduction, improved inventory turnover and increased
availability of useful information (Hyde 1996). Several other high profile ERP projects such as Dell Computer
Corp., Dow Chemical, Hershey Food Cooperation, Whirlpool and Gore-text have also failed to implement an
ERP package as intended (Davenport 1998). In some cases, companies lost not only the capital invested in
ERP, but also a portion of their business. As a result, there is some skepticism associated with the ability of
ERP projects to deliver anticipated benefits (Bingi et al. 1999; Gable 1998; Mabert et al. 2001). An important
reason for these failures is that the implemented ERP systems suffer from system integration problems; the lack
of alignment between people, processes, and the new technology, preclude an organization from realizing
anticipated benefits or even to recover the cost of the implementation effort (e.g., Davenport 1998).
Moreover, the initial justification that drives the development of an ERP system also is considered an important
reason for success or failure (Peterson et al. 2001). System-led implementations have a higher incidence of
failure compared to those that are business-led. Yet, many ERP initiatives are still systems-driven, with the
great majority of non-quantifiable business cases being focused on system issues, such as replacing legacy
systems and attaining systems integration (Peterson et al. 2001). Likewise, the Meta Group survey reports that

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system implementation is most often justified on the need to improve internal integration, to support growth,
and to support new processes or a changed business model in a firm’s supply chain (Meta Group 1999). For
systems-led implementation efforts, it is often hard to measure and evaluate attainment of anticipated benefits,
easier to distract from the original system scope, and business benefits lag in terms of their realization due to
adjustments needed in the system’s post-implementation phase.
Furthermore, it is also widely recognized that lack of user training and failure to completely understand how
enterprise applications change business processes are important factors of failure (Wilder and Davis 1998).
According to the Benchmarking Partners (1998) report, major “go-live” surprises that companies experienced
related to the fact that it was difficult for people to grasp the degree of discipline that was required on a daily
basis due to the degree of integration imposed by the ERP system. Users could not fully realize that their
actions now had an immediate impact on downstream operations. Companies were also surprised by the
knowledge gap between the training employed and what people needed to work effectively with the new ERP
system. Training might have been provided too early, or there was not enough, or the wrong training was
provided. The sheer volume of training overwhelmed some users, while others were further confused by the
lack of training about the context of the new capability from a business standpoint.
Despite its risks, ERP implementation is pervasive in many different types of industries (Kumar and Van
Hillegersberg 2000; Mabert et al. 2000). The goals of ERP systems implementation extend beyond internal
business process integration to external connectivity and support of a firm’s value chain activities. ERP
vendors are changing their business model as they move toward a component strategy, often web-based, that
separates ERP systems into modules that can be adopted individually, thus permitting small and medium sized
businesses to adopt such systems and improve their operations (Sprott 2000). McCarthy et al. (1996) also
support this argument by suggesting that ERP systems must retain their enterprise objective but must adopt a
much simpler and flexible implementation. There seems to be consensus on the need for interoperable
components that can be customized to model a particular enterprise as close as possible to its actual way of
doing business.
Given the significance and risk of ERP projects, it is essential that research examines methods to improve ERP
implementation. This research will focus on the issue of examining success factors during the post-
implementation review process. A well-planned and executed post-implementation review of the ERP system
implementation, should assist organizations to effect needed changes in organizational plans and processes,
avoid implementation risks, and realize potential operational and strategic benefits. Table 1 summarizes the
discussion in this literature review section. The first column in the table presents the critical implementation
factors as they have been presented in the academic and professional literature that was reviewed here; the
second column in the table presents the corresponding post-implementation review dimensions that an ERP
adopting organization should be expected to evaluate in order to ensure a successful implementation of an ERP
system. The dimensions in the table should be useful in guiding the analysis of the qualitative data that were
collected in the present study and are reported in a following section of this paper.

Critical Factors of ERP Implementation Critical Dimensions of Success in Post Implementation Stage
• Top management support and • Evaluation of fit with strategic vision.
commitment to project; fit to business
strategy. • Review of project planning effectiveness.
• Evaluation of infrastructure development.
• Alignment of people, process, • Review of fit resolution strategies.
technology.
• Evaluation of system integration attainment and reporting
flexibility.
• Anticipated Benefits from ERP • Evaluation of level of attainment of expected system
implementation project. benefits.
• Motivation behind ERP • Review of driving principles for project.
implementation (business- vs. system-
led). • Review of project justification practices.

• Scope of user training. • Review of user learning.

• Evaluation of effective knowledge transfer (among project
team members and other users).

