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The relationship between implementation

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Article in International Journal of Technology Management January 2007

DOI: 10.1504/IJTM.2007.013406

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

The Relationship Between Implementation Variables and Performance

Improvement of ERP Systems

Wen-Hsien Tsai*, Julian Ming-Sung Cheng*, Jun-Der Leu*

Yi-Wen Fan**, Ping-Yu Hsu*, Li-Wen Chou*, Ching-Chien Yang*
*Dept. of Business Administration, **Dept. of Information Management,
National Central University National Central University
Jung-Li, Taiwan Jung-Li, Taiwan
Email: whtsai@mgt.ncu.edu.tw E-mail: iwfan@mgt.ncu.edu.tw

Abstract

The purpose of this paper is to explore the relationship between some implementation variables and
performance improvement of ERP systems. DeLone and McLean (1992) surveyed 180 articles attempting to
measure information systems (IS) success and proposed an analysis framework, composed of six
dimensions, for assessing the ERP performance in the post-implementation stage. In this paper, DeLone-&-
McLeans framework will be used to develop the ERP performance measures fit for ERP adopters of
Taiwan. The implementation variables explored in this paper are ERP implementation statuses (all the
planned modules having been implemented or not), ERP system sources (packaged ERP systems or non-
packaged ERP systems), and ERP implementation strategies (integral or step-by-step planning; Big Bang
or phased approach). Structured questionnaire were sent to those companies listed in the TOP500 The
Largest Corporations in Taiwan 2001. The research findings indicate that the companies using non-
packaged ERP systems, integral planning and having implemented all the planned ERP modules will have
the better performance improvement.

Keywords: ERP System Sources, ERP Implementation Strategies, Performance Improvement

1. Introduction

In recent years, companies throughout the world gradually adopt Enterprise Resource Planning (ERP)
systems to enhance competitiveness, to enhance the ability of responding more quickly to change, to enable
easier access to information and faster retrieval of information or reports, to improve information for
strategic planning and operational control, and to achieve other benefits (Mirani and Lederer, 1998). The
main purpose of ERP projects is the automation and integration of many basic processes in order to
integrate information across the enterprise and eliminating complex, expensive interfaces between
computer systems (Teltumbde, 2000). Since all business functions are involved in ERP systems, they will
be highly complex information systems. And, it is expensive and time consuming to implement an ERP
system (Sarkis and Gunasekaran, 2003). Due to the constraints of budget and time, some companies may
employ a phased implementation approach, that is, modules are implemented one at a time or in a group of
modules, often a single location at a time. Phased implementations require substantial attention and
maintenance given to legacy systems in order to facilitate integration with the new ERP system. Moreover,
there may not be enough modules implemented to achieve functionality. However, there also are some
advantages and disadvantages for a Big Bang implementation approach, where an entire suite of ERP
modules is implemented at all locations at the same time (Thanasankit, 2001; Mabert et al., 2003).
Generally, so-called ERP systems are the packaged ERP software purchased from vendors.
Nevertheless, in our knowledge, some companies in Taiwan employed the non-packaged ERP systems that
came from evolution of legacy systems, self-redevelopment, or outsourcing. ERP vendors designed their
packaged ERP systems to be the universal package software for various industries and organizations. Also,
Packaged ERP systems often offer numerous options representing best practices (Teltumbde, 2000). Even
so, it is impossible for any organization to install a packaged ERP system without any tailoring or add-on.
Thus, it is not advantageous to adopt an ERP system if it requires considerable modifications.
In view of the issues mentioned above, the purpose of this research is to explore the relationship
between some implementation variables and performance improvement of ERP systems. The
implementation variables explored in this paper are ERP implementation statuses (all the planned modules

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

having been implemented or not), ERP system sources (packaged ERP systems or non-packaged ERP
systems), and ERP implementation strategies (integral or step-by-step planning; Big Bang or phased
approach). Besides, the Information System (IS) success model of DeLone and McLean (1992) is used to
develop the ERP performance measures for measuring the performance improvement levels.

