Somers and Nelson (2004) identify the activities associated with the implementation of ERP systems. This resulted from using an information theory approach and gathering data from cross sections of 116 organisations that had completed an ERP implementation. van Beijsterveld (2006) identified the ERP like cycle stages as; stages initiation, adoption, adaptation, acceptance, routinization, and infusion. Haddara and Zach (2012) in an article titled “ERP Systems in SMEs: A literature Review” state that in a ERP file-cycle model there should be clear distinction between ERP adoption , ERP acquisition, ERP system evolution and ERP system retirement .In a study by Esteves and Pastor (1999) the author defines and categorises the research issues relating to ERP systems within an ERP life-cycle framework as seen in figure 3. Esteves and Pastor (1999) reviewed 77 articles relating to ERP life-cycle phases and described them accordingly.
25
Figure 3 The ERP life-cycle framework (Esteves and Pastor1999)
Adoption Decision: During this phase, organisations identifies their business and technical needs and reason the requirement for an ERP (Esteves and Pastor 1999; Haddara and Zach 2012; Nah 2002; Stefanou 2000). Markus and Tanis (2000) states that adoption of an ERP may be initiated by Information Systems (IS) specialists or business owners. The business decision makers must consider the general information system approach that will adequately meet critical business challenges and enhance the organisational strategy. The definition of system requirements, goals and benefits, and impact analysis, are included in the decision phase. Somers and Nelson (2004) state that, during this phase, selecting the correct ERP package involves important decisions related to time-frames, budgets, goals and deliverables. Markus and Tanis (2000) argues that not all organisations adopt an ERP although they have some or all the listed motivations to do so. Organisations may choose to implement only certain modules, keeping the legacy systems in place or developing bespoke systems for the organisations’ remaining needs. A reason for non-adoption, partial adoption or discontinuance is related to functional fit between what the organisation requires and what the ERP packages offers. Raymond and Uwizeyemungu (2007) has stated that there are three reasons for organisations to adopt an ERP system.
26
The need to improve the performance of business operations (strategic decision- making, cost reduction, and adaptability to client requirements),
The need to integrate systems and data, and to replace legacy systems with one integrated ERP system, and
The need to set up “best practices” and avoid competitive disadvantage. ERP systems are adopted to improve operational efficiencies and effectiveness, and over time to gain competitive advantage. Another reason for adoption is cost of entry to a highly competitive industry (Yen et al., 2011).
Acquisition: In this phase an ERP system is identified that best fits the organisational requirements (Esteves and Pastor 1999; Haddara and Zach 2012; Nah 2002). The intention is to minimise customisation since customisation can lead to substantial long-term cost implications. At this stage consulting companies are identified, and other factors like price, training and maintenance are analysed. Contractual agreements are also defined (van Beijsterveld, 2006). Stefanou (2000) states that at this phase it is also important to carry out an analysis of the return on investment of the selected ERP package. Tazyeen (2012) states that a two-step acquisition process should be followed: the COTS package selection and the selection of the contractor or vendor. It would be optimal to select an ERP package that closely fits the business functional requirements, and then consider the selection of the vendor. The vendor should be responsible for the entire implementation from requirements, coding, setup, testing, deployment, maintenance, and support.
Palanisamy (2012) argues that the acquisition team has to develop acquisition strategies in order to reduce the uncertainty associated with the acquisition process. The author suggests a single location vendor information session, product demonstrations, visits to vendor sites, and referrals. Palanisamy further states that the acquisition process consists of six distinct iterative processes: planning, information search, selection, evaluation, choice and negotiations. Implementation: ERP implementation is a complex exercise in business process change management and technology management (Wei and Wang, 2004). This phase should not be confused with an implementation project, as an implementation project is much broader than the actual implementation. In the context of the implementation project, the implementation of an ERP system does not end when the system goes live (van Beijsterveld, 2006). This phase consists of the parameterisation or customisation of the ERP software package according to the
27
requirements of the organisation. This task is usually carried out by consultants who provide various implementation methodologies, experience, and training (Esteves and Pastor, 1999). The ERP application implementation methodology is composed of defined processes that are managed in serval ways to guide the organisation through the implementation process. The methodology provides the tools required to efficiently and effectively plan, conduct and control the steps in the project to successful implementation (Ganesh et al., 2014). According to Haddara and Zach (2012) this phase is the most resource intensive as in includes the actual ERP installation, customisation, business process re-engineering and other activities that will assist in aligning the system with the business requirements. Tazyeen (2012) adds that the implementation phase may also include activities of development for customisations required, data transfer from legacy systems, training of end users and deployment.
Use & Maintenance: At this phase the organisation uses the functionality provided by the ERP package in a live environment. Maintenance refers to addressing problem identified post deployment. Updates to the ERP system or issues identified by the users are corrected with the assistance of the ERP vendor. This is based on contractual terms that were identified during the acquisition and implementation phase (Tazyeen, 2012). Alanbay (2005) adds that there should be no restrictions in this type of environment so that whenever an add-on procedure or patch is available, updates can be done immediately. Esteves and Pastor (1999) and van Beijsterveld (2006) state that in this phase the organisation should realise the expected benefits and minimise disruptions. The organisation must be aware of aspects related to functionality, adequacy and usability related to business, and organisational processes. Post implementation, the system must be maintained, since malfunctions may occur, special optimisation requests must be attended to, and general system improvements are to be made. According to Shanks et al. (2003) maintenance generates benefits and the lack thereof entails lost benefits. Since implementing an ERP system is typically a long-term investment, it therefore requires a long- term maintenance strategy.
Evolution: In this phase additional capabilities are integrated into the ERP to gain further benefits. This can be classified into evolution “upwards” and evolution “outward”. Upwards evolution functionality is geared to decision-making, with application functionality such as advanced planning and scheduling, business intelligence, and data warehousing. Evolution outward to the ERP environment are systems such as supply-chain management, customer relationship management, organisational workflow and electronic commerce (Alanbay 2005; Esteves and Pastor 1999; Nah 2002). Haddara and Elragal (2011) further states that this phase
28
requires more study as little literature exists in this regard. The evolution phase is a non-trivial process and requires a stable and mature ERP system.
Retirement: In this phase the ERP is retired from use, or abandoned with the appearance of new technologies, the inadequacy of the ERP, and approach to the business needs (Haddara and Elragal 2011; Haddara and Zach 2012). The business will decide if they will substitute the ERP with another information system that will adequately suite the business requirements (Nah, 2002). Esteves and Pastor (1999) further state that organisations go through this phase for reasons such as: lack of trust in the ERP vendor or implementation partner, strategic changes and bad implementation experiences.