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Selection of an ERP System for a Construction Firm in Taiwan: A Case

Study

Jyh-Bin Yang, Chih-Tes Wu and Chiang-Huai Tsai

Institute of Construction Management, Chung Hua University, Taiwan, ROC

Abstract The primary functions of Enterprise Resource Planning (ERP) are to integrate the

inter-departmental operation procedures and Management Information System (MIS)

modules, and to reallocate the resources of a company. How to successfully implement an

ERP system in an organization is always a hot research topic for researchers as well as a

pending problem for an organization that wants to implement it. This research is a case

study on the selection of system suppliers and contract negotiation during the ERP

implementation of a local construction company in Taiwan. After reviewing the common

key success factors discussed in the literature, this study discussed seven issues: coding

system, working process reengineering, priority of ERP functionality implementation,

customization, participant roles, consultant role and performance level of subcontractor,

which also affected the implementation. Lessons learned from the case study in discussed

seven issues are valuable for a construction company in deciding to implement an ERP

system. This research suggests that additional case studies are necessary for the successful

application of ERP systems in the construction industry.

Keywords: case study, enterprise resource planning, supplier evaluation, contract

negotiation, contractor.

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1. Introduction

Enterprise Resource Planning (ERP) is a system for the seamless integration of all the

information flowing through the company such as finances, accounting, human resources,

supply chain, and customer information [1]. Recently, ERP has become a strategic and

survival weapon for most firms in which Information Technology (IT) is widely used.

Implementing an ERP system requires an enormous investment for a firm in terms of time,

cost and resources. Thus the decision to implement ERP must be considered carefully.

Additionally, an ERP system will be the IT backbone of an enterprise [2]. A firm must

address the culture and general practice of the business in order to achieve its expected

implementation objectives [3]. The range of functionality of ERP systems has further

expanded in recent years to include more front-office, back-office and even strategic

functions. Detailed function descriptions and discussions are out of the scope of this study,

but can be found elsewhere [3-6]. Although there are many world famous ERP providers,

including SAP, Oracle (integrated with PeopleSoft and J. D. Edwards) and IFS, no system

specifically designed for the construction industry is yet available. Construction companies

wishing to implement an ERP system must generally select a general ERP system

mentioned above. However, the construction industry has some uniqueness, which should

be considered by the ERP vendor, namely the construction industry is a highly fragmented

one with specialized segments requiring specialized systems and driven by projects [7, 8].

Recently, ERP systems have been used in construction-related companies because of

their benefits in improving responsiveness in relation to customers, strengthening supply

chain partnerships, carrying out remote procurements and inventory management,

enhancing organizational flexibility, improving decision-making capabilities, reducing

project completion time, analyzing accurate business profile and lowering costs [8,9].

However, there are very few studies conducted concerning the implementation of ERP

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systems in the construction industry, particularly for the construction contractors.

Successfully implementing an ERP system in a firm is extremely difficult. Many studies

have provided numerous success factors [10-14]. It still exists that the standard and best

methodology for implementation of an ERP system does not exist [7]. O’Connor and Dodd

recommended that it is beneficial to develop a case study on how a contractor implements

an ERP system [15]. This study aims to fulfill this need.

Commercial ERP packages cannot provide a once-and-for-all business model for all

processes in all industries. Thus, no single ERP packaged software can meet all firm

functionalities or all special business requirements [10-14]. Therefore, firms must choose a

flexible ERP system and a co-operative vendor that effectively responds to customer

requirements. So far, none of the construction management modules provided by software

suppliers have been found to be suitable for construction firms. Moreover, some companies

that introduced ERP were unsuccessful or even went bankrupt eventually. These failures

occurred because the level of application of IT of construction companies is comparatively

low and thus, considerable attention needs to be paid and caution in advocating ERP

systems.

However, previous studies have also suggested that language, culture, politics,

government regulations, management style, and labor skills affect various ERP

implementation practices in different countries [16, 17]. Language differences (the

common language used in Taiwan’s IT software is traditional Chinese) and the entry

barrier of using an English-based ERP system for a general contractor in Taiwan (or other

non-native-speaking English areas) must be carefully considered.