2. ERP Performance Measures

In this paper, we utilize DeLone and McLean (1992) IS success model to develop ERP performance
measures. DeLone and McLean (1992) divided IS success measure into six dimensions or categories as
follows:
(1). System Quality: measures of the information processing system itself.
(2). Information Quality: measures of the information system output.
(3). System Use: measures of recipient use of information system.
(4). User Satisfaction: measures of recipient response to the use of information system.
(5). Individual Impact: measures of the effect of information on the behavior of the recipient.
(6). Organizational Impact: measures of the effect of information on organizational performance.

This study selected ERP performance measures from the related literature (DeLone and McLean,
1992; DeLone and McLean, 2003; Saarinen, 1996; Skot et. al., 2001; Mirani and Lederer, 1998; Lee et al.,
2002; Liberatore and Miller, 1998; Mabert et al., 2000). As for Organizational Impact, the Balanced
Scorecard (BSC) approach is used to divide ERP performance measures of Organization Impact dimension
into four categories (Kaplan and Norton, 1992; Roseman and Wiese, 1999; Lipe and Salterio, 2000).
Among those authors researching on the DeLone and McLeans IS success model, Li (1997) and Skok et
al., (2001) explored the importance of IS success measures using 7-point and 9-point Likert-type scales of
survey questionnaires respectively. In this research, we will use 7-point Likert-type scales.

3. Methodology

3.1 Research Hypotheses

As mentioned in Section 1, the purpose of this research is to exploring the relationship between some
implementation variables and performance improvement of ERP systems. The dependent variables are the
performance improvement levels of System Quality, Information Quality, System Use, User Satisfaction,
Individual Impact, Organizational Impact, and Composite Performance after having implemented ERP
systems. The implementation variables (dependent variables) explored in this paper are: (1) ERP
implementation statuses (all the planned modules having been implemented or not), (2) ERP system
sources (packaged ERP systems or non-packaged ERP systems), and (3) ERP implementation strategies
(integral or step-by-step planning; Big Bang or phased approach). The research hypotheses of this research
are as follows:
H1: There is no difference in performance improvement levels between the companies that have
implemented all the planned modules and that have implemented the partial modules.
H2: There is no difference in performance improvement levels between the companies that have
implemented ERP systems with different ERP system sources.
H3: There is no difference in performance improvement levels between the companies that have
implemented ERP systems with different ERP implementation strategies.

3.2 Data Collection

There are two stages in this research described as follows:

Stage1: Listing ERP Performance Measures and Evaluating their Importance by a Small Sample Survey
The list of ERP performance measures is obtained after a literature review. These ERP performance
measures are categorized according to the six dimensions of DeLone and McLeans model. Then the
importance of these ERP performance measures (83 measures in total) are evaluated by companies that
have implemented ERP systems by using 7-point Likert-type scales. In this stage, 260 questionnaires were
sent to the companies that had implemented ERP systems. The number of usable responses is 45, and the

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

usable response rate is 17.31%.

Stage 2: Redesigning the Survey Questionnaire Concerning ERP Performance Measures and
Implementation Variables. Collecting the Data by a Large Sample and Analyzing the Data Collected
According to the average importance score rankings obtained from Stage 1, top five important
performance measures were chosen for each success dimension of DeLone and McLeans model except the
Organizational Impact dimension where 12 measures were chosen. The 37 chosen measures are as shown
in Table 3. In this stage, 3597 questionnaires were sent to the companies of manufacturing and services
industries, listed in the TOP 5000 The Largest Corporations in Taiwan on 2001. Of the 3597 questionnaires
mailed, 657 (18.27% of 3597) were usable responses. Among 657 usable responses, 93 (14.16% of 657)
were under implementation and there were no module going-live, 137 (20.85% of 657) had implemented
partial modules, and 146 (22.22% of 657) had implemented all the planned modules. In this paper, 283
companies, that had implemented all the planned modules or the partial planned modules, will be analyzed.
The characteristics of the respondents are shown in Table 1.

