ERP-Cambridge Stemberger Kovacic

8/13/2019 ERP-Cambridge Stemberger Kovacic

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The Role of Business Process Modelling in ERP Implementation Projects

Mojca Indihar temberger, Andrej KovaiUniversity of Ljubljana, Faculty of [email protected], [email protected]

Abstract

Companies and ot er organisations use E!" systems more and more e#tensively. $ e problem ist at many projects of t is type are unsuccessful, mostlydue to t eir comple#ity being underestimated. $ e

purpose of t e paper is to analyse t e c allenges of E!" implementation projects and to propose a frame%ork based on a composite approac to E!" systems implementation. & special emp asis is given tobusiness process modelling, because t e key to a

successful c oice, implementation and usage of an E!" system is fit of planned processes in anorganisation %it processes implemented in t e

solution. $ e paper also presents some results ofempirical investigation in t e field of E!"implementation.

1. Introduction

Organisations growingly implement theirinformation systems (I ! by p"rchasing #$% systems&'hey "nderestimate the comple ity of s"ch projects inmany cases and as a conse)"ence the rate of"ns"ccessf"l projects is high (Al*Mashari, + -!& Oneof the most common reasons therefor is still the factrecognised almost a decade ago, namely that the logicof the system may conflict with the b"siness processesin an organisation (.avenport, /001!& 'he sit"ation issimilar to that in the implementation of 2$M, 2M ore*b"siness concepts&

'he p"rpose of the paper is to e pose and analysethe challenges of #$% implementation projects and to propose a framewor3 that wo"ld enable to managetheir comple ity and to lead to their s"ccessf"lo"tcome& 'he framewor3 is based on a compositeapproach to #$% systems implementation& A specialemphasis is given to b"siness process modelling, beca"se we believe that the 3ey to a s"ccessf"l choice,implementation and "sage of an #$% system is fit of planned processes in an organisation with processesimplemented in the sol"tion&

'he str"ct"re of the paper is as follows4 ection + presents a review of challenges by #$%implementation projects& ection - describes several possibilities and some res"lts of an empiricalinvestigation are presented& ection 5 describes the proposed framewor3 that can lead to a s"ccessf"l #$%implementation& 'he role of b"siness processmodelling is each phase is analysed& 'he last sectionconcl"des the paper and gives several directions forf"rther research&

2. hallenges of ERP s!stemsimplementation

An #nterprise $eso"rce %lanning (#$%! system is a b"siness management system that comprises integratedsets of comprehensive software that can be "sed, whens"ccessf"lly implemented, to manage and integrate all b"siness processes and f"nctions within anorganisation ( hehab et al&, + 5!& 'hey "s"allyincl"de a set of mat"re b"siness applications and toolsfor financial and cost acco"nting, sales anddistrib"tion, management of materials, h"manreso"rces, prod"ction planning and comp"terintegrated man"fact"ring, s"pply chain, and c"stomerinformation (6oy3in, + /7 2hen, + /!& 'raditionally,they have been applied to man"fact"ring companies,however recently, #$% systems have been e panded beyond man"fact"ring and introd"ced to services, li3efinance, health care, hotel chains, ed"cation, ins"rance,retail and telecomm"nications sectors&

%otential benefits of implementing #$% systemsincl"de drastic declines in inventory, brea3thro"ghred"ctions in wor3ing capital, ab"ndant informationabo"t c"stomers8 wishes and needs, along with theability to view and manage the e tended enterprise ofs"ppliers, alliances and c"stomers as an integratedwhole (2hen, + /7 hehab et al&, + 5!& Among themost important characteristics of #$% systems that can bring these benefits (9ah et al&, + /7 oh et al&, + !are their abilities to4 a"tomate and integrate b"siness processes across organisational f"nctions and


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locations7 enable the implementation of all variationsof best b"siness practices7 share common data and practices across the entire enterprise&

:owever, many organisations failed to realise potential benefits (9ah et al&, + /!& 'he main reasonis "nderestimation of the comple ity of s"ch project

that re)"ires several organisational changes andinvolvement of employees& Massive organisationalchanges involved in #$% implementation res"lt fromthe shift in a b"siness design from a fragmented,f"nctional*based organisational str"ct"re to a process* based (.avenport, /001!& A project co"ld therefore belenghty, e ceeding the b"dget, inconsistent, or mayres"lt in incomplete installations of system mod"les,and conse)"ently, lower benefits than hoped for (Al*Mashari, + -!&

