THE ANTECEDENTS OF ERP ADOPTION: USING SECONDARY DATA Woosang Hwang, College of Business Administration, University of Toledo, Toledo,

Ohio 43606, 419-530-2342, davidhws@hotmail.com Jungsik Jeong, College of Business Administration, University of Toledo, Toledo, Ohio 43606, 419-530-4067, gojungsik73@yahoo.com Udayan Nandkeolyar, College of Business Administration, University of Toledo, Toledo, Ohio, 43606, 419-530-4365, unandke@utnet.utoledo.edu ABSTRACT ERP (Enterprise Resource Planning) is a critical strategic tool to achieve business goals. However, ERP adoption is not always successful despite using substantial amount of time and human and material resources. To prevent ERP failures, proper adoption processes and selection criteria should be considered to minimize possible losses. In this paper, we suggest an ERP adoption model which may help managers to avoid ERP failures. It includes antecedents of ERP adoption and attitude and intention toward ERP adoption. To validate the suggested conceptual model, we examined five ERP failure cases which are found in different referred journal articles. Key words: ERP adoption, ERP failure, Antecedents of ERP adoption INTRODUCTION Enterprise Resource Planning (ERP) systems which integrate many components of management information system in a firm have been viewed as a competitive strategic tool. The revenue of ERP vendors was reported at $20.7 billion in 2003 (AMR Research, 2005). The total installation cost is much higher than the software cost and were estimated to be nearly $80 billion (Info Tech Trends, 2003). ERP systems normally have three components: a central database, a data collection and data management module, and user application modules. The purpose of ERP is to integrate information flow within a supply chain. However, the high cost of ERP software from SAP, Oracle and other main ERP providers make companies to rethink the balance between benefit and risk of implementing ERP. Researches also reported some cases of ERP implementation failures (Deutsch, 1998). Implementation of ERP cannot be done over a night; it includes adoption, adaptation, acceptance, routinization, and infusion. The huge risk of failure in implementing ERP cannot be ignored by organizations. Organizations should be cautious in implementing ERP systems at the very beginning. We suggest a theoretical model of ERP adoption and examine the suggested model using five cases reported in academic journals to identify potential factors which should be considered before ERP adoption. MODEL DEVELOPMENT [Figure-1] shows the integrated model for ERP adoption intention model. The theoretical constructs incorporated in the integrated conceptual model are perceived strategic value, perceived ease of use, perceived usefulness, organizational readiness, external pressure, attitude toward ERP adoption, and intention toward ERP adoption.

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Perceived Strategic Value External Pressure or Support Organizational Readiness Perceived Usefulness Perceived Ease of Use Figure 1 Integrated ERP adoption intention model Attitude Toward ERP Adoption Intention Toward ERP Adoption

Perceived Strategic Value In this study, perceived benefits are defined as a persons perception of the possibility of having positive outcome or gains associated with ERP. For example, the perceived benefits of ERP adoption are streamlining the procurement process, costsaving, coordinated supply chain management and so on (Hunter et al., 2003). Perceived risk is a subjective probability of suffering a loss in the pursuit of a desired outcome or a persons perception of the possibility of having negative outcome or suffering harm or losses associated with ERP (Liu and Wei, 2003). Perceived risk of ERP adoption includes financial risk, physical risk, security risk and performance risk. According to TRA(Theory of Reasoned Action) and many other studies, the attitudes are the function of the beliefs. And if performing a given behavior leads to a positive outcome (perceived benefits), it will, in turn, lead to a favorable attitude. If performing a given idea leads to a negative outcome (perceived risks), it will produce an unfavorable attitude. Based on these, we can posit that the perceived value of ERP will affect the attitude toward ERP positively. Organizational Readiness While it is important for firms to perceive the benefits of ERP adoption, the fact that the perceived benefits can be achieved within the allotted resources should not be ignored. Usually costs and technological knowledge have been identified as two of the most important organizational readiness factors that hinder IT growth in small organizations (Iacovou et al., 1995). Kuan and Chau (2001) considered two the organizational elements including financial readiness and technological readiness, as perceived ones. Also, fast communication, proper structure to implement, enough financial resources, rich and competent knowledge and skills, and top management support are examples of organizational readiness. In the adoption process, financial readiness and technological readiness are perceived measures in nature, rather than real measures. Organizational readiness, as perceived measure, will have positive impact on the attitude toward ERP adoption. - 3122 -

