ERP Implementation: An Exploratory Study of Customization Levels Marcus Rothenberger University of Nevada, Las Vegas Mark Srite University 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 strategies 1. “Vanilla” and BPR (modifications limited to configuration) 2. Modifications only through add-ons 3. Modifications only through ERP code changes 4. 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 Comparative Case Studies Consultant Interviews Literature Multiple Sources of Evidence (Construct Validity) Analytical Generalization (External Validity) Explanation Building (Internal Validity) Explanation Building (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, minutes each A technical project lead at each ERP adopter A functional project lead at each ERP adopter Consultants – 3 Consultants, 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

Causal RelationshipSouthern EuropeanUtility CompanySouthern EuropeanFood and BeverageManufacturing CoCentral EuropeanFinancial Institution 1Central EuropeanFinancial Institution 2North AmericanBusiness ProductManufacturing CoNorth AmericanEngineering CompanyNorth AmericanUtility CompanyNorth AmericanConsumer ProductsManufacturing CoSouthern EuropeanConsultantCentral EuropeanConsultantNorth AmericanConsultant 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?