3.3 Measurement of Performance Improvement Levels

In the questionnaire of Stage 2, we asked respondents to evaluate the performance improvement level
and importance level for each of the 37 chosen ERP performance measures by using 7-point Likert-type
scales ranging from 1 (Substantial Deterioration) to 7 (Substantial Improvement) and from 1 (Extremely
unimportant) to 7 (Extremely important), respectively. The data of importance levels are used to calculate
the relative weights of measures. We used these data and the following equations to determine the
performance improvement levels of System Quality, Information Quality, System Use, User Satisfaction,
Individual Impact, Organizational Impact, and Composite Performance after implementing ERP systems:
th th
1.The performance improvement level of the j dimension for the i respondents company:

lj
W
Pij = Pijk , i = 1 , 2 , 3 ,..., N , j = 1, 2 , 3 ,..., 6
jk
lj

W
k =1
jk
k =1

where W jk = the average importance level score of the k th measure of the j th dimension as perceived by
N respondents
N
( W ijk )
= i =1 ,
N
Wijk = the importance level score (1 to 7) of the k th measure of the j th dimension as perceived by
the i th respondent,

Pijk = the performance improvement level score (1 to 7) of the k th measure of the j th dimension
th
for the i respondents company,
l j = the number of chosen measures for the j th dimension.

th
2.The composite performance improvement level for the i respondents company:

lj

6 W jk

Pi = ( Pij k =1
), i =1, 2, 3, , N
6 lj

W
j =1
jk
j =1 k =1

where Pij , W jk , and l j are defined as above.

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

Table 1. Characteristics of the Respondents

Enterprise Employment Freq. Percentage
Fewer than 100 employees 42 14.84%
10 to 300 127 44.88%
More than 300 114 40.28%
Annual Revenue (NT$ bil.) Fre. Percentage
$0.2 or <$0.5 34 12.01%
$0.5 to <$1.0 71 25.09%
$1.0 to <$5.0 119 42.05%
$5.0 to <$10.0 26 9.19%
$10.0 to <$30.0 16 5.65%
$30.0 & up 17 6.01%
Capital Amount (NT$ mil.) Freq. Percentage
$80 or less 20 7.07%
$80 to <$200 38 13.43%
$200 to <$500 36 12.72%
$500 to <$1000 74 26.15%
$1000 to <$2000 57 20.14%
$2000 to <$5000 27 9.54%
$5000 to <$10000 14 4.15%
$10000 & up 17 6.01%
ERP Experience Freq. Percentage
Less than 2 years 22 7.77%
2 to 4 years 33 11.66%
4 to 6 years 20 7.07%
6 to 8 years 4 1.41%
Above 8 years 17 6.01%
Type of Company Freq. Percentage
Foreign 22 7.77%
Domestic-Foreign Joint Venture 20 7.07%
Domestic 241 85.16%
Industry Freq. Percentage
Manufacturing 201 71.02%
Services 82 28.98%
Implementation Statuses Freq. Percentage
Implemented all the planned modules 146 51.59%
Implemented the partial planned modules 137 48.41%
ERP System Sources Fre. Percentage
Evolution from legacy systems 41 14.49%
Self-redevelopment 25 8.83%
Outsourcing 40 14.13%
ERP Packaged systems 119 42.05%
ERP package systems with other systems 54 19.08%
Missing 4 1.41%
Implementation Strategies (N=173) Freq. Percentage
Integral planning & Big Bang approach 69 39.88%
Integral planning & phased approach 75 43.35%
Step-by-step planning & phased approach 28 16.18%
Missing 1 0.58%

Table 2. Average Performance Improvement and Importance Levels of Six Dimensions

Average
Performance Measure Performance Average
Dimensions Improvement Rank Importance Rank
Level Level
System Quality 5.883 1 6.200 1
Information Quality 5.702 2 6.137 2
System Use 5.481 3 5.550 6
User Satisfaction 5.248 6 5.649 5
Individual Impact 5.334 4 5.728 4
Organizational Impact 5.305 5 5.770 3

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4. Research Results
4.1 Performance Improvement and Importance Levels of ERP Performance Measures
The performance improvement and importance levels of ERP performance evaluation dimensions and
measures for all respondents are shown in Table 2 and Table 3. From Table 2, we know that System Quality
and Information Quality are the top two important dimensions of ERP performance evaluation as perceived
by the respondents. These two dimensions are the fundamental factors of achieving ERP/IS success. Also,
System Quality and Information Quality are the top two performance improvement dimensions after having
implemented ERP systems. From Table 3, the top five important measures in evaluating ERP performance
are: (1) data accuracy, (2) believability of output, (3) system accuracy, usefulness of output, and (5)
inventory level; the top five performance improvement levels after having implemented ERP systems are:
(1) data accuracy, (2) database contents, (3) data accuracy, (4) timeliness of output, and (5) usefulness of
output.