External Pressure or Support Many companies are willing to adopt ERP not only because of internal capability but also because of environmental factors. According to Iacovou et al. (1995), external pressure refers to influences from the organizational environment. They considered two main sources which are competitive pressure and new position by trading partners in EDI adoption context. ERP context has different external pressure elements in nature. Grandon and Pearson (2004) suggested five external pressure elements in ERP which are competition, social factors, dependency on other firms already using ERP, the industry, and the government. On the other hand, many firms implement ERP through outsourcing which includes training, maintenance, and updating. So enough external support should be considered before making a decision. Thus the external pressure and support will have an impact on the attitude. A higher level of external pressure and support will have positive impact on the attitude toward ERP adoption. Perceived Usefulness Perceived usefulness is defined as the extent to which a person believes that using a particular technology will enhance his or her job performance (Davis, 1989). Hendrickson et al. (1993) supports the relationship between the perceived usefulness and the attitude. Perceived usefulness is about the perception of the usefulness in making ERP activities to accomplish the goal. Therefore we define perceived usefulness as the extent to which a person believes that implementing any ERP activities will increase the performance of the company. If a person perceives a high level of usefulness in adopting ERP, it would be likely to yield more a positive attitude toward ERP adoption. So the perceived usefulness of ERP will positively affect the attitude toward ERP. Perceived Ease of Use Perceived ease of use, in TAM (Technology Acceptance Model), is defined as the degree to which a person believes that using the system will be free from efforts (Vendartesh and Morris, 2000). Many studies (Doll et al., 1998; Davis et al., 1989) support the relationship between the perceived ease of use and attitude. Perceived ease of use is the perception of the ease of implementing ERP. Therefore, in this study, perceived ease of use is defined as the extent to which a person believes that implementing ERP activities will be free from effort. In technology acceptance research studies, perceived ease of use has been shown to have a positive effect on using technology (Davis et al., 1989). So perceived ease of use will affect the attitude toward ERP adoption positively Attitude toward ERP Adoption and Intention toward ERP Adoption The ultimate goal of the proposed model is to predict or understand ERP adoption intention. According to TRA, a persons intention is a function of two determinants which are subjective norm and attitude. It simply refers to a persons judgment that performing the behavior is good or bad, or that he is in favor of or against performing the behavior. The attitude in TAM is considered as a mixed measure having two different types which are cognitive and affective attitude (Yang and Yoo, 2004). The Affective dimension of attitude focuses on how much a person likes the object of thought and measures the degree of emotional attraction toward the object, while the Cognitive dimension of attitude refers to an individuals specific beliefs related to the object and

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consists of the evaluation, judgment, reception, or perception of the object of thought based upon values. Intention toward behavior is explained as the strength of ones intention to perform a specified behavior in the TRA. Also TAM postulates that technology usage is determined by behavior intention. These show that the attitude is very critical factor to form behavior intention (Triandis, 1997; Bagozzi, 1981). Therefore, the attitude toward ERP adoption will affect the intention toward ERP adoption positively. CASES To examine the suggested model, we review five cases of ERP adoption selected from different referred journal articles. We present the five cases below. Case1: The City of El Paso (Solis et al., 2005) The City of El Paso is one of the 25 largest cities in the United States. A number of problems were found in the stage of initial ERP system implementation: Some department managers hesitated in assigning their star performers to take key user roles in system implementation (Top management support). Some department managers did not appear to apply enough pressure on their personnel to ensure proper system usage (HR issues). Some members of the core team were not fully dedicated to the ERP project (employees skill, knowledge and experience). The Project Team Leader was not able to exercise proper authority over the core team members because some of whom continued to be on call for other work associated with their home department (HR issues). Case 2: Comp Group-Middle Eastern manufacturer (Al-Mashari and Al-Mudimigh, 2003) Comp group is a major middle-eastern manufacturer which represents a network of complementary companies (Comp1, Comp2, Comp3, and Comp4). Qualitative case study technique was used for data collection. Semi-structured interviews, observations and documents are the main sources for data collection. Following are the reasons for failure: - Scope creep: the strong resistance resulted in focusing on not strategic goals but immediate organizational problems and daily business demands - Lack of top management support and knowledge: Too much responsibility and level of decision making of consulting company and too little managerial responsibility for its employees led to ineffective use of the ERP system and employees lack of knowledge - Lack of change management: Strong resistance in the firm because of reducing employees - Lack of communication support, and response: no formal communication. - Lack of performance measurement: No comprehensive performance measurement. - Propensity to isolate IT from business affairs: Lack of alignment between IT and business strategy resulted in the ineffective use of ERP. Case 3: SMHK (Semiconductor manufacturing in Hong Kong; Sarker and Sarker, 2000) This company is a Hong Kong based multi-national semiconductor manufacturing company, established in 1962. The number of employees is 15,000 and annual sales are