The construction industry is a localized industry. In Taiwan, successful ERP

implementation is still rare in the construction industry. Researches performed in Taiwan

regarding ERP mainly focused on the procedures of application and software system

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functionalities, respectively. On the contrary, only a few studies have been related to the

selection of system suppliers and the content of the ERP contract and specifications. This

study aims to remedy the lack of discussion of the above issues.

In sum, this study focuses on the early stage of ERP system implementation for a

general contractor in Taiwan. A detailed discussion of the costs and benefits of system

implementation, that is confidential information of studied company, is beyond the scope

of this study. The rest of this paper is organized as follows. Section 2 presents the research

method, case study method, and why this method was chosen. Section 3 then reviews the

literature on ERP implementation. Next, Section 4 describes the case information

concerning ERP implementation. Subsequently, Section 5 discusses seven issues that affect

successful ERP implementation. Conclusions are finally drawn in Section 6, along with

future research directions recommended as well.

2. Research method

There are three factors that distinguish research method selection [18]: (1) the type of

research question being asked; (2) the control a researcher has over actual behavioural

events; and (3) the degree of focus on temporary as opposed to historical events. Historical

methods are useful when a researcher has no control over the sources of data. Experiments

are the preferred method if the researcher can manipulate behavior directly, precisely and

systematically. As the research conducted is examining contemporary events, but the

relevant behavior is unable to be manipulated, the use of the case study method is the

preferred method for answering the research questions. Generally, the case study method is

a preferred strategy when “how” and “why” questions are being posed, and the researcher

has little control over events [18].

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The case study method, a qualitative and descriptive research method, looks intensely

at an individual or small participants, drawing conclusions only about that participants or

group and only in that specific context [18]. The case study method is an ideal

methodology when a holistic, in-depth investigation is required [19]. The case study

method has been used in various domains, particularly in sociological investigations. The

case study research is not sampling research [18-20]. However, selecting suitable cases

must be done so as to maximize what can be learned in the period of time available for the

study [21].

There are three types of case study method: exploratory, explanatory and descriptive

[18]. The research questions used in this research are explanatory types of question (e.g.,

why the studied company did not select a localized ERP system in evaluation), which are

most likely to require the use of the case study method, because such questions deal with

operational links that need to be traced by involved persons.

The case study is known as a triangulated research strategy [18, 21-22]. The

protocols that are used to ensure accuracy and alternative explanations are termed

triangulation [20]. Triangulation (sometimes known as triangulation) encourages a

researcher to collect information from multiple sources but aims at corroborating the same

fact or phenomenon. The need for triangulation arises from the ethical need to confirm the

validity of the processes [21, 22]. In the case study methodology, triangulation could be

done using multiple sources of data [18]. This study interviewed the project managers who

are from the studied company and ERP implementation consultant respectively to improve

the accuracy of the study findings.

The case study method has been proven a useful tool in investigating the problems of

ERP implementation [16, 23-25]. Such a fact is also fit for this study. Based on the above

discussions, this study used the case study method as a data collection method and then

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used participant interviews and comparison with the literature to validate the findings from

the case study.

3. Literature review

The ERP system is an increasingly popular management tool to reshape a business or

organization. The ERP system was developed and derived from the previous MRP

(Materials Requirement Planning) system and MRPII (Manufacturing Resource Planning)

system. Modern ERP system encompasses all integrated information systems that can be

used across an organization [26]. The key idea of ERP is using IT to achieve the capability

to plan and integrate enterprise-wide resources [27]. ERP has become a necessary tool of a

progressive firm who wants to hold the edge in his comparative domain. However, there

are a number of examples in which organizations were not successful in obtaining the

potential benefits that motivated them to make large investments in ERP systems [1, 28-30].

The problems that led to the failure of ERP implementation can be grouped into the

categories of human/organizational (e.g. lack of strong and committed leadership),

technical (e.g. problems in software customization and testing, and lack of technically

knowledgeable staff) and economic (e.g. lack of economic planning and justification) [23].

The question of how to successfully implement an ERP system in an organization remains

a hot research topic for researchers and a pending problem for organizations wishing to

implement this system.