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Table 1. Critical Factors of ERP Implementation and Corresponding Dimensions of Post-Implementation

Success

3.0 RESEARCH METHOD

This study has the objective to explore the process of post-implementation in ERP systems and identify the
factors that lead to successful implementations. Such “why” questions can be answered using the case study
method (Yin 1994). A qualitative approach was used to analyze a series of events exhibiting some theoretical
principles. The purpose was to explore in detail the dynamics present in relevant organizations and
conceptually interpret the significance of various factors that influence post-implementation success. In this
regard, Eisenhardt’s (1989) conceptualization of the case study methodology was followed in the attempt to
understand the concepts involved in the field of post-implementation success in ERP systems and define the
substantive domain of these concepts and their relationships. The literature that was reviewed in prior sections
offered the opportunity to formulate a general research framework and identify factors of potential interest.
These factors were further explored by carrying out semi-structured interviews in two different organizations,
which had implemented ERP systems.
The selection of the two organizations was based on the need to collect detailed data about the ERP
implementation process in each organization. The organizations were varied significantly in size, in type of
industry, and also in their degree of “success” in their ERP system implementation effort. The one
organization was a large Fortune 500 manufacturing corporation operating globally (hereafter referred to as
‘MANU’), while the other was a medium-size utility operating in a European country (hereafter referred to as
‘UTIL’) preparing to enter the new unregulated environment of the European Union. Personal interviews were
carried out with the Corporate Directors of Information Technology in both companies. In both cases, an
initial interview was carried out, the observations obtained were further considered, and a second interview
with the same individual followed for further explanations. The semi-structured interviews were guided by an
interview protocol, which is shown in the following Exhibit 1.
1. What were the driving forces for the system change to an ERP architecture?
2. Was there a strategic plan in place to guide the deployment of the new ERP system?
What were the specific principles that guided system development as part of the
strategic plan?
3. Looking back at the implementation process, what were those factors that critically
determined implementation success or failure?
4. On a post-implementation basis, what actions were taken to enhance system
functionality, review the system’s service potential, or evaluate user acceptance?
5. Could specific success factors be identified that were discovered during the post-
implementation phase of the system life cycle? What tools were used for their
measurement, if any?
Exhibit 1: Interview Protocol
Even though the researcher did not collect archival data from the two organizations, the individuals
interviewed often referred to internal documentation or sought the help of in-house experts in responding to the
researcher’s inquiries. The researcher also met with those in-house experts, who provided more detailed
information on several of the issues presented in the interview protocol. All interviews were tape-recorded.
Following each interview, the researcher listened to the tapes and transcribed the various comments made by
each interviewee. The following sections present the observations from these interviews with regard to the
driving forces and principles for ERP implementation in the two companies, as well as significant issues
relating to the implementation process.

4.0 CASE EVIDENCE

4.1 Case Background: MANU

MANU had a long history of in-house development of legacy systems that addressed different needs for its
separate business units. By the year 1995, there existed more than 200 legacy systems that were in serious need
of upgrading. In addition, the company was burdened with a significant cost associated with the maintenance
of these systems. There were data inconsistencies in those systems across business units and it was impossible
for the corporation to provide for data integration using those same applications. These inconsistencies also

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made much more difficult any system documentation and maintenance tasks.
Customer service presented significant problems to the company since it was fragmented and costly. Existing
legacy systems were focused on specific departments and lacked the ability to present a single “face” to the
customer. A customer with queries that related to different products had to contact different people at different
operating divisions, often receiving conflicting information. As a result, internal cooperation and effective
management of operations were hindered by inconsistencies in the developed systems. In addition, external
firm growth through acquisitions of other businesses was almost impossible to accomplish due to the great
obstacles involved in the integration of the company’s systems and processes with those of the acquired
companies. The degree of operating complexity in MANU was therefore at a very high level and any system
development effort had to address the complexity of issues that characterized its operations.
Given the above problems with the corporation’s existing legacy systems, the decision was made to deploy an
enterprise-wide system that would span all processes and business units of the company. The company had
begun implementation of the SAP system across its business units in 1995. In addition, it required its divisions
to provide quantifiable business cases before initiating the system implementation effort. Most quantifiable
benefits related to improvements in customer response time, improved turnover by maintaining existing
customers or by gaining customers from the competition, and by attaining efficiencies of scope through
acquisitions of other businesses in its vertical supply chain. The ERP system was considered to be a significant
facilitator for the straightforward integration of new acquisitions into the company’s information infrastructure.
MANU had implemented modules relating to sales and distribution processes, materials management
processes, production planning processes, and financial and management control processes. The new system
required the setup of some 30,000 programs within SAP that accessed data in 7,000 different database tables.
System configuration was a very arduous task that involved multidisciplinary teams of internal people and
external consultants. The company’s system analysts had configured programs to automatically execute the
appropriate business rules when relevant data were entered into the system. In addition, the system analysts had
to develop several custom reports in addition to the ones already provided by the system in order to satisfy
specific user needs. By the end of the year 1999, the company had implemented the SAP system in all of its
business units on a global basis.

