ERP

CIS 325Dr. Les Singletary

Chapter 03A Comprehensive Framework for Assessing

and Managing the Benefits of Enterprise Systems: The Business Manager’s Perspective

Shari Shang and Peter B. SeddonCreated by: Andrew Bailey, Jake Lacaze, Bruce Loe

Defining Criteria for Enterprise System Evaluation

Seven questions for measuring organization performance:

• From whose perspective is effectiveness being judged?

• What is the domain of Activity?

• What is the level of analysis?

Defining Criteria for Enterprise System

Evaluation

• What is the purpose of evaluation?

• What time frame is employed?

• What types of data are to be used?

• Against which referent is effectiveness to be judged?

Perspective

Anthony’s Planning and Control Systems Framework: Pyramid of Management

Level Example Focus

Strategic Planners Senior Executives Financial performance of investment

Process Owners Senior Middle Managers

Deliver value to customers

Operational Managers

Factory Foreman System Abilities (information quality)

Process owners are uniquely qualified to evaluate enterprise systems due to their understanding of both operating issues and the strategic goals of the company.

Domain of Activity and Level of Analysis

• Domain of Activity: The Organization’s Enterprise System

• Level of Analysis: Organizational Functional

*Analysis at BOTH levels is needed to address the unique ways in which each level interacts with the system.

Purpose of Evaluation

• The purpose of this evaluation is to assist process owners in: Planning to maximize benefits from enterprise

system use Managing those benefits Improve the benefits already attained

Timeframe and Data

• Timeframe The timeframe of evaluation is the years after

the system goes live.

• Data Both objective (financial data, etc) and

perceptual data must be evaluated to adequately measure the benefits of an enterprise system.

Referents

Three Possible Referents

• Stated Goals of the Organization Compare the performance of the enterprise

system at some point after implementation to the business case for the investment.

• Benchmarking Compare the performance of the enterprise

system to some other organization.

• Ideal Compare the enterprise system to some ideal

level or performance.

Ideal Level of Performance

• To measure the relative success of an enterprise system one must define a standard of “optimal success”. Optimal Success: the best outcomes the

organization could possibly achieve with enterprise systems, given its business situation, measured against a portfolio of project, early operational, and longer term business results metrics.

Developing a Framework

To develop a frame with which to classify the benefits of an enterprise system the following steps were followed:

1. Analysis of the features of enterprise systems;2. A comprehensive review of the literature on

information technology (IT) evaluation;3. Analysis of data from 233 enterprise system-

vendor success stories published on the web;4. Interviewing managers in 34 enterprise system-

using organizations.In this way a framework with five dimensions was

created.

Dimensions of an enterprise system benefits

framework

• Dimension 1: Operational Benefits Cost Reduction Cycle Time Reduction Productivity Improvement Quality Improvement Customer Service Improvement

• Dimension 2: Managerial Benefits Better Resource Management Improved Decision making and Planning Performance Improvement

• Dimension 3: Strategic Benefits Support Business Growth Support Business Alliance Build Business Innovations Build Cost Leadership Generate Product Differentiation (including

customization) Build External Linkages (customers and

suppliers)

• Dimension 4: IT Infrastructure Benefits Build Business Flexibility for Current and Future

Changes IT Costs Reduction Increased IT Infrastructure Capability

• Dimension 5: Organizational Benefits Support Organizational Changes Facilitate Business Learning Empowerment Build Common Visions

Web Case Analysis

Reasons to Use Web Case Analysis to Refine and Extend Benefits Framework

• They present a complete picture of the enterprise system investment scenario including: Business Environment Background Objectives Competitive Strategy IS support Investment Decisions Implementation Realized Benefits

• They are traceable evidence with the organization’s name and project sponsor’s name and title, so follow-up verification is possible.

• They are reported from the business users’ point of view.

Reasons NOT to Use Web Case Analysis

• Vender Exaggeration / Omission Product Strength Business Benefits Product Shortcomings

• Data is Second Hand and May be Misinterpreted.

Why Web Case Analysis?

• The purpose of this is simply to build a broad list of possible business benefits from a large range of enterprise system users.

• This study selected the benefit items only if they were found in more than three cases from at least two different product vendors.

Selecting the Cases

233 cases were selected using the following process:• Visited vendor websites for customer case

studies.• Reviewed cases and selected qualified stories

• They have applied enterprise systems to manage major enterprise resources• Cases with a single enterprise system module used and

not connected with other core resource management processes were not selected

• They have sufficient information about the case, with organization background, implementation descriptions, and benefit descriptions.

• They were focused on the business benefits• They have quantitative measures or precise business benefit

descriptions

• Verified reliability of cases by contacting project managers in a convenient sample cases.

• Built analysis table of cases with information about country, industry, user size, modules installed, implementation stages and benefits achieved by the five categories

• Analyzed benefit differenced between industry, vendors, and firm sizes.

• Assembled case benefits according to the dimensions in the framework

• Consolidated benefit details from three benefits files into each benefit dimension. Modified the benefits framework as needed

• Prepared a list of benefits with Analyzed results Benefit descriptions Typical case examples

Confirming the Facts

Confirming the Facts in a Sample of Cases

34 of 233 firms were contacted to confirm benefits stated in Web Cases. Several firms were able to expand the list of benefits beyond the Web Cases.

Classify Benefits

• Analyze the benefits of the enterprise system in the cases and relegate them to the appropriate dimension of the enterprise system benefit framework.

Discussion

• Through examining the sample cases the following was discovered: Validity of the framework verified Enhancements to the framework More benefits likely after additional experience

with the system Contingency factors Different organizations gain different benefits

from the same applications Criteria for selection of enterprise systems Long expected system life for enterprise systems

Author Conclusion

The enterprise system benefit framework presented in this chapter provides a more objective method for assessing the benefits of using and enterprise system when compared to the more standard “Overall, are you satisfied with your ERP system?”.

In addition to longitudinal case studies practical uses of this framework include:

• A tool for enterprise system planning and management

• A tool for benchmarking enterprise systems across different organizations.

• A technique for measuring the dependant variable in studies that seek to asses the impact of factors that influence enterprise benefits.

• The basis for a mail survey for enterprise system user organizations.

Contributions

Group Critique

We found this chapter to be well researched and documented. It is our impression that the authors went to grate pains to identify the scope of their research and the scope of its influence. The research was well conducted. The constraints and liabilities of the research were well identified.

However, we feel that the editors of the selection could have done a more thorough job. There were numerous typographical errors and several sections that were somewhat redundant.