There is a lot of research focusing on critical success factors (CSFs) for ERP

implementation. For instance, Nah et al. [30] identified 11 factors based on a review of the

ERP literature. The identified CSFs include ERP teamwork and composition, top

management support, software development and so on. Based on a survey of 10 Canadian

government organizations, Kumar et al. [31] reported that the top three CSFs affecting the

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selection of ERP product/vendor are (1) functionality of the system, (2) systems reliability

and (3) system recommended by the Treasury Board. Furthermore, Kumar et al. [27]

examined the same issue of product/vendor selection with a questionnaire and structured

interviews of 20 Canadian organizations and then revealed that the five most prominent

CSFs affecting selection are: (1) functionality of the system, (2) systems reliability, (3) fit

with parent/allied organization systems, (4) available business best practices in the system

and (5) cross module integration. One of the general CSFs that only occurred in Asia was

the cultural difference. Popular ERP software are developed by Western companies, Asian

companies need to customize some ERP functionalities because their business models are

different from the Western practices that are embedded in the ERP systems [12, 25, 32, 33].

A study focusing on the construction industry discussed the topic of executing the

capital facility delivery with an ERP system by conducting a survey to evaluate the

functionality and adequacy of a famous ERP system [15]. This study concluded that there

were many functional, technical and usability problems that existed in their examined ERP

system and it is necessary for ERP system designers to understand the detailed work

processes of the engineering and construction industry for broad product acceptance.

Another study, based on the construction companies that had ERP systems in place,

revealed that there are the barriers to the implementation of ERP systems in the

construction industry and the major CSFs in small construction firms are financial capital

and human and technical resources [34].

Lee et al. [8] investigated the development of ERP systems and their implementation

in materials management in the construction industry. This study evaluated the benefits of

an ERP implementation case by simulation techniques and then this study concluded that

an ERP system can shorten the procurement cycle through automating most repeated

transactions, and by reducing manpower to perform the tasks. Shi and Halpin [3] thought

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that an internet-based integrated resource planning system offers a potential solution for

achieving construction enterprise-wide business automation. This study proposed a

conceptual Construction Enterprise Resources Planning (CERP) architecture that is project-

oriented, integrated, paralleled and distributed, open and expandable, scalable, remotely

accessible, transparent, and reliable and robust. For a company wishing to successfully and

quickly implement an ERP system, the construction customized ERP, or the CERP, is

unrealistic. Mature commercial ERP systems are the first choice for most companies

because firms required long term technical support and custom service.

The method of using a case study to discuss ERP implementation in the construction

industry is rare. A case study involving three ERP implementations in different business

units of a Dutch-based construction firm concluded that the ERP system is appropriate for

the firms that are changing their business strategy from a low-cost strategy for all market

segments to a differentiation strategy for one or a few market segments, as well as being

appropriate for firms adopting tools for the inter-organizational standardization of primary

business processes, and moreover can transform IT function within firms from computer

management to information management [24].

4. Case description

4.1 General information about the studied company

The studied company (subsequently termed company X) is a registered “A class”

general contractor in Taiwan. The company was established in the 1970s and had a staff of

about 500. In the construction industry in Taiwan, the studied company was ranked among

the top ten construction firms according to their annual revenue. Recently, the types of

projects in which company X is involved have included: housing and hi-tech buildings,

infrastructure, and mass transit projects.

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Company X had developed several single-functionality programs to facilitate

independent management. For instance, a construction information system based on FoxPro

language was developed to collect site information by a dial-up protocol. Despite being out

of date, the systems were able to meet the basic requirements of conventional construction

management style. Owing to the need to provide more real and accurate information for

both top management staff and project clients, company X decided to evaluate whether it

was necessary to implement an ERP system to enhance its IT competence.

4.2 Evaluation process

Before implementing an ERP system, company X developed a four-phase

implementation plan to obtain desired information and to make necessary decisions, which

are beneficial to its ERP implementation. The four phases include (1) self evaluation of the

feasibility of ERP implementation, (2) Request for Proposal (RFP) preparation, (3) ERP

systems evaluation and (4) ERP contract negotiation. Some substantial issues in each phase

are depicted below.

