1 Summarize from: Sustainability of ERPS performance outcomes: The role of post-implementation review quality Nicolaou A. and Bhattacharya S. International.

1

Summarize from: Sustainability Summarize from: Sustainability of ERPS performance of ERPS performance outcomes: The role of post-outcomes: The role of post-implementation review qualityimplementation review qualityNicolaou A. and Bhattacharya S.Nicolaou A. and Bhattacharya S.International Journal of Accounting International Journal of Accounting Information Systems 9 (2008) 43Information Systems 9 (2008) 43––6060

Student : 986227 EanStudent : 986227 Ean 986238 Mark986238 Mark

2

Introduction (1/2)Introduction (1/2)• Past qualitative research has argued that the

sustainability in financial and other performance outcomes earned by ERPS adopting organizations could be significantly influenced by the level of quality in Post- Implementation Review.

• Nicolaou and Bhattacharya (2006) examined two timing levels (early and late) and two post-implementation changes (enhancements and abandonments) to contrast post-implementation change making firms to their non-ERP peers.

3

Introduction (2/2)Introduction (2/2)• This paper examine performance differentials

relating to the timing(3 years before implementation and after 10 years implement)of post implementation 14 activities that represent, – 1.The review of overall project scope and

planning.– 2.The review of the driving principles for

project development.– 3.The effectiveness of misfit resolution

strategies.– 4.The evaluation of attained benefits.– 5.The evaluation of learning.

4

Literature review (1/3) Literature review (1/3) (Post-implementation outcome (Post-implementation outcome

effectiveness)effectiveness)• The fact that Nicolaou and Bhattacharya

(2006) did not explicitly differentiate between performance differences in adopting firms in years beyond the first year of adoption, make it difficult to gauge whether the performance deterioration of ERPS adopting firms occurred as a result of changes made to the initial ERPS installation or as a result of new modular additions.

• In this paper employ the PIR (Post-implementation review) construct developed in Nicolaou (2004b) to capture a wide range of post-ERPS implementation activities.

5

Literature review (2/3)Literature review (2/3)(Post-implementation review)(Post-implementation review)

• The Nicolaou (2004b) model proposes 14 different PIR activities that fall into five major PIR dimensions.

• In this study adopt a PIR Quality perspective that focuses on activities occurring post-implementation as our fundamental unit of analysis.

6

Literature review (3/3)Literature review (3/3)(Post-implementation review) (Post-implementation review)

7

Research questionsResearch questions• This study to address the following two

research questions:• RQ1:

– Is there any difference in the financial performance of ERPS adopting firms that employ PIR Quality activities in comparison to other ERPS adopting firms that do not employ any PIR Quality activities?

• RQ2:– Is the financial performance effect of use ERPS

adoption moderated by the observed frequency of use and timing of PIR activities?

8

Research method (1/2)Research method (1/2)• This paper use the original Nicolaou

(2004a) data set to identify our sample of 247 ERP adopting and non-adopting firm pairs.

• A binary code was used where a “1” indicated the presence of an activity in a specific firm and “0” indicated the absence thereof.

9

Research method (2/2)Research method (2/2)• This paper identified 79 ERPS-adopting

companies that reported use of some PIR activities. The most frequently used activities included– process integration (n=33)– project planning and attainment of benefits

(n=26 each)– infrastructure and strategy (n=20 each)– global reach (n=15)– fit resolution (n=10)– other activities with lower frequencies.

10

Performance measuresPerformance measures

11

Cluster analysis on PIR activity Cluster analysis on PIR activity timing (1/3)timing (1/3)

• This research’s sample focuses on 3 years prior to implementation (t−3 to t−1) and 10 years after (t+1 to t+10) the ERPS adoption (implementation) year (t0). To examine effects due to the timing of the various PIR activities observed, a cluster analysis was performed on the event years with the objective of classifying the firms in similar clusters by event timing.

12

Cluster analysis on PIR activity Cluster analysis on PIR activity timing (2/3)timing (2/3)

• Clustering the data into 3 clusters resulted in the following distribution:

– 203 firms were classified into cluster #1

– 10 firms were in cluster #2

– 34 firms were clustered in #3

13

Cluster analysis on PIR activity Cluster analysis on PIR activity timing (3/3)timing (3/3)

• Cluster #1 included all ERPS adopters with no other changes (PIR activities), changes that coincided with the year of implementation, or a few changes at a very late time period.

