In this study, we build a conceptual model, which draws upon information systems implementation theory, to investigate the relationship between critical success factors related to the implementation of ERP software and the goal of competitive advantage. We test this model with data from a survey of 217 Australian organisations, using structural equation modelling (SEM). We find that organisations can best achieve competitive advantage by carefully managing: a) training and education, and b) system integration activities. Perhaps unexpectedly, neither well-conducted business process re-engineering nor good project management necessarily lead to competitive advantage. We have extended prior knowledge by providing empirical evidence that some CSFs do influence competitive advantage but that others may not. The results confirm that overall project delivery outcomes can be improved by understanding the influence of factors on both project management performance and post-implementation performance. Some theoretical and managerial consequences of the study's findings and limitations are discussed.
Organisational spending on enterprise resource planning (ERP) systems has surged in recent years and is expected to continue to grow in the wake of technological advancement in cloud computing and ‘pay-as-you-go’ solutions (Gartner, 2012). This growth is due mainly to the expected benefits and value promised by ERP systems in information capabilities and resources; intellectual capital through knowledge creation; and improvements in operational, managerial and strategic dimensions (Molla and Bhalla, 2006 and Woo, 2007). Academic and trade literature demonstrates that implementation of ERP systems remains a complex exercise, often resulting in difficulties and failures (Kanaracus, 2012, Ram and Corkindale, 2014 and Ram et al., 2013a). For example, Avantor Performance Materials sued IBM over SAP project failure, and the US Air Force abandoned their ERP implementation after spending $1 billion ( Kanaracus, 2012). On the other hand, ERP implementation has often led to performance improvements for organisations, as well as other tangible and intangible benefits ( Beheshti and Beheshti, 2010 and Seddon, 2005).
The monolithic approach manifested through integrated, end-to-end business processes by ERP systems offers opportunities for improved decision-making, information-driven innovations and consistent data management. It offers a platform from which to reach out through seamless connectivity — to supply chain partners and business stakeholders at inter- and intra-organisational levels (Ganly and Montgomery, 2012). Such capabilities can help organisations achieve competencies ‘that go far beyond operational efficiency’, hopefully evolving into competitive differentiation (Lengnick-Hall et al., 2004, p.308).
A resource based view (RBV) suggests that developing a unique collection of tangible and intangible assets and resources – and managing the resultant evolving capabilities – can lead to competitive advantage ( Beard and Sumner, 2004). That means organisations need to develop capabilities and competencies that are difficult for competitors to imitate. On the other hand, a motivation for introducing ERP is to achieve process standardisation and to bring operational commonality with other organisations. Such a commonality of work routines and practices poses challenges for organisations if they then wish to develop assets and capabilities that provide differential advantage and sustain that for long periods.
The literature is not unanimous as to whether or not ERP can lead to competitive advantage. Some authors (Laframboise and Reyes, 2005 and Molla and Bhalla, 2006) argue that ERP can lead to competitive advantage — by helping organisations develop efficient supply chain capabilities, attain agility in product/services delivery, achieve flexibility and adaptability in responding to customer needs, and improve information management to support innovations. Other authors (e.g. Seddon, 2005) recognise that ERP can help in achieving profitability, but not necessarily competitive advantage.
The large capital investment required to introduce ERP systems means that the investment decision is based on a carefully crafted business case. The decision to invest and implement ERP has to be aligned to the strategic direction of an organisation. Given the far-reaching affects on the organisation's use of the system and its subsequent performance outcome, it is clear that the way implementation is carried out can facilitate or hinder the ultimate performance outcome — including the achievement of any competitive advantage. A successful implementation outcome could provide a necessary platform for development of differential capabilities (Laframboise and Reyes, 2005). However our current understanding of how the implementation process – and the factors considered critical to its success i.e. CSFs – actually influences the achievement of competitive advantage, remains limited.