4.2.1 Self evaluation

To evaluate the feasibility of ERP implementation, company X formed a task force to

deal with the affairs of ERP implementation. The criteria for assessing the staff to be

included in the task force consist of the following conditions: (1) An individual must have

experience of construction computerization, (2) An individual must be a department

director and have sufficient computer skills and (3) An individual must be familiar with

company business processes and have sufficient computer skills. Following an interview

with company staff, the task force included seven members (one project manager who is a

department manager, five company staffs and one outsourcing university professor). The

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work force received authorization from the general manager of company X. The work force

carried out a self evaluation program that uses an evaluation sheet (see Figure 1) to serve as

the key for determining whether the ERP implementation is required or not. By the

information shown in Figure 1, the members of the task force conducted independent

evaluations. The relative weightings of the evaluation items, excluding those in the cost

category, are determined by the task force by the majority. The sum of the weightings in all

items equals 100. Owing to the decision regarding whether to implement ERP were

essential to success or to failure to some extent, company X set the average value of 80 as

the threshold for executing the ERP implementation project. The self evaluation result

drove company X into the second phase: RFP preparation.

4.2.2 RFP preparation

Establishing a request for proposal (RFP) for unbiased competition offers benefits in

terms of correct ERP system selection that is another key to successful ERP

implementation. RFP preparation for a company with no related computerization

experience is a tough and hard task. On the one hand, the existing information systems in

company X were developed by the staff of company X. Therefore, purchasing a

commercial information system or an ERP system is a difficult decision that requires

careful consideration. On the other hand, there is no available RFP template for ERP

implementation for company X. Consequently, the preparation of a suitable RFP is another

issue for ERP implementation in company X. Before preparing the RFP, company X

invited several ERP vendors to demonstrate their systems and to provide system

functionalities and requirements, as well as to adopt company lists and preliminary

quotations. Simultaneously, company X conducted a self inspection program for collecting

the requirement information on ERP implementation. The self inspection program gathered

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basic ERP requirements of all departments, depicted the current working processes of all

departments, and assembled the working processes and ERP requirements according to a

centralized management perspective.

Based on the results of the self inspection program and the data provided by ERP

vendors, the work force generated a RFP that consisted of the work scope of the required

ERP system, as well as the major ERP functionalities including preliminary sub functions,

implementation priority and relative schedule and preliminary ERP implementation

contract. Furthermore, the work force also recommended candidates for invitation to

participate in the final competition.

4.2.3 System evaluation

This evaluation phase evaluates all possible ERP vendors to determine the priority of

contract negotiation during the next phase. Although the system functionalities and the

strengths and weaknesses of individual vendors can be evaluated by structured evaluation

items, none of the systems fully fit the requirements depicted in RFP. Initially, local

construction-related ERP vendors were invited to demonstrate their systems. However, the

lack of process reengineering and other business management modules, such as financial

and accounting management, forced company X to reject those local construction-related

ERP vendors. After focusing on global ERP vendors, company X changed its consideration

to find an ERP system with long term usability, system stability, functionality completeness

and internationalization possibility. Based on the above attributes, two final ERP vendors

were targeted. This decision is identical to the advice offered by Shi and Halpin [3].

Following several scenarios involving separate discussions with two vendors

regarding the system functionality and the requirements of company X, a modified RFP

was prepared for final invitation and evaluation. The modification in RFP included the

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scope and schedule of ERP implementation, a list of customizations on request and a list of

client-furnished items. Company X issued the new RFP with a formal quotation sheet (see

Figure 2) to two candidates and used an evaluation framework (see Figure 3) to determine

the final ranking of ERP vendors for contract negotiation. Figure 3 shows the sheet used for

ERP system evaluation. The evaluation items in the sheet were collected from relevant

literature and ERP vendors and then determined by the work force. The evaluation sheet

contains 36 evaluation items which are grouped into ten categories, each with a weight of

ten. The evaluator (the member of the work force) was then asked to fill out the score fields

and opinions in the sheet. Following independent evaluation by all evaluators, one of the

two candidates was awarded the right to negotiate the contract. The contract winner was an

ERP implementation consultant company, not an ERP total solution company.