4.2 Case Background: UTIL

UTIL had a primary objective of improving operational efficiencies, while ERP adoption was initiated in 1997
in order to replace a number of legacy, functional systems. The SAP R/3 system was selected at the time, based
on a detailed requirements analysis that apparently matched a strategic plan that was put in place at the same
time.
The company operated in a regulated environment in the energy business (electric utility). Although its
regulated environment presented some advantages in terms of protecting UTIL from competitive forces at that
time, it also required customized reporting that could not be easily accomplished without significant
customization to the ERP system. From the start of the project, therefore, there existed significant
idiosyncrasies that hindered process integration and limited the process reengineering effort. The level of
operating complexity in UTIL might not have been as high as that in MANU, although its specialized reporting
needs rendered system selection and development a difficult task.
UTIL’s top management believed that the integrated nature of an ERP system made necessary the transfer of
data control solely to users, without having the IT department involved in the process. External system
consultants were hired to assist users in the implementation process; however, the project teams lacked both the
in-house technical expertise to match business and system requirements and also lacked the overall
understanding of business processes and how should those be evaluated or re-engineered in order to
successfully implement the system. In addition, the system was greatly customized in order to fix reporting
inadequacies and prepare specialized reports required by governmental mandatory reporting requirements.
After two years of unsuccessful efforts, the implementation was turned over to the IT department with a
deadline to be operational in 14 months, including the completion of all necessary customizations. In order to
meet the deadlines, numerous short-cuts were followed and work-arounds were adopted. Configuration
management controls were by-passed and system testing became superficial. The implementation effort was
completed and the system was eventually implemented with significant delays and cost overruns. End users did
not fully accept the system and the training provided was just designed to train users in specific system
functionalities, without learning the system’s capability as a whole. Top management did not consider the ERP
system implementation as an on-going project but just as another IS project.
Eventually, SAP ceased support of the version implemented and it became apparent that a system upgrade was

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necessary. At this time, top management, users, process experts and the IT department are all involved in the
effort which shares more characteristics of an initial implementation rather than just a simple system upgrade.
UTIL’s top management realized that the system implementation effort has to be viewed as an on-going
process, where the basic infrastructure that is built through process redesign and integration can offer strategic
advantages in the future. System implementation is not viewed any longer as just a single project but as an
overall long-term effort for the development of a new business model that would ensure sustainability in the
company’s existing competitive advantage. UTIL is now operating in a deregulated environment, primarily
due to European Union’s regulations, where new competitors could enter the industry on a dynamic basis.
UTIL is required by law to allow competitors to utilize its established network, by charging a fee, which is
determined by an independent negotiator. In addition, the company is moving to acquire new businesses, as in
mobile telecommunications, which are characterized by intensive competitive pressures. In conclusion, the
post-implementation phase of the company has clearly demonstrated the many inadequacies in the initial
implementation effort and the need for a newly designed implementation effort.

4.3 Analysis of Similarities and Differences in Post-Implementation Practices at MANU and UTIL
The dimensions that were identified in table 1 could be useful in classifying the observations made at each
company. As a result, the five dimensions that were identified to correspond to the critical factors of ERP
implementation were re-considered and used to classify the various post-implementation practices followed at
each of the two companies. Table 2 presents in summary format the observations from the two companies
along the five critical dimensions.

Success MANU UTIL

Factor
I. Review of • Evaluated system fit with strategic vision for • Evaluated fit with strategic vision;
Overall organizational transformation. support focus.
Project Scope
and Planning • Project planning evaluated and changes • No formal evaluation of project
instituted in subsequent implementation teams. planning but instituted changes after
initial failure.
• Information infrastructure considered critical
for survival, competitive advantage. • Information infrastructure had
support role for organization; not a
• Emphasis on supply-chain transformation in driver for competitive advantage.
selecting post-ERP applications.
II. Review of • Initial reactive response to problems due to • No formal review of process
Driving implementation process inadequacies integration; primarily reactive
Principles for introduced by system. review due to problems identified by
Project key users (example of major
Development • Formally reviewed process integration and problems with customer billing
formed process review teams within process- module).
oriented competence centers. The process
review teams represented a cultural shift for the • No review of business justification;
organization. The system was thus effective in system change after failure and due
causing such major organizational changes. to termination of support by vendor.
• Evaluated global reach and support.
• Re-evaluation of initial system justification.
III. • Evaluated process simplicity and implemented • Evaluated process and reporting
Effectiveness 80/20 rule (implement standard system if it inadequacies and developed “work-
of Misfit satisfied at least 80% of process needs; justify arounds” to by-pass many major
Resolution customization only if percentage coverage of system deficiencies.
Strategies needs by standard system fell below the critical
benchmark of 80%).
• Process Review Boards were effective in
making such decisions.
IV. • Evaluated benefits – primarily those related to • No formal evaluation of benefits;
Evaluation of customer satisfaction using customer surveys. lack of benefits was evident due to

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Attained user complaints.