Leidecker and Bruno (1984, p.24) define CSFs as ‘those characteristics, conditions, or variables that when properly sustained, maintained, or managed can have a significant impact on the success of a firm competing in a particular industry.’ Such a conceptualisation implies that CSFs play an important, which could be direct or indirect, role in achievement of the desired performance outcome. Various researchers (see for example, Byrd and Turner, 2001, Kearns and Lederer, 2003, Liu, 2011 and Tian et al., 2010) have investigated a direct association between CSFs and the achievement of performance improvements and competitive advantage. Yet little knowledge exists on the role of CSFs for ERP in generation of competitive advantage.
We believe that a better understanding of the contributions of the ERP implementation CSFs will provide an opportunity to managers to devote their time, resources and leadership to areas that are established as to be contributing to performance outcome, which is particularly important as managers have limited resources at their disposal. It could also help managers in making better decisions in choosing CSFs from among a plethora of identified CSFs, as well as target and manage those CSFs as a priority that are empirically shown to be influencing achievement of competitive advantage. Understanding of the role of CSFs for ERP could be vital for managers to establish a platform and strategise for achieving competitive advantage. A number of authors (for example, Shi, 2011, Tharenou et al., 2007 and Thomas and Mullaly, 2006) concur with this line of thinking and emphasise gaining a better understanding of the role of CSFs in achievement of competitive advantage. As stated earlier, however, little empirical evidence of the relationships between CSFs for ERP and achievement of competitive advantage appears in the literature. Our study, therefore, seeks to address this gap in knowledge.
Hence our primary research question is as follows:
How important are certain implementation CSFs in influencing the achievement of competitive advantage from ERP projects?
We present a literature review in Section 2, and a theoretical underpinning of the study in Section 3. We then present our research hypotheses, methodology and data collection in 4 and 5 respectively. The results, a discussion of findings, theoretical and managerial implications, limitations of the study and possible directions for further research are provided in 6, 7 and 8. Our conclusions are summarised in Section 9.
Identifying which factors in EP implementation are
most critical to success has remained one of the major
research activities in ERP lite
rature. However, the value of
much of this research has been limited to just identification
of possible CSFs, rather than to understand their role
and effective influence (
Ram and Corkindale, 2014
). Ad-
dressing this gap in knowledge, this study has empirically
established that some implementation CSFs have multiple
influences in that they are not only important for implemen-
tation success but are also dri
vers to genera
te competitive
advantage too.
The results show that the two factors of 1) providing
effective training and education and 2) efficiently integrating
ERP system with internal and external systems are vital to
achieve differential benefits of implementing ERP. While some
preliminary evidence of the relationships between CSFs and
performance improvements does exist, this is one of the first
studies which has provided a concrete evidence of the role of
training and education, as well as of system integration, in
driving competitive advantage.
It could be expected that staff learning and knowledge
development to effectively and efficiently use the system
will occur post-implementation of ERP, which can be exploited
to generate competitive advantage. However, this study is
unable to claim or refute such a proposition, as it is beyond the
scope of this study. The non-significant influence shown in this
study of the two factors of
project management
and
business
process re
-
engineering
on competitive advantage explains
that these activities are more related to outcomes up to the
point of project completion, rather than longer-term outcomes
afterwards.
One of the key contributions of this research is that it has
provided evidence that the two most influential CSFs in this
study collectively and substantially predict achievement of
competitive advantage in ERP projects. This suggests that
managers need to appreciate the possible complementarities in
managing a set of CSFs rather than concentrating on individual
ones. The substantially large goodness-of-fit (GoF) value of
46% for the model also demonstrates the robustness of the
results of the research.
Managers may need to keep two different initiatives in
mind: those geared to project management performance and
those geared to longer-term outcomes. This echoes
Holland and
Light's (1999)
study, which separated CSFs in a
‘
strategic
–
tactical
’
dimension. This paper has suggested a way in which
managers, by concentrating on certain CSFs, translate project
goals into longer term delivery outcomes.