4.2.4 Contract negotiation

During this phase, company X negotiated with the contract winner based on the

submitted quotation and preliminary contract provisions. Figure 4 shows the contracting

configuration before and after the contract negotiation. At the beginning of contract

negotiations, company X planned to sign three contracts with an implementation consultant,

a hardware vendor and a software vendor, respectively. During the negotiations with the

implementation consultant, company X decided that negotiating with a firm in a domain

with which it was unfamiliar was hard work owing to the lack of IT specialists in the

company. Therefore, company X finally signed only one contract with the implementation

consultant who would have sub-contracts with the IT hardware vendor, ERP system vendor

and construction domain consultant, respectively. Notably, owing to the selected ERP

system being a general purpose ERP system, the implementation consultant needs to find a

construction domain consultant with IT implementation experience to help in resolving the

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problems of implementing a general purpose ERP system for the construction domain and

performing construction domain specified customizations.

The chapters of the signed contract include: (1) project scope, schedule and standard

(consisting of the provisions of the scope of the ERP implementation project,

implementation schedule, service standard and principles, testing and acceptance process,

and change and resolution of service standards), (2) obligations of contracting parties

(consisting of the authority and responsibility of the project team members and project

manager), (3) privacy protection, operation guidance and data manipulation principles, (4)

consultant fee and payment conditions (consisting of the consultant fee, exclusive cost,

payment terms that are tied to implementation milestones, and payment associated with

changes in service), (5) intellectual property rights, (6) change of local laws or regulations,

(7) contract duration and termination, (8) contract trade, (9) emergency support plan, (10)

work transfer under contract termination (11) indemnification of damage, (12) dispute

resolution and applicable laws, and (13) other special provisions.

4.3 Implementation phases and current status

In the ERP implementation proposal prepared by the work force, the estimated

duration of the implementation project is about 18 months, and can be divided into four

phases. The first phase is a preparation period for ERP implementation, during which an

EIP (Enterprise Information Platform) is established and a new coding system is

established for company X. The second phase is the initial stage of ERP implementation,

during which the core system (the ERP infrastructure which consists of system hardware

and software) of ERP is implemented. The third phase is the second stage of ERP

implementation, during which a CSIS (construction site information system) integrated

with the core ERP system, is implemented. During this phase, an independent ERP portal is

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established for each construction project, via which project clients can easily access project

execution information. The fourth phase is the third stage of ERP implementation, during

which the functionality customization of human resources and accounting management

systems of ERP is completed.

The implementation project was initiated on September 2002, and the project work

force was established on December 2002. The project work force surveyed available ERP

software, conducted RFP preparation, and evaluated candidates for about ten months.

During October 2003, the implementation contract was awarded to an ERP implementation

consultant who was identified as the best provider. At this time, about one year later, the

implementation project was initiated. The contract negotiations lasted about four months.

Therefore, the ERP implementation project began in February 2004. Whereas the

difference between the planned schedule and actual schedule concerning system evaluation

and contract negotiation was about six months, the implementation duration was extended

from 11 to 16n months. The causes of the delay in the ERP implementation schedule were

summarized as follows. (1) Company X has no experience with large scale IT

implementation. Top management thus needs to carefully consider all evaluation results of

the consultant and the task force provided. This decision-making style wasted some

implementation time. (2) Integrating the ideas and opinions of involved staff is challenging.

The task force is a project-oriented team. All members came from different departments

and backgrounds. This inconsistency in the thinking of task force members also delayed the

implementation schedule. (3) A perfect implementation project is difficult to prepare. As

the implementation project proceeded, new information and technology emerged. Some of

the new ideas were put into the implementation project by some consultation meetings with

the staff of company X. This unexpected change delayed the schedule to some extent. Up to

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now the project is still in the fourth phase. The task of education training before go-live has

completed but there are minor bugs being ridded.

5. Discussion

5.1 Coding system

Available ERP systems generally include a coding system that is mainly designated

for the manufacturing industry, rather than for the construction industry, and certainly not

for the construction industry in Taiwan. Company X was aware that this problem was a key

issue in successfully constructing the ERP system. Company X thought that the

compatibility and scalability of the coding system in the candidate ERP system should be

an essential criterion in determining the final ERP system. Furthermore, a public coding

system in Taiwan’s construction industry was issued [35], and a public available cost

estimate system, known as PCCES (Public Construction Cost Estimate System) [36] was

developed and propagated, and has since become popular in Taiwan’s government agencies

when performing construction projects. It is necessary to make an ERP system compatible

with the public coding system and the PCCES. Therefore, the coding system sued by the

selected ERP system should also consider this compatibility problem.