'he reason for the many fail"res that have occ"rredis that companies have concentrated e cl"sively on thetechnical aspects while ignoring the changedmanagement elements& 'he lac3 of appropriate c"lt"raland organisational readiness was fo"nd as the mostimportant factor contrib"ting to the fail"re of an #$% project (;argeya, 6rady, +

Businessneeds

ERP systemcapabilities

Comparing andfinding

differences

Deciding for analternativepossibility

Adaptation ofan ERP system

Adaptation ofbusinessprocesses

CombiningERP withother solutions

Figure 1 !he alternatives for selection andimplementation of ERP system

?irst of all b"siness needs to be compared with thecapabilities of an #$% system in order to finddifferences (Kovai, 6osilj*@"3 iB, +

models of an #$% system&'he problem is that many organisations fail to ma3es"ch comparison at all& In an empirical researchcond"cted among 2IOs of /< largest loveniancompanies at the beginning of + D we have fo"nd o"tthat almost a half of them had not assessed theirinformation needs by any 3ind of b"siness modelling(processes, organisation, data!&

After that an organisation has three alternatives4 (/!to adapt an #$% system to their b"siness processes7 (+!to adapt their b"siness processes to the processesimplemented in an #$% system7 (-! to combine theac)"ired (#$%!, integrated (best*of*breed! and

engineered (adapted or b"ilt! applications& In practicethere is also a fo"rth alternative, namely to do no or nosignificant adj"stment& 'his alternative s"rely leads to=living with problems>, which means that anorganisation "ses an #$% system that is not tailoredwith the way b"siness is done&

'he first alternative is appropriate for thoseorganisations, which believe their b"siness processesare better than those implemented in an #$% system


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and do not want to lose their competitive advantage&Altho"gh fine t"ning of an #$% system can be donethro"gh parameterisation, an additional comp"ter codedevelopment is necessary for greater changes& 'hisalternative can ca"se high additional costs, beca"sec"stomisation of #$% mod"les can be very e pensive&

6esides, it presents diffic"lties in maintenance and"pgrading to new versions& As a conse)"ence thisalternative can lead to a fail"re of a project& It wo"ld probably be better for s"ch organisations to developtheir own sol"tion in the first place& 9evertheless, #$%vendors do not hesitate adapting their software beca"sethey e pect high earnings and beca"se s"ch project iseasier to manage from their point of view&

'he second alternative, also named a technologydriven approach (Arif et al&, +

'he best possible alternative in a majority of cases proved to be a composite approach, i&e& a blend ofac)"ired (#$%!, integrated (best*of*breed! andengineered (adapted or b"ilt! applications& It seems best for standard b"siness processes (e&g& acco"nting processes! to adapt to best practices, whereasc"stomised b"siness processes (e&g& order f"lfilment!sho"ld in many cases adapt to an #$% system& It is also possible to combine an #$% sol"tion with best*of* breed or c"stom developed mod"les ( tolovits3y,+ D!& ?"rthermore, this alternative is in accordancewith the c"rrent trends in the #$% mar3et& Ehilevendors propagated "sage of monolithic sol"tions inthe past, nowadays they switched their tendency tocombining their software with ind"stry*specificsol"tions (;enovese, +

Investigation mentioned above also showed that the

sit"ation in this area is rather concerning& Only / F ofcompanies that had already implemented an #$%system adapted their b"siness processes to the sol"tionand 0F of them adapted it to the software& ?"rther 5 F

of organisations decided for the third alternative thefinding of which is enco"raging& :owever, 5/F ofcompanies have not done anything, which ran3s themamong the ones that =live with problems> and ma3etheir projects "ns"ccessf"l&

Another interesting res"lt of the investigation is

abo"t doc"menting the changes in an #$% systemandGor b"siness processes& In 5/F of companies thesechanges are not doc"mented at all and in -0F of themthey are doc"mented only partly& Again, b"siness process modelling wo"ld be a very appropriate way todoc"ment changes&

$. %o& to implement an ERP s!stemsuccessfull!

In this section we present a proposal of theframewor3 that can help organisations to avoiddiffic"lties mentioned above and to implement an #$%

system s"ccessf"lly& 6"siness process modelling playsa very important role in the framewor3& 'he framewor3in designed for the third alternative described above&Eith some modifications it can also be "sed for otherapproaches&

$.1. The frame&or' for the third alternati#e

As disc"ssed above, we advise most organisationsto apply the third alternative, the composite approachto #$% implementation& In this case some b"siness processes are adapted to the #$% system and in someof them c"stom developed or best*of*bread mod"les

are applied& ?or this alternative we propose aframewor3 represented in ?ig"re +& It has seven stagesthat are dependent from each other and are notnecessarily carried o"t in a se)"ence&

1. Assessing the current situation in anorganisation. In this stage c"rrent b"siness processesin an organisation are modelled& everal organisationsalready have some models, however, in practice theyrarely correspond to the act"al b"siness processes orincl"de an ade)"ate level of details& 'herefore somemodelling has to ta3e place in almost every case& 9evertheless there is no need to develop detailedmodels beca"se s"ch project co"ld be very lengthy andmay inc"r m"ch costs& 'he res"lts of this stage arehigh*level A *I models of b"siness processes&


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1" Assessing the currentsituation in an organisation

#" Finding business needs

$" %electing the tooland its vendor

&" Forming two groups ofprocesses

'roup 1 Processes which willbe adapted to ERP system'roup # Processes for whichbest(of(breed or customdeveloped modules will beused

A%()% models

*ission+ vision+strategy

!,(BE modelsdata models

Possible toolsand vendors

-" )mplementing ERPsystem and performing

BPR

'roup #'roup 1

." *anaging the processes

/" %electing or developingappropriate modules and

performing BPR

Figure # !he proposed framewor0 for a composite approach to ERP implementation

2. (inding business needs. In the second stage b"siness needs are determined in the form of high*level'O*6# models and data models& 'he mission, visionand strategy of an organisation are "sed as an inp"t tothis stage& 'here are vario"s levels of changes fromA *I to 'O*6# processes& ome companies needonly small changes, b"t for others major changes in b"siness processes are necessary& In the latter case a probability of project fail"re is m"ch higher and as aconse)"ence a higher level of top managementinvolvement is re)"ired&

". )electing the tool and its #endor. In stage - possible #$% systems on the mar3et and their vendorshave to be analysed& 'he tool has to be selected on the basis of several criteria, some of them are disc"ssed inliterat"re, e&g& (Eei et al&, +


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*. Implementing an ERP s!stem and performingBPR. ?or the processes in the first gro"p the selected#$% system is implemented at this stage& 'heimplementation interweaves with a b"siness processchange project& In many cases changes are remar3able&In s"ch case all the constit"ent parts of a 6%$ project,

li3e change management, changes in organisationalstr"ct"res and organisational c"lt"re, have to ta3e place& "ch project might be e tremely comple anddiffic"lt to manage& It re)"ires a high level of topmanagement and all other employeesC involvement&:owever, if only standard mod"les of an #$% systemare implemented, then the project is "s"ally not socomple &

+. )electing or de#eloping appropriate modules andperforming BPR. ?or the processes in the secondgro"p best*of*bread or c"stom developed mod"les areimplemented& If an appropriate sol"tion to a partic"lar process is available, it has to be implemented andintegrated with the rest of the system& In case ofc"stom developed mod"les additional modelling of b"siness processes and data is re)"ired, beca"se in theinitial stages of methodology only high*level modelsare developed& 'his stage also re)"ires a b"siness process change with the same characteristics asdescribed in the previo"s paragraph&

tages < and D are typically e ec"ted at the sametime and are tightly connected& A b"siness processchange is performed sim"ltaneo"sly for both phases&

,. Managing the processes. 'he last stage act"allynever ends& It incl"des the meas"rement andcontin"o"s improvement of b"siness processes& 'hechanges in processes have to be constantlydoc"mented& It is important that processes are fle ibleeno"gh to enable a company to accommodate them tomar3et e pectations fast eno"gh&

$.2. )uggestions for the first and secondalternati#es

."ring #$% systems implementation b"siness process modelling is necessary also for the first(adaptation of an #$% system! or the second(adaptation of b"siness processes! alternative describedin the previo"s section& tage /, in which high*level A *I models aredeveloped is inevitable, beca"se an #$% system cannot be selected if it is not 3nown precisely eno"gh how b"siness processes are performed& 9evertheless there)"ired level of precision is not high, high levelmodels are an even better form detailed for this p"rpose&

tage + can rarely be avoided as well, beca"se in practice no company performs their b"siness processes perfectly& In o"r e perience at least the "nification of processes (e&g& order f"lfilment in different b"siness"nits! is needed& Eitho"t that the software cannot beimplemented& ?or the second alternative reference

models of an #$% system play the role of 'O*6#models&It case an organisation decided to adapt their

b"siness processes to an #$% system it has to beselected (stage -! even more caref"lly& In stage 5 all processes fall into the first gro"p& tage < is performedas described above and stage D is not performed at allor only in a limited scope for the processes that are notcovered by the selected sol"tion& In stage H ma3ingchanges to the processes is "s"ally more complicated&

?or the first alternative (adaptation of an #$%system!, which is not recommendable, yet is, however,)"ite pop"lar in practice, the sit"ation is somewhatdifferent& In this case the changes of an #$% sol"tionhave to be well doc"mented& Again b"siness processmodelling can serve as a s"itable techni)"e& 6"siness process change ta3es place for this alternative only in alimited amo"nt or not at all& It red"ces the comple ityof the project, b"t as a conse)"ence stage H is m"chmore problematic& Of co"rse stage - is e tremelyimportant as well&

*. -iscussion and conclusion

'he paper analysed some challenges of #$%implementation projects and described their possiblealternatives& Ee share the opinion that the bestalternative for a majority of companies is the thirdalternative, which combines adaptation of some b"siness processes to an #$% system with theapplication of c"stom developed or best*of*breadmod"les& As we can see form the res"lts of theempirical investigation presented in section -, severalcompanies have already recognised the benefits of thisapproach&

'hen the paper presented the framewor3 for acomposite approach to #$% implementation thatenables s"ccessf"l implementation& 6"siness processmodelling plays an important role, especially in thefirst two stages of the framewor3& 'he res"lts of o"rinvestigation showed that less than half of thecompanies, which implement an #$% system performany 3ind of b"siness modelling to asses theirinformation needs& 'his is rather warring and showsthat the importance of b"siness process modelling in#$% implementation projects is still not ac3nowledgedin practice& Moreover, even the idea of conformation


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between an #$% system and b"siness processes in thecompany has been poorly accepted in practice&

ome of well 3nown methodologies for #$%systems implementation incl"de some 3ind of b"siness process modelling, however, in a very limited scope&?or e ample the A A% methodology (Accelerated

A%! contains aligning the software (at a high level!with the internal b"siness processes phase, yet in theform of interviews and wor3shops (;"lledge, imon,+

Models developed in the initial stages of the proposed framewor3 are val"able for companies forother p"rposes as well& %eople start to be aware thattheir wor3 is part of something that gives val"e to thec"stomer& Any 3ind of b"siness process modellingincreases coordination among departments and otheraspects of b"siness process mat"rity (Mc2ormac3,+ H!&

On the other hand there are also some threats in b"siness process modelling& ?irst of all, a too detailed process modelling can delay the project& 6esides, theselection of the proper modelling techni)"e and tools isalso important& As evident from o"r previo"s research( a3li et al, + D!, we s"ggest not to select every toolthat enables modelling with 6%M9 or similartechni)"e in this case&

'he framewor3 has already been applied is somestill ongoing projects in lovenian companies& Eee pect to describe the res"lts in o"r f"t"re papers&

*. References

J/ M& Al*Mashari, =A %rocess 2hange*Oriented Model for#$% Application>, 'nternational (ournal of )uman* computer 'nteraction , /D, /, pp& -0L, +usiness "rocess anagement

(ournal , //, , ;@ NaloRba, Qj"bljana, + ,Communicationsof t e &C , 5-, 5, pp& 5H*, +usiness "rocess anagement (ournal , / , 5, pp& -,%roceedings of the Americas 2onference on Informationystems, pp& +-& 'nternational

(ournal of "roduction Economics , 0D, pp& 5HLD+, +

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