Strategic Approaches to ERP Implementation

ABSTRACT Strategic reasoning behind ERP triggers a specific path to ERP implementation. In this article we present a simple typology of ERP implementation approaches based on literature review and an empirical research for both manufacturing and services. We distinguish between bottom-up and top-down approaches and between process-oriented and technology-oriented approaches and we discuss the differences between the four resulting types of implementation approaches. INTRODUCTION During the 1980's and 1990's, many organizations were growing through mergers and acquisitions resulting in ever higher levels of systems incompatibility (involving different legacy-type mainframe systems). At the multinational level such issues only multiplied several-fold (Ives & Jarvenpaa, 1993). The challenges of increasing competition and expanding markets, the search for business solutions in the face of the changes resulting from mergers, acquisitions, take-over and restructuring processes, and rising customer expectations increased the pressure on firms to manage total costs in the supply chain, to shorten throughput times, reduce inventories, expand product variety, provide more reliable delivery dates and better customer service, improve quality, and efficiently coordinate global demand, supply, and production (Shankarnarayanan, 2000; Umble, 2003). ERP systems were offered with the promise that they would meet many if not all of these challenges simultaneously. On the other hand, the demand for ERP software packages was also driven by frustration with information system departments' inability to cope with systems integration (Holland & Light, 1999), the year 2000 problem, and the consolidation of currencies in Europe (Chung & Snyder, 1999). Developments in large, globalized companies were subsequently followed by smaller, local firms equipping themselves with custom-designed and/or industry designed packages primarily to lower their costs and add value in their services to their clients (e.g., local ERP suppliers: Acto, Exact, Caseware, etc). ERP implementation enables the convergence of organizational knowledge throughout the firm (Baskerville, 2000). This convergence may draw together functional areas within the organization such as manufacturing, purchasing, inventory management, and transportation, and generate synergies that lead to more efficient product flows throughout the enterprise (Davenport, 1998). ERP software packages strive to support essentially all the processes in a firm's value chain. Most IT managers responsible for managing their organizations' ERP project viewed the ERP systems as their organizations' most strategic planning platform (Sweat, 1998). Yet despite the scope of offerings, most customers inevitably found that at least 20% of their needed functionality was missing from the package they had selected (Scott & Kaindall, 2000). The early literature on ERP implementation reflects the fact that ERP started mainly with larger companies and was then taken up by smaller ones. It tends to describe the needs and opportunities of small companies as a subset of those facing large companies. (Markus, 2001) To a large extent, the development of ERP packages and accompanying implementation routines were based on the same assumptions. In the course of time, however, it has become clear that there is a wide variety of motives for ERP adoption, even among large corporations, but also between large and small firms and between firms from different sectors. These differences in motive have an impact on the implementation approach and the subsequent implementation process. Some companies have largely technical reasons, mainly replacement of legacy systems and Y2K problems, for investing in enterprise systems. Other companies focus largely on business reasons for adopting enterprise systems. They expect to derive a competitive advantage from the adoption of such systems. …