The public coding system used in Taiwan is one of the many products completed and

developed by the Integration Center for Construction Specifications for Public Works of

the Public Construction Commission [35]. The aim of the center is to develop Master

Construction Specifications that was evolved from the MasterFormat by the Construction

Specifications Institute [37], which had 17 divisions. Detailed coding systems can be

obtained at the web site. The coding system is completely congruous to the specification

and is built in the cost estimate system (PCCES).

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The resolution of the coding system problem in company X is to incorporate a

construction consultant to deal with the problem. The consultant should not only develop a

conversion system to transfer existing coding systems to the employed ERP system, but

should also modify the coding system in the selected ERP system to make it compatible

with the public coding system and the PCCES. Transfer problems still exist at this point,

because company X has huge cost and resource data that are difficult to quickly and

completely transfer to the ERP system.

Clearly, a coding system is the core for storing and transferring data among modules

in an ERP and between the ERP and other existing systems inside and outside the firm. The

existing ERP system does not have a well-structured coding system for the construction

domain or for Taiwan’s construction firms. It is required for ERP venders to develop a

construction-based ERP system with construction-oriented coding system. Otherwise, it is

difficult for construction firms to purchase a high cost commercial ERP system.

5.2 Working process reengineering

The computerization task in the construction industry always faces the dilemma of

customizing the functionalities of a new system to fit the needs of existing working

processes in business management or reengineering the working processes to fit the new

system’s functionalities. No standard solution exists to this dilemma. As mentioned earlier,

company X is a conservative firm, and hopes to minimize the changes in business processes

and ERP customization. Consequently, the selected ERP system cannot fully fit the

requirements of company X, and it is also necessary to reengineer the business processes.

To resolve the problems encountered during working process reengineering, company X

dictated that the task force should analyze the discordant working processes, and then

decided to reengineer or maintain existing processes.

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Although the changes are as least as possible, a problem still exists in setting proper

rights to the right person at the right time for the new processes. This problem is another

issue arising from process reengineering. The construction consultant and top managers are

responsible for conflict resolution. However, until now, the reengineering processes

following ERP system implementation will still take a long time because ERP

implementation and business processes reengineering occurred concurrently. This

concluded that to run above two tasks concurrently waste a lot of time. For firms that wish

to run business processes reengineering and ERP implementation, the best solution to the

dilemma is to perform ERP implementation after completing a business processes

reengineering.

5.3 Priority of ERP functionality implementation

The implementation priority of all ERP functionalities is always difficult to decide.

Conventionally, the priority of all functionalities is determined based on company

requirements and the cost management or accounting functionality of ERP system is

generally implemented first. Owing to company X having a conservative business culture,

the human resources and accounting management systems of ERP were planned to be

implemented last. Comparatively, the EIP of the ERP system was implemented first

because the success or failure of EIP has a minimal effect on the firm. On the other hand,

the first implementation phase was used to check whether the next phase needs to proceed.

The evidence from the case study demonstrated that the ERP functionalities do not have a

fixed priority, and firms can determine the priorities based on their own evaluation.

5.4 Customization

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It is difficult to customize functionalities of an ERP system that are completely

developed and are not designated for a construction company. Although the selected ERP

system is a module-based system, a firm can select suitable modules to develop the system

is desires. Company X removed some default modules and requested that the

implementation consultant should develop certain new functionalities. This customization

cost many man-hours but the customization results fitted the requirements of company X

regarding business management.

There is a need to customize available world-popular ERP systems to fit the

requirements of the construction domain. The case study presented here is a typical

example. One of the critical issues in customization is the coding system discussed

previously. Besides that, adjusting the system performance to reach the satisfied state of the

localized construction property of Taiwan area, or even non-native-speaking English areas,

is another issue that available ERP systems should face. Regarding the language difference

issue, the transformation of the selected ERP system from an English-based interface to

Chinese-based interface has been completed. Additionally, company X asked for a clear

contract provision to ensure the performance of new functionalities. In sum, the

functionality customization of a well-developed ERP system not only increased the cost of

implementation but also complicated its performance. It is necessary to assure the

performance by a contract manner.