4.2 Implementation Statuses and Performance Improvement

Of the 283 companies that have implemented ERP systems, 146 (51.59% of 283) have implemented
all the planned modules and 137 (48.41% of 283) have implemented the partial planned modules. From
Table 4 and Fig.1, we can see obviously that the average performance improvement levels on each
performance evaluation dimension and composite performance are significantly different between these
two groups. That is, the companies having implemented all the planned modules will have higher
performance improvement levels than the companies having implemented partial planned modules. It may
because the companies will achieve the synthetic effect after having implemented all the planned modules.

4.3 ERP System Sources and Performance Improvement

Among the 283 companies that have implemented ERP systems, their ERP system sources are: (1)
evolution from legacy systems (41, 14.49%), (2) self-redevelopment (25, 8.83), (3) outsourcing (40,
14.13%), (4) ERP package system (119, 42.05%), and (5) ERP package system with other systems. The
average performance improvement levels for these five system sources are shown in Table 5. From Table 5,
we know that these five sources can be divided into two groups. The first group (106, 37.46%) including
evolution from legacy system, self-redevelopment, and outsourcing, has higher performance improvement
level than the second group (173, 61.13%), including ERP package systems and ERP package systems with
other systems. The first group is non-packaged ERP systems and the second group is packaged ERP
systems. Table 6 and Fig. 2 show the research results concerning these two groups. From Table 5, we know
that the average performance improvement levels on each performance evaluation dimension and
composite performance are significantly different between these two groups. And, the companies with non-
packaged ERP systems will have higher performance improvement levels than the companies with
packaged ERP systems. This research result is against our normal expectation. This may because that the
companies implemented packaged ERP systems in Taiwan are on the early stage of post-implementation
and have not achieve the ERP benefits fully.

4.4 Implementation Strategies and Performance Improvement

As explained in Section 4.3, there are 173 companies adopting the packaged ERP systems among the
283 companies that have implemented ERP systems. Of these 173 companies, 69 (39.88% of 173) adopted
the Integral planning & Big Bang approach, 75 (43.35% of 173) the Integral planning & phased approach,
and 28 (16.18%) the Step-by-step planning & phased approach. Table 7 and Fig.3 show the research results
about implementation strategies. We can find that, except the Individual Impact dimension, the decreasing
rank order in the performance improvement levels of each dimension for these three approaches is: (1)
Integral planning & phased approach, (2) Integral planning & Big Bang approach, and (3) Integral
planning & Big Bang approach. We also find that there is no significant difference in performance
improvement levels of various performance evaluation dimensions and composite performance except the
Information Quality and System Use dimensions between the companies with different ERP implementation
strategies. From Table 8, we can see that the significant differences exist between Integral planning &
phased approach and Step-by-step planning & phased approach. All these research results indicate that
there is almost no significant difference in ERP performance improvement between the various approaches.
However, if a company adopts the phased implementation, it should do the integral planning job for all the
ERP implementation phases.

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

Table 3 Performance Improvement and Importance Levels of ERP Performance Measures