• Cluster #2 included those firms employing later PIR activities only, specifically at event year t+4 (four years after baseline implementation year)

• Cluster #3 included those firms that employed PIR activities around the baseline implementation year (closer to t0).

14

Factor analysis on PIR activities Factor analysis on PIR activities (1/2)(1/2)

• This paper applied the binary data factor analysis technique (Knol and Berger, 1991) to reduce the wide set of 14 PIR activities into a manageable set that could be used in our analysis. For this purpose, we only used the seven of the 14 categories with the highest frequency in observations.

15

Factor analysis on PIR activities Factor analysis on PIR activities (2/2)(2/2)

16

Statistical modelsStatistical models

RQ1：

RQ2：

17

Results (RQ1)Results (RQ1)• The results indicate a significant

performance improvement on account of the effect of the second PIR factor on a firm's incremental ROI, ROS, the cost of goods sold over sales ratio, and the employee efficiency ratio.

• The results seems that efforts to effectively deploy the system and realize benefits necessitate additional investments which may have a negative impact on a firm's short-run profitability. The results where the first PIR significantly contributes to deterioration in differential financial performance relating to ROS and the employee efficiency ratio.

18

Results (RQ2)Results (RQ2)• This paper mainly focus on the interaction

rows of Table 5. The results indicate a highly significant interaction between the adoption of ERP event, the use of the second factor of PIR (process effectiveness and implementation planning factor), combined with the use of PIR activities over timing that is closer to ERPS baseline adoption events.

19

Table 5Table 5

20

Discussion (1/6)Discussion (1/6)• Nicolaou and Bhattacharya's (2006) analysis

was limited in that– (a) it considered changes made subsequent to

baseline ERPS adoptions alone– (b) did not explicitly differentiate between the

changes made by ERPS adopting firms in the 1+ years beyond implementation (t0).

• This paper analysis addresses the above limitations to span the time over which organizations make additional changes to the existing baseline ERPS adoption as well as make modular additions to their baseline implementation.

21

Discussion (2/6)Discussion (2/6)• Nicolaou (2004b) suggests that the activities of

project planning, strategic definition and process integration would be expected to typically occur closer to the time of ERPS implementation. Because ERPS adopting firms would be expected to streamline and integrate their business processes, educate users to ensure systems acceptance, and plan for future modular expansion of the ERPS scope very shortly following the implementation point.

• So this paper analysis writer also focus on the potential interaction between the earlier time cluster (Cluster 3) and the set of earlier activities as defined by the second factor — PIR 2.

22

Discussion (3/6)Discussion (3/6)• The authors find that there are

certain changes undertaken by ERPS adopting firms that coupled with their timing may have a significant positive impact on the performance differentials attained by these firms over their post-implementation life-cycles.

23

Discussion (4/6)Discussion (4/6)• This paper analysis suggests that PIR

2 activities are best undertaken shortly after the “going live” ERPS stage. These activities, undertaken early in the post-implementation life-cycle, appear to yield significant performance benefits to these firms.

24

Discussion (5/6)Discussion (5/6)• On the other hand, PIR 1 activities

are typically fraught with relative threats. They indicate a long term consideration of the ERP system's fit with the enterprise's other business processes, cultural norms and myriad other hard and soft variables that impact upon ephemeral firm success.

25

Discussion (6/6)Discussion (6/6)• ERPS adopting firms must be conscious of and

circumspect enough to realize that ERPS are different from other IT systems.

• Firms must be cognizant of both the nature and timing of such post-implementation changes.

• Certain activities undertaken early in the ERPS' life-cycle yield benefits for ERP adopting firms.

• The same activities undertaken later may not yield benefits and may even prove detrimental.

26

Contributions of The Paper in MIS FieldContributions of The Paper in MIS Field

• MIS employees or project team can be aware of the importance of difference PIR activities and timing; this can allow them to do the right thing at right time and bring benefit to enterprise.

• In the future, the companies that have adopted the ERP system can decide whether to use PIR activities or not; this can reduce the risk of failure.

27

Contributions Found in the Contributions Found in the paper for the futurepaper for the future

• The proposed timing cluster analysis method can be used in accordance with the talking time of cell phone to conduct a clustering analysis, and then implement different fee rate plan to market to targeted cluster.

• Can use factor pir1 and pir2 to determine whether post-implementation of other IT systems for enterprise has any difference effect in the financial performance.