5.5 Participant roles

The implementation of an ERP system is the key to improving the efficiency of all

business processes. Reengineering is the main means of smoothing the existing processes.

It needs the support of all levels managers and staff. Namely, successful implementation of

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ERP requires not only the support of top management, but also the clear authorization of all

participants.

During the early stage of implementation, the project participants in company X were

not all full time staff dealing with implementation matters. Some participants were not

departmental directors or were not authorized by the departmental directors. The

coordination between the members of the ERP work force and departmental staff was not

smooth, leading to slow communications and decision-making regarding ERP

implementation. After several meetings organized by top management, all participants

adopted a more proactive attitude, which smoothed communication and accelerated

implementation. This study demonstrates that effective communication and clear authority

are the key factors ensuring successful implementation.

5.6 Consultant role

The studied case had a signed contract with an ERP implementation consultant with

whom numerous successful cases had been implemented in non-construction domains in

Taiwan. Although the ERP system was implemented by the construction-related company

in several cases, none of these cases were located in Taiwan. The signed consultant, who

was a localized implementation vendor, regarded this case as a pilot case for implementing

its ERP system in the Taiwan’s construction domain. Based on this opinion, the consultant

attempted to assume the majority of control in this implementation case. This situation

resulted in company X facing the problem of being unable to completely customize the

ERP system. The consultant adopted a policy of customizing the system on a minimum

scale or a general style. This caused the consultant to resist rapidly adjusting the ERP

system. Company X thought that the role of consultant should be clearly identified as

involving consulting rather than mere advising. To customize the ERP system on a

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minimum scale is a common schema, however, there are different concerns of the client

and vendor. The question of how to balance the differences between the client and vender

thus should be carefully defined in the contract.

5.7 Performance level of subcontractor

Most construction companies consider that the evaluation of ERP implementation is

unnecessary in assessing the impact of the performance level of subcontractors or

construction material/equipment vendors. However, ERP implementation should consider

all participants in the construction supply chain. It is necessary to establish an evaluation

system to check the performance of subcontractors or construction material/equipment

vendors. Otherwise, a gap exists between the expected performance of ERP

implementation and real operations.

Discussions with the project manager identified some influences on the performance

of ERP implementation. The influence factors included the level of computerization in

subcontractors or construction material/equipment vendors, the degree of loyalty to the

contractor, the differences in utilized IT platforms between contractors and subcontractors

or construction material/equipment vendors, and the transferring problem between various

payment systems in practice.

In Taiwan, the general level of computerization in subcontractors or construction

material/equipment vendors is not very high. Company X did not consider this issue in

advance of implementation. Although this decision has not influenced the instant

performance of ERP implementation, it may create a barrier to long-term performance. The

above factors were not validated by any research method, but this study identified another

issue that required further investigation.

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6. Conclusions and Suggestions

ERP has long been applied and promoted in the manufacturing industry. The

construction industry has been slow in implementing ERP. In Taiwan, the main difficulties

for general contractors in applying ERP are the complexities of their working processes

and habits. However, there is no reason to resist the trend of implementing ERP for firms

wishing to hold an edge in their comparative domain.

This research studied a case which described the selection of an ERP system by a

local construction company in Taiwan. Seven issues affecting implementation were

discussed, and then some lessons learned from the studied case were identified, including:

●coding system: selecting an ERP system with a construction-oriented coding system

is the best solution; otherwise, it is necessary to form a transformation protocol

between the existing system and the ERP system.

●working process reengineering: the solution to the dilemma of customizing the

functionalities versus reengineering the existing processes is to first perform

business processes reengineering, and then implement an ERP system.

●priority of ERP functionality implementation: firms can determine the priority

according to their own evaluation. A right priority can provide excellent benefits to

the firm and reduce resistance from involved stakeholders.

●customization: the functionality customization of a well-developed ERP system not

only increased the implementation cost, but also complicated implementation

performance.

●participant roles: in ERP implementation, top management support is essential for

success. Effective communication and clear authority are crucial in ensuring

successful implementation.

22

●consultant role: in ERP implementation, the signed implementation contract with

implementation consultant should clear define consultant obligation.