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HK $600 million. Major facilities are in Hong Kong, China, and Thailand. SMHK wanted to implement ERP systems in SMTH (Semiconductor manufacturing in Thailand). Following are the reasons for failure: - Leadership: whenever CEO (Jack) saw that any initiative was not being implemented in a way that he would like, he would step into the related supervisors role and direct operational employees personally. This caused ambiguity in chain of command and departments goals and also discredited the supervisors and managers who were responsible. - Communication: due to the language difference between Hong Kong and Thailand, their communication was vague between SMHK and SMTH. - HR issues: High turnover rate caused by unrelenting pressure by managers, lack of incentives, constant conflict in the organization led to an absence of cohesion among colleagues and poor productivity. - IT related issues: CEO didnt examine the system before purchasing. The system was not compatible in SMTH. CEO forced the staff to implement the system. Case 4: AML (public sector Company in Egypt; Kholeif et al., 2005 & 2007) The previous name of AML is NOUR, the leading international company in the electronics industry based in the Netherlands. The companys name was changed to AML in 1997. The failure of the ERP project in AML is discussed in this case. ERP implementation in AML faced some unique challenges. The problems were: - The new rules built into ERP software were incompatible with the established ways of thinking and the norms of behavior embedded in the existing accounting routines. - The lack of expertise on the part of both the ERP Project Manager and external IT consultants led to mistrust. - Securing legitimacy for the ERP project was successful but there was lack of financial or technical support from the holding company. - Scarce financial resources due to continuous losses. - Lack of capacity to cope with ERP on the part of all organizational members at all levels due to the lack of training. Case 5: BOTTLER Company (the soft drink industry in US; Barker and Frolick, 2003) The Bottler Company is one of the largest independent bottlers in the soft drink industry. The problems were: - Improper employee involvement and lack of training: the project team members were barely trained in their day-to-day job activities, and they were not experts in the business practices within their department. - Inconsistent management support: certain project leaders and upper management did not see the importance of sharing certain aspects of the project across modules and departments. In additions, the lack of faith in the consultants advice made implementation process even more challenging. - Lack of communication: Communication issues, including employee encouragement concerns, added to the burden of the human resources problem. In additions, due to breakdowns in the channels of communication and the lack of management support, many constituents including high-level employees resigned.

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Lack of recognition of lower- level employees: In addition to the lack of expertise, employees were not provided assistance when it came to keeping up with their regular job duties. Uneasiness of the system: the system was not easy to use.

CASE ANALYSIS We summarize factors identified in each case to validate the model. For the case of the city of El Paso, the main failure reasons are organizational readiness such as top management support, HR issues, and the lack of employees skills, knowledge, and experience. The Comp Group-Middle Eastern manufacturer case showed all factors in our model and fit our model very well. The need for globalization and the need for customer focused business are two main perceived strategic values; growing competition is an external pressure for adopting ERP. The organization readiness factors are lack of top management support, knowledge, change management, communication, commitment, support, response, performance measurement, propensity to isolate IT from business affairs. Perceived usefulness includes need for quality improvement, shorten lead time, and eliminate overlapping activities. One example of perceived ease of use is outdated IT infrastructure. The SMHK, AML and the Bottlers cases mainly focus on organizational readiness and perceived ease of use. Leadership, communication, and HR issues are three critical elements related with organizational readiness in these cases. The compatible system in SMTH practices is the biggest problem related ease of use. CONCLUSIONS We developed an integrated behavioral model of ERP adoption intention. The proposed model identifies key constructs that are likely to influence ERP adoption intention and explores the relationship among these constructs. From the theoretical perspective, each construct in the model has been identified and behavioral patterns of ERP usage intention are developed. The model broadens the previous studies in ERP context by integrating several existing theoretical models into one theoretical framework. It incorporated antecedents which include perceived strategic value, external pressure or support, organizational readiness, perceived ease of use, and perceived usefulness. It would allow businesses to have better understanding of adoption criteria. There are some limitations in this study. Even though we examined the model using five case studies, we did not test the model using large set of data. As a result, it generates only preliminary suggestions. However, this study makes contributions to the ERP literature in two ways. First, from the theoretical perspective, this paper broadens the exploratory development of a conceptual model by synthesizing previous models such as TRA and TAM by integrating several key issues into one theoretical framework. Second, the conceptual model presented in this article is specifically designed for ERP adoption setting. In sum, this study contributes to the conceptual explanation of the ERP adoption intention based on previous research. From a managerial perspective, it suggests the effective way of improving ERP adoption reducing the possibility of ERP adoption failures. References available davidhws@hotmail.com) upon request from Hwang (email address:

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