Performance Rank Importan Rank
ERP Performance Measures Improveme Within Overall Within Overall
ce
nt
System Quality
(1) Data accuracy 5.8973 3 3 6.5171 1 1
(2) Database contents 5.9280 2 2 5.9923 5 9
(3) Data currency 5.9658 1 1 6.0115 4 8
(4) System accuracy 5.8295 4 6 6.3674 2 3
(5) Response time 5.7947 5 8 6.1069 3 7
Information Quality
(1) Believability of output 5.7577 3 9 6.4170 1 2
(2) Timeliness of output 5.8808 1 4 6.1686 3 6
(3) Usefulness of output 5.8506 2 5 6.2239 2 4
(4) Understandability of output 5.6092 4 13 5.9349 5 12
(5) Relevance of output 5.4115 5 19 5.9419 4 11
System Use
(1) Rate of using ERP to assist in 5.3194 4 26 5.6565 3 27
making decision
(2) Charge for ERP system use 4.9160 5 36 4.8577 5 37
(3) Frequency of report requests 5.7433 2 11 5.8669 1 15
(4) Voluntariness of use 5.7567 1 10 5.7452 2 22
(5) Amount of connect time 5.6718 3 12 5.6160 4 32
User Satisfaction
(1) Information satisfaction 5.4198 1 18 5.7899 1 20
(2) Software satisfaction 5.1603 4 31 5.6409 3 29
(3) Interface satisfaction 5.1374 5 33 5.5388 5 34
(4) Overall satisfaction 5.2863 2 27 5.7066 2 24
(5) ERP project satisfaction 5.2366 3 30 5.5681 4 33
Individual Impact
(1) Job performance 5.4580 1 15 5.8340 1 16
(2) Individual productivity 5.3626 2 20 5.7992 2 19
(3) Decision quality 5.3321 3 24 5.7104 3 23
(4) Information awareness 5.2443 5 29 5.6332 5 30
(5) Accurate interpretation 5.2710 4 28 5.6628 4 26
Organizational Impact
a. Financial 5.4237 4 17 6.2179 1 5
(1) Inventory levels
(2) Purchasing costs 5.3626 5 21 5.9767 2 10
(3) Inventory turnover 5.3244 8 25 5.9302 3 13
b. Customer
(1) On-time delivery 5.1031 10 34 5.9264 4 14
(2) Customer complaint reaction time 4.9733 11 35 5.8038 6 18
(3) Frequency of on-time mail 5.3626 6 22 5.7846 7 21
c. Internal Business Process
(1) Data transmission time between 5.8130 1 7 5.8269 5 17
departments
(2) Frequency of interaction across the
enterprise 5.5267 2 14 5.6641 8 25
(3) Ability of forecasting stock
requirement 5.4389 3 16 5.6332 10 30
d. Learning and Growth
(1) Degree of understanding work flow 5.3626 7 23 5.6538 9 28
(2) Employees achievement 5.1412 9 32 5.4346 11 35
(3) Product development to market 4.8244 12 37 5.3858 12 36
time

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Table 4 Implementation Statuses and Performance Improvement

System Information System User Individual Organizational Composite
Implementation Statuses Quality Quality Use Satisfaction Impact Impact Performance
Freq.
Implemented all the
planned modules (1) 6.005 5.850 5.580 5.387 5.421 5.412 5.6323 146
Implemented the partial
planned modules (2) 5.735 5.528 5.394 5.079 5.224 5.173 5.3555 137

Difference (1)(2) 0.270 0.322 0.186 0.308 0.197 0.239 0.2768 283
Significance (ANOVA) .011** .002*** .055* .011** .062* .011** .002***
***p-value < 0.01; **p-value < 0.05; *p-value < 0.1

System Quality
6.5
6
Organization Impact 5.5 Information Quality

5 Implemented all the planned

modules
4.5 Implemented the partial
planned modules

Individual Impact System Use

User Satisfaction

Fig.1 Implementation Statuses and Performance Improvement

Table 5 ERP System Sources and Performance Improvement

System Information System User Individual Organizational Composite
ERP System Sources Quality Quality Use Satisfaction Impact Impact Performance
Freq.
Evolution from legacy
systems 6.043 5.931 5.683 5.467 5.634 5.582 5.7138 41

Self-development 6.287 6.049 5.865 5.811 5.688 5.709 5.9089 25

Outsourcing 5.941 5,875 5.630 5.469 5.654 5.497 5.6845 40
ERP package systems 5.803 5.570 5.405 5.090 5.087 5.142 5.3585 119
ERP package systems
with other systems 5.685 5,523 5.262 4.994 5.229 5.084 5.3653 54