●performance level of the subcontractors: ERP implementation should consider all

participants in the construction supply chain to maximize the associated benefits.

Achieving this is difficult in the construction industry because the general level of

computerization is low compared to other industries.

The issues discussed above are not just the problems of firms implementing ERP but

also issues faced by ERP vendors. Although this case study has provided some methods of

dealing with these issues, further examinations are also needed. Additional case studies are

necessary and essential for the successful application of ERP systems in the construction

industry.

This case study only discussed some aspects of factors that influenced successful

ERP implementation in the construction industry. Other factors, such as staff training

before ERP implementation and lack of appropriate IT staff in construction firms, should

also be carefully considered. Besides, ERP system vendors should be aware that they must

work with construction industry professionals to develop more customized solutions for

construction firms. That would be the best solution for implementing ERP in the

construction industry.

Acknowledgements

The authors would like to thank the project participants of company X for contributing

their experience and knowledge, and the project manager from the ERP implementation

consultant for sharing his practice understanding of this case study.

References

23

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Weight Score ExplanationSystem completeness 10System compatibility 10System usability 10System integrality 10Organization needed to beadjusted 10

Process needed to be improved 10

Tendering ability for publicconstruction projects 5

Coding system that iscompatible for PCCES system 5

Information accuracy andeffectiveness 5

Information retrieve speed 5Knowledge can be used toimprove competitiveness 10

Experience accumulation andsharing 10

Domestic or foreign vender 0Project is phased or not 0Manpower is sufficient or not 0ERP implementation is aninvestment or expense 0

Item in thiscategory isfor referenceonly

Competitiveness inpublic constructionproject tendering

Decision mechanism

Knowledgemanagement

Cost

X Construction Co. Ltd.Evaluation items

Necessary change onexisting systems

Necessary change onexisting businessprocesses

Fig. 1. Self evaluation sheet for ERP implementation.

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Ven.A Ven.BA1. Employed system technologiesA2. Embedded Database systemA3. System development tool and languageA4. Compatibility with old systemsA5. System efficiencyA6. Completeness of system documentationin Chinese and EnglishB1. Expertise about ERP implementationB2. Ability of project managerB3. Implementation methodology and toolB4. Experience on similar cases

D1. Hardware requirementsD2. Compatibility with old hardwareD3. Hardware upgrade capabilityD4. Fitness of available modulesD5. ScalabilityD6. FlexibilityD7. UsabilityD8. Acceptance by middle-to-high levelmanagersD9. Working load for end usersE1.Familiarity with clientE2. Implementation schedule planningE3. Risk of over-budgetE4. Risk of out-of-scopeF1. Maintenance capabilityF2. Customization capabilityG1. ERP system authorization costG2. Maintenance costG3. Hardware costG4. Consultant feeG5. Education feeH1. Planning of succeeding servicesH2. Construction domain knowledgeH3. Education schedule arrangement

X Construction Co. Ltd.

Evaluation Items Scoring for Opinion

A. Adaptability ofERP system

B. Service qualityof consultants

C. System education

D. Systemacceptance by endusers

E. Guarantee forimplementationschedule

F. Maintenance andcustomization

G. Cost

I. Technical supports from ERP system vender and otherJ. Performance on service proposal and live demo

H. Customerservice quality

Fig. 2. Evaluation sheet of ERP system vendors.

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No. Item and description QTY Unit price Amount Remark

1ERP system (please list all modulesseparately)

2 Hardware and related cost3 Number of account 804 Database cost5 Customization cost6 Consultant fee

7Implementation cost (includingeducation fee)

8 Annual software maintenance cost9 Annual hardware maintenance cost

10 Others (please list item)

Fax: 123456E-mail :123@xxx

Quotation Company: . .Contact Name:Address: .Tel: .Fax: .E-mail : .

X Construction Co. Ltd.Contact Name: XXXAddress: YYYTel: 123456

SubtotalTax (5%)

Total

Person

From: ??? ERP vendor Quotation valid until:

Unit

For X Construction Co. Ltd.

ERP Quotation Summary Sheet

Fig. 3. Quotation sheet for ERP vendors.

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Fig. 4. Contracting configuration before and after contract negotiation.