Benefits
V. Evaluation • Reviewed user learning and instituted • User training not evaluated; limited
of Learning corrective mechanisms. initial training and lack of interest
in system.
• Evaluated knowledge transfer among
implementation teams (multi-site
implementations).
Table 2: Post-Implementation Practices at MANU and UTIL

5.0 DISCUSSION
Each of the two companies is identified to have followed a very divergent implementation path; it is evident,
however, that the range and types of post-implementation practices that each followed depended on how well
they managed the various issues during the initial implementation of the project. To the extent that critical
factors of implementation were initially dealt with in a satisfactory manner, post-implementation could have
followed a planned approach rather than a reactive approach to problem resolution, and take into account
system user and organizational needs. The post-implementation success could therefore be affected by the
extent to which an organization follows a planned approach in dealing with each of the five critical
dimensions. Furthermore, in both UTIL and MANU, the post-implementation phase of their ERP systems
necessarily led to changes in organizational power relations. In UTIL, the IT department gained more power
over user departments, especially after the initial failure. In MANU, the cultural and organizational impact of
the enterprise system has been dramatic. It necessitated structural changes in the information technology
organization, along with other post-implementation activities that ultimately led to front and back office
integration. In order to fully utilize the expertise that the company has acquired through the repeated SAP
implementations, the company’s information technology organization has moved away from being mainly a
back office group to one involved in a broader range of core business activities. The company has changed its
structure and created a number of competence centers so that its customer service, logistics, materials
management, supply chain planning, and information technology groups can best work under a common
umbrella to effectively address post-ERP implementation challenges. In the literature, competence centers are
presented as important not only for ERP software maintenance (for example, updating process tables as the
business changes), but also as an invaluable resource for user education, support, and to promote ongoing
improvements in business processes (Eriksen, Axline and Markus 1999).
All of the above factors had greatly influenced the implementation of the ERP systems at the two companies
and had shaped the users’ predisposition toward the system after its initial implementation. As a result, these
case findings support the basic drivers of ERP implementation success, as they have been extracted from the
review of past literature. As it was discussed earlier in this paper, the most important culprits in a problematic
ERP implementation are lack of user training and failure to completely understand how enterprise applications
change business processes (Wilder and Davis 1998). It is also emphasized by system professionals that for an
organization to turn around after initial failure, it must engage in post-implementation review that will assist in
better defining the scope of the project and improving user training and acceptance of the system. This
situation was demonstrated very eloquently in the case of UTIL, which had to redefine the project scope in
turning around from initial failure.
Organizations may expect to gain strategic advantages from the implementation of ERP systems. Such
strategic advantages could be associated with (a) increased data accuracy that facilitates interactions with
customers and suppliers and (b) improvements in the availability and quality of information due to
improvements in business processes (Mabert et al. 2001). As a result, broad user training and acceptance of the
system, in its post-implementation phase, are critical components in an organization’s ability to realize such
strategic benefits. In MANU, these factors were significant facilitators of system success. Even though each
of the five dimensions implies the adoption of different practices, it is the cumulative outcome of these practices
that determines the degree of success in an organization’s post-implementation process. As a result, the effect
of each of the practices is complementary to one another and adoption of a specific practice does not render
redundant any of the other practices. It remains an important empirical question, therefore, to further examine
post-implementation success and investigate the relative importance and contribution of individual practices to
successful ERP implementations.
Conceptually, ERP post implementation success could be defined by determining the extent to which an
organization carries out a planned set of review/evaluation activities on a post-implementation basis which
relate to the following five dimensions: (a) review of overall project scope and planning; (b) review of driving

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principles for project development; (c) evaluation of misfit resolution strategies; (d) evaluation of attained
benefits; and (e) evaluation of user and organizational learning. Each of these five post-implementation review
dimensions could be further examined in future studies, where operational measurement items can be
developed and data on such specific items can be collected from firms that had adopted and deployed ERP
systems in their organizational environments. These empirical measurements can then be tested in future
research to determine the validity of construct measurement in terms of construct representativeness, internal
reliability of measurement, and discriminating ability in empirically distinguishing post-implementation
success from its antecedent conditions and potential outcomes.
In conclusion, this study has attempted to explore the issue of post-implementation success in ERP systems,
conceptualize and empirically validate critical dimensions that contribute to post-implementation success, and
offer implications that could be useful for both the practice and research on ERP implementation effectiveness.
The lack of prior empirical findings in this area lends additional importance to such a research effort that
explores potentially significant constructs and defines conceptual boundaries that could contribute to future
empirical investigations.

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