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

Table 6 Non-packaged and Packaged ERP Systems and Performance Improvement

Non-packaged and System Information System User Individual Organizational Composite
Freq.
Packaged ERP Systems Quality Quality Use Satisfaction Impact Impact Performance
Non-packaged ERP
systems (1) 6.061 5.937 5.706 5.549 5.655 5.579 5.7489 106
Packaged ERP
systems (2) 5.766 5.555 5.360 5.060 5.131 5.124 5.3518 173

Difference (1)(2) 0.295 0.382 0.346 0.489 0.524 0.455 0.3971 279
Significance (ANOVA) .037** .011** .006*** .001*** .000*** .000*** .000***
***p-value < 0.01; **p-value < 0.05; *p-value < 0.1

System Quality
6.5
6
5.5
Organizational Impact Information Quality
5
4.5
Non-packaged ERP systems
4 Packaged ERP systems

Individual Impact System Use

User Satisfaction
Fig. 2 Non-packaged and Packaged ERP Systems and Performance Improvement

Table 7 Implementation Strategies and Performance Improvement

Implementation System Information System User Individual Organizational Composite
Freq.
Strategies Quality Quality Use Satisfaction Impact Impact Performance
Integral planning & Big
Bang approach 5.722 5.562 5.298 5.045 5.031 5.087 5.3443 69
Integral planning &
phased approach 5.867 5.654 5.514 5.176 5.244 5.235 5.4507 75
Step-by-step planning &
phased approach 5.417 5.211 5.095 4.753 5.088 4.917 5.0871 28

Significance (ANOVA) .106 .093* .044** .209 .322 .151 .104

**p-value < 0.05; *p-value < 0.1

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

Table 8 Scheffe Test for Implementation Strategies and Performance Improvement

in Information Quality and System Use
Information Quality System Use
Implementation Strategies IP&BB IP&P IP&BB IP&P
Integral planning & Big
Bang approach IP&BB - -
Integral planning & phased
approach IP&P .826 - .256 -
Step-by-step planning &
phased approach SP&P .230 .095* .528 .063*
*p-value < 0.1

System Quality
6

5.5
Organizational Impact Information Quality
5

4.5

Individual Impact System Use

Integral planning & Big Bang

Integral planning & phased

User Satisfaction
Step-by-step planning &
phased

Fig.3 Implementation Strategies and Performance Improvement

7. Conclusions
The purpose of this paper is to explore the relationship between some implementation variables and
performance improvement of ERP systems. The implementation variables explored in this paper are ERP
implementation statuses (all the planned modules having been implemented or not), ERP system sources
(packaged ERP systems or non-packaged ERP systems), and ERP implementation strategies (integral or
step-by-step planning; Big Bang or phased approach). The performance improvements are measured
according to the six dimensions of Delone and McLeans 1992 success model and by the 7-point Likert-
type scales of ERP performance improvement and ERP performance measures importance. We also use the
composite performance that integrates all the six dimensions measures into one single composite
performance index. In this study, we utilize a two-stage approach: (1) listing ERP performance measure and
then evaluating their importance by a small sample survey, and (2) redesigning the survey questionnaire
concerning ERP performance measures and implementation variables; collecting the data by a large sample
and analyzing the data collected. The research results indicate that:
(1) System Quality and Information Quality are the top two important dimensions of ERP performance
evaluation as perceived by the respondents. Also, System Quality and Information Quality are the top

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Proceedings of the First Workshop on Knowledge Economy and Electronic Commerce

two performance improvement dimensions after having implemented ERP systems. These two
dimensions are the fundamental factors of achieving ERP/IS success.
(2) The companies having implemented all the planned modules will have higher performance
improvement levels than the companies having implemented partial planned modules. It may because
the companies will achieve the synthetic effect after having implemented all the planned modules.
(3) The companies with non-packaged ERP systems will have higher performance improvement levels
than the companies with packaged ERP systems.
(4) There is no significant difference in ERP performance improvement between the various
implementation strategies. However, if a company adopts the phased implementation, it should do the
integral planning job for all the ERP implementation phases.

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Acknowledgement

This paper is supported by the MOE Excellence Research Project: Electronic Commerce Environment,
Technology Development, and Application (Project Number: 91-H-FA08